-----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, Nw0RtT9SAcAMOkOYuSahIjfQAWOTCtGbd2mve/Tf68bgcu5XkFKSTWeZHSHxi0N2 /s5b1edPwwz7LA1CPc32zQ== 0000912057-01-530767.txt : 20010830 0000912057-01-530767.hdr.sgml : 20010830 ACCESSION NUMBER: 0000912057-01-530767 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20010829 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: 1933 Act SEC FILE NUMBER: 333-68630 FILM NUMBER: 1727348 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 a2057631zs-4.txt S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 2001. REGISTRATION NO. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- EDISON MISSION ENERGY (Exact name of Registrant as specified in its charter) CALIFORNIA 4911 95-4031807 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
18101 VON KARMAN AVENUE, SUITE 1700 IRVINE, CALIFORNIA 92612 (949) 752-5588 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) -------------------------- STEVEN D. 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 PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE 10% Senior Notes due August 15, 2008 $400,000,000 100% $400,000,000 $100,000
(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) Computed in accordance with Section 6(b) of the Securities Act by multiplying 0.00025 by the proposed maximum aggregate offering price. -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 AUGUST 29, 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 IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS OFFER TO EXCHANGE $400 MILLION 10% SENIOR NOTES DUE AUGUST 15, 2008 FOR $400 MILLION 10% SENIOR NOTES DUE AUGUST 15, 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OF [EDISON MISSION ENERGY 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 notes are being registered with the Securities and Exchange Commission and are being offered in exchange for the original notes 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 notes that are validly tendered and not withdrawn prior to the expiration of the exchange offer. - You may withdraw tenders of original notes at any time prior to the expiration of the exchange offer. - We believe that the exchange of original notes will not be a taxable event for U.S. federal income tax purposes, but you should see "Material United States Federal Income Tax Considerations" on page 115 for more information. - We will not receive any proceeds from the exchange offer. - The terms of the exchange notes are substantially identical to the original notes, except that the exchange notes are registered under the Securities Act and the transfer restrictions and registration rights applicable to the original notes do not apply to the exchange notes. ------------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF THE RISKS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR ORIGINAL NOTES.
PRINCIPAL AMOUNT ANNUAL INTEREST RATE FINAL DISTRIBUTION DATE - ---------------- -------------------- ----------------------- $400,000,000................................ 10% August 15, 2008
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 FORWARD-LOOKING STATEMENTS.................................. ii AVAILABLE INFORMATION....................................... ii INCORPORATION OF DOCUMENTS BY REFERENCE..................... iii NOTICE TO NEW HAMPSHIRE RESIDENTS........................... iv PROSPECTUS SUMMARY.......................................... 1 RISK FACTORS................................................ 12 USE OF PROCEEDS............................................. 20 CAPITALIZATION.............................................. 21 SELECTED CONSOLIDATED FINANCIAL DATA........................ 22 THE EXCHANGE OFFER.......................................... 23 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 32 BUSINESS.................................................... 70 MANAGEMENT.................................................. 99 CERTAIN TRANSACTIONS AND RELATIONS WITH AFFILIATES.......... 102 DESCRIPTION OF THE NOTES.................................... 103 EXCHANGE OFFER; REGISTRATION RIGHTS......................... 113 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.... 115 PLAN OF DISTRIBUTION........................................ 118 LEGAL MATTERS............................................... 119 EXPERTS..................................................... 119
i FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements. We 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 control, including, among other things: - the direct and indirect effects of the current California power crisis on us and on our 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 we do business; - governmental, statutory, regulatory or administrative changes or initiatives affecting us 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; - 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; - our ability to complete the development or acquisition of current and future projects or the sale of the Ferrybridge and Fiddlers' Ferry plants; - our ability to maintain an investment grade rating; and - our ability to refinance short-term debt or raise additional financing for our future cash requirements, including funds to pay down or refinance our three credit facilities maturing in October 2001. We use words like "anticipate," "estimate," "projected," "plan," "expect," "will," "believe," "intend," "may," "should" 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 12. 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 subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance with these requirements, file reports and information statements and other information with the Securities and Exchange Commission. These reports and information statements and other information filed by us with the SEC can be inspected and copied at the Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the ii 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 of this material can 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 us with the SEC under the Securities Act. As permitted by the rules and regulations of the SEC, the 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 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 reference to that document. INCORPORATION OF DOCUMENTS BY REFERENCE The following documents filed with the SEC are incorporated by reference into this prospectus: (i) Our Annual Report on Form 10-K for the year ended December 31, 2000; (ii) Our Quarterly Reports on Form 10-Q for the periods ended March 31, 2001 and June 30, 2001; and (iii) Our Current Reports on Form 8-K, dated March 22, 2001 and August 1, 2001. All reports and other documents we subsequently file under Sections 13(a), 13(c), 14 or 15(d) of the 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 we subsequently file these reports and documents. Copies of our Annual Report on Form 10-K for the year ended December 31, 2000, Quarterly Reports for the periods ended March 31, 2001 and June 30, 2001 and Current Reports on Form 8-K, dated March 22, 2001 and August 1, 2001, are available, without charge, from us. You may request a copy of any of these filings, at no cost, by writing or telephoning us 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 this statement. Any statement so modified or iii superseded will not be deemed to constitute a part of this prospectus except as so modified or superseded. ------------------------ NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. ------------------------ iv PROSPECTUS SUMMARY The following summary highlights selected information from this prospectus and may not contain all of the information that is important to you. This prospectus includes specific terms of the exchange notes we are offering, as well as information regarding our business and detailed financial data. We encourage you to read this prospectus in its entirety. You should pay special attention to the "Risk Factors" section beginning on page 12 of this prospectus. SUMMARY OF THE EXCHANGE OFFER On August 10, 2001, we completed the private offering of $400 million aggregate principal amount of 10% Senior Notes due August 15, 2008. As part of that offering, we entered into a registration rights agreement with the initial purchasers of these original notes in which we agreed, among other things, to deliver this prospectus to you and to complete an exchange offer for the original notes. Below is a summary of the exchange offer. Securities Offered..................... Up to $400,000,000 aggregate principal amount of new 10% Senior Notes due August 15, 2008, which have been registered under the Securities Act. The form and terms of these exchange notes are identical in all material respects to those of the original notes. The exchange notes, however, will not contain transfer restrictions and registration rights applicable to the original notes. The Exchange Offer..................... We are offering to exchange new $1,000 principal amount of our 10% Senior Notes due August 15, 2008, which have been registered under the Securities Act, for $1,000 principal amount of our outstanding 10% Senior Notes due August 15, 2008. In order to be exchanged, an original note must be properly tendered and accepted. All original notes that are validly tendered and not withdrawn will be exchanged. As of the date of this prospectus, there are $400 million principal amount of original notes outstanding. We will issue exchange notes 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 notes 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 notes in the ordinary course of your business; - 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 notes; and - you are not an "affiliate" of ours. If you are an affiliate of ours, 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 notes: (1) you cannot rely on the applicable interpretations of the staff of the SEC; and
1 (2) you must comply with the registration requirements of the Securities Act in connection with any resale transaction. Each broker or dealer that receives exchange notes for its own account in exchange for original notes 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 notes 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 notes. Furthermore, any broker-dealer that acquired any of its original notes 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 noteholder 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 Notes and Original Notes................... The exchange notes will bear interest from the most recent date to which interest has been paid on the original notes. If your original notes are accepted for exchange, then you will receive interest on the exchange notes and not on the original notes. 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 resolicit tenders of the original notes. See "The Exchange Offer--Conditions to the Exchange Offer" for more information regarding conditions to the exchange offer. Procedures for Tendering Original Notes................................ 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 The Bank of New York at the address listed in this prospectus; or -if original notes 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.
2 See "The Exchange Offer--Procedures for Tendering." Special Procedures for Beneficial Holders.............................. If you are the beneficial holder of original notes 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 notes are registered and instruct that person to tender on your behalf. See "The Exchange Offer--Procedures for Tendering." Guaranteed Delivery Procedures......... If you wish to tender your original notes and you cannot deliver your notes, the letter of transmittal or any other required documents to the exchange agent before the expiration date, you may tender your original notes 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 Notes and Delivery of Exchange Notes........... 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 notes which are properly tendered in the exchange offer before 5:00 p.m., New York City time, on the expiration date. The exchange notes will be delivered promptly after the expiration date. See "The Exchange Offer--Terms of the Exchange Offer." Material United States Federal Income Tax Considerations................... We believe that your exchange of original notes for exchange notes 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 United States Federal Income Tax Considerations." Exchange Agent......................... The Bank 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 under the heading "The Exchange Offer--Exchange Agent." Use of Proceeds........................ We will not receive any proceeds from the issuance of exchange notes in the exchange offer. We will pay all expenses incident to the exchange offer. See "Use of Proceeds" and "--The Company--Recent Developments--Offering of Original Notes."
3 SUMMARY OF TERMS OF THE EXCHANGE NOTES The form and terms of the exchange notes and the original notes are identical in all material respects, except that transfer restrictions and registration rights applicable to the original notes do not apply to the exchange notes. The exchange notes will evidence the same debt as the original notes and will be governed by the same indenture. Where we refer to "notes" in this document, we are referring to both original notes and exchange notes. Exchange Notes Offered................. Up to $400 million principal amount of 10% Senior Notes due August 15, 2008. Maturity............................... August 15, 2008. Interest............................... Interest accrues on the principal amount of the notes at 10% per year. Interest is payable on the notes, and interest payments will be made semi-annually in arrears on February 15 and August 15 of each year. The first payment will be made on February 15, 2002. Ranking................................ The notes are senior unsecured obligations of ours and rank equally with all of our senior unsecured indebtedness and rank senior to our subordinated indebtedness. All existing and future liabilities of our subsidiaries will be effectively senior to the notes. The indenture permits us to incur significant additional indebtedness. See "Description of the Notes." Ratings................................ The notes are currently rated "BBB-" by Standard & Poor's Ratings Services and "Baa3" by Moody's Investors Service, Inc. Optional Redemption.................... We may redeem any or all of the notes at a redemption price equal to the greater of: - 100% of the principal amount of the notes being redeemed; or - the sum of the present values of the remaining scheduled payments on the notes being redeemed discounted to the date of redemption on a semiannual basis at a rate based on the rates of U.S. Treasury securities with average lives comparable to the remaining lives of the notes plus 75 basis points; plus accrued and unpaid interest on the notes being redeemed.
4 THE COMPANY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCE IS MADE TO "RISK FACTORS" FOR A DISCUSSION OF SEVERAL ISSUES THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES. IN THIS PROSPECTUS, THE TERMS "THE COMPANY," "WE," "OUR," "OURS" AND "US" REFER TO EDISON MISSION ENERGY AND ITS DIRECT AND INDIRECT SUBSIDIARIES UNLESS THE CONTEXT OTHERWISE REQUIRES. OUR BUSINESS We are among the largest independent producers of electricity in the world based on megawatts, or "MW," generated, with operations in North America, Europe and the Asia Pacific region. We develop, acquire, lease and operate electric power generation facilities that sell power both under long-term contracts and to wholesale markets. Our portfolio of power projects as of June 30, 2001 consisted of 33 domestic and 39 international power projects with aggregate generation capacity of 27,798 MW, our share of which was 22,923 MW. To complement our generation capabilities, we also market energy and manage risks associated with energy price fluctuations in power markets open to competition. We believe our portfolio of power projects, operating and development experience and marketing and risk management activities enable us to meet the broad range of our customers' needs and to maximize the value of our power projects. We play an active role in all phases of power generation, from planning and development to construction and commercial operation. We believe that this involvement allows us to better ensure, with our experienced personnel, that our projects are well-planned, structured and managed. Our portfolio of power projects is strategically located in domestic and international power markets and is diversified by fuel type. A significant portion of the capacity and energy output from our facilities is sold under long-term contracts, which generally provide predictable revenue streams during the contract term and reduce our exposure to fluctuations in market prices for electricity. The table below summarizes, as of June 30, 2001, our portfolio of power projects.
CAPACITY (IN MW) --------------------------------- AGGREGATE NUMBER OF GENERATION OUR REGION PROJECTS CAPACITY SHARE - ------ --------- ---------- -------- North America................................... 33 15,221 13,302 Europe.......................................... 26 7,284 6,840 Asia Pacific.................................... 13 5,293 2,781 -- ------ ------ Total......................................... 72 27,798 22,923 == ====== ======
Subsequent to June 30, 2001, we have entered into agreements, subject to obtaining consents from third parties and other conditions precedent to closing, for the sale of our interests in the EcoElectrica, Gordonsville, Commonwealth Atlantic, James River, Nevada Sun-Peak and Saguaro projects. In addition, we are currently offering for sale our interest in the Brooklyn Navy Yard project. We expect the proceeds from the sale of our interests in the above projects, if completed, will be in excess of their book value with respect to those projects ($482 million at June 30, 2001). We are also offering for sale the Ferrybridge and Fiddler's Ferry plants in the United Kingdom. If we are successful in selling our Ferrybridge and Fiddler's Ferry plants, it is likely that we will not recover any of our investment in the subsidiary that owns these assets. At June 30, 2001, that investment was approximately $974 million. The aggregate generation capacity set forth in the above table will be reduced by 5,800 MW, of which our share is 4,892 MW, if we are successful in completing the sale of our interests in all of these projects. 5 OUR MARKET OPPORTUNITY Historically, electric utility monopolies were vertically integrated, meaning that they were responsible for building and maintaining power generation facilities, building and maintaining transmission and distribution infrastructure and selling power to residential, commercial and industrial customers, generally referred to as "retail sales," at regulated rates. However, governmental and regulatory initiatives have caused significant changes in this historical model of the electric power industry. For example, in the United States, the passage of the Public Utility Regulatory Policies Act of 1978 encouraged the development of independent power producers by removing regulatory constraints relating to the production and sale of electric energy by certain non-utilities and requiring electric utilities to buy electricity from non-utility power producers, known as qualifying facilities, under specified conditions. The passage of the Energy Policy Act of 1992 further encouraged the development of independent power producers by significantly expanding the options available to independent power producers with respect to their regulatory status and by liberalizing transmission access. As a result, a significant market for electric power produced by independent power producers, such as us, has developed in the United States. In 1998, utility deregulation in several states led utilities to divest generating assets, which has created additional new opportunities for growth of independent power producers in the United States. For example, we acquired fossil fuel power generating plants located in Illinois after deregulation in that state. Finally, there has been a movement in many foreign countries toward privatization of the power generation industry. These initiatives have changed the fundamental structure of the electric power industry in the affected markets by replacing vertically integrated operations with stratified businesses organized by power generation, transmission, distribution and retail sales operations. We conduct most of our operations within the power generation business line. We believe that we are well-positioned to continue to realize opportunities as a result of these changes in the industry. In addition to the opportunities created by the governmental and regulatory initiatives described above, the demand for power continues to increase as a result of economic growth both domestically and abroad. In some countries, including the United States, investment in new power generation facilities has not been adequate to support the increase in demand, resulting in shortages of electricity in many regions. As a result, there exists an increased need for companies like ours that have a large portfolio of power projects to provide dependable power both to the wholesale energy market and directly to distribution companies. In addition, this situation provides us with the opportunity to expand the generation capacity of our existing sites and to develop new generation projects to meet market demands. OUR STRATEGY Our business goal is to continue to be one of the leading owners and operators of electric generating assets in the world. We play an active role, as a long-term owner, in all phases of power generation, from planning and development through construction and commercial operation. We believe that this involvement allows us to better ensure, with our experienced personnel, that our projects are well-planned, structured and managed, thus maximizing value creation. Our strategy focuses on enhancing the value of existing assets, expanding plant capacity at existing sites and developing new projects in locations where we have an established position or otherwise determine that attractive financial performance can be realized. In addition, because our merchant plants sell power into markets without the certainty of long-term contracts, we conduct power marketing, trading, and risk management activities to stabilize and enhance the financial performance of these projects. We also recognize that our principal customers are regulated utilities. We therefore strive to understand the regulatory and economic environment in which the utilities operate so that we may continue to create mutually beneficial relationships and business dealings. 6 Due to the impact of the California power crisis, our current operational focus is on enhancing the performance of our existing portfolio of power projects, expanding our generation capacity at existing sites and maintaining our credit quality. Our long-term strategy is to continue to grow our business while maintaining investment grade credit ratings. OUR COMPETITIVE STRENGTHS We believe that our competitive strengths advantageously position us to enhance our financial performance, expand our business and pursue strategic opportunities in independent power markets both domestically and abroad. Our key competitive strengths are summarized below. - GLOBAL PRESENCE. We are among the largest independent power producers in the world based on MW generated. As of June 30, 2001, we owned interests in 33 domestic operating projects with total generating capacity of 15,221 MW, of which our share was 13,302 MW. In addition, as of June 30, 2001, we owned interests in 39 projects outside the United States with total generation capacity of 12,577 MW, of which our share was 9,621 MW. In assembling and operating this global portfolio, we have gained substantial experience and expertise in major U.S. and foreign power markets and, as a result, enjoy access to a broader range of development and acquisition opportunities worldwide. - DIVERSIFIED ASSET PORTFOLIO. In addition to owning interests in power generation facilities in 10 countries worldwide, our portfolio of power projects is also diversified by fuel type. As of June 30, 2001, our portfolio of power projects was comprised of 57% coal, 30% natural gas, 11% hydroelectric and 2% oil and geothermal, as a percentage of our share of aggregate generation capacity. The fuel type diversification of our portfolio of power projects reduces our exposure to shortages or other disruptions in the market for any particular fuel source. The geographic diversification of our portfolio of power projects spreads our operations across different regions and market segments, thereby allowing us to participate in multiple segments of the domestic and international power markets and reducing the level of risk presented by any particular market. - BALANCED CONTRACT POSITION. The contract status of our generation facilities reflects a blend of long-term contracts and sales from our merchant plants. As of June 30, 2001, the majority of our MW were subject to long-term power purchase agreements, which provide us with contracted revenue streams from those generation facilities. Our remaining MW were generated by our merchant plants which sell power into wholesale power markets. This blend of contracted and merchant generation provides for a stream of contract revenue while allowing us the flexibility to sell power into wholesale markets. - DISCIPLINED MARKETING AND RISK MANAGEMENT ACTIVITIES. We use a disciplined approach to energy marketing and risk management that is centered around our merchant plants and is designed primarily to stabilize and enhance the operational and financial performance of those facilities. These activities also reduce our exposure to energy price fluctuations. - STRONG AND EXPERIENCED PROJECT MANAGEMENT TEAM. We have an experienced project management team that continues to focus on our core competencies and to draw upon our significant domestic and international development and operating experience. ------------------------ THE CALIFORNIA POWER CRISIS AND OUR RELATIONSHIP WITH AFFECTED AFFILIATES 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 California utilities, Southern California Edison Company and Pacific Gas and Electric Co., have operated under a retail 7 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, including us, and others. Given these and other payment defaults, Southern California Edison could face bankruptcy at any time. Pacific Gas and Electric filed a voluntary bankruptcy petition on April 6, 2001. See "Risk Factors--The ongoing California power crisis has had, and is likely to continue to have, an adverse impact on us." Edison International, our ultimate parent company, is also the corporate parent of Southern California Edison. Both Edison International and Southern California Edison have faced and continue to face material operating disruptions as a result of the California power crisis. The chart below, although not a complete representation of our corporate structure, generally outlines our relationship with Edison International and Southern California Edison. [CHART] Through the enactment of provisions in our articles of incorporation and bylaws and other measures, (1) we have taken steps to preserve our investment grade credit ratings and (2) we have attempted to isolate ourselves from potential bankruptcies of Edison International, Southern California Edison and their subsidiaries by preserving us as a stand-alone entity, despite the current credit difficulties of Edison International and Southern California Edison. For a discussion of the specific provisions, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--The California Power Crisis and Our Response." However, we cannot assure you that these measures will effectively isolate us from the credit downgrades or the potential bankruptcies of Edison International, Southern California Edison or any of their subsidiaries. In addition to the risks described above, the California power crisis has adversely affected our liquidity. We have undertaken a series of initiatives in response. These initiatives are summarized below. - On August 10, 2001, we issued and sold the original notes, the proceeds of which were used to permanently repay $400 million of outstanding indebtedness. - On April 5, 2001, we issued $600 million of 9.875% senior notes due April 15, 2011, the proceeds of which were used to permanently repay $225 million of outstanding indebtedness and to provide for additional working capital. 8 - On June 25, 2001, we completed the sale of a 50% interest in the Sunrise project to Texaco Power & Gasification Holdings Inc. for $84 million. - On June 29, 2001, we completed the sale of our 25% interest in the Hopewell project to our existing partner for $26.5 million. - We have agreed to sell our interests in the EcoElectrica, Gordonsville, Commonwealth Atlantic, James River, Nevada Sun-Peak and Saguaro projects. We are also engaged in a competitive bidding process through an investment bank for the disposition of our ownership interest in the Brooklyn Navy Yard project. For more information on which projects are currently offered for sale, see "Business--Regional Overview of Business Segments." - We have extended the maturity date of the indebtedness under our corporate credit facilities, totaling $823.3 million as of August 10, 2001, to October 10, 2001. We have selected a syndicate of bank lenders to implement a new $750 million credit facility. We plan to use this new facility, together with other corporate funds, to replace our existing corporate credit facilities. For more information on our financing plans, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Corporate Financing Plans." As a result of our focus on short-term initiatives designed to improve our liquidity, our current focus is on operating our existing project portfolio and focusing our development activities on expanding our generation capacity at existing sites rather than pursuing acquisition and development opportunities at our historical levels. Upon the improvement of our financial position through the completion of the initiatives discussed above and the resolution of the California power crisis, we plan to focus to a greater extent on the development of new projects. For a more detailed description of the California power crisis, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--The California Power Crisis and Our Response." In addition, for a further discussion of our transactions and relations with our affiliates, see "Business--Our Relationship with Affected Affiliates." MISSION ENERGY HOLDING FINANCING On June 8, 2001, Edison International created Mission Energy Holding Company as a wholly-owned indirect subsidiary. Mission Energy Holding's principal asset is our common stock. On July 2, 2001, Mission Energy Holding engaged in a $1,185 million debt financing, and pledged our common stock to the lenders as security for their debt obligations. The majority of the proceeds of this financing was ultimately used by Edison International to repay a portion of its indebtedness maturing in 2001. The Mission Energy Holding financing documents contain restrictions on our ability and the ability of our subsidiaries to enter into specified transactions or engage in specified business activities and require in some instances that we obtain the approval of the Mission Energy Holding board of directors for these transactions. Our articles of incorporation bind us to the restrictions in the Mission Energy Holding financing documents by restricting our ability to enter into specified transactions or engage in specified business activities, as set forth in the Mission Energy Holding financing documents, without shareholder approval. See "Risk Factors--Restrictions in our articles of incorporation, our credit facilities and the Mission Energy Holding financing documents limit or prohibit us from entering into specified transactions that we otherwise may enter into." 9 RECENT DEVELOPMENTS OFFERING OF ORIGINAL NOTES On August 10, 2001, we issued and sold the original notes. We used the proceeds of that offering, which were $400 million, to repay a portion of our indebtedness under our three corporate credit facilities. See "Use of Proceeds." ------------------------ Edison Mission Energy is incorporated under the laws of the State of California. Our headquarters and principal executive offices are located at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612, and our telephone number is (949) 752-5588. We are considering a possible reincorporation in the State of Delaware. The reincorporation would be accomplished through a merger with Edison Mission Energy, a Delaware corporation and wholly-owned subsidiary of ours, in which the Delaware corporation would be the surviving corporation. The Order Authorizing Disposition of Jurisdictional Facilities issued by the Federal Energy Regulatory Commission on August 24, 2001 found that our proposed transaction was consistent with the public interest and granted our request for authority to complete the reincorporation, subject to certain conditions. We cannot assure you that a rehearing of the August 24, 2001 order will not be requested, and cannot provide any assurances as to the outcome of such hearing or as to the consummation of the reincorporation. 10 SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth our selected consolidated financial data for the periods indicated. The selected consolidated financial data for the six month period ended June 30, 2001 were derived from the unaudited consolidated financial statements of Edison Mission Energy and our consolidated subsidiaries. The selected consolidated financial data for the years ended December 31, 1996, 1997, 1998, 1999 and 2000 were derived from the audited consolidated financial statements of Edison Mission Energy and our 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.
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------- ------------------- 1996 1997 1998 1999 2000 2000 2001 -------- -------- -------- -------- -------- -------- -------- (DOLLARS IN MILLIONS) (DOLLARS IN MILLIONS) (UNAUDITED) INCOME STATEMENT DATA: Operating revenues................................... $ 843.6 $ 975.0 $ 893.8 $1,635.9 $3,241.0 $1,460.2 $1,585.8 Operating expenses: Depreciation and amortization...................... 89.9 102.8 87.3 190.2 382.1 202.5 174.3 Other operating expenses........................... 386.6 478.3 456.0 1,019.3 2,028.1 1,004.7 1,105.3 ------- ------- ------- -------- -------- -------- -------- Total operating expenses......................... 476.5 581.1 543.3 1,209.5 2,410.2 1,207.2 1,279.6 ------- ------- ------- -------- -------- -------- -------- Operating income..................................... 367.1 393.9 350.5 426.4 830.8 253.0 306.2 Interest expense..................................... (164.2) (223.5) (196.1) (375.5) (721.5) (370.5) (328.9) Interest and other income............................ 40.7 53.9 50.9 55.8 74.0 42.4 34.7 Minority interest.................................... (69.5) (38.8) (2.8) (3.0) (3.2) (1.4) (7.5) ------- ------- ------- -------- -------- -------- -------- Income (loss) before income taxes.................... 174.1 185.5 202.5 103.7 180.1 (76.5) 4.5 Provision (benefit) for income taxes................. 82.0 57.4 70.4 (40.4) 72.5 (27.8) 1.7 ------- ------- ------- -------- -------- -------- -------- Income (loss) before accounting changes, and extraordinary loss................................. 92.1 128.1 132.1 144.1 107.6 (48.7) 2.8 Cumulative effect on prior years of changes, in accounting, net of tax............................. -- -- -- (13.8) 17.7 17.7 6.0 Extraordinary loss on early extinguishment of debt, net of income tax benefit.......................... -- (13.1) -- -- -- -- -- ------- ------- ------- -------- -------- -------- -------- Net income (loss).................................... $ 92.1 $ 115.0 $ 132.1 $ 130.3 $ 125.3 $ (31.0) $ 8.8 ======= ======= ======= ======== ======== ======== ======== OTHER DATA: Ratio of earnings to fixed charges(1)(2)............. 1.42 1.64 1.69 1.18 1.23 0.81 0.93
- ------------------------------ (1) For purposes of computing the ratio of earnings to fixed charges, earnings are divided by fixed charges. "Earnings" represents the aggregate of our income before income taxes (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 expressed or capitalized), the amortization of debt discount and interest portion of rental expense. (2) For the six month periods ended June 30, 2001 and 2000, there was a fixed charge deficiency of $25.4 million and $76.6 million, respectively.
AS OF DECEMBER 31, AS OF ------------------------------------------------------ JUNE 30, 1996 1997 1998 1999 2000 2001 -------- -------- -------- --------- --------- ------------- (IN MILLIONS) (IN MILLIONS) (UNAUDITED) BALANCE SHEET DATA: Assets................................................... $5,152.5 $4,985.1 $5,158.1 $15,534.2 $15,017.1 $15,257.3 Current liabilities...................................... 270.9 339.8 358.7 1,772.8 3,911.0 3,031.2 Long-term obligations, less current portion.............. 2,419.9 2,532.1 2,396.4 7,439.3 5,334.8 6,349.3 Preferred securities of subsidiaries..................... 150.0 150.0 150.0 476.9 326.8 325.7 Shareholder's equity..................................... 1,019.9 826.6 957.6 3,068.5 2,948.2 2,672.6
11 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 notes. The following risk factors, other than "--You may have difficulty selling the notes that you do not exchange," generally apply to the original notes as well as the exchange notes. WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS, INCLUDING A SUBSTANTIAL AMOUNT OF SHORT-TERM INDEBTEDNESS. As of June 30, 2001, we had $2.5 billion of debt which is recourse to Edison Mission Energy and $6.1 billion of debt which is non-recourse to Edison Mission Energy but is recourse to our subsidiaries appearing on our consolidated balance sheet. The indenture governing the notes will not impose limitations on our ability or the ability of our subsidiaries to incur additional indebtedness. We have a substantial amount of short-term debt that will need to be repaid, extended or refinanced. As of June 30, 2001, we had three credit facilities with an aggregate amount of outstanding indebtedness and letters of credit of $1.224 billion. We used the proceeds from the private offering of the original notes to pay down a portion of these facilities. Currently, all three of these credit facilities are scheduled to mature on October 10, 2001 and will need to be either extended or refinanced. We have selected a syndicate of bank lenders to implement a new $750 million corporate credit facility. We plan to use this new facility, together with other corporate funds, to replace the credit facilities expiring on October 10, 2001. However, we cannot assure you that we will be able to extend or refinance our credit facilities by October 10, 2001 on similar terms and rates as our existing credit facilities, on commercially reasonable terms, on the terms required by the Mission Energy Holding financing documents or at all. For more information on the restrictions in the Mission Energy Holding financing documents, see "--Restrictions in our articles of incorporation, our credit facilities and the Mission Energy Holding financing documents limit or prohibit us from entering into specified transactions that we otherwise may enter into." A failure to repay, extend or refinance our existing credit facilities as required by their terms could result in an event of default under the credit facilities. An event of default under the credit facilities would trigger cross-defaults under agreements to which our subsidiaries are party. This would have the effect of not permitting distributions from our subsidiaries, which would have a negative impact on our liquidity and on our ability to make debt service payments on the notes. Our substantial amount of debt and financial obligations presents the risk that we might not have sufficient cash to service our indebtedness, including the notes, and that our existing corporate and project debt could limit our ability to grow our business, to compete effectively or to operate successfully under adverse economic conditions. See "Prospectus Summary--Our Strategy." RESTRICTIONS IN OUR ARTICLES OF INCORPORATION, OUR CREDIT FACILITIES AND THE MISSION ENERGY HOLDING FINANCING DOCUMENTS LIMIT OR PROHIBIT US FROM ENTERING INTO SPECIFIED TRANSACTIONS THAT WE OTHERWISE MAY ENTER INTO. The financing documents entered into by Mission Energy Holding contain financial and investment covenants restricting us and our subsidiaries. Our articles of incorporation bind us to the provisions in the Mission Energy Holding financing documents by restricting our ability to enter into specified transactions and engage in specified business activities, as contemplated by the Mission Energy Holding financing documents, without shareholder approval. The instruments governing our indebtedness also contain financial and investment covenants. Restrictions contained in the documents described in the preceding sentences could affect, and in some cases significantly limit or prohibit, our and our subsidiaries' ability to, among other things, incur and prepay debt, make capital expenditures, pay 12 dividends and make other distributions, make investments, create liens, sell assets, enter into sale and leaseback transactions, issue equity interests, enter into transactions with affiliates, create restrictions on the ability to pay dividends or make other distributions and engage in mergers and consolidations. IN A BANKRUPTCY OF MISSION ENERGY HOLDING, CREDITORS OF MISSION ENERGY HOLDING MAY PETITION TO HAVE OUR ASSETS AND LIABILITIES CONSOLIDATED WITH THOSE OF MISSION ENERGY HOLDING. Although we operate independently of Mission Energy Holding, our articles of incorporation bind us to the restrictions in the Mission Energy Holding financing documents by restricting our ability to enter into specified transactions or engage in specified business activities, as set forth in the Mission Energy Holding financing documents, without shareholder approval. For more information on the restrictions in the Mission Energy Holding financing documents, see "--Restrictions in our articles of incorporation, our credit facilities and the Mission Energy Holding financing documents limit or prohibit us from entering into specified transactions that we otherwise may enter into." In the event of a bankruptcy of Mission Energy Holding, creditors of Mission Energy Holding might seek to have a bankruptcy court substantively consolidate our assets and liabilities with those of Mission Energy Holding. In the event that a bankruptcy court were to require substantive consolidation, our assets and those of Mission Energy Holding would be treated as if they were held by, and our liabilities and those of Mission Energy Holding would be treated as if they were incurred by, a single entity, and we may be financially unable to pay amounts due on the notes. RATINGS OF THE NOTES AND OUR CREDIT RATINGS ARE SUBJECT TO CHANGE, AND A DOWNGRADE OF OUR CREDIT RATING BELOW INVESTMENT GRADE COULD HAVE AN ADVERSE IMPACT ON US. In January 2001, Standard & Poor's and Moody's downgraded our senior unsecured credit ratings to "BBB-" from "A-" and to "Baa3" from "Baa1," respectively. Our credit ratings remain "investment grade." However, we cannot assure you that Standard & Poor's and/or Moody's will not downgrade us below investment grade, whether as a result of the California power crisis or otherwise. If we are downgraded below investment grade, we could be required to, among other things: - provide additional guarantees, collateral, letters of credit or cash for the benefit of counterparties in our trading activities (see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Other Commitments--Credit Support for Trading and Price Risk Management Activities"); and - post a letter of credit or cash collateral to support our $58.5 million equity contribution obligation in connection with our acquisition in February 2001 of a 50% interest in the project owned by CBK Power Co. Ltd. in the Philippines, which equity contribution would otherwise be payable as currently scheduled in 2003. A further downgrade could result in a downgrade of Edison Mission Midwest Holdings Co., our indirect subsidiary. In the event of a downgrade of Edison Mission Midwest Holdings below its current credit rating, provisions in the agreements binding on its subsidiary, Midwest Generation, LLC, limit the ability of Midwest Generation to use excess cash flow to make distributions. A downgrade in our credit rating below investment grade could increase our cost of capital, increase our credit support obligations, make efforts to raise capital more difficult, adversely affect our trading operations, and have an adverse impact on us and our subsidiaries, particularly in light of the capital intensive nature of our business. Furthermore, a downgrade in our credit rating could adversely affect our ability to make debt service payments on the notes. Standard & Poor's and Moody's have assigned ratings to the notes of "BBB-" and "Baa3," respectively. A rating is not a recommendation to purchase, hold or sell notes, because a rating does not address market price or suitability for a particular investor. We cannot assure you that a rating will 13 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 so warrant. THE ONGOING CALIFORNIA POWER CRISIS HAS HAD, AND IS LIKELY TO CONTINUE TO HAVE, AN ADVERSE IMPACT ON US. 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 California utilities, Southern California Edison and Pacific Gas and Electric, 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, including us, and others. Given these and other payment defaults, Southern California Edison could face bankruptcy at any time. Pacific Gas and Electric filed a voluntary bankruptcy petition on April 6, 2001. Edison International, our ultimate parent company, is also the corporate parent of Southern California Edison. Southern California Edison's current financial condition has had, and may continue to have, an adverse impact on Edison International's credit quality. Both Standard & Poor's and Moody's have lowered the credit ratings of Edison International and Southern California Edison to substantially below investment grade levels. Through the enactment of ring-fencing provisions in our articles of incorporation and bylaws and other measures, (1) we have taken steps to preserve our investment grade credit ratings and (2) we have attempted to isolate ourselves from potential bankruptcies of Edison International, Southern California Edison and their subsidiaries by preserving us as a stand-alone entity, despite the current credit difficulties of Edison International, Southern California Edison and their subsidiaries. These measures are discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations--The California Power Crisis and Our Response." We cannot assure you that these measures will effectively isolate us from the credit downgrades or the potential bankruptcies of Edison International and Southern California Edison or any of their subsidiaries. A downgrade in our credit ratings could increase our cost of capital, increase our credit support obligations, make efforts to raise capital more difficult and have an adverse impact on our business and operations. In addition, we have partnership interests in eight partnerships which own power plants in California and 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. As a result of Southern California Edison's and Pacific Gas and Electric's current liquidity crises, each of these utilities has failed to make full payment under these contracts. As of June 30, 2001, our share of amounts owed to these partnerships under the power purchase contracts with Southern California Edison was approximately $301 million. In addition, our share of amounts owed to these partnerships under the power purchase contracts with Pacific Gas and Electric was approximately $23 million at the petition date. We have not established any reserves for these amounts. In 2000, our share of earnings before taxes from these partnerships was $168 million, which represented 20% of our operating income. Our investment in these partnerships at June 30, 2001 was $607 million. 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 to June 30, 2001, subsidiaries of ours have made equity contributions totaling approximately $134 million to meet capital calls by the partnerships. Although Southern California Edison has been paying the partnerships for power delivered after March 27, 2001 and Pacific Gas and Electric has paid for power delivered after April 6, 2001 and four partnerships have entered into settlement agreements with Southern California Edison with respect to past due payments, our subsidiaries and the other partners may be required to make additional capital contributions to the partnerships if the utilities fail 14 to make future payments. Given the severity of the California power crisis and the uncertainty surrounding any potential legislative or other solution to the crisis, it is impossible at this time to determine whether we will receive any or all amounts owed to us under the power purchase contracts or the settlement agreements, whether the utilities will continue to operate under the contracts and to what extent our investment in the affected partnerships will be impaired. For a more complete discussion, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--The California Power Crisis and Our Response." In addition, we cannot assure you that future developments with respect to the California power crisis will not have a material impact on our business and operations and our ability to meet our obligations under the notes. WE CANNOT PREDICT THE OUTCOME OF THE ONGOING CALIFORNIA PUBLIC UTILITIES COMMISSION INVESTIGATION. On April 3, 2001, the California Public Utilities Commission adopted an order instituting an investigation. The order reopens past Commission decisions authorizing the California investor-owned utilities to form holding companies and initiates an investigation into: - whether the holding companies violated requirements to give "first priority" to the capital needs of their respective utility subsidiaries in the recent energy crisis; - whether ring-fencing actions by Edison International and PG&E Corporation and their respective non-utility affiliates (including us) were an asset-shielding action that also violated requirements to give "first 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 later-discovered violations of laws or Commission rules and decisions; and - whether additional rules, conditions, or other changes to the holding company decisions are necessary. On June 6, 2001, in response to motions filed by the three holding companies (including Edison International) to dismiss the investigation for lack of subject matter jurisdiction, the Commission issued for comment a draft decision, which concluded, among other matters, that applicable law permits the Commission, even if the normal common law prerequisites for piercing the corporate structures are absent, to disregard the corporate forms within the holding company system "to reach the assets of or challenge the behaviors of entities within the holding company system" in order to protect ratepayers. Commissioner Henry Duque has issued a draft alternate decision that would grant the three holding companies' motions to dismiss the order as to themselves, finding lack of subject matter jurisdiction over them, and would direct the Commission's general counsel to file an action in state court to enforce the holding company conditions, if necessary. The alternate, as well as the draft decision that would deny the motions to dismiss, are presently on the Commission's agenda for its October 11 meeting. Either would require a vote of 3 out of 5 commissioners in order to be adopted. We are not a party to this investigatory proceeding. We cannot predict whether, when or in what form this order will be adopted, or what direct or indirect effects any subsequent action taken by the Commission in such proceeding or in any other action or proceeding, in reliance on the principles articulated in this order and in other applicable authority, may have on Edison International or on us. OUR ABILITY TO MEET CASH REQUIREMENTS DEPENDS UPON THE PERFORMANCE OF OUR SUBSIDIARIES. The original notes are, and the exchange notes will be, exclusively our obligations and will not be the obligations of any of our subsidiaries. Because substantially all our operations are conducted by our subsidiaries and other investments, our cash flow and ability to service our indebtedness or otherwise meet our financial obligations, including our ability to pay the interest on, and principal of, the notes 15 when due, are dependent upon the ability of our subsidiaries and other investments to generate earnings and have available cash sufficient to allow such entities to pay dividends and make distributions to us. In general, the ability of our subsidiaries and other investments to generate earnings and have available cash is subject to a number of risks, many of which are beyond our control, including changes in the regulatory environment, increased competition, fuel and energy commodity prices, natural disaster, foreign operating risk, financial environment and a downturn in the economy. In particular, as discussed above, the California power crisis has had, and is likely to continue to have, an adverse impact on our California partnership investments and may adversely affect the ability of these partnerships to make distributions to us. See "--The ongoing California power crisis has had, and is likely to continue to have, an adverse impact on us." In addition, financing agreements of our subsidiaries and other investments generally place limitations on the ability of those subsidiaries and other investments to pay dividends, make distributions or otherwise transfer funds to us. Financing agreements for our operating subsidiaries and affiliates are generally secured and contain representations, warranties, covenants and other agreements on our or the applicable subsidiary's or other investment's part that, if not met, could lead to a default under those agreements. If there is a default under a project financing for any reason, project lenders could exercise rights and remedies typically granted to secured parties, including the ability to take control of the project's assets and/or our ownership interest in the project company. In addition, we own less than all the equity interests in some of our projects, and so are unable unilaterally to cause dividends or distributions to be made to us from those projects. Lastly, many of our projects are located outside the United States. We have a general policy of not repatriating funds from our foreign projects and instead reinvest those funds in the foreign projects. Therefore, any distributions from foreign operations could be subject to additional taxes in the United States upon repatriation. These taxes could materially affect the amount of cash realized by us from dividends from our foreign projects. Accordingly, we cannot assure you that we will receive sufficient distributions from our subsidiaries to pay debt service on the notes when due. Any right of ours to receive any assets of any of our subsidiaries upon any liquidation or reorganization of a subsidiary, and the consequent right of holders of the notes to participate in distributions 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 our subsidiaries, Edison First Power, is not in compliance with a required financial ratio under the financing documents related to the acquisition of the Fiddler's Ferry and Ferrybridge plants located in the United Kingdom. In July, Edison First Power received a waiver for its breach of the required financial ratios under the financing documents. We cannot assure you that Edison First Power's creditors will continue to waive its non-compliance with requirements under the financing documents or that Edison First Power will satisfy the financial ratios in the future. The financing documents stipulate that a breach of the financial ratio covenant constitutes an immediate event of default. If the event of default is not waived, the financing parties are entitled to enforce their security interest over Edison First Power's assets, including the Fiddler's Ferry and Ferrybridge plants. We are currently offering for sale through a competitive bidding process the Fiddler's Ferry and Ferrybridge plants. If we are successful at selling the Ferrybridge and Fiddler's Ferry plants, it is likely that we will not recover any of our investment in the subsidiary that owns these assets. At June 30, 2001, that investment was $974 million. We plan to use the proceeds from the sale, if it occurs, to repay a portion or all of the indebtedness of the project. If we retain these plants, it is likely that we will not satisfy the interest coverage requirement set forth in the financing documents. See "Management Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Subsidiary Financing Plans--Status of Edison First Power Loan." Our subsidiary, Doga Enerji, owns 80% of the Doga project in Turkey. Doga Enerji has experienced delays in receiving payments from its power purchaser Turkiye Elektrik, A.S., also referred 16 to as TEAS. Doga Enerji is in the process of determining whether these delays will materially adversely affect the future cash flow projections for the project. Until such determination is made, Doga Enerji will not make a distribution for 2001. While such payment obligations are guaranteed by the Turkish Treasury, we cannot assure you that TEAS will make its payments on a timely basis. SOME OF OUR PROJECTS OPERATE WITHOUT LONG-TERM POWER PURCHASE AGREEMENTS AND ARE OR WILL BE SUBJECT TO MARKET FORCES THAT AFFECT THE PRICE OF POWER. Some of our projects do not have long-term power purchase agreements. Also, projects which we 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. We cannot assure you that these plants will be successful in selling power into their markets. If they are unsuccessful, they may not be able to generate enough cash to service their own debt or to make distributions to us. A SUBSTANTIAL AMOUNT OF OUR REVENUES ARE DERIVED UNDER POWER PURCHASE AGREEMENTS WITH A SINGLE CUSTOMER, AND WE MAY BE ADVERSELY AFFECTED IF THAT CUSTOMER FAILS TO FULFILL ITS OBLIGATIONS UNDER THOSE POWER PURCHASE AGREEMENTS. For the first six months of 2001, 27% of our consolidated operating revenues, and in 2000, 33% of our consolidated operating revenues, were derived under three power purchase agreements between our subsidiary, Midwest Generation, LLC, and Exelon Generation Company, a subsidiary of Exelon Corporation. These agreements were entered into in connection with our December 1999 acquisition of fossil fuel power generating plants in Illinois, which we refer to as the Illinois Plants. Exelon Corporation is the holding company of Commonwealth Edison and PECO Energy Company, major utilities located in Illinois and Pennsylvania. Electric revenues attributable to sales to Exelon Generation are earned from capacity and energy provided by the Illinois Plants under three five-year power purchase agreements expiring in 2004. Exelon Generation has the option to terminate two of these agreements in their entirety or with respect to any generating unit or units in each of 2002, 2003 and 2004. In June 2001, Exelon Generation provided our subsidiary with notice to continue the agreement related to the coal units for 2002. If Exelon Generation were to fail or become unable to fulfill or choose to terminate some of its obligations under these power purchase agreements, we may not be able to find another customer on similar terms for the output of our power generation assets. Any material failure by Exelon Generation Company to make payments under these power purchase agreements could adversely affect our results of operations and liquidity. OUR INTERNATIONAL PROJECTS ARE SUBJECT TO RISKS OF DOING BUSINESS IN FOREIGN COUNTRIES. Our 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 us and against which we 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 our equity contributions to, and distributions from, our international projects. At times, we have hedged a portion of our exposure to fluctuations in currency exchange rates. However, hedge contracts may involve risks, including default by the other party to the contract, and we 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 notes. Generally, the uncertainty of the legal structure in some foreign countries in which we may develop or acquire projects could make it more difficult to enforce our rights under agreements relating to the projects. In addition, the laws and regulations of some countries may limit our ability to hold a majority interest in some of the projects that we may develop or acquire. 17 The economic crisis in Indonesia has raised concerns over the ability of PT PLN, the state owned utility, to meet its obligations under its power purchase agreement with our Paiton project and has negatively affected and may continue to negatively affect that project's dividends to us. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Contingencies--Paiton." COMPETITION COULD ADVERSELY AFFECT OUR 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 we do. 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 we operate. Increased competition for new project investment opportunities may adversely affect our ability to develop or acquire projects on economically favorable terms. WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION. Our operations are subject to extensive regulation by governmental agencies in each of the countries in which we conduct operations. See "Business--Regulatory Matters." Our 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. Our projects are also subject to federal, state and local laws and regulations that govern the geographical location, zoning and land use of or with respect to a project. Our 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. We cannot assure you that the introduction of new laws or other future regulatory developments in countries in which we conduct business will not have a material adverse effect on our business, results of operations or financial condition, nor can we assure you that we will be able to obtain and comply with all necessary licenses, permits and approvals for our proposed energy projects. If we cannot comply with all applicable regulations, our business, results of operations and financial condition could be adversely affected. In addition, if any of our projects were to lose its status as a qualifying facility, eligible facility or foreign utility company under U.S. federal regulations, we could become subject to regulation as a "holding company" under the Public Utility Holding Company Act of 1935. If that were to occur, we 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 "Business--Regulatory Matters--U.S. Federal Energy Regulation." GENERAL OPERATING RISKS AND CATASTROPHIC EVENTS MAY ADVERSELY AFFECT OUR 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 errors, 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 our projects or increase their generating expenses, thus diminishing distributions by the projects to us and, as a result, our ability to make payments under the notes. Equipment and plant warranties and insurance obtained by us may not be adequate to cover lost revenues or increased expenses and, as a 18 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 of a project entity could cause us to lose our interest in the project. OUR FUTURE ACQUISITIONS AND DEVELOPMENT PROJECTS MAY NOT BE SUCCESSFUL. Our long-term strategy includes the development and acquisition of electric power generation facilities. The development projects and acquisitions in which we have invested, or in which we may invest in the future, may be large and complex, and we may not be able to complete the development or acquisition of any particular project. The development of a power project may require us to expend significant sums for preliminary engineering, permitting, legal and other expenses before we can determine whether we will win a competitive bid, or whether a project is feasible, economically attractive or financeable. Moreover, our access to capital for future projects is uncertain. Furthermore, due to the effects of the California power crisis on Edison International and Southern California Edison, we do not expect to receive capital contributions from Edison International in the near future. We cannot assure you that we will be successful in obtaining financing for our projects or that we will obtain sufficient additional equity capital, project cash flow or additional borrowings to enable us to fund the equity commitments required for future projects. YOU MAY HAVE DIFFICULTY SELLING THE NOTES THAT YOU DO NOT EXCHANGE. If you do not exchange your original notes for exchange notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your original notes described in the legend on your original notes. The restrictions on transfer of your original notes arise because we issued the original notes 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 notes 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 notes under the Securities Act. To the extent original notes are tendered and accepted in the exchange offer, the trading market, if any, for the original notes would be adversely affected. See "The Exchange Offer--Consequences of Exchanging or Failing to Exchange Original Notes." YOU MAY FIND IT DIFFICULT TO SELL YOUR NOTES BECAUSE THERE IS NO EXISTING TRADING MARKET FOR THE EXCHANGE NOTES. You may find it difficult to sell your notes because an active trading market for the notes may not develop. The exchange notes are being offered to the holders of the original notes. The original notes were issued on August 10, 2001, primarily to a small number of institutional investors. After the exchange offer, the trading market for the remaining untendered original notes could be adversely affected. There is no existing trading market for the exchange notes. We do not intend to apply for listing or quotation of the exchange notes 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, BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SGC Owen Securities Corporation, TD Securities (USA) Inc., and Westdeutsche Landesbank Girozentrale (Dusseldorf), the initial purchasers in the private offering of the original notes, have informed us that they intend to make a market in the exchange notes, 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 notes could be adversely affected. 19 BROKER-DEALERS OR NOTEHOLDERS MAY BECOME SUBJECT TO THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT. Any broker-dealer that: - exchanges its original notes in the exchange offer for the purpose of participating in a distribution of the exchange notes; or - resells exchange notes 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 notes 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 noteholder that exchanges its original notes in the exchange offer for the purpose of participating in a distribution of the exchange notes 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 noteholder. USE OF PROCEEDS We will not receive any proceeds from the exchange offer. In consideration for issuing the exchange notes, we will receive in exchange original notes of like principal amount, the terms of which are identical in all material respects to the exchange notes. The original notes surrendered in exchange for exchange notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the exchange notes will not result in any increase in our indebtedness. We have agreed to bear the expenses of the exchange offer. No underwriter is being used in connection with the exchange offer. On August 10, 2001, we issued and sold the original notes in an offering exempt from registration under the Securities Act. We used the proceeds of that offering, which were $400 million, to repay indebtedness under our corporate credit facilities. The interest rates on the credit facilities that we repaid averaged approximately 5.84% per annum as of the dates they were repaid. All of these credit facilities are scheduled to expire in October 2001. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources--Corporate Financing Plans." 20 CAPITALIZATION The following table sets forth our consolidated capitalization as of June 30, 2001 and as adjusted to reflect the issuance of the original notes and application of the proceeds from the issuance of the original notes as discussed in "Use of Proceeds." The information 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." CAPITALIZATION AS OF JUNE 30, 2001
AS ACTUAL ADJUSTED(1) --------- ----------- (IN MILLIONS) Short-Term Indebtedness................................ $ 819.8 $ 419.8 Long-Term Indebtedness(2).............................. 7,763.1 8,163.1 Preferred Securities................................... 325.7 325.7 --------- --------- Total Indebtedness................................. 8,908.6 8,908.6 Shareholder's Equity................................... 2,672.6 2,672.6 --------- --------- Total Capitalization............................... $11,581.2 $11,581.2 ========= =========
- ------------------------ (1) Represents the capitalization at June 30, 2001, as adjusted for the net proceeds from the issuance of the original notes. (2) Includes current maturities of long-term indebtedness. 21 SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth our selected consolidated financial data for the periods indicated. The selected consolidated financial data for the six month period ended June 30, 2001 were derived from the unaudited consolidated financial statements of Edison Mission Energy and our consolidated subsidiaries. The selected consolidated financial data for the years ended December 31, 1996, 1997, 1998, 1999 and 2000 were derived from the audited consolidated financial statements of Edison Mission Energy and our 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.
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------- ------------------- 1996 1997 1998 1999 2000 2000 2001 -------- -------- -------- -------- -------- -------- -------- (DOLLARS IN MILLIONS) (DOLLARS IN MILLIONS) (UNAUDITED) INCOME STATEMENT DATA: Operating revenues................................... $ 843.6 $ 975.0 $ 893.8 $1,635.9 $3,241.0 $1,460.2 $1,585.8 Operating expenses: Depreciation and amortization...................... 89.9 102.8 87.3 190.2 382.1 202.5 174.3 Other operating expenses........................... 386.6 478.3 456.0 1,019.3 2,028.1 1,004.7 1,105.3 ------- ------- ------- -------- -------- -------- -------- Total operating expenses......................... 476.5 581.1 543.3 1,209.5 2,410.2 1,207.2 1,279.6 ------- ------- ------- -------- -------- -------- -------- Operating income..................................... 367.1 393.9 350.5 426.4 830.8 253.0 306.2 Interest expense..................................... (164.2) (223.5) (196.1) (375.5) (721.5) (370.5) (328.9) Interest and other income............................ 40.7 53.9 50.9 55.8 74.0 42.4 34.7 Minority interest.................................... (69.5) (38.8) (2.8) (3.0) (3.2) (1.4) (7.5) ------- ------- ------- -------- -------- -------- -------- Income (loss) before income taxes.................... 174.1 185.5 202.5 103.7 180.1 (76.5) 4.5 Provision (benefit) for income taxes................. 82.0 57.4 70.4 (40.4) 72.5 (27.8) 1.7 ------- ------- ------- -------- -------- -------- -------- Income (loss) before accounting changes, and extraordinary loss............................................... 92.1 128.1 132.1 144.1 107.6 (48.7) 2.8 Cumulative effect on prior years of changes, in accounting, net of tax............................. -- -- -- (13.8) 17.7 17.7 6.0 Extraordinary loss on early extinguishment of debt, net of income tax benefit.......................... -- (13.1) -- -- -- -- -- ------- ------- ------- -------- -------- -------- -------- Net income (loss).................................... $ 92.1 $ 115.0 $ 132.1 $ 130.3 $ 125.3 $ (31.0) $ 8.8 ======= ======= ======= ======== ======== ======== ======== OTHER DATA: Ratio of earnings to fixed charges(1)(2)............. 1.42 1.64 1.69 1.18 1.23 0.81 0.93
- ------------------------------ (1) For purposes of computing the ratio of earnings to fixed charges, earnings are divided by fixed charges. "Earnings" represents the aggregate of our income before income taxes (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 expressed or capitalized), the amortization of debt discount and interest portion of rental expense. (2) For the six month periods ended June 30, 2001 and 2000, there was a fixed charge deficiency of $25.4 million and $76.6 million, respectively.
AS OF DECEMBER 31, AS OF ------------------------------------------------------ JUNE 30, 1996 1997 1998 1999 2000 2001 -------- -------- -------- --------- --------- ------------- (IN MILLIONS) (IN MILLIONS) (UNAUDITED) BALANCE SHEET DATA: Assets............................................... $5,152.5 $4,985.1 $5,158.1 $15,534.2 $15,017.1 $15,257.3 Current liabilities.................................. 270.9 339.8 358.7 1,772.8 3,911.0 3,031.2 Long-term obligations, less current portion.......... 2,419.9 2,532.1 2,396.4 7,439.3 5,334.8 6,349.3 Preferred securities of subsidiaries................. 150.0 150.0 150.0 476.9 326.8 325.7 Shareholder's equity................................. 1,019.9 826.6 957.6 3,068.5 2,948.2 2,672.6
22 THE EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER Upon the terms and conditions described in this prospectus and in the accompanying letter of transmittal, which together constitute the exchange offer, we will accept for exchange original notes 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, $400 million aggregate principal amount of the original notes is outstanding. This prospectus, together with the letter of transmittal, is first being sent on or about , 2001 to all holders of original notes known to us. Our obligation to accept original notes for exchange in the exchange offer is subject to the conditions described below 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 notes by giving oral or written notice of an extension to the holders of original notes as described below. During any extension period, all original notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any original notes not accepted for exchange will be returned to the tendering holder after the expiration or termination of the exchange offer. Original notes tendered in the exchange offer must be in denominations of principal amounts 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 notes 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 notes as promptly as practicable. If we materially change the terms of the exchange offer, we will resolicit tenders of the original notes, file a post-effective amendment to the registration statement of which this prospectus constitutes a part and provide notice to the noteholders. 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 noteholders 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 notes 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 Except as described below, 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 The Bank of New York at the address listed below under the heading "--Exchange Agent"; or - if notes 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." 23 In addition: - the exchange agent must receive, on or before the expiration date, certificates for the original notes; or - a timely confirmation of book-entry transfer of the original notes 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 Depository Trust Company will be referred to as DTC in this prospectus. The term "agent's message" means a message, transmitted to DTC and received by the exchange agent and forming a part of a book-entry transfer, that states that DTC 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 notes, 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 notes to us. If you are a beneficial owner whose original notes 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 DTC's book-entry transfer facility system may make book-entry delivery of the original notes by causing DTC to transfer the original notes into the exchange agent's account. Signatures on a letter of transmittal or a notice of withdrawal must be guaranteed unless the original notes surrendered for exchange are tendered: - by a registered holder of the original notes 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 notes 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 note not properly tendered or any which acceptance 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 note 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 note 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 notes 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 24 notification of any defect or irregularity in any tender of original notes. 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 notes, 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 notes must be endorsed or accompanied by appropriate powers of attorney. In either case, the original notes must be signed exactly as the name of any registered holder appears on the original notes. If the letter of transmittal or any original notes 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 notes are being acquired in the ordinary course of business of the person receiving the exchange notes, 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 notes. 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 notes. If any holder or other person is an "affiliate" of ours, as defined under Rule 405 of 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 notes, that holder or other person can 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. Each broker-dealer that receives exchange notes for its own account in exchange for original notes, where the original notes 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 notes. 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 NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all original notes properly tendered. We will issue the exchange notes promptly after acceptance of the original notes. See "--Conditions to the Exchange Offer" below. For purposes of the exchange offer, we will be deemed to have accepted properly tendered original notes 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 note accepted for exchange, the holder of the original note will receive an exchange note having a principal amount equal to that of the surrendered original note. The exchange notes will bear interest from the most recent date to which interest has been paid on the original notes. Accordingly, registered holders of exchange notes 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 notes accepted for exchange will cease to accrue interest from and after the date of completion of the exchange offer. Holders of original notes 25 whose original notes are accepted for exchange will not receive any payment for accrued interest on the original notes 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 notes. In all cases, issuance of exchange notes for original notes will be made only after timely receipt by the exchange agent of: - certificates for the original notes, or a timely book-entry confirmation of the original notes, 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 notes will be returned without expense to the tendering holder of the original notes. In the case of original notes tendered by book-entry transfer in accordance with the book-entry procedures described below, the non-exchanged original notes 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 for the original notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in DTC's systems must make book-entry delivery of original notes by causing DTC to transfer those original notes into the exchange agent's account at DTC in accordance with DTC's procedure for transfer. This participant should transmit its acceptance to DTC on or prior to the expiration date or comply with the guaranteed delivery procedures described below. DTC will verify this acceptance, execute a book-entry transfer of the tendered original notes into the exchange agent's account at DTC 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 DTC 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 notes issued in the exchange offer may be effected through book-entry transfer at DTC. 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: (1) 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 (2) comply with the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES If a registered holder of original notes desires to tender the original notes, and the original notes are not immediately available, or time will not permit the holder's original notes or other required documents to reach the exchange agent before the expiration date, or the 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, 26 (1) stating the name and address of the holder of original notes and the amount of original notes 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 notes, 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 notes, 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 notes 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 notes to be withdrawn; - identify the notes to be withdrawn, including the certificate number or numbers and principal amount of the original notes; - contain a statement that the holder is withdrawing his election to have the original notes exchanged; - be signed by the holder in the same manner as the original signature on the letter of transmittal by which the original notes were tendered, including any required signature guarantees, or be accompanied by documents of transfer to have the trustee with respect to the original notes register the transfer of the original notes in the name of the person withdrawing the tender; and - specify the name in which the original notes are registered, if different from that of the depositor. If certificates for original notes 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 notes 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 notes. We will determine all questions as to the validity, form and eligibility, including time of receipt, of notices of withdrawal. Any original notes so withdrawn will be deemed not to have been validly tendered for exchange. No exchange notes will be issued unless the original notes so withdrawn are validly re-tendered. Any original notes 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 notes tendered by book-entry transfer, the original notes will be credited to an account maintained with the book-entry transfer facility for the original notes. 27 Properly withdrawn original notes may be re-tendered by following the procedures described under "--Procedures for Tendering" 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 notes in exchange for, any original notes, and may terminate or amend the exchange offer, if at any time before the acceptance of the original notes for exchange or the exchange of the exchange notes for the original notes, 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, (2) resulting in a material delay in our ability to accept for exchange or exchange some or all of the original notes 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; or - 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 notes having obligations with respect to resales and transfers of exchange notes 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; or (2) any limitation by a governmental authority which may adversely affect our ability to complete the transactions contemplated by the exchange offer; or (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 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 notes or the exchange notes; which in our sole judgment in any case makes it inadvisable to proceed with the exchange offer and/or with such acceptance for exchange or with such exchange. 28 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 foregoing rights will not be deemed a waiver of any right. In addition, we will not accept for exchange any original notes tendered, and no exchange notes will be issued in exchange for any original notes, 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 indenture under the Trust Indenture Act of 1939. EXCHANGE AGENT We have appointed The Bank 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: The Bank of New York, EXCHANGE AGENT BY HAND BEFORE 4:30 P.M.: BY REGISTERED OR CERTIFIED MAIL: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street Seventh Floor E Seventh Floor E New York, NY 10286 New York, NY 10286 Attention: Carolle Montreuil Attention: Carolle Montreuil BY HAND OR OVERNIGHT DELIVERY AFTER 4:30 P.M. ON THE EXPIRATION DATE: The Bank of New York 101 Barclay Street Seventh Floor E New York, NY 10286 Attention: Carolle Montreuil FOR INFORMATION CALL: (212) 815-5920 BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (212) 815-6339 Attention: Customer Service CONFIRM BY TELEPHONE: (212) 815-5920
If you deliver the letter of transmittal to an address other than any address indicated above or transmit instructions via facsimile other than any facsimile number indicated, then your delivery or transmission will not constitute a valid delivery of the letter of transmittal. 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 $500,000. 29 ACCOUNTING TREATMENT We will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer. We will amortize the expense of the exchange offer over the term of the exchange notes under generally accepted accounting principles. TRANSFER TAXES Holders who tender their original notes for exchange will not be obligated to pay any related transfer taxes, except that holders who instruct us to register exchange notes in the name of, or request that original notes 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 NOTES Holders of original notes who do not exchange their original notes for exchange notes in the exchange offer will continue to be subject to the provisions in the indenture regarding transfer and exchange of the original notes and the restrictions on transfer of the original notes as described in the legend on the notes as a consequence of the issuance of the original notes 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 notes 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. As discussed in "Exchange Offer; Registration Rights," we do not currently anticipate that we will register original notes 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 notes issued in the exchange offer in exchange for original notes may be offered for resale, resold or otherwise transferred by holders of the original notes, other than any holder which is an "affiliate" of ours 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 notes 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 notes. However, the SEC has not considered the exchange offer in the context of a no-action letter. 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 notes and has no arrangement or understanding to participate in a distribution of exchange notes. If any holder is an affiliate of ours, 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 notes to be acquired in the exchange offer, that holder: (1) could not rely on the applicable interpretations of the staff of the SEC; and (2) 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 notes for its own account in exchange for original notes must acknowledge that the original notes 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 of the exchange notes. Furthermore, any broker-dealer that acquired any of its original notes 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 & 30 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 noteholder 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 notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification, with which there has been compliance, is available. The offer and sale of the exchange notes 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 notes in any state where an exemption from registration or qualification is required and not available. 31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS REGARDING EDISON MISSION ENERGY. THESE STATEMENTS ARE BASED ON OUR CURRENT PLANS AND EXPECTATIONS AND INVOLVE RISKS AND UNCERTAINTIES WHICH 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." UNLESS OTHERWISE INDICATED, THE INFORMATION PRESENTED IN THIS SECTION IS WITH RESPECT TO EDISON MISSION ENERGY AND OUR CONSOLIDATED SUBSIDIARIES. GENERAL We are an independent power producer engaged in the business of developing, acquiring, owning or leasing and operating electric power generation facilities worldwide. We also conduct energy trading and price risk management activities in power markets open to competition. Edison International is our ultimate parent company. Edison International also owns Southern California Edison, one of the largest electric utilities in the United States. We were formed in 1986 with two domestic operating projects. As of June 30, 2001, we owned interests in 33 domestic and 39 international operating power projects with an aggregate generating capacity of 27,798 megawatts (MW), of which our share was 22,923 MW. At that date, one domestic and five international projects, totaling 1,551 MW of generating capacity, of which our anticipated share will be approximately 926 MW, were in construction. At June 30, 2001, we had consolidated assets of $15.3 billion and total shareholder's equity of $2.7 billion. ACQUISITIONS, DISPOSITIONS AND SALE-LEASEBACK TRANSACTIONS Set forth below is a description of our acquisitions, dispositions and sale-leaseback transactions since January 1, 1998. ACQUISITION OF CBK POWER CO. LTD. In February 2001, we completed the acquisition of a 50% interest in CBK Power Co. Ltd. in exchange for $20 million. CBK Power has entered into a 25-year build-rehabilitate-transfer-and-operate agreement with National Power Corporation related to the 728 MW Caliraya-Botocan-Kalayaan (CBK) hydroelectric project located in the Philippines. Financing for this $460 million project comprises equity commitments of $117 million (our 50% share of which is $58.5 million) required to be made upon completion of the rehabilitation and expansion, currently scheduled for 2003, and debt financing which is in place for the remainder of the cost for this project. ACQUISITION OF SUNRISE PROJECT On November 17, 2000, we completed a transaction with Texaco Power & Gasification Holdings Inc. to purchase a proposed 560 MW gas-fired combined cycle project to be located in Kern County, California, referred to as the Sunrise project. The acquisition included all rights, title and interest held by Texaco in the Sunrise project, except that Texaco had an option to repurchase at cost a 50% interest in the project prior to its commercial operation which commenced on June 27, 2001. On June 25, 2001, Texaco exercised its option and repurchased a 50% interest for $84 million. As part of our acquisition of the Sunrise project, we also: (i) acquired from Texaco two gas turbines for the project and (ii) granted Texaco an option to acquire a 50% interest in 1,000 MW of future power plant projects we designate. The Sunrise project consists of two phases, with Phase I, a single-cycle gas-fired facility (320 MW), completed on June 27, 2001, and Phase II, conversion to a combined-cycle gas-fired facility (560 MW), currently scheduled to be completed in July 2003. We entered into a long-term power purchase agreement with the California Department of Water Resources on June 25, 2001. 32 The total purchase price of the Sunrise project from Texaco was $27.0 million. We funded the purchase with cash. The total estimated construction cost of this project through 2003 is approximately $455.0 million. The project intends to obtain project financing for a portion of the capital costs. ACQUISITION OF TRADING OPERATIONS OF CITIZENS POWER LLC On September 1, 2000, we completed a transaction with P&L Coal Holdings Corporation and Gold Fields Mining Corporation (Peabody) to acquire the trading operations of Citizens Power LLC and a minority interest in structured transaction investments relating to long-term power purchase agreements. The purchase price of $44.9 million was based on the sum of: (a) fair market value of the trading portfolio and the structured transaction investments at the date of the acquisition and (b) $25 million. The acquisition was funded with cash. As a result of this acquisition, we have expanded our trading operations beyond the traditional marketing of our electric power. By the end of the third quarter of 2000, the Citizens trading operations were merged into our own marketing operations under Edison Mission Marketing & Trading, Inc. ACQUISITION OF INTEREST IN ITALIAN WIND On March 15, 2000, we completed a transaction with UPC International Partnership CV II to acquire Edison Mission Wind Power Italy B.V., formerly known as Italian Vento Power Corporation Energy 5 B.V., which owns a 50% interest in a series of power projects that are in operation or under development in Italy. All the projects use wind to generate electricity from turbines which is sold under fixed-price, long-term tariffs. Assuming all the projects under development are completed, currently scheduled for 2002, the total capacity of these projects will be 283 MW. The total purchase price is 90 billion Italian Lira (approximately $44 million at December 31, 2000), with equity contribution obligations of up to 33 billion Italian Lira (approximately $16 million at December 31, 2000), depending on the number of projects that are ultimately developed. As of December 31, 2000, our payments in respect of these projects included $27 million toward the purchase price and $13 million in equity contributions. ACQUISITION OF ILLINOIS PLANTS On December 15, 1999, we completed a transaction with Commonwealth Edison, a subsidiary of Exelon Corporation, to acquire Commonwealth Edison's fossil-fuel power generating plants located in Illinois. These plants provide access to the Mid-America Interconnected Network and the East Central Area Reliability Council. In connection with this transaction, we entered into power purchase agreements with Commonwealth Edison with terms of up to five years expiring in 2004, pursuant to which Commonwealth Edison purchases capacity and has the right to purchase energy generated by the plants. Subsequently, Commonwealth Edison assigned its rights and obligations under these power purchase agreements to Exelon Generation Company, LLC. Exelon Generation has the option to terminate two of the three agreements in their entirety or with respect to any generating unit or units in each of 2002, 2003 and 2004. In June 2001, Exelon Generation provided us notice to continue the agreement related to the coal units for 2002. Concurrently with the acquisition of the Illinois Plants, we assigned our right to purchase the Collins Station, a 2,698 MW gas and oil-fired generating station located in Illinois, to third party lessors. After this assignment, we entered into leases of the Collins Station with terms of 33.75 years. The aggregate MW either purchased or leased as a result of these transactions with Commonwealth Edison and the third party lessors is 9,539 MW. Consideration for the Illinois Plants, excluding $860 million paid by the third party lessors to acquire the Collins Station, consisted of a cash payment of approximately $4.1 billion. The acquisition was funded primarily with a combination of approximately $1.6 billion of non-recourse debt secured by 33 a pledge of the stock of specified subsidiaries, $1.3 billion of our debt and $1.2 billion in equity contributions to us from Edison International. ACQUISITION OF FERRYBRIDGE AND FIDDLER'S FERRY PLANTS On July 19, 1999, we completed a transaction with PowerGen UK plc to acquire the Ferrybridge and Fiddler's Ferry coal fired electric generating plants located in the U.K. Ferrybridge, located in West Yorkshire, and Fiddler's Ferry, located in Warrington, each have a generating capacity of approximately 2,000 MW. Consideration for the purchase of the Ferrybridge and Fiddler's Ferry plants by our indirect subsidiary, Edison First Power, consisted of an aggregate of approximately $2.0 billion (L1.3 billion at the time of the acquisition) for the two plants. The acquisition was funded primarily with a combination of net proceeds of L1.15 billion from the Edison First Power Limited Guaranteed Secured Variable Rate Bonds due 2019, a $500 million equity contribution to us from Edison International and cash. The Edison First Power Bonds were issued to a special purpose entity formed by Merrill Lynch International. Merrill Lynch International sold the variable rate coupons portion of the bonds to a special purpose entity that borrowed $1.3 billion (L830 million at the time of the acquisition) under a term loan facility due 2012 to finance the purchase. For a description of the status of the loan and related matters, see "--Liquidity and Capital Resources--Subsidiary Financing Plans--Status of Edison First Power Loan." ACQUISITION OF INTEREST IN CONTACT ENERGY On May 14, 1999, we completed a transaction with the New Zealand government to acquire 40% of the shares of Contact Energy Limited. The remaining 60% of Contact Energy's shares were sold in a New Zealand and overseas public offering resulting in widespread ownership among the citizens of New Zealand and offshore investors. These shares are publicly traded on stock exchanges in New Zealand and Australia. During 2000, we increased our share of ownership in Contact Energy to 42.6%. Contact Energy owns and operates hydroelectric, geothermal and natural gas fired power generating plants primarily in New Zealand with a total current generating capacity of 2,247 MW. Consideration for our interest in Contact Energy consisted of a cash payment of approximately $635 million (NZ $1.2 billion), which was financed by $120 million of preferred securities, a $214 million (NZ $400 million at the time of the acquisition) credit facility, a $300 million equity contribution to us from Edison International and cash. The credit facility was subsequently paid off with proceeds from the issuance of additional preferred securities. During the second quarter of 2001, we completed the purchase of additional shares of Contact Energy for NZ$152 million, thereby increasing our ownership interest from 42.6% to 51.2%. Accordingly, we began accounting for Contact Energy on a consolidated basis effective June 1, 2001, upon acquisition of a controlling interest. Prior to June 1, 2001, we used the equity method of accounting for Contact Energy. In order to finance this purchase, we obtained a NZ$135 million, 364-day bridge loan from an investment bank under a credit facility which is to be syndicated by the bank. In addition to other security arrangements, a security interest over all Contact Energy shares held has been provided as collateral. In June and July 2001, we issued through one of our subsidiaries new preferred securities to repay the bridge loan. On July 2, 2001, we redeemed NZ$400 million EME Taupo preferred securities from the existing holders. Funding for the redemption of the existing preferred securities was provided by a NZ$400 million credit facility scheduled to mature in July 2005. The financing documents governing the credit facility provide that the credit facility may be funded under either, or a combination of, a letter of credit facility or a revolving credit facility. The NZ$400 million was originally funded as a revolving credit facility. 34 ACQUISITION OF HOMER CITY PLANT On March 18, 1999, we completed a transaction with GPU, Inc., New York State Electric & Gas Corporation and their respective affiliates to acquire the 1,884 MW Homer City Electric Generating Station. This facility is a coal-fired plant in the mid-Atlantic region of the United States and has direct, high voltage interconnections to both the New York Independent System Operator, which controls the transmission grid and energy and capacity markets for New York State and is commonly known as the NYISO, and the Pennsylvania-New Jersey-Maryland Power Pool, which is commonly known as the PJM. Consideration for the Homer City plant consisted of a cash payment of approximately $1.8 billion, which was partially financed by $1.5 billion of new loans, combined with our revolver borrowings and cash. ACQUISITION OF INTEREST IN ECOELECTRICA In December 1998, we acquired 50% of the 540 MW EcoElectrica liquefied natural gas combined-cycle cogeneration facility under construction in Penuelas, Puerto Rico for approximately $243 million. The project also includes a desalination plant and liquefied natural gas storage and vaporization facilities. Commercial operation commenced in March 2000. For information about the disposition of the EcoElectrica facility, see "--Dispositions." ACCOUNTING TREATMENT OF ACQUISITIONS Each of the acquisitions described above has been accounted for utilizing the purchase method. The purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair market values. Amounts in excess of the fair value of the net assets acquired have been assigned to goodwill. Our consolidated statement of income reflects the operations of Citizens beginning September 1, 2000, Italian Wind beginning April 1, 2000, EcoElectrica beginning March 1, 2000, the Homer City plant beginning March 18, 1999, Contact Energy beginning May 1, 1999, the Ferrybridge and Fiddler's Ferry plants beginning July 19, 1999, and the Illinois Plants beginning December 15, 1999. We began accounting for Contact Energy on a consolidated basis effective June 1, 2001, upon acquisition of a controlling interest. DISPOSITIONS On June 30, 2000, we completed the sale of our 50% interest in the Auburndale project to the existing partner. Proceeds from the sale were $22 million. We recorded a gain on the sale of $17.0 million ($10.5 million after tax). On August 16, 2000, we completed the sale of 30% of our interest in the Kwinana cogeneration plant to SembCorp Energy. We retain the remaining 70% ownership interest in the plant. Proceeds from the sale were $12 million. We recorded a gain on the sale of $8.5 million ($7.7 million after tax). On June 25, 2001, we completed the sale of a 50% interest in the Sunrise project to Texaco Power & Gasification Holdings Inc. Proceeds from the sale were $84 million. On June 29, 2001, we completed the sale of our 25% interest in the Hopewell project to the existing partner. Proceeds from the sale were $26.5 million. We recorded a gain on the sale of $5.4 million ($2.8 million after tax). Subsequent to June 30, 2001, we have entered into agreements, subject to obtaining consents from third parties and other conditions precedent to closing, for the sale of our interests in the EcoElectrica, Gordonsville, Commonwealth Atlantic, James River, Nevada Sun-Peak and Saguaro projects. In addition, we are currently offering for sale our interest in the Brooklyn Navy Yard project. We expect 35 the proceeds from the sale of our interests in the above projects, if completed, will be in excess of their book value with respect to those projects, which was $482 million at June 30, 2001. We are also offering for sale the Ferrybridge and Fiddler's Ferry plants in the United Kingdom. See "--Liquidity and Capital Resources--Subsidiary Financing Plans--Status of Edison First Power Loan." SALE-LEASEBACK TRANSACTIONS On August 24, 2000, we entered into a sale-leaseback transaction for 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), our subsidiary makes semi-annual lease payments on each January 2 and July 2, which began January 2, 2001. We guarantee our subsidiary's payments under the leases. If a lessor intends to sell its interest in the Powerton or Joliet power facility, we have a right of first refusal to acquire the interest at fair market value. Minimum lease payments during the next five years are $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 are $2.4 billion. Lease costs of these power facilities will be levelized over the terms of the respective leases. The gain on the sale of the power facilities has been deferred and is being amortized over the term of the leases. On July 10, 2000, one of our subsidiaries 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. We guaranteed the monthly payments under the lease. In connection with the sale-leaseback, a subsidiary of ours purchased $255 million of notes issued by the lessor which accrue interest at LIBOR plus 0.65% to 0.95%, depending on our credit rating. The notes are due and payable in 2005. The gain on the sale of equipment has been deferred and is being amortized over the term of the operating lease. MISSION ENERGY HOLDING COMPANY On June 8, 2001, Edison International created Mission Energy Holding Company as a wholly-owned indirect subsidiary. Mission Energy Holding's principal asset is our common stock. In July 2001, Mission Energy Holding issued $800 million of 13.50% senior secured notes due 2008. Concurrently with the consummation of the offering of its senior secured notes, Mission Energy Holding borrowed $385 million under a new term loan. The senior secured notes and the term loan are secured by a first priority security interest in our common stock. The respective rights, remedies and priorities of the holders of the senior secured notes and the lenders with respect to our stock are governed by intercreditor arrangements. Both the senior secured notes and the term loan also have security interest in interest reserve accounts, covering the interest payable on those obligations for the first two years. The net proceeds of the offering and the term loan not deposited into the respective interest escrow accounts were used to pay a dividend to Mission Energy Holding's parent, The Mission Group, which in turn loaned the net proceeds to its parent, Edison International. Edison International used the funds to repay a portion of its indebtedness that matures in 2001. The Mission Energy Holding financing documents contain restrictions on our ability and the ability of our subsidiaries to enter into specified transactions or engage in specified business activities and require in some instances that we obtain the approval of the Mission Energy Holding board of directors. Our articles of incorporation bind us to the restrictions in the Mission Energy Holding financing documents by restricting our ability to enter into specified transactions or engage in specified business activities, as set forth in the Mission Energy Holding financing documents, without shareholder approval. See "Risk Factors--Restrictions in our articles of incorporation, our credit facilities and the Mission Energy Holding financing documents limit or prohibit us from entering into specified transactions that we otherwise may enter into." 36 RESULTS OF OPERATIONS We operate predominantly in one line of business, electric power generation, with reportable segments organized by geographic region: Americas, Asia Pacific, and Europe, Central Asia, Middle East and Africa. Operating revenues are derived from our majority-owned domestic and international entities. Equity in income from investments relates to energy projects where our ownership interest is 50% or less in the projects. The equity method of accounting is generally used to account for the operating results of entities over which we have a significant influence but in which we do not have a controlling interest. With respect to entities accounted for under the equity method, we recognize our proportional share of the income or loss of such entities. AMERICAS
YEARS ENDED SIX MONTHS THREE MONTHS DECEMBER 31, ENDED JUNE 30, ENDED, JUNE 30, ------------------------------ ------------------- ------------------- 1998 1999 2000 2000 2001 2000 2001 -------- -------- -------- -------- -------- -------- -------- (IN MILLIONS) (IN MILLIONS) (IN MILLIONS) (UNAUDITED) (UNAUDITED) Operating revenues................. $ 29.9 $378.6 $1,571.0 $637.1 $687.2 $390.8 $379.7 Net gains (losses) from energy trading and price risk management....................... -- (6.4) (17.3) (33.8) 32.5 (32.1) 13.6 Equity in income from investments...................... 184.6 224.8 257.2 94.3 192.3 61.0 110.0 ------ ------ -------- ------ ------ ------ ------ Total operating revenues....... 214.5 597.0 1,810.9 697.6 912.0 419.7 503.3 Fuel and plant operations.......... 22.2 237.7 1,131.6 516.1 593.0 286.6 305.8 Depreciation and amortization...... 9.8 52.5 191.2 100.4 79.5 50.3 40.1 Administrative and general......... -- -- 21.1 -- 10.9 -- 5.1 ------ ------ -------- ------ ------ ------ ------ Operating income................... $182.5 $306.8 $ 467.0 $ 81.1 $228.6 $ 82.8 $152.3 ====== ====== ======== ====== ====== ====== ======
INTERIM RESULTS OPERATING REVENUES Operating revenues decreased $11.1 million for the second quarter ended June 30, 2001, compared to the corresponding period of 2000. The decrease was primarily due to lower dispatch from the coal units at the Illinois Plants as a result of lower market prices during the second quarter of 2001. Operating revenues increased $50.1 million for the six months ended June 30, 2001, compared to the same prior year period. The increase resulted from higher electric revenues from the Homer City plant due to higher energy prices and from the Illinois Plants due to increased generation from the coal units as a result of higher market prices, as compared to the same prior year period. Net gains from energy trading activities were $6.5 million and $2.4 million for the second quarter and six months ended June 30, 2001, respectively. There were no comparable gains or losses for the same prior year periods. Total gains and losses from price risk management activities increased $39.2 million and $63.9 million for the second quarter and six months ended June 30, 2001, respectively, compared to the corresponding periods of 2000. The increase in gains was primarily due to realized and unrealized gains for a gas swap purchased to hedge a portion of our gas price risk related to our share of gas production in Four Star, an oil and gas company in which we have a minority interest and which we account for under the equity method. Although we believe the gas swap hedges our gas price risk, hedge accounting is not permitted for our investments accounted for on the equity method. Partially offsetting this gain in the second quarter and six months ended June 30, 2001 was a 37 loss resulting from the change in market value of future contracts with respect to fuel purchases at the Illinois Plants that did not qualify for hedge accounting under SFAS No. 133. Equity in income from investments increased $49 million and $98 million during the second quarter and six months ended June 30, 2001, respectively, compared to the same prior year periods. The increase was primarily the result of higher revenues from cogeneration projects due to higher energy pricing during the six-month period ended June 30, 2001, and higher revenues from oil and gas investments due to higher oil and gas prices in the first quarter of 2001. Due to warmer weather during the summer months, electric revenues generated from the Homer City plant and the Illinois Plants are usually higher during the third quarter of each year. In addition, our third quarter equity in income from investments in energy projects is materially higher than other quarters of the year due to higher summer pricing for our West Coast power investments. OPERATING EXPENSES Fuel and plant operations increased $19.2 million and $76.9 million for the second quarter and six months ended June 30, 2001, respectively, compared to the corresponding periods of the prior year. The increase in plant operations resulted from lease costs related to the sale-leaseback commitments for the Powerton-Joliet power facilities and the Collins gas and oil-fired power plant. There were no comparable lease costs for the Powerton-Joliet power facilities during the six months ended June 30, 2000. In addition, plant operations increased due to higher major maintenance costs at the Illinois Plants during the six-month period ended June 30, 2001. The increase in fuel expense for the six months ended June 30, 2001, as compared to the same period last year, resulted from higher fuel costs at the Illinois Plants primarily due to higher natural gas and fuel oil prices. Depreciation and amortization expense decreased $10.2 million and $20.9 million for the second quarter and six months ended June 30, 2001, respectively, compared to the same periods last year. The decrease resulted from lower depreciation expense at the Illinois Plants related to the sale-leaseback transaction for the Powerton-Joliet power facilities to third-party lessors in August 2000. Administrative and general expenses for the quarter ended and six months ended June 30, 2001 consist of administrative and general expenses incurred at our trading operations in Boston, Massachusetts. Prior to September 1, 2000, the acquisition date of Citizens Power, administrative and general expenses incurred by our own marketing operations were reflected in Corporate/Other administrative and general expenses. OPERATING INCOME Operating income increased $69.5 million and $147.5 million during the second quarter and six months ended June 30, 2001, respectively, compared to the corresponding periods of the prior year. The increase was primarily due to operating income from the Homer City plant, equity in income from investments in energy projects and gains from price risk management activities discussed above. ANNUAL RESULTS OPERATING REVENUES Operating revenues increased $1.2 billion in 2000 compared to 1999, and increased $348.7 million in 1999 compared to 1998. The 2000 increase resulted from a full-year of electric revenues from the Illinois Plants acquired in December 1999 and the Homer City plant acquired in March 1999. The 1999 increase resulted from electric revenues from the Homer City plant. There were no comparable electric revenues for the Homer City plant for 1998. 38 Electric power generated at the Illinois Plants is sold under three five-year power purchase agreements with Exelon Generation Company terminating in December 2004. Exelon Generation is obligated to make capacity payments for the plants under contract and an energy payment for electricity produced by these plants. Our revenues under these power purchase agreements were $1.1 billion for the year ended December 31, 2000. On September 1, 2000, we acquired the trading operations of Citizens Power LLC. As a result of this acquisition, we have expanded our trading operations beyond the traditional marketing of our electric power. Our energy trading activities are accounted for using the fair value method under EITF 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." Net gains from energy trading activities since the date of the acquisition of trading operations of Citizens Power LLC through December 31, 2001 were $62.2 million. Our price risk management activities included economic hedge transactions that required mark to market accounting. Total losses from price risk management activities were $79.5 million and $6.4 million in 2000 and 1999, respectively. The increase in losses was primarily due to realized and unrealized losses for a gas swap entered into as an economic hedge of a portion of our gas price risk related to our share of gas production in Four Star (an oil and gas company in which we have a minority interest and which we account for under the equity method). Partially offsetting this loss 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 at the Illinois Plants. During the fourth quarter, we determined that it was no longer probable that we would purchase natural gas at the Illinois Plants 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 at the Illinois Plants, 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. Equity in income from investments rose 14% in 2000 over 1999, and 22% in 1999 over 1998. The 2000 increase was primarily the result of higher revenues from cogeneration projects due to higher energy pricing and higher revenues from oil and gas investments due to higher oil and gas prices. The 1999 increase was primarily the result of higher revenues from several cogeneration projects due to a final settlement on energy prices tied to short-run avoided cost with the applicable public utilities and, second, from one cogeneration project as a result of a gain on termination of a power sales agreement. In addition, the 1999 increase resulted from higher revenues from oil and gas investments primarily due to higher oil and gas prices. Many of the domestic energy projects rely on one power sales contract with a single electric utility customer for the majority, and in some cases all, of their power sales revenues over the life of the power sales contract. The primary power sales contracts for four of our operating projects in 2000 and 1999 and five of our operating projects in 1998 are or were with Southern California Edison. Our share of equity in earnings from these projects accounted for 5% in 2000, 8% in 1999 and 13% in 1998 of our consolidated revenues for the respective years. For more information on these projects and other projects in California, see "--Contingencies--The California Power Crisis." 39 OPERATING EXPENSES Fuel and plant operations increased $893.9 million in 2000 compared to 1999, and increased $215.5 million in 1999 compared to 1998. The 2000 increase resulted from a full year of expenses at the Illinois Plants and the Homer City plant. The 1999 increase in fuel and plant operations resulted from having no comparable expenses for the Homer City plant and the Illinois Plants for 1998. Depreciation and amortization expense increased $138.7 million in 2000 compared to 1999, and increased $42.7 million in 1999 compared to 1998. The 2000 increase was primarily due to a full year of depreciation and amortization expense related to the Illinois Plants. The 1999 increase in depreciation and amortization compared to 1998 resulted primarily from the 1999 acquisition of the Homer City plant. Administrative and general expenses for 2000 consist of administrative and general expenses incurred at our trading operations in Boston, Massachusetts from September 1, 2000. Prior to September 1, 2000, the acquisition date of Citizens Power, administrative and general expenses incurred by our own marketing operations were reflected in Corporate/Other administrative and general expenses. OPERATING INCOME Operating income increased $160.2 million in 2000 compared to 1999, and increased $124.3 million in 1999 compared to 1998. The 2000 increase was primarily due to operating income from the Illinois Plants, the Homer City plant and equity in income from investments in oil and gas. The 1999 increase resulted from operating income from the Homer City plant and equity in income from investments in energy projects. ASIA PACIFIC
YEARS ENDED SIX MONTHS THREE MONTHS DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30, ------------------------------ ------------------- ------------------- 1998 1999 2000 2000 2001 2000 2001 -------- -------- -------- -------- -------- -------- -------- (IN MILLIONS) (IN MILLIONS) (IN MILLIONS) (UNAUDITED) (UNAUDITED) Operating revenues..................... $205.1 $213.6 $184.2 $93.1 $138.6 $40.8 $92.4 Net gains from energy trading and price risk management...................... -- -- -- -- 0.1 -- 0.6 Equity in income from investments...... 1.3 18.1 14.6 4.4 7.0 1.7 3.9 ------ ------ ------ ----- ------ ----- ----- Total operating revenues........... 206.4 231.7 198.8 97.5 145.7 42.5 96.9 Fuel and plant operations.............. 69.6 73.8 61.5 32.5 58.2 15.7 43.2 Depreciation and amortization.......... 31.6 40.5 35.0 18.0 16.5 7.4 8.3 ------ ------ ------ ----- ------ ----- ----- Operating income....................... $105.2 $117.4 $102.3 $47.0 $ 71.0 $19.4 $45.4 ====== ====== ====== ===== ====== ===== =====
INTERIM RESULTS OPERATING REVENUES Operating revenues increased $51.6 million and $45.5 million for the second quarter and six months ended June 30, 2001, respectively, compared to the corresponding periods of 2000. The increase was primarily due to consolidating Contact Energy operating revenues due to acquiring a controlling interest in the project, effective June 1, 2001. The increase was partially offset by lower electric revenues from the Loy Yang B plant in Australia due to a 14.4% decrease in the average 40 exchange rate of the Australian dollar compared to the U.S. dollar at the six-month period ended June 30, 2001, compared to the same prior year period. Net gains from price risk management activities were $0.6 million and $0.1 million for the second quarter and six months ended June 30, 2001, respectively. There were no comparable gains or losses for the same prior year periods. The gains primarily represent the ineffective portion of a long-term contract with the State Electricity Commission of Victoria and interest rate swaps entered into by Loy Yang B plant, which are derivatives that qualified as cash flow hedges under SFAS No. 133. Equity in income from investments increased $2.2 million and $2.6 million during the second quarter and six months ended June 30, 2001, respectively, compared to the same prior year periods. The increase primarily reflects gains from Contact Energy through May 31, 2001 due to higher wholesale electricity prices in the current year. OPERATING EXPENSES Fuel and plant operations increased $27.5 million and $25.7 million for the second quarter and six months ended June 30, 2001, respectively, compared to the corresponding periods of 2000. The increase was primarily due to consolidating Contact Energy operating expenses, effective June 1, 2001. OPERATING INCOME Operating income increased $26 million and $24 million during the second quarter and six months ended June 30, 2001, respectively, compared to the corresponding periods of 2000. The increase was primarily due to consolidating Contact Energy results of operations, effective June 1, 2001. Prior to June 1, 2001, we used the equity method of accounting for Contact Energy. ANNUAL RESULTS OPERATING REVENUES Operating revenues decreased $29.4 million in 2000 compared to 1999, and increased $8.5 million in 1999 compared to 1998. The 2000 decrease was attributable to lower electric revenues from our Loy Yang B plant. During May 2000, we experienced a major outage due to damage to the generator at one of our two 500 MW units at the Loy Yang B power plant complex in Australia. The unit was restored to operation in September 2000. Under our insurance program, we are obligated for the property damage insurance deductible of $2 million and for loss of profits during the first 15 days following the insurable event. The repair costs in excess of the deductible amount together with the loss of profits after the first 15 days and until the unit was back in operation were partially recovered from insurance as of December 31, 2000. The 1999 increase was primarily due to higher electric revenues from the Loy Yang B plant due to increased generation in 1999; as compared to 1998, when the plant experienced longer planned outages. Equity in income from investments decreased $3.5 million in 2000 compared to 1999, and increased $16.8 million in 1999 compared to 1998. The 2000 decrease is primarily due to lower profitability of our interest in Contact Energy resulting from lower electricity prices caused by milder winter weather conditions. The 1999 increase reflects the purchase of our 40% ownership interest in Contact Energy in May 1999. 41 OPERATING EXPENSES Fuel and plant operations decreased $12.3 million in 2000 compared to 1999, and increased $4.2 million in 1999 compared to 1998. The 2000 decrease resulted primarily from lower fuel costs at the Loy Yang B plant due to the major outage at one of its two 500 MW units. The 1999 increase in fuel expense and plant operations resulted from higher fuel costs from the Loy Yang B plant due to increased production in 1999; as compared to 1998, when the plant had lower fuel expenses and longer planned outages. Depreciation and amortization expense decreased $5.5 million in 2000 compared to 1999, and increased $8.9 million in 1999 compared to 1998. The 2000 decrease was primarily due to favorable changes in foreign exchange rates. The 1999 increase in depreciation and amortization expense related to the acquisition of our interest in 1999 in the Contact Energy project. OPERATING INCOME Operating income decreased $15.1 million in 2000 compared to 1999, and increased $12.2 million in 1999 compared to 1998. The 2000 decrease was due to lower operating income from the Loy Yang B plant resulting from the major outage at one of its two 500 MW units and a decrease in the value of the Australian dollar compared to the U.S. dollar. We recorded pre-tax losses of $8.4 million in 2000 related to this outage. The 1999 increase resulted from the acquisition of Contact Energy. EUROPE, CENTRAL ASIA, MIDDLE EAST AND AFRICA
YEARS ENDED SIX MONTHS THREE MONTHS DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30, ------------------------------ ------------------- ------------------- 1998 1999 2000 2000 2001 2000 2001 -------- -------- -------- -------- -------- -------- -------- (IN MILLIONS) (IN MILLIONS) (IN MILLIONS) (UNAUDITED) (UNAUDITED) Operating revenues......................... $469.4 $805.8 $1,236.3 $668.7 $540.6 $265.8 $217.9 Net losses from energy trading and price risk management.......................... -- -- -- -- (14.1) -- (3.9) Equity in income (loss) from investments... 3.5 1.4 (5.0) (3.7) 0.3 (4.8) 1.1 ------ ------ -------- ------ ------ ------ ------ Total operating revenues............... 472.9 807.2 1,231.3 665.0 526.8 261.0 215.1 Fuel and plant operations.................. 241.3 456.6 730.1 382.3 381.0 156.4 181.9 Depreciation and amortization.............. 40.3 88.3 144.8 74.6 72.9 36.9 37.7 ------ ------ -------- ------ ------ ------ ------ Operating income (loss).................... $191.3 $262.3 $ 356.4 $208.1 $ 72.9 $ 67.7 $ (4.5) ====== ====== ======== ====== ====== ====== ======
INTERIM RESULTS OPERATING REVENUES Operating revenues decreased $47.9 million and $128.1 million for the second quarter and six months ended June 30, 2001, respectively, compared to the corresponding periods of the prior year. The decrease resulted primarily from lower electric revenues from the Ferrybridge and Fiddler's Ferry plants and the First Hydro plant due to lower energy prices and an 8.2% decrease in the average exchange rate of the pound sterling compared to the U.S. dollar at the six-month period ended June 30, 2001, compared to the same prior year period. The time weighted average System Marginal Price decreased from L21.3/MWh during the quarter ended March 31, 2000 to L18.6/MWh during the quarter ended March 31, 2001. On March 27, 2001, the United Kingdom pool pricing system was replaced with a bilateral physical trading system referred to as the new electricity trading arrangements, therefore eliminating the System Marginal Price. The new electricity trading arrangements are described in further detail under "--Market Risk Exposures--United Kingdom." These new electricity 42 trading arrangements have resulted in lower forward contract prices for the quarter ended June 30, 2001, compared to the quarter ended June 30, 2000. The First Hydro plant, Ferrybridge and Fiddler's Ferry plants and the Iberian Hy-Power plants generally provide higher electric revenues during the winter months. Net losses from price risk management activities were $3.9 million and $14.1 million for the second quarter and six months ended June 30, 2001, respectively. There were no comparable gains or losses for the same prior year periods. The losses primarily represent the change in market value of electricity rate swap agreements that were recorded at fair value under SFAS No. 133 with changes in fair value recorded through the income statement. Equity in income from investments increased $5.9 million and $4 million during the second quarter and six months ended June 30, 2001, respectively, compared to the same prior year periods. The increase reflects lower losses during the second quarter ended June 30, 2001, compared to the corresponding period in 2000 from the ISAB project, which commenced operations in April 2000. We had no comparable results for the ISAB project in the first quarter of 2000. OPERATING EXPENSES Fuel and plant operations increased $25.5 million for the quarter ended June 30, 2001, compared to the corresponding period in 2000. The increase in fuel expense resulted from higher fuel costs at the Doga plant due to increased production in the second quarter of 2001, compared to the same prior year quarter, when the plant experienced more unplanned outages. In addition, fuel costs increased at the First Hydro plant due to higher overnight prices and imbalance charges. The increase in plant operations resulted primarily from higher overhaul costs at the Ferrybridge and Fiddler's Ferry plants during the quarter ended June 30, 2001, compared to the corresponding period in 2000. Fuel and plant operations decreased $1.3 million for the six months ended June 30, 2001, compared to the same prior year period. The decrease in fuel expense and plant operations resulted primarily from a decrease in the average exchange rate of the pound sterling compared to the U.S. dollar. In addition, plant operations decreased from lower production at the Ferrybridge and Fiddler's Ferry plants during the first six months of 2001. Partially offsetting these decreases were higher fuel costs and plant operation expenses for the Doga plant due to increased production in the first six months of 2001, compared to the same prior year period. OPERATING INCOME Operating income decreased $72.2 million and $135.2 million during the second quarter and six months ended June 30, 2001, respectively, compared to the same prior year periods. The decrease was due to lower operating income from the Ferrybridge and Fiddler's Ferry plants, the First Hydro plant and the Doga plant. ANNUAL RESULTS OPERATING REVENUES Operating revenues increased $430.5 million in 2000 compared to 1999, and increased $336.4 million in 1999 compared to 1998. The 2000 increase resulted from a full year of electric revenues from the Ferrybridge and Fiddler's Ferry plants acquired in July 1999 and the Doga project, which commenced commercial operation in May 1999. Despite the overall increase in operating revenues in 2000 which resulted from the inclusion of a full year of operations of these projects, electric revenues from Ferrybridge and Fiddler's Ferry in 2000 were adversely affected by lower energy prices during the year, primarily due to increased competition, milder winter weather and uncertainty surrounding planned changes in electricity trading arrangements described below under "--Market Risk 43 Exposures--United Kingdom." The time weighted average System Marginal Price dropped from L22.39/MWh in 1999 to L18.75/MWh in 2000. We have entered into electricity rate price swaps for the majority of our forecasted generation through the winter 2000/2001, and accordingly, have mitigated the downside risks to further decreases in energy prices during this period. Despite improvement in capacity prices during August, September and early October 2000, and a slight firming of forward prices, the short-term prices for energy continued to be below the prices in prior years. As a result of the foregoing, we continue to expect lower revenues from our Ferrybridge and Fiddler's Ferry plants in 2001. The 1999 increase as compared to 1998 was primarily due to inclusion of electric revenues from the Ferrybridge and Fiddler's Ferry plants and the Doga project. There were no comparable electric revenues for the Ferrybridge and Fiddler's Ferry plants and the Doga project for 1998. Equity in income from investments decreased $6.4 million in 2000 compared to 1999, and decreased $2.1 million in 1999 compared to 1998. The 2000 decrease reflects losses from initial commercial operation of the ISAB project in April 2000. We had no comparable results for the ISAB project in 1999. OPERATING EXPENSES Fuel and plant operations increased $273.5 million in 2000 compared to 1999, and increased $215.3 million in 1999 compared to 1998. The 2000 increase resulted from a full year of expenses at the Ferrybridge and Fiddler's Ferry plants and the Doga project, partially offset by lower fuel expense at the First Hydro plant. Fuel expense at First Hydro decreased primarily due to a drop in energy prices throughout the year and lower pumping costs. The 1999 increase in fuel expense and plant operations resulted from having no comparable expenses for the Ferrybridge and Fiddler's Ferry plants and the Doga project for 1998. Depreciation and amortization expense increased $56.5 million in 2000 compared to 1999, and increased $48 million in 1999 compared to 1998. The 2000 increase was primarily due to a full year of depreciation and amortization expense associated with the Ferrybridge and Fiddler's Ferry plants. The 1999 increase in depreciation and amortization resulted primarily from the 1999 acquisition of the Ferrybridge and Fiddler's Ferry plants. OPERATING INCOME Operating income increased $94.1 million in 2000 compared to 1999, and increased $71 million in 1999 compared to 1998. The 2000 increase was primarily due to operating income from the Ferrybridge and Fiddler's Ferry plants, the Doga project and higher operating income from the First Hydro plant. The 1999 increase resulted from the inclusion of operating income from the Ferrybridge and Fiddler's Ferry plants and the Doga project. CORPORATE/OTHER
YEARS ENDED SIX MONTHS THREE MONTHS DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30, ------------------------------ ------------------- ------------------- 1998 1999 2000 2000 2001 2000 2001 -------- -------- -------- -------- -------- -------- -------- (IN MILLIONS) (IN MILLIONS) (IN MILLIONS) (UNAUDITED) (UNAUDITED) Net gains from energy trading and price risk management................................ $ -- $ -- $ -- $ -- $ 1.3 $ -- $ 0.4 Depreciation and amortization............... 5.6 8.9 11.1 9.4 5.4 4.8 2.6 Long-term incentive compensation............ 39.0 136.3 (56.0) -- (2.9) -- 0.8 Administrative and general.................. 83.9 114.9 139.8 73.8 65.1 39.7 33.4 ------- ------- ------ ------ ------ ------ ------ Operating loss.............................. $(128.5) $(260.1) $(94.9) $(83.2) $(66.3) $(44.5) $(36.4) ======= ======= ====== ====== ====== ====== ======
44 INTERIM RESULTS Net gains from price risk management activities were $0.4 million and $1.3 million for the second quarter and six months ended June 30, 2001, respectively. There were no comparable gains or losses for the same prior year periods. The gains primarily resulted from the change in market value of our interest rate swaps with respect to our $100 million senior notes that did not qualify for hedge accounting under SFAS No. 133 Long-term incentive compensation expense consists of charges related to our terminated phantom option plan. We recorded an adjustment to our long-term incentive compensation accrual during the six months ended June 30, 2001 for changes in the market value of stock equivalent units. Administrative and general expenses decreased $6.3 million and $8.7 million for the second quarter and six months ended June 30, 2001, respectively, compared to the corresponding periods of 2000. The decrease was the result of lower administrative and general operating costs. ANNUAL RESULTS Long-term incentive compensation expenses decreased $192.3 million in 2000 compared to 1999, and increased $97.3 million in 1999 compared to 1998. The 2000 decrease was due to the absence of new accruals, as the plan had been terminated, and to a reduction in the liability for previously accrued incentive compensation by approximately $60 million. This decrease resulted from the lower valuation implicit in the August 2000 exchange offer pursuant to which the phantom option plan was terminated compared to the value previously accrued. The 1999 increase was primarily due to the impact of the 1999 acquisitions of the Illinois Plants, the Ferrybridge and Fiddler's Ferry plants, the Homer City plant and a 40% interest in Contact Energy. No further phantom option plan grants were made in 2000 and, since the plan and all the outstanding phantom stock options have been terminated, no further phantom stock options will be granted or exercised. Administrative and general expenses increased $24.9 million in 2000 compared to 1999, and increased $31 million in 1999 compared to 1998. The increases in both periods were primarily due to additional salaries and facilities costs incurred to support the 1999 acquisitions. We recorded a pretax charge of approximately $9 million against earnings for severance and other related costs, which contributed to the 2000 increase. The charge resulted from a series of actions undertaken by us designed to reduce administrative and general operating costs, including reductions in management and administrative personnel. OTHER INCOME (EXPENSE) INTERIM RESULTS Interest and other income increased $5.5 million for the six months ended June 30, 2001, compared to the same prior year period. The increase was primarily due to higher interest income and foreign exchange gains on intercompany loans. Higher interest income resulted from the $255 million of notes purchased in connection with the sale-leaseback of the Illinois peaker power units in July 2000. On June 29, 2001, we completed the sale of our 25% interest in the Hopewell project to the existing partner. Proceeds from the sale were $26.5 million. We recorded a gain on the sale of $5.4 million ($2.8 million after tax). On June 30, 2000, we completed the sale of our 50% interest in the Auburndale project to the existing partner. Proceeds from the sale were $22 million. We recorded a gain on the sale of $17.0 million ($10.5 million after tax). Interest expense decreased $18.5 million and $37.7 million for the second quarter and six months ended June 30, 2001, respectively, compared to the same prior year periods. The decrease was 45 primarily the result of payment on our $500 million floating rate notes issued in December 1999 and subsequently paid in September 2000, lower interest rates on debt financing associated with the Illinois Plants and favorable changes in foreign exchange rates. Minority interest expense increased $6.5 million and $6.1 million for the second quarter and six months ended June 30, 2001, respectively, compared to the same prior year periods. The increase was due to accounting for Contact Energy on a consolidated basis, effective June 1, 2001, due to the purchase of additional shares of Contact Energy that resulted in our ownership interest increasing from 42.6% to 51.2%. ANNUAL RESULTS On August 16, 2000, we completed the sale of 30% of our interest in the Kwinana cogeneration plant to SembCorp Energy. We retain the other 70% ownership interest in the plant. Proceeds from the sale were $12 million. We recorded a gain on the sale of $8.5 million ($7.7 million after tax). During the fourth quarter of 1999, we completed the sale of 31.5% of our 50.1% interest in Four Star Oil & Gas for $34.2 million in cash and a 50% interest in the acquirer, Four Star Holdings. Four Star Holdings financed the purchase of the interest in Four Star Oil & Gas from $27.5 million in loans from affiliates, including $13.7 million from us, and $13.7 million from cash. Upon completion of the sale, we continue to own an 18.6% direct interest in Four Star Oil & Gas and an indirect interest of 15.75% which is held through Four Star Holdings. As a result of this transaction, our total interest in Four Star Oil & Gas has decreased from 50.1% to 34.35%. Cash proceeds from the sale were $34.2 million ($20.5 million net of the loan to Four Star Holdings). The gain on the sale of the 31.5% interest in Four Star Oil & Gas was $11.5 million of which we deferred 50%, or $5.6 million, due to our equity interest in Four Star Holdings. The after-tax gain on the sale was approximately $30 million. Interest expense increased $336.2 million in 2000 compared to 1999, and increased $170.3 million in 1999 compared to 1998. The 2000 increase was primarily the result of additional debt financing associated with the acquisitions of the Illinois Plants, Ferrybridge and Fiddler's Ferry plants and the Homer City plant. The 1999 increase was also the result of debt financing of the Homer City plant, Ferrybridge and Fiddler's Ferry plants and the Illinois Plants acquisition. Dividends on mandatorily redeemable preferred securities increased $9.7 million in 2000 compared to 1999 and increased $9.2 million in 1999 compared to 1998. The 2000 and 1999 increases reflect the issuance of preferred securities in connection with the Contact Energy acquisition. PROVISION (BENEFIT) FOR INCOME TAXES INTERIM RESULTS During the six months ended June 30, 2001, we recorded an effective tax provision rate of 39% based on projected income for the year and benefits under our tax sharing agreement, compared to the annual effective tax benefit rate for the first six months of 2000 of 36%. ANNUAL RESULTS We had effective tax provision (benefit) rates of 40.3%, (39.0%) and 34.8% in 2000, 1999 and 1998, respectively. Income taxes increased in 2000 principally due to a higher foreign income tax expense compared to 1999, nonrecurring 1999 tax benefits discussed below and higher state income taxes due to the Homer City plant and Illinois Plants. Income taxes decreased in 1999, principally due to lower pre-tax income and income tax benefits. In 1999, we recorded tax benefits associated with a capital loss attributable to the sale of a portion of our interest in Four Star Oil & Gas Company, refunds of advanced corporation tax payments from the United Kingdom and a reduction in deferred taxes in Australia as a result of a decrease in statutory rates. In addition, our effective tax rate has 46 decreased as a result of lower foreign income taxes that result from the permanent reinvestment of earnings from foreign affiliates located in different foreign tax jurisdictions. The Australian corporate tax rate decreased from 36% to 34% effective in July 2000, and is scheduled to decrease from 34% to 30% effective in July 2001. The 1998 tax provision reflects a benefit from reductions in the U.K. corporate tax rate from 33% to 31% effective in April 1997, and from 31% to 30% effective in April 1999. In accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," the reductions in the Australia and U.K. income tax rates resulted in reductions in income tax expense of approximately $5.9 million and $11 million in 1999 and 1998, respectively. We are, and may in the future be, under examination by tax authorities in varying tax jurisdictions with respect to positions we take in connection with the filing of our tax returns. Matters raised upon audit may involve substantial amounts, which, if resolved unfavorably, an event not currently anticipated, could possibly be material. However, in our opinion, it is unlikely that the resolution of any those matters will have material adverse effect upon our financial condition or results of operations. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE Effective January 1, 2001, we adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that derivative instruments be recorded in the balance sheet as either assets or liabilities measured at their fair value unless they meet an exception. 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. Our primary market risk exposures arise from changes in electricity and fuel prices, interest rates, and fluctuations in foreign currency exchange rates. We manage these risks in part by using derivative financial instruments in accordance with established policies and procedures. Effective January 1, 2001, we record all derivatives at fair value unless the derivatives qualify for the normal sales and purchases exception. This exception applies to physical sales and purchases of power or fuel where it is probable that physical delivery will occur, the pricing provisions are clearly and closely related to the contracted prices and the documentation requirements of SFAS No. 133, as amended, are met. The majority of our physical long-term power and fuel contracts, and the similar business activities of our affiliates, qualify under this exception. The majority of our remaining risk management activities, including forward sales contracts from our Homer City plant, qualify for treatment under SFAS No. 133 as cash flow hedges with appropriate adjustments made to other comprehensive income. The hedge agreement we have with the State Electricity Commission of Victoria for electricity prices from our Loy Yang B project in Australia qualifies as a cash flow hedge. This contract could not qualify under the normal sales and purchases exception because financial settlement of the contract occurs without physical delivery. Some of our derivatives did not qualify for either the normal sales and purchases exception or as cash flow hedges. These derivatives are recorded at fair value with subsequent changes in fair value recorded through the income statement. The majority of our activities related to the Ferrybridge and Fiddler's Ferry power plants in the United Kingdom and fuel contracts related to the Collins Station in Illinois do not qualify for either the normal purchases and sales exception or as cash flow hedges. In both these situations, we could not conclude, based on information available at June 30, 2001, that the timing of generation from these power plants met the probable requirement for a specific forecasted transaction under SFAS No. 133. Accordingly, the majority of these contracts are recorded at fair value, with subsequent 47 changes in fair value reflected in net gains (losses) from energy trading and price risk management in the consolidated income statement. As a result of the adoption of SFAS No. 133, we expect our quarterly earnings will be more volatile than earnings reported under our prior accounting policy. We recorded a $6 million, after tax, increase to net income as the cumulative change in the accounting for derivatives during the quarter ended March 31, 2001. In addition, we recorded a $230 million, after tax, unrealized holding loss upon adoption of a change in accounting principle reflected in accumulated other comprehensive loss in the consolidated balance sheet. During the quarter ended June 30, 2001, we recorded a $120 million, after tax, unrealized holding gain reflected in accumulated other comprehensive loss in the consolidated balance sheet. We recorded a loss of $0.3 million, after tax, and $7.4 million, after tax, for the quarter ended and six months ended June 30, 2001, respectively, as the change in the fair value of derivatives required under SFAS No. 133 that previously qualified for hedge accounting. We also recorded a net gain of $1.5 million and $1.6 million for the quarter ended and six months ended June 30, 2001, respectively, representing the amount of cash flow hedges ineffectiveness, reflected in net gains (losses) from energy trading and price risk management in the consolidated income statement. The Derivative Implementation Group of the Financial Accounting Standards Board has recently provided guidance on the normal sales and purchases exception that affects classification on commodity contracts. We did not use the normal sales and purchases exception for forward sales contracts from our Homer City plant due to our net settlement procedures with counterparties for the period between January 1, 2001 through June 30, 2001. Effective July 1, 2001, the Derivative Implementaton Group of the Financial Accounting Standards Board extended the normal sales and purchases exception to include forward sales contracts subject to net settlement procedures with counterparties. Accordingly, we intend to use the normal sales and purchases exception for our Homer City forward sales contracts commencing July 1, 2001 and plan to record a cumulative change in the accounting for derivatives during the quarter ended September 30, 2001. We are currently evaluating the impact of the implementation guidance on our remaining commodity contracts, which would be accounted for on a prospective basis. Through December 31, 1999, we accrued for major maintenance costs incurred during the period between turnarounds (referred to as "accrue in advance" accounting method). In March 2000, we voluntarily decided to change our accounting policy to record major maintenance costs as an expense as incurred. This change in accounting policy is considered preferable based on guidance provided by the Securities and Exchange Commission. In accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes," we recorded a $17.7 million, after tax, increase to net income, as a cumulative change in the accounting for major maintenance costs during the quarter ended March 31, 2000. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities," which became effective in January 1999. The Statement requires that specified costs related to start-up activities be expensed as incurred and that specified previously capitalized costs be expensed and reported as a cumulative change in accounting principle. The reduction to our net income that resulted from adopting SOP 98-5 was $13.8 million, after tax. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2001, we had cash and cash equivalents of $573.4 million and had available a total of $16 million of borrowing capacity under one of our three revolving senior credit facilities. We had no borrowing capacity under our other two credit facilities. The revolving credit facility provides credit available in the form of cash advances or letters of credit, and bears interest on advances under the London Interbank Offered Rate, LIBOR, which was 6.66% at December 31, 2000, plus the applicable margin as determined by our long-term credit ratings (0.175% margin at December 31, 2000). In 48 addition to the interest component described above, we pay a facility fee as determined by our long-term credit ratings (0.09% at December 31, 2000) on the entire credit facility independent of the level of borrowings. One of our credit facilities was originally scheduled to mature in March 2001 but was extended twice: first to May 2001 and then to October 2001. One of our other credit facilities was originally scheduled to mature in May 2001 but was also extended to October 2001. Currently, all three of these credit facilities are scheduled to mature on October 10, 2001. In April 2001, we issued $600 million of 9.875% senior notes, due in 2011. We used the proceeds of that offering to repay indebtedness, including mandatory repayments of $225 million, which also permanently reduced the amount available under our credit facilities. As a result of the mandatory repayments, the credit facilities were reduced from $1.5 billion to $1.275 billion. In connection with the sale of our 25% interest in the Hopewell project and a 50% interest in the Sunrise project, our credit facilities were further reduced to $1.224 billion. On August 10, 2001, we issued $400 million of 10% senior notes, due in 2008. We used the proceeds to permanently repay indebtedness under our corporate credit facilities, reducing the outstanding commitments under these facilities to $823.3 million. DISCUSSION OF HISTORICAL CASH FLOW CASH FLOW FROM OPERATING ACTIVITIES Cash provided by operating activities is derived primarily from operations of the Illinois Plants and the Homer City plant, distributions from energy projects and dividends from investments in oil and gas. Net cash used in operating activities totaled $372.1 million during the six months ended June 30, 2001, compared to net cash provided by operating activities of $68.4 million for the corresponding period of the prior year. The decrease is primarily due to higher working capital requirements. Net cash provided by operating activities increased $248.1 million in 2000 compared to 1999 and $150.6 million in 1999 compared to 1998. The 2000 increase primarily reflects higher pre-tax earnings from projects acquired in 1999 and higher dividends from oil and gas investments. The 1999 increase was primarily due to higher distributions from energy projects and higher dividends from oil and gas investments. Net working capital at June 30, 2001 was ($1,160.5) million compared to ($1,703.9) million at December 31, 2000. Net working capital at December 31, 2000 was ($1,703.9) million compared to ($815.5) million at December 31, 1999. The decrease reflects the reclassification to current maturities of long-term obligations from long-term obligations at December 31, 2000 of indebtedness under the financing documents entered into to finance the acquisition of the Ferrybridge and Fiddler's Ferry plants in 1999. CASH FLOW FROM FINANCING ACTIVITIES Net cash provided by financing activities decreased to $381.4 million for the six months ended June 30, 2001, from $524.6 million for the six months ended June 30, 2000. Net cash used in financing activities totaled $783 million in 2000, compared to net cash provided by financing activities of $8,363.5 million and $17.9 million in 1999 and 1998, respectively. In January 2000, one of our foreign subsidiaries borrowed $242.7 million from Edison Capital, an indirect affiliate. During the first quarter of 2001, the subordinated financing was repaid with interest. In April 2001, we issued $600 million of 9.875% senior notes due 2011, the proceeds of which were used to permanently repay $225 million on our corporate credit facilities. In June 2001, an additional $51 million was permanently repaid on our corporate credit facilities. In addition, dividends totaling $65 million were paid to The Mission Group and ultimately to Edison International, our ultimate parent company, during the six-month period ended June 30, 2001, compared to $44 million during the same prior year period. As of June 30, 2001, we had recourse debt of $2.5 billion, with an additional $6.1 billion of non-recourse debt (debt which is recourse to specific assets or subsidiaries, but not to Edison Mission Energy) on our consolidated 49 balance sheet. Payments made on our credit facilities totaling $1.4 billion, a $500 million payment on our floating rate notes and the redemption of the Flexible Money Market Cumulative Preferred Stock for $124.7 million were the primary contributors of the net cash used in financing activities during 2000. We used the proceeds from the August 2000 Powerton and Joliet sale-leaseback transaction for a significant portion of those payments on the credit facilities, commercial paper facilities and the floating rate notes. We also paid dividends of $88 million to The Mission Group and ultimately to Edison International. In 2000, we also had borrowings of $1.2 billion under our credit facilities and commercial paper facilities. In February 2000, Edison Mission Midwest Holdings Co. issued $1.7 billion of commercial paper under its credit facility and repaid a similar amount of its outstanding bank borrowings for the Illinois Plants. Subsequently, Edison Mission Midwest Holdings Co. repaid $769.3 million of commercial paper under its credit facility and issued a similar amount of its bank borrowings for the Illinois Plants in December 2000. In 1999, financings related to the acquisition of four new projects in 1999 contributed to net cash provided by financing activities: a term loan facility of $1.3 billion related to the Ferrybridge and Fiddler's Ferry plants, senior secured bonds totaling $830 million related to the Homer City plant, $120 million Flexible Money Market Cumulative Preferred Stock and $125 million Retail Redeemable Preference Shares and $84 million Class A Redeemable Preferred Shares related to Contact Energy and credit facilities totaling $1.7 billion related to the Illinois Plants. In addition, our financings in connection with the aforementioned acquisitions consisted of floating rate notes of $500 million, borrowings of $215 million under our revolving credit facility and commercial paper facilities totaling $1.2 billion. In addition, we also received $2.0 billion in equity contributions from Edison International, which amount was 100% financed in the capital markets, to finance our 1999 acquisitions. In June 1999, we issued $600 million of 7.73% Senior Notes due 2009. As of December 31, 2000, we had recourse debt of $2.1 billion, with an additional $5.9 billion of non-recourse debt (debt which is recourse to specific assets or subsidiaries, but not to Edison Mission Energy) on our consolidated balance sheet. CASH FLOW FROM INVESTMENT ACTIVITIES Net cash used in investing activities increased to $347.5 million for the six months ended June 30, 2001 from $307.6 million for the six months ended June 30, 2000 and net cash provided by investing activities totaled $718.1 million in 2000, compared to net cash used in investing activities of $8,837.8 million and $408.2 million in 1999 and 1998, respectively. The increase is primarily due to the equity contributions made by us to meet capital calls by partnerships who own qualifying facilities that have power purchase agreements with Southern California Edison and Pacific Gas and Electric during the six-month period ended June 30, 2001. See "--The California Power Crisis and Our Response" for further discussion. Through June 30, 2001, $3.8 million was paid towards the purchase price and $1.5 million in equity contributions for the Italian Wind Projects, $20 million was paid for the purchase of the 50% interest in the CBK project and $59.5 million was paid for the purchase of additional shares in Contact Energy. Through June 30, 2000, $27 million was paid towards the purchase price and $13 million in equity contributions for the Italian Wind Projects and $33.5 million was made in equity contributions for the EcoElectrica project. In June 2001, we also competed the sale of a 50% interest in the Sunrise project to Texaco for $84 million. We invested $113.2 million and $178.5 million during the six-month periods ended June 30, 2001 and 2000, respectively, in new plant equipment principally related to the Homer City plant and Illinois Plants. In 2000, net cash provided by investing activities was primarily due to proceeds of $1.367 billion and $300 million received from the sale leaseback transactions with respect to the Powerton and Joliet power facilities in August 2000 and the Illinois peaker power units in July 2000, respectively. In connection with the Illinois peaker power units transaction, we purchased $255 million of notes issued by the lessor. In 2000, we also paid $44.9 million for the Citizens trading operations and structured transaction investments, and $27 million for the acquisition of the Sunrise project. In addition, $21.2 million and $20 million were made in equity contributions for the Tri Energy project (July 2000) and the ISAB project (September 2000), 50 respectively. In 1999, cash used in investing activities was primarily due to the purchase of the Homer City plant, Ferrybridge and Fiddler's Ferry generating facilities, the Illinois Plants and the 40% interest in Contact Energy. We invested $352.3 million, $216.4 million and $73.4 million in 2000, 1999 and 1998, respectively, in new plant and equipment principally related to the Homer City plant and Illinois Plants in 2000, the Homer City plant and Ferrybridge and Fiddler's Ferry plants in 1999, and the Doga project in 1998. CORPORATE FINANCING PLANS As discussed above, we have three corporate credit facilities scheduled to expire on October 10, 2001 with an aggregate amount of commitments of $1.224 billion thereunder as of June 30, 2001, which we had committed to reduce to $1 billion in the aggregate by August 15, 2001. Our corporate cash requirements in 2001 are expected to exceed cash distributions from our subsidiaries. In addition to our commitment to pay down the corporate credit facilities by $224 million, our expected corporate cash payments for the remainder of 2001 include: - debt service under senior notes and intercompany notes resulting from sale-leaseback transactions which aggregate $123 million; - equity and capital requirements for projects in development and under construction of $67 million; - dividends payable to Mission Energy Holding of $65 million; and - general and administrative expenses. We used the proceeds from the offering of the original notes to pay down a portion of our existing corporate credit facilities. In addition, we have selected a syndicate of bank lenders to implement a new $750 million credit facility. We plan to use this new facility, together with other corporate funds, to replace the balance under our existing corporate credit facilities. Completion of this new credit facility is subject to a number of conditions. Although we believe our corporate financing plans will be successful in meeting our cash and credit requirements for 2001, no assurance can be provided that we will be able to obtain new financing to meet our obligations under our corporate credit facilities in 2001, or if we were able to obtain new financing, that the new financing would be on similar terms and rates as our existing credit facilities, on commercially reasonable terms or on the terms required by the Mission Energy Holding financing documents. In addition, we: - have agreed to sell our interests in the Commonwealth Atlantic, EcoElectrica, Gordonsville, James River, Nevada Sun-Peak and Saguaro projects subject to obtaining consents from third parties and other conditions precedent to closing; - have undertaken a competitive bidding process through an investment bank for the sale of our ownership interest in the Brooklyn Navy Yard project; and - are planning on obtaining project financing for the Sunrise project based on a power purchase agreement, including construction financing for Phase II of the project (See "--Acquisitions, Dispositions and Sale-Leaseback Transactions--Acquisition of Sunrise Project"). We may incur additional federal and state income taxes from the proceeds of the sale of one of our foreign projects if the sale of this project is completed and we are required to repatriate funds to reduce senior bank indebtedness. There is no assurance that we will be able to sell projects on favorable terms or that the sale of individual projects will not result in a loss. We are also considering sale-leaseback transactions of several projects, the proceeds of which would be used to repay short-term indebtedness or to meet other capital requirements. 51 SUBSIDIARY FINANCING PLANS The estimated capital expenditures of our subsidiaries for the second half of 2001 are $117 million, including environmental expenditures disclosed under "Business--Regulatory Matters--Environmental Regulation." These capital expenditures are planned to be financed by existing subsidiary credit agreements and cash generated from their operations. Other than as described below under "--Commitments and Contingencies," we do not plan to make additional capital contributions to our subsidiaries. PURCHASE OF ADDITIONAL SHARES IN CONTACT ENERGY During the second quarter of 2001, we completed the purchase of additional shares of Contact Energy for NZ$152 million, thereby increasing our ownership interest from 42.6% to 51.2%. In order to finance this purchase, we obtained a NZ$135 million, 364-day bridge loan from an investment bank under a credit facility which is to be syndicated by the bank. In addition to other security arrangements, a security interest over all Contact Energy shares held has been provided as collateral. In June and July 2001, we issued through one of our subsidiaries new preferred securities to repay the bridge loan. On July 2, 2001, we redeemed NZ$400 million EME Taupo preferred securities from the existing holders. Funding for the redemption of the existing preferred securities was provided by a NZ$400 million credit facility scheduled to mature in July 2005. The financing documents governing the credit facility provide that the credit facility may be funded under either, or a combination, of a letter of credit facility or a revolving credit facility. The NZ$400 million was originally funded as a revolving credit facility. STATUS OF EDISON FIRST POWER LOAN The financial performance of the Fiddler's Ferry and Ferrybridge power plants has not met our expectations, largely due to lower power prices resulting primarily from increased competition, milder winter weather and uncertainty surrounding the new electricity trading arrangements. See "--Market Risk Exposures--United Kingdom." As a result, Edison First Power has defaulted on its financing documents related to the acquisition of the power plants. As a result of the reduced financial performance, Edison First Power deferred some environmental capital expenditure milestone requirements in the original capital expenditure program set forth in the financing documents. The original capital expenditure program has been revised, and this revision has been agreed to by the financing parties. In addition, in July 2001, the financing parties waived technical defaults under the financing documents and a default under the financing documents resulting from the fact that, due to this reduced financial performance, Edison First Power's debt service coverage ratio during 2000 declined below the threshold set forth in the financing documents. There is no assurance that Edison First Power's creditors will continue to waive its non-compliance with the requirements under the financing documents or that Edison First Power will satisfy its financial ratios in the future. 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. Despite the breaches under the financing documents, Edison First Power's debt service coverage ratio for 2000 exceeded 1:1. 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. In March 2001, L61 million was paid by Edison First Power to meet its semi-annual debt service requirements. Another of our indirect subsidiaries, EME Finance UK Limited, is the borrower under the facility made available for the purposes of funding coal and capital expenditures related to the Fiddler's Ferry 52 and Ferrybridge power plants. At June 30, 2001, L58 million was outstanding for coal purchases and zero was outstanding to fund capital expenditures under this facility. EME Finance UK Limited on-lends any drawings under this facility to Edison First Power. The financing parties of this facility have also issued letters of credit directly to Edison First Power to support their obligations to lend to EME Finance UK Limited. EME Finance UK Limited's obligations under this facility are separate and apart from the obligations of Edison First Power under the financing documents related to the acquisition of these plants. We have guaranteed the obligations of EME Finance UK Limited under this facility, including any letters of credit issued to Edison First Power under the facility, for the amount of L359 million, and Edison Mission Energy's guarantee remains in force notwithstanding any breaches under Edison First Power's acquisition financing documents. In accordance with SFAS No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED," we have evaluated impairment of the Ferrybridge and Fiddler's Ferry power plants. The undiscounted projected cash flow from these power plants exceeds the net book value at December 31, 2000, and, accordingly, no impairment of these power plants is permitted under SFAS No. 121. As a result of the change in the prices of power in the U.K., we are offering for sale through a competitive bidding process the Ferrybridge and Fiddler's Ferry Power plants. Management has not made a decision whether or not the sale of these power plants will ultimately occur and, accordingly, these assets are not classified as held for sale. If we are successful at selling the Ferrybridge and Fiddler's Ferry plants, it is likely that we will not recover any of our investment in the subsidiary that owns these assets. At June 30, 2001, that investment was $974 million. We plan to use the proceeds from the sale, if it occurs, to repay a portion or all of the indebtedness of the project. We cannot provide assurance that acceptable bids will be obtained or, if such bids are acceptable, that completion of the sale will occur. In this regard, there is no assurance that we will be able to negotiate acceptable terms and conditions with a potential buyer or that if an agreement was reached, that we will be able to satisfy the conditions needed for closing, which will include, among other things, a regulatory review in the United Kingdom. LIMITATIONS ON DIVIDENDS FROM THE DOGA PROJECT Our subsidiary, Doga Enerji, owns 80% of the Doga project in Turkey. Doga Enerji has experienced delays in receiving payments from its power purchaser Turkiye Elektrik, A.S., also referred to as TEAS. Doga Enerji is in the process of determining whether these delays will materially adversely affect the future cash flow projections for the project. Until the determination is made, Doga Enerji will not make a distribution for 2001. While such payment obligations are guaranteed by the Turkish Treasury, we cannot assure you that TEAS will make its payments on a timely basis. INTERCOMPANY TAX SHARING PAYMENTS We participate in a tax sharing agreement with The Mission Group, which in turn participates in a tax sharing agreement with Edison International. We have historically received tax payments under the tax sharing agreement related to domestic net operating losses incurred by us. However, we will be required to pay Edison International $51 million during 2001 as a result of changes in estimated taxable income for 2000. At June 30, 2001, we have recorded $142.5 million as an income tax receivable under the tax sharing agreement. However, we are not eligible to receive tax sharing payments for those losses until such time as Edison International and its subsidiaries generate sufficient taxable income in order to be able to monetize our tax losses in the consolidated income tax returns for Edison International and its subsidiaries. CREDIT RATINGS In January 2001, Standard & Poor's and Moody's downgraded our senior unsecured credit ratings to "BBB-" from "A-" and to "Baa3" from "Baa1", respectively. Our credit ratings remain "investment 53 grade." Maintaining our investment grade credit ratings is part of our current operational focus and our long term strategy. However, we cannot assure you that Standard & Poor's and Moody's will not downgrade our credit rating below investment grade, whether as a result of the California power crisis or otherwise. If our credit ratings are downgraded below investment grade, we could be required to, among other things: - provide additional guarantees, collateral, letters of credit or cash for the benefit of counterparties in our trading activities; and - post a letter of credit or cash collateral to support its $58.5 million equity contribution obligation in connection with our acquisition in February 2001 of a 50% interest in the CBK Power Co. Ltd. project in the Philippines, which equity contribution would otherwise be payable as currently scheduled in 2003. A downgrade of our credit ratings could result in a downgrade of the credit rating of Edison Mission Midwest Holdings Co., our indirect subsidiary. In the event of a downgrade of Edison Mission Midwest Holdings below its current credit ratings, provisions in the agreements binding on its subsidiary, Midwest Generation, LLC, limit the ability of Midwest Generation to use excess cash flow to make distributions. A downgrade in our credit ratings below investment grade could increase our cost of capital, increase our credit support obligations, make efforts to raise capital more difficult and could have an adverse impact on us and our subsidiaries. RESTRICTED ASSETS OF SUBSIDIARIES Each of our direct or indirect subsidiaries is organized as a legal entity separate and apart from us and our other subsidiaries. Assets of our subsidiaries may not be available to satisfy our obligations or the obligations of any of our other subsidiaries. However, unrestricted cash or other assets which are available for distribution may, subject to applicable law and the terms of financing arrangements of the parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to us or to an affiliate of ours. 54 COMMITMENTS AND CONTINGENCIES CAPITAL COMMITMENTS The following table summarizes our consolidated capital commitments as of June 30, 2001. Details regarding these capital commitments are discussed in the sections referenced.
U.S. TYPE OF COMMITMENT ESTIMATED TIME PERIOD DISCUSSED UNDER - ------------------ ------------- ----------- ---------------------------------- (IN MILLIONS) New Gas-Fired Generation.......... $250 by 2003 Illinois Plants--Power Purchase Agreements New Gas-Fired Generation.......... 986(1) 2001-2004 Edison Mission Energy Master Turbine Lease Environmental Improvements at our Project Subsidiaries.............. 494 2001-2005 Environmental Matters and Regulations Project Acquisition for the Italian Wind Projects............. 8 2001-2002 Firm Commitment for Asset Purchase Equity Contribution for the Sunrise Project................... 123 2001-2003 Firm Commitments to Contribute Project Equity Equity Contribution for the Italian Wind Projects............. 1 2001-2002 Firm Commitments to Contribute Project Equity Equity Contribution for the CBK Project........................... 59 2003 Firm Commitments to Contribute Project Equity
- ------------------------ (1) Represents the total estimated costs related to four projects using the Siemens Westinghouse turbines procured under the Edison Mission Energy Master Turbine Lease. One of these projects may be used to meet the new gas-fired generation commitments resulting from the acquisition of the Illinois Plants. See "--Illinois Plants--Power Purchase Agreements." ILLINOIS PLANTS--POWER PURCHASE AGREEMENTS During 2000, 33% of our electric revenues were derived under power purchase agreements with Exelon Generation Company, a subsidiary of Exelon Corporation, entered into in connection with our December 1999 acquisition of the Illinois Plants. Exelon Corporation is the holding company of Commonwealth Edison and PECO Energy Company, major utilities located in Illinois and Pennsylvania. Electric revenues attributable to sales to Exelon Generating Company are earned from capacity and energy provided by the Illinois Plants under three five-year power purchase agreements. If Exelon Generation were to fail to or became unable to fulfill its obligations under these power purchase agreements, we may not be able to find another customer on similar terms for the output of our power generating assets. Any material failure by Exelon Generation to make payments under these power purchase agreements could adversely affect our results of operations and liquidity. Pursuant to the acquisition documents for the purchase of generating assets from Commonwealth Edison, we committed to install one or more gas-fired power plants having an additional gross 55 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. EDISON MISSION ENERGY MASTER TURBINE LEASE In December 2000, we entered into a master lease and other agreements for the construction of new projects using nine turbines that are being procured from Siemens Westinghouse. The aggregate total construction cost of these projects is estimated to be approximately $986 million. Under the terms of the master lease, the lessor, as owner of the projects, is responsible for the development and construction costs of the new projects using these turbines. We have agreed to supervise the development and construction of the projects as the agent of the lessor. Upon completion of construction of each project, we have agreed to lease the projects from the lessor. In connection with the lease, we have provided a residual value guarantee to the lessor at the end of the lease term. We are required to deposit treasury notes equal to 103% of the construction costs as collateral for the lessor which can only be used under circumstances involving our default of the obligations we have agreed to perform during the construction of each project. Lease payments are scheduled to begin in November 2003. Minimum lease payments under this agreement are $3.1 million in 2003, $27.7 million in 2004, and $50.2 million in 2005. The term of the master lease ends in 2010. The master lease grants us, as lessee, a purchase option based on the lease balance which can be exercised at any time during the term. FIRM COMMITMENT FOR ASSET PURCHASE
PROJECTS LOCAL CURRENCY U.S. - -------- ----------------------- --------------- ($ IN MILLIONS) Italian Wind Projects(1).................................. 18 billion Italian Lira $7.9
- ------------------------ (1) The Italian Wind Projects are a series of power projects that are in operation or under development in Italy. A wholly-owned subsidiary of ours owns a 50% interest. Purchase payments will continue through 2002, depending on the number of projects that are ultimately developed. FIRM COMMITMENTS TO CONTRIBUTE PROJECT EQUITY
PROJECTS LOCAL CURRENCY U.S. - -------- ---------------------- --------------- ($ IN MILLIONS) Italian Wind Projects(1)................................... 3 billion Italian Lira $ 1.4 CBK Project(2)............................................. -- 58.5 Sunrise Project(3)......................................... -- 122.9
- ------------------------ (1) The Italian Wind Projects are a series of power projects that are in operation or under development in Italy. A wholly-owned subsidiary of ours owns a 50% interest. Equity will be contributed depending on the number of projects that are ultimately developed. (2) Caliraya-Botocan-Kalayaan is a 728 MW hydroelectric power project under construction in the Philippines. A wholly-owned subsidiary of ours owns a 50% interest. Equity will be contributed upon completion of the rehabilitation and expansion, which is currently scheduled for 2003. This equity commitment could be accelerated if our credit rating were to fall below investment grade. (3) The Sunrise Project consists of two phases, with Phase I, a single-cycle gas-fired facility (320MW) that commenced commercial operation in June 2001, and Phase II, conversion to a combined-cycle gas-fired facility (560 MW) currently scheduled to be completed in July 2003. A wholly-owned 56 subsidiary of ours owns a 50% interest. Equity will be contributed to fund the construction of Phase II. The project intends to obtain project financing for a portion of the capital costs. Firm commitments to contribute project equity could be accelerated due to certain events of default as defined in the non-recourse project financing facilities. Management does not believe that these events of default will occur to require acceleration of the firm commitments. OTHER COMMITMENTS SALE-LEASEBACK COMMITMENTS At December 31, 2000, we had minimum lease payments related to purchased power generation assets from Commonwealth Edison that were leased back to us in three separate transactions. In connection with the 1999 acquisition of the Illinois Plants, we assigned the right to purchase the Collins gas and oil-fired power plant to third party lessors. The third party lessors purchased the Collins Station for $860 million and leased the plant to us. During 2000, we entered into sale-leaseback transactions for equipment, primarily the Illinois peaker power units, and for two power facilities, the Powerton and Joliet coal-fired stations located in Illinois, to third party lessors. Total minimum lease payments during the next five years are $146.6 million in 2001, $168.6 million in 2002, $168.6 million in 2003, $168.8 million in 2004, and $191.4 million in 2005. At December 31, 2000, the total remaining minimum lease payments were $3.9 billion. FUEL SUPPLY CONTRACTS At December 31, 2000, we 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 clauses in some cases, these minimum commitments are currently estimated to aggregate $2.4 billion in the next five years summarized as follows: 2001--$838 million; 2002--$653 million; 2003--$386 million; 2004--$308 million; and 2005--$241 million. HOMER CITY We have guaranteed to the bondholders, banks and other secured parties which financed the acquisition of the Homer City plant the performance and payment when due by Edison Mission Holdings Co. of its obligations in respect of specified senior debt, up to $42 million. This guarantee will be available until December 31, 2001, after which time Edison Mission Energy will have no further obligations under this guarantee. To satisfy the requirements under the Edison Mission Holdings Co. bank financing to have a debt service reserve account balance in an amount equal to six months' debt service, Edison Mission Energy provides a guarantee of Edison Mission Holdings' obligations in the amount of $9 million to the lenders involved in the bank financing. CREDIT SUPPORT FOR TRADING AND PRICE RISK MANAGEMENT ACTIVITIES Our trading and price risk management activities are conducted through our subsidiary, Edison Mission Marketing & Trading, Inc. As part of obtaining an investment grade rating for this subsidiary, Edison Mission Energy has entered into a support agreement, which commits it to contribute up to $300 million in equity to Edison Mission Marketing & Trading, if needed to meet cash requirements. An investment grade rating is an important benchmark used by third parties when deciding whether or not to enter into master contracts and trades with us. The majority of Edison Mission Marketing & Trading's contracts have various standards of creditworthiness, including the maintenance of specified credit ratings. If Edison Mission Marketing & Trading does not maintain its investment grade rating or if other events adversely affect its financial position, a third party could request Edison Mission 57 Marketing & Trading to provide adequate assurance. Adequate assurance could take the form of supplying additional financial information, additional guarantees, collateral, letters of credit or cash. Failure to provide adequate assurance could result in a counterparty liquidating an open position and filing a claim against Edison Mission Marketing & Trading for any losses. The California power crisis has adversely affected the liquidity of West Coast trading markets, and to a lesser extent, other regions in the United States. Our trading and price risk management activity has been reduced as a result of these market conditions and uncertainty regarding the effect of the power crisis on our affiliate, Southern California Edison. It is not certain that resolution of the California power crisis will occur in 2001 or that, if resolved, we will be able to conduct trading and price risk management activities in a manner that will be favorable to us. SUBSIDIARY INDEMNIFICATION AGREEMENTS Some of our subsidiaries have entered into indemnification agreements, under which the subsidiaries have agreed to repay capacity payments to the projects' power purchasers in the event the projects unilaterally terminate their performance or reduce their electric power producing capability during the term of the power contracts. Obligations under these indemnification agreements as of June 30, 2001, if payment were required, would be $246 million. We have no reason to believe that the projects will either terminate their performance or reduce their electric power producing capability during the term of the power contracts. OTHER In support of the businesses of our subsidiaries, we have made, from time to time, guarantees, and have entered into indemnity agreements with respect to our subsidiaries' obligations like those for debt service, fuel supply or the delivery of power, and have entered into reimbursement agreements with respect to letters of credit issued to third parties to support our subsidiaries' obligations. We may incur additional guaranty, indemnification, and reimbursement obligations, as well as obligations to make equity and other contributions to projects in the future. CONTINGENCIES THE CALIFORNIA POWER CRISIS 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 California utilities, Southern California Edison and Pacific Gas and Electric, 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, including us, and others. Given these and other payment defaults, Southern California Edison could face bankruptcy at any time. Pacific Gas and Electric filed a voluntary bankruptcy petition on April 6, 2001. Edison International, our ultimate parent company, is also the corporate parent of Southern California Edison. For a description of this contingency and the California power crisis, see "--The California Power Crisis and Our Response." PAITON Our wholly-owned subsidiary owns a 40% interest in PT Paiton Energy, which owns a 1,230 MW coal-fired power plant in operation in East Java, Indonesia, which is referred to as the Paiton project. Our investment in the Paiton project was $503 million at June 30, 2001. Under the terms of a long-term power purchase agreement between Paiton Energy and PT PLN, the state-owned electric utility company, PT PLN is required to pay for capacity and fixed operating costs once each unit and the plant achieve commercial operation. As of December 31, 2000, PT PLN had not paid invoices 58 amounting to $814 million for capacity charges and fixed operating costs under the power purchase agreement. Paiton Energy is in continuing negotiations on a long-term restructuring of the tariff under the power purchase agreement. Paiton Energy and PT PLN agreed on an interim agreement for the period through December 31, 2000 and on a Phase I Agreement for the period from January 1, 2001 through June 30, 2001. The Phase I Agreement provides for fixed monthly payments aggregating $108 million over its six-month duration and for the payment for energy delivered to PT PLN from the plant during this period. PT PLN made all fixed and energy payments due under the interim agreement and has made all fixed payments due under the Phase I Agreement totaling $108 million as scheduled. Paiton Energy received lender approval of the Phase I Agreement, and Paiton Energy has also entered into a lender interim agreement under which lenders have effectively agreed to interest-only payments and to deferral of principal repayments while Paiton Energy and PT PLN seek a long-term restructuring of the tariff. The lenders have agreed to extend that agreement through December 31, 2001. Paiton Energy and PT PLN intended to complete the negotiations of the future phases of a new long-term tariff during the six-month duration of the Phase I Agreement. Although Paiton Energy and PT PLN did not complete negotiations on a long-term restructuring of the tariff by June 30, 2001, Paiton Energy and PT PLN have signed an agreement providing for an extension of the Phase I Agreement from July 1, 2001 to September 30, 2001. Paiton Energy is continuing to generate electricity to meet the power demand in the region and believes that PT PLN will continue to agree to make payments for electricity on an interim basis beyond June 30, 2001 while negotiations regarding long-term restructuring of the tariff continue. Although completion of negotiations may be delayed, Paiton Energy continues to believe that negotiations on the long-term restructuring of the tariff will be successful. All arrears under the power purchase agreement continue to accrue, minus the fixed monthly payments actually made under the year 2000 interim agreement and under the Phase I Agreement, with the payment of these arrears to be dealt with in connection with the overall long-term restructuring of the tariff. In this regard, under the Phase I Agreement, Paiton Energy has agreed that, so long as the Phase I Agreement is complied with, it will seek to recoup no more than $590 million of the above arrears, the payment of which is to be dealt with in connection with the overall tariff restructuring. Any material modifications of the power purchase agreement resulting from the continuing negotiation of a new long-term tariff could require a renegotiation of the Paiton project's debt agreements. The impact of any such renegotiations with PT PLN, the Government of Indonesia or the project's creditors on our expected return on our investment in Paiton Energy is uncertain at this time; however, we believe that we will ultimately recover our investment in the project. BROOKLYN NAVY YARD Brooklyn Navy Yard is a 286 MW gas-fired cogeneration power plant in Brooklyn, New York. Our wholly-owned subsidiary owns 50% of the project. In February 1997, the construction contractor asserted general monetary claims under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners, L.P. for damages in the amount of $136.8 million. Brooklyn Navy Yard Cogeneration Partners has asserted general monetary claims against the contractor. In connection with a $407 million non-recourse project refinancing in 1997, we agreed to indemnify Brooklyn Navy Yard Cogeneration Partners and its partner from all claims and costs arising from or in connection with the contractor litigation, which indemnity has been assigned to Brooklyn Navy Yard Cogeneration Partners' lenders. At this time, we cannot reasonably estimate the amount that would be due, if any, related to this litigation. Additional amounts, if any, which would be due to the contractor with respect to completion of construction of the power plant would be accounted for as an additional part of its power plant investment. Furthermore, our partner has executed a reimbursement agreement with us that provides recovery of up to $10 million over an initial amount, including legal fees, payable from its 59 management and royalty fees. We believe that the outcome of this litigation will not have a material adverse effect on our consolidated financial position or results of operations. CONTINGENT OBLIGATIONS TO CONTRIBUTE PROJECT EQUITY
PROJECTS LOCAL CURRENCY U.S. - -------- ----------------------- --------------- ($ IN MILLIONS) Paiton(i)................................................. -- $ 5.3 ISAB(ii).................................................. 84 billion Italian Lira 36.5
- ------------------------ (i) Contingent obligations to contribute additional project equity will be based on events principally related to insufficient cash flow to cover interest on project debt and operating expenses, project cost overruns during the plant construction, specified partner obligations or events of default. Our obligation to contribute contingent equity will not exceed $141 million, of which $136 million has been contributed as of June 30, 2001. For more information on the Paiton project, see "--Paiton" above. (ii) ISAB is a 512 MW integrated gasification combined cycle power plant near Siracusa in Sicily, Italy. A wholly-owned subsidiary of Edison Mission Energy owns a 49% interest. Commercial operations commenced in April 2000. Contingent obligations to contribute additional equity to the project relate specifically to an agreement to provide equity assurances to the project's lenders depending on the outcome of the contractor claim arbitration. We are not aware of any other significant contingent obligations or obligations to contribute project equity other than as noted above and equity contributions to be made by us to meet capital calls by partnerships who own qualifying facilities that have power purchase agreements with Southern California Edison and Pacific Gas and Electric. See "--The California Power Crisis and Our Response" for further discussion. THE CALIFORNIA POWER CRISIS AND OUR RESPONSE THE CALIFORNIA POWER CRISIS We have partnership interests in eight partnerships that own power plants in California and 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, our share of earnings before taxes from these partnerships was $168 million, which represented 20% of our operating income. Our investment in these partnerships at June 30, 2001 was $607 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 that are owned by partnerships in which we have a partnership interest. Southern California Edison did not pay the partnerships for power delivered between November 1, 2000 and March 26, 2001; however, in response to the March 27, 2001 California Public Utilities Commission order discussed below, Southern California Edison has been paying the partnerships for power delivered after March 27, 2001. Also, following the execution of the standstill agreements, discussed below, Southern California Edison has paid the partnerships 10% of the past due amounts (for power delivered between November 2000 and March 2001) and has also begun making monthly interest payments on the past due amounts. It is possible that Southern California Edison may miss future payments. At June 30, 2001, accounts receivable due to these partnerships from Southern California Edison were $606 million. Our share of these receivables was $301 million. 60 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. Pacific Gas and Electric made its January payment in full and has paid for power delivered after April 6, 2001, 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. Although Pacific Gas and Electric has thus far paid for post-petition deliveries, future payments by Pacific Gas and Electric to the qualifying facilities, including those owned by partnerships in which we have a partnership interest, may 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. At the petition date, accounts receivable to these partnerships from Pacific Gas and Electric were $47 million. Our share of these receivables was $23 million. We cannot assure you that the partnerships with long-term contracts with Pacific Gas and Electric will not be adversely affected by the bankruptcy proceeding. The California utilities' failure to pay has adversely affected the operations of our eight California qualifying facilities. Continuing failures to pay similarly could have an adverse impact on the operations of our 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 the partnership. During the period in which Southern California Edison failed to make payments, some of the partnerships sought to minimize their exposure to Southern California Edison by reducing deliveries under their power purchase agreements. Four of the partnerships have filed complaints against Southern California Edison with respect to the payment defaults. All of those partnerships have entered into agreements with Southern California Edison, under which the partnerships and Southern California Edison will suspend the current litigation for a specified "standstill period" and provisionally stipulate as to the amount of past due payments, and Southern California Edison will make partial payments with respect to past due amounts. The partial payments are to be made on the following schedule: 10% of the past due amount to be paid within three business days after signing the agreements, a second 10% to be paid upon the effective date of legislation that restores Southern California Edison to creditworthiness and enables it to pay its debts in a timely manner, and the final 80% on the fifth business day after the first day on which Southern California Edison receives proceeds from the first financing of the "net undercollected amount" resulting from such legislation. The agreements also require Southern California Edison to make monthly interest payments on past due amounts. Southern California Edison has already paid the first 10% of the past due amounts. It is unclear at this time what additional actions, if any, the partnerships will take in regard to any future suspension of payments due to the qualifying facilities by the utilities or in the event that the settlement agreements cease to be in effect. 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 to June 30, 2001, subsidiaries of ours have made equity contributions totaling approximately $134 million to meet capital calls by the partnerships. Although Southern California Edison has been paying the partnerships for power delivered after March 27, 2001 and Pacific Gas and Electric has paid for power delivered after April 6, 2001, our subsidiaries and the other partners may be required to make additional capital contributions to the partnerships if the utilities fail to make future payments. 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 61 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 we have 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 we believe that the generation of electricity by the qualifying facilities, including those owned by partnerships in which we have a partnership interest, is needed to meet California's power needs, we cannot assure you that these settlement agreements will continue to be effective during the standstill period, or that the power purchase agreements will not be adversely affected by a bankruptcy or any further 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. As a result of this decision, Southern California Edison paid in full for power delivered after March 27, 2001, and Pacific Gas and Electric paid for power delivered after April 6, 2001 (the date it filed its bankruptcy petition). This decision did not address payment to the qualifying facilities for amounts due prior to March 27, 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 at 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 decision, it could have a material adverse effect on our 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 our California partnerships. 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 we will execute a contract with the Department of Water Resources or another state agency for the provision of power from the Sunrise project to the State at cost-based rates for ten years. We executed this contract on June 25, 2001, and the first phase became operational on June 27, 2001. Edison International and Southern California Edison believe that execution of the Memorandum was 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 62 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 at any time because required regulatory and legislative actions were not taken before the applicable deadlines, but neither party has terminated the Memorandum. A number of alternatives to the Memorandum have been proposed in the California Legislature. Senate Bill 78XX, which was approved by the State Senate on July 20, 2001 and referred to the State Assembly, was opposed by Southern California Edison on the grounds that it would not be effective in restoring the creditworthiness of Southern California Edison and contained other objectionable provisions. Whether Senate Bill 78XX or any other legislation will be enacted is unknown. In addition, a California voter initiative or referendum has been threatened against any measures that would raise consumer rates or aid California's investor-owned utilities. Finally, the enactment of legislation would 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 3, 2001, the California Public Utilities Commission adopted an order instituting investigation. The order reopens past Commission decisions authorizing the California investor-owned utilities to form holding companies and initiates an investigation into: whether the holding companies violated requirements to give priority to the capital needs of their respective utility subsidiaries; whether ring-fencing actions by Edison International and PG&E Corporation and their respective non-utility affiliates (including us) also violated 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. The Memorandum calls for the Commission to adopt a decision clarifying that the first priority condition in Southern California Edison's holding company decision refers to equity investment, not working capital for operating costs. On June 6, 2001, in response to motions filed by the three holding companies (including Edison International) to dismiss the investigation for lack of subject matter jurisdiction, the Commission issued for comment a draft decision, which concludes, among other matters, that applicable law permits the Commission, even if the normal common law prerequisites for piercing the corporate structures are absent, to disregard the corporate forms within the holding company system "to reach the assets of or challenge the behaviors of entities within the holding company system" in order to protect ratepayers. Commissioner Henry Duque has issued a draft alternate decision that would grant the three holding companies' motions to dismiss the order as to themselves, finding lack of subject matter jurisdiction over them, and would direct the Commission's general counsel to file an action in state court to enforce the holding company conditions, if necessary. The alternate, as well as the draft decision that would deny the motions to dismiss, are presently on the Commission's agenda for its October 11 meeting. Either would require a vote of three out of five commissioners in order to be adopted. We are not a party to this investigatory proceeding. We cannot predict whether, when or in what form this order will be adopted, or what direct or indirect effects any subsequent action taken by the Commission in such proceeding or in any other action or proceeding, in reliance on the principles articulated in this order and in other applicable authority, may have on Edison International or on us and our subsidiaries. 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 increases, acceleration of power plant permitting and state entry into the power market. Many of these activities are ongoing. For example, on March 27, 2001, the California Public Utilities Commission made permanent the interim surcharge on customers' bills that it authorized on January 4, 2001 and authorized a rate increase of three cents per kilowatt-hour; neither this interim surcharge nor the rate increase affected the retail rate freeze which has been in effect since deregulation began in 1998. On April 26, 2001, the Federal Energy Regulatory Commission ordered price mitigation measures, or price 63 caps, for power sales in the California spot market during emergency periods only; on June 19, 2001, the price mitigation measures were expanded to apply during all periods and to cover the entire eleven-state Western region. After extensive settlement negotiations failed to produce a global settlement, on July 25, 2001, the Federal Energy Regulatory Commission ordered that refunds may be due from sellers who engaged in transactions in these markets from October 2, 2000 through June 20, 2001, at levels in excess of the requirements in the April 26 and July 19 orders (with certain modifications), and ordered an evidentiary hearing to determine the required refunds. A separate proceeding was also instituted to evaluate the potential for refunds in the Pacific Northwest. The price mitigation measures end on September 30, 2002. The federal and state, legislative and regulatory initiatives may result in a restructuring of the California power market. At this time, it is not possible to estimate the likely ultimate outcome of these activities. OUR RESPONSE To isolate ourselves from the credit downgrades and potential bankruptcies of Edison International and Southern California Edison, and to facilitate our ability and the ability of our subsidiaries to maintain our respective investment grade credit ratings, on January 17, 2001, we amended our articles of incorporation and our bylaws to include so-called "ring-fencing" provisions. These ring-fencing provisions are intended to preserve us as a stand-alone investment grade rated entity in spite of the current credit difficulties of Edison International, Southern California Edison and their subsidiaries. These provisions require the unanimous approval of our board of directors, including at least one independent director, before we can do any of the following: - declare or pay dividends or distributions unless either of the following are true: we then have an investment grade credit rating and receive rating agency confirmation that the dividend or distribution will not result in a downgrade; or the dividends do not exceed $32.5 million in any fiscal quarter and we meet an interest coverage ratio of not less than 2.2 to 1 for the immediately preceding four fiscal quarters; - institute or consent to bankruptcy, insolvency or similar proceedings or actions; or - consolidate or merge with any entity or transfer substantially all our assets to any entity, except to an entity that is subject to similar restrictions. We cannot assure you that these measures will effectively isolate us from the credit downgrades or the potential bankruptcies of Edison International, Southern California Edison or any of their subsidiaries. In January 2001, after we implemented the ring-fencing amendments, Standard & Poor's and Moody's lowered our credit ratings. Our senior unsecured credit ratings were downgraded to "BBB-" from "A-" by Standard & Poor's and to "Baa3" from "Baa1" by Moody's. Our credit ratings remain investment grade. Both Standard & Poor's and Moody's have indicated that the credit ratings outlook for us is stable. However, as a result of the downgrades, our cost of capital has increased. Future downgrades could further increase our cost of capital, increase our credit support obligations, make efforts to raise capital more difficult and could have an adverse impact on us and our subsidiaries. The measures described above are intended to insure that we are considered a stand-alone entity. However, in the event of a bankruptcy of Mission Energy Holding, creditors of Mission Energy Holding might seek to have a bankruptcy court substantially consolidate the assets and liabilities of us with those of Mission Energy Holding. MARKET RISK EXPOSURES Our primary market risk exposures arise from changes in electricity and fuel prices, interest rates and fluctuations in foreign currency exchange rates. We manage these risks in part by using derivative financial instruments in accordance with established policies and procedures. 64 COMMODITY PRICE RISK Electric power generated at our merchant plants is generally sold under bilateral arrangements with utilities and power marketers under short-term contracts with terms of two years or less, or, in the case of the Homer City plant, to the Pennsylvania-New Jersey-Maryland Power Pool (PJM) or the New York Independent System Operator (NYISO). We have developed risk management policies and procedures, which, among other things, address credit risk. When making sales under negotiated bilateral contracts, it is our policy to deal with investment grade counterparties or counterparties that provide equivalent credit support. Our Risk Management Committee grants exceptions to the policy only after thorough review and scrutiny. Most entities that have received exceptions are organized power pools and quasi-governmental agencies. We hedge a portion of the electric output of our merchant plants, whose output is not committed to be sold under long-term contracts, in order to lock in desirable outcomes. When appropriate, we manage the spread between electric prices and fuel prices, and use forward contracts, swaps, futures, or options contracts to achieve those objectives. Our electric revenues were increased by $47.5 million, $60.9 million and $108.4 million in 2000, 1999 and 1998, respectively, as a result of electricity rate swap agreements and other hedging mechanisms. A 10% increase in pool prices would result in a $130.8 million decrease in the fair market value of electricity rate swap agreements. A 10% decrease in pool prices would result in a $130.5 million increase in the fair market value of electricity rate swap agreements. An electricity rate swap agreement is an exchange of a fixed price of electricity for a floating price. As a seller of power, we receive the fixed price in exchange for a floating price, like the index price associated with electricity pools. A 10% increase in electricity prices at December 31, 2000 would result in a $1.8 million decrease in the fair market value of forward contracts entered into by the Loy Yang B plant. A 10% decrease in electricity prices at December 31, 2000 would result in a $1.8 million increase in the fair market value of forward contracts entered into by Loy Yang B plant. A 10% increase in fuel oil, natural gas and electricity forward prices at December 31, 2000 would result in a $15.7 million decrease in the fair market value of energy contracts utilized by our domestic trading operations in energy trading and price risk management activities. A 10% decrease in fuel oil, natural gas and electricity forward prices at December 31, 2000 would result in a $15.7 million increase in the fair market value of energy contracts utilized by our domestic trading operations in energy trading and price risk management activities. AMERICAS On September 1, 2000, we acquired the trading operations of Citizens Power LLC. As a result of this acquisition, we have expanded our trading operations beyond the traditional marketing of our electric power. Our energy trading and price risk management activities give rise to market risk, which represents the potential loss that can be caused by a change in the market value of a particular commitment. Market risks are actively monitored to ensure compliance with our risk management policies. Policies are in place that limit the amount of total net exposure we may enter into at any point in time. Procedures exist that allow for monitoring of all commitments and positions with daily reporting to senior management. We perform 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 reasons for 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, we supplement 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. 65 Electric power generated at the Homer City plant is sold under bilateral arrangements with domestic utilities and power marketers under short-term contracts with terms of two years or less, or to the PJM or the NYISO. These pools have short-term markets, which establish an hourly clearing price. The Homer City plant is situated in the PJM control area and is physically connected to high-voltage transmission lines serving both the PJM and NYISO markets. The Homer City plant can also transmit power to the Midwestern United States. Electric power generated at the Illinois Plants is sold under three 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 plants under contract and an energy payment for the electricity produced by these plants and taken by Exelon Generation. The capacity payments provide the Illinois Plants revenue for fixed charges, and the energy payments compensate the Illinois Plants for variable costs of production. Exelon Generation has the option to terminate two of the three agreements in their entirety or with respect to any generating unit or units in each of 2002, 2003 and 2004. In June 2001, Exelon Generation provided us notice to continue the agreement related to the coal units for 2002. If Exelon Generation does not fully dispatch the 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. UNITED KINGDOM Since 1989, our plants in the U.K. have sold their electrical energy and capacity through a centralized electricity pool, which established a half-hourly clearing price, also referred to as the pool price, for electrical energy. On March 27, 2001, this system was replaced with a bilateral physical trading system referred to as the new electricity trading arrangements. The new electricity trading arrangements provide for, among other things, the establishment of a spot market or voluntary short-term power exchanges operating from a year or more in advance to 3 1/2-hours before a trading period of 1/2 hour; a balancing mechanism to enable the system operator to balance generation and demand and resolve any transmission constraints; a mandatory settlement process for recovering imbalances between contracted and metered volumes with strong incentives for being in balance; and a Balancing and Settlement Code Panel to oversee governance of the balancing mechanism. Contracting over time periods longer than the day-ahead market is not directly affected by the proposals. Physical bilateral contracts have replaced the prior financial contracts for differences, but function in a similar manner. However, it remains difficult to evaluate the future impact of the new electricity trading arrangement. A key feature of the new arrangements is to require firm physical delivery, which means that a generator must deliver, and a consumer must take delivery, against their contracted positions or face assessment of energy imbalance penalty charges by the system operator. A consequence of this should be to increase greatly the motivation of parties to contract in advance and develop forwards and futures markets of greater liquidity than at present. Recent experience has been that the new electricity trading arrangements have placed a significant downward pressure on forward contract prices. Furthermore, another consequence may be that counterparties may require additional credit support, including parent company guarantees or letters of credit. Legislation in the form of the Utilities Act, which was approved July 28, 2000, provided for the implementation of the new electricity trading arrangements and the necessary amendments to generators' licenses. The legislation providing for the implementation of the new arrangements, the Utilities Act 2000, sets a principal objective for the Gas and Electric Market Authority to "protect the interests of consumers...where appropriate by promoting competition...." This represents a shift in emphasis toward 66 the consumer interest. But this is qualified by a recognition that license holders should be able to finance their activities. The Act also contains new powers for the Secretary of State to issue guidance to the Gas and Electric Market Authority on social and environmental matters, changes to the procedures for modifying licenses and a new power for the Gas and Electric Market Authority to impose financial penalties on companies for breach of license conditions. We will be monitoring the operation of these new provisions. See "Business--Regulatory Matters--Recent Foreign Regulatory Matters--United Kingdom." ASIA PACIFIC AUSTRALIA. The Loy Yang B plant sells its electrical energy through a centralized electricity pool, which provides for a system of generator bidding, central dispatch and a settlements system based on a clearing market for each half-hour of every day. The National Electricity Market Management Company, operator and administrator of the pool, determines a system marginal price each half-hour. To mitigate exposure to price volatility of the electricity traded into the pool, the Loy Yang B plant has entered into a number of financial hedges. From May 8, 1997 to December 31, 2000, approximately 53% to 64% of the plant output sold was hedged under vesting contracts, with the remainder of the plant capacity hedged under the State Hedge described below. Vesting contracts were put into place by the State Government of Victoria, Australia, between each generator and each distributor, prior to the privatization of electric power distributors in order to provide more predictable pricing for those electricity customers that were unable to choose their electricity retailer. Vesting contracts set base strike prices at which the electricity will be traded. The parties to the vesting contracts make payments, which are calculated based on the difference between the price in the contract and the half-hourly pool clearing price for the element of power under contract. Vesting contracts were sold in various structures and accounted for as electricity rate swap agreements. The State Hedge agreement with the State Electricity Commission of Victoria is a long-term contractual arrangement based upon a fixed price commencing May 8, 1997 and terminating October 31, 2016. The State Government of Victoria, Australia guarantees the State Electricity Commission of Victoria's obligations under the State Hedge. From January 2001 to July 2014, approximately 77% of the plant output sold is hedged under the State Hedge. From August 2014 to October 2016, approximately 56% of the plant output sold is hedged under the State Hedge. Additionally, the Loy Yang B plant entered into a number of fixed forward electricity contracts commencing either in 2001 or 2002, which expire on various dates through December 31, 2002, and which will further mitigate against the price volatility of the electricity pool. NEW ZEALAND. The New Zealand Government has been undergoing a steady process of electric industry deregulation since 1987. Reform in the distribution and retail supply sector began in 1992 with legislation that deregulated electricity distribution and provided for competition in the retail electric supply function. The New Zealand Energy Market, established in 1996, is a voluntary competitive wholesale market that allows for the trading of physical electricity on a half-hourly basis. The Electricity Industry Reform Act, which was passed in July 1998, was designed to increase competition at the wholesale generation level by splitting up Electricity Company of New Zealand Limited, the large state-owned generator, into three separate generation companies. The Electricity Industry Reform Act also prohibits the ownership of both generation and distribution assets by the same entity. The New Zealand Government commissioned an inquiry into the electricity industry in February 2000. This Inquiry Board's report was presented to the government in mid 2000. The main focus of the report was on the monopoly segments of the industry, transmission and distribution, with substantial limitations being recommended in the way in which these segments price their services in order to limit their monopoly power. Recommendations were also made with respect to the retail customer in order to reduce barriers to customers switching. In addition, the Board made recommendations in relation to the wholesale market's governance arrangements with the purpose of streamlining them. The recommended changes are now being progressively implemented. 67 INTEREST RATE RISK Interest rate changes affect the cost of capital needed to finance the construction and operation of our projects. We have mitigated the risk of interest rate fluctuations by arranging for fixed rate financing or variable rate financing with interest rate swaps or other hedging mechanisms for a number of our project financings. Interest expense included $9.3 million and $9.6 million of additional interest expense for the six months ended June 30, 2001 and 2000, respectively, and $16.1 million, $25.2 million and $22.8 million for the years 2000, 1999 and 1998, respectively, as a result of interest rate hedging mechanisms. We have entered into several interest rate swap agreements under which the maturity date of the swaps occurs prior to the final maturity of the underlying debt. A 10% increase in market interest rates at December 31, 2000 would result in a $17.2 million increase in the fair value of our interest rate hedge agreements. A 10% decrease in market interest rates at December 31, 2000 would result in a $17.1 million decline in the fair value of our interest rate hedge agreements. We had short-term obligations of $819.8 million consisting of commercial paper and bank borrowings at June 30, 2001. The fair values of these obligations approximated their carrying values at June 30, 2001, and would not have been materially affected by changes in market interest rates. The fair market value of long-term fixed interest rate obligations are subject to interest rate risk. The fair market value of our total long-term obligations (including current portion) was $7.7 billion at June 30, 2001. A 10% increase in market interest rates at December 31, 2000 would result in a decrease in the fair value of total long-term obligations by approximately $96 million. A 10% decrease in market interest rates at December 31, 2000 would result in an increase in the fair value of total long-term obligations by approximately $104 million. FOREIGN EXCHANGE RATE RISK Fluctuations in foreign currency exchange rates can affect, on a United States dollar equivalent basis, the amount of our equity contributions to, and distributions from, our international projects. As we continue to expand into foreign markets, fluctuations in foreign currency exchange rates can be expected to have a greater impact on our results of operations in the future. At times, we have hedged a portion of our current exposure to fluctuations in foreign exchange rates through financial derivatives, offsetting obligations denominated in foreign currencies, and indexing underlying project agreements to United States dollars or other indices reasonably expected to correlate with foreign exchange movements. In addition, we have used statistical forecasting techniques to help assess foreign exchange risk and the probabilities of various outcomes. We cannot assure you, however, that fluctuations in exchange rates will be fully offset by hedges or that currency movements and the relationship between certain macro economic variables will behave in a manner that is consistent with historical or forecasted relationships. Foreign exchange considerations for three major international projects, other than Paiton, which was discussed earlier, are discussed below. The First Hydro, Ferrybridge and Fiddler's Ferry plants in the U.K. and the Loy Yang B plant in Australia have been financed in their local currency, pounds sterling and Australian dollars, respectively, thus hedging the majority of their acquisition costs against foreign exchange fluctuations. Furthermore, we have evaluated the return on the remaining equity portion of these investments with regard to the likelihood of various foreign exchange scenarios. These analyses use market-derived volatilities, statistical correlations between specified variables, and long-term forecasts to predict ranges of expected returns. Foreign currencies in the U.K., Australia and New Zealand decreased in value compared to the U.S. dollar by 6%, 8% and 9%, respectively (determined by the change in the exchange rates from December 31, 2000 to June 30, 2001). The decrease in value of these currencies was the primary reason for the foreign currency translation loss of $101.2 million during the first six months of 2001 and a 68 $157.3 million loss during 2000. A 10% increase or decrease in the exchange rate at December 31, 2000 would result in foreign currency translation gains or losses of $196.7 million. In December 2000, we entered into foreign currency forward exchange contracts in the ordinary course of business to protect ourselves from adverse currency rate fluctuations on anticipated foreign currency commitments. The periods of the forward exchange contracts correspond to the periods of the hedged transactions. At December 31, 2000, the outstanding notional amount of the contracts totaled $91 million, consisting of contracts to exchange U.S. dollars to pounds sterling. A 10% fluctuation in exchange rates would change the fair value of the contracts at December 31, 2000 by approximately $6 million. At June 30, 2001, the outstanding notional amount of the contracts totaled $73 million, consisting of contracts to exchange U.S. dollars to pound sterling with varying maturities ranging from July 2001 to July 2002. During the first six months of 2001, we recognized a foreign exchange gain of approximately $36,000 related to the fuel purchases underlying the contracts that matured during the first six months of 2001. We will continue to monitor our foreign exchange exposure and analyze the effectiveness and efficiency of hedging strategies in the future. OTHER The electric power generated by some of our investments in domestic operating projects, excluding the Homer City plant and the Illinois Plants, is sold to electric utilities under long-term contracts, typically with terms of 15 to 30 years. We structure our long-term contracts so that fluctuations in fuel costs will produce similar fluctuations in electric and/or steam revenues and enter into long-term fuel supply and transportation agreements. The degree of linkage between these revenues and expenses varies from project to project, but generally permits the projects to operate profitably under a wide array of potential price fluctuation scenarios. RECENT DEVELOPMENTS We are considering a possible reincorporation in the State of Delaware. The reincorporation would be accomplished through a merger with Edison Mission Energy, a Delaware corporation and wholly-owned subsidiary of ours, in which the Delaware corporation would be the surviving corporation. The Order Authorizing Disposition of Jurisdiction Facilities issued by the Federal Energy Regulatory Commission on August 24, 2001 found that our proposed transaction was consistent with the public interest and granted our request for authority to complete the reincorporation, subject to certain conditions. We cannot assure you that a rehearing of the August 24, 2001 order will not be requested, and cannot provide any assurances as to the outcome of such hearing or as to the consummation of the reincorporation. 69 BUSINESS GENERAL OVERVIEW We are an independent power producer engaged in the business of developing, acquiring, owning or leasing and operating electric power generation facilities worldwide. We also conduct energy trading and price risk management activities in power markets open to competition. Edison International is our ultimate parent company. Edison International also owns Southern California Edison, one of the largest electric utilities in the United States. As of June 30, 2001, we owned interests in 33 domestic and 39 international operating power projects with aggregate generation capacity of 27,798 MW, of which our share was 22,923 MW. One domestic and five international projects totaling 1,551 MW of generating capacity, of which our anticipated share is approximately 926 MW, are in the construction stage. At June 30, 2001, we had consolidated assets of $15.3 billion and total shareholder's equity of $2.7 billion. ELECTRIC POWER INDUSTRY Until the enactment of the Public Utility Regulatory Policies Act of 1978, utilities were the only producers of bulk electric power intended for sale to third parties in the United States. The Public Utility Regulatory Policies Act encouraged the development of independent power by removing regulatory constraints relating to the production and sale of electric energy by certain non-utilities and requiring electric utilities to buy electricity from certain types of non-utility power producers, qualifying facilities, under certain conditions. The passage of the Energy Policy Act of 1992 further encouraged the development of independent power by significantly expanding the options available to independent power producers with respect to their regulatory status and by liberalizing transmission access. As a result, a significant market for electric power produced by independent power producers, such as us, has developed in the United States since the enactment of the Public Utility Regulatory Policies Act. In 1998, utility deregulation in several states led utilities to divest generating assets, which has created new opportunities for growth of independent power in the United States. The movement toward privatization of existing power generation capacity in many foreign countries and the growing need for new capacity in developing countries have also led to the development of significant new markets for independent power producers outside the United States. We believe that we are well-positioned to continue to realize opportunities in these new foreign markets. See "--Strategic Overview" below. STRATEGIC OVERVIEW Our business goal is to continue to be one of the leading owners and operators of electric generating assets in the world. We play an active role, as a long-term owner, in all phases of power generation, from planning and development through construction and commercial operation. We believe that this involvement allows us to better ensure, with our experienced personnel, that our projects are well-planned, structured and managed, thus maximizing value creation. Our strategy focuses on enhancing the value of existing assets, expanding plant capacity at existing sites and developing new projects in locations where we have an established position or otherwise determine that attractive financial performance can be realized. In addition, because our merchant plants, sell power into markets without the certainty of long-term contracts, we conduct power marketing, trading, and risk management activities to stabilize and enhance the financial performance of these projects. We also recognize that our principal customers are regulated utilities. We therefore strive to understand the regulatory and economic environment in which the utilities operate so that we may continue to create mutually beneficial relationships and business dealings. 70 In making investment decisions, we evaluate potential project returns against our internally generated rate of return guidelines. We establish these guidelines by identifying a base rate of return and adjusting the base rate by potential risk factors, such as risks associated with project location and stage of project development. We endeavor to mitigate these risks by (i) evaluating all projects and the markets in which they operate, (ii) selecting strategic partners with complementary skills and local experience, (iii) structuring investments through subsidiaries, (iv) managing up-front development costs, (v) utilizing limited recourse financing and (vi) linking revenue and expense components where appropriate. In response to the increasing globalization of the independent power market, we have organized our operation and development activities into three geographic regions: (i) Americas, (ii) Asia Pacific and (iii) Europe, Central Asia, Middle East and Africa. Each region is served by one or more teams consisting of business development, operations, finance and legal personnel, and each team is responsible for all our activities within a particular geographic region. Also, we mobilize personnel from outside a particular region when needed in order to assist in the development of specified projects. Due to the impact of the California power crisis, our current operational focus is on enhancing the performance of our existing portfolio of power projects, expanding our generation capacity at existing sites and maintaining our credit quality. Our long-term strategy is to continue to grow our business while maintaining investment grade credit ratings. COMPETITIVE STRENGTHS We believe that our competitive strengths advantageously position us to enhance our financial performance, expand our business and pursue strategic opportunities in independent power markets both domestically and abroad. Our key competitive strengths are summarized below. - GLOBAL PRESENCE. We are among the largest independent power producers in the world based on MW generated. As of June 30, 2001, we owned interests in 33 domestic operating projects with total generating capacity of 15,221 MW, of which our share was 13,302 MW. In addition, as of June 30, 2001, we owned interests in 39 projects outside the United States with total generation capacity of 12,577 MW, of which our share was 9,621 MW. In assembling and operating this global portfolio, we have gained substantial experience and expertise in major U.S. and foreign power markets and, as a result, enjoy access to a broader range of development and acquisition opportunities worldwide. - DIVERSIFIED ASSET PORTFOLIO. In addition to owning interests in power generation facilities in 10 countries worldwide, our portfolio is also diversified by fuel type. As of June 30, 2001, fuel type for our portfolio of power projects was comprised of 57% coal, 30% natural gas, 11% hydroelectric and 2% oil and geothermal, as a percentage of our share of aggregate generation capacity. The fuel type diversification of our portfolio of power projects reduces our exposure to shortages or other disruptions in the market for any particular fuel source. The geographic diversification of our portfolio of power projects spreads our operations across different regions and market segments, thereby allowing us to participate in multiple segments of the domestic and international power markets and reducing the level of risk presented by any particular market. - BALANCED CONTRACT POSITION. The contract status of our generation facilities reflects a blend of long-term contracts and sales from our merchant plants. As of June 30, 2001, the majority of our MW were generated subject to long-term power purchase contracts, which provide us with contracted revenue streams on some portion of the output or capacity from those generation facilities. Our remaining MW were generated by our merchant plants which sell power into wholesale power markets. This blend of contracted and merchant generation provides for a stream of contract revenue while allowing us the flexibility to sell energy into wholesale markets. 71 - DISCIPLINED MARKETING AND RISK MANAGEMENT ACTIVITIES. We use a disciplined approach to energy marketing and risk management that is centered around our merchant plants and is designed primarily to stabilize and enhance the operational and financial performance of those facilities. These activities also reduce our exposure to energy price fluctuations. - STRONG AND EXPERIENCED PROJECT MANAGEMENT TEAM. We have an experienced project management team that continues to focus on our core competencies and to draw upon our significant domestic and international development and operating experience. BUSINESS DESCRIPTION OPERATION OF GENERATION FACILITIES We have ownership interests in operating projects that employ gas fired combustion turbine technology predominantly through an application known as cogeneration. Cogeneration facilities sequentially produce two or more useful forms of energy, such as electricity and steam, from a single primary source of fuel, such as natural gas or coal. Many of our cogeneration projects are located near large, industrial steam users or in oil fields that inject steam underground to enhance recovery of heavy oil. The regulatory advantages for cogeneration facilities under the Public Utility Regulatory Policies Act of 1978, as amended, have become somewhat less significant because of other federal regulatory exemptions made available to independent power producers under the Energy Policy Act. Accordingly, we expect that the majority of our future projects will generate power without selling steam to industrial users. We also have ownership interests in projects that use renewable resources like hydroelectric energy and geothermal energy. Our hydroelectric projects, excluding First Hydro's plants, use run-of-the-river technology to generate electricity. The First Hydro plant utilizes pumped-storage stations that consume electricity when it is comparatively less expensive in order to pump water for storage in an upper reservoir. Water is then allowed to flow back through turbines in order to generate electricity when its market value is higher. This type of generation is characterized by its speed of response, its ability to work efficiently at wide variations of load and the basic reliance of revenue on the difference between the peak and trough prices of electricity during the day. Our geothermal projects included as part of our Contact Energy investment use technologies that convert the heat from geothermal fluids and underground steam into electricity. We also have domestic and international ownership interests in operating projects and projects which are large scale, coal-fired projects using pulverized coal and coal-fired generation technology. In the United States, we have developed and acquired coal and waste coal-fired projects that employ traditional pulverized coal and circulating fluidized bed technology, which allows for the use of lower quality coal and the direct removal of sulfur from the coal. We also have acquired ownership interests in gas-fired projects and have purchased gas-fired turbines for combined cycle gas turbines (commonly referred to as "F" technology), which are designed to increase efficiency of power generation due to higher firing temperatures. CONTRACTED FACILITIES Many of our operating projects in the United States sell power and steam to domestic electric utilities and industrial steam users under long-term contracts. Electric power generated by several of our international projects is sold under long term contracts to electric utilities located in the country where the power project is located. These projects' revenues from power purchase agreements usually consist of two components: energy payments and capacity payments. Energy payments are made based on actual deliveries of electric energy, such as kilowatt hours, to the purchaser. Energy payments are usually indexed to specified variable costs that the purchaser avoids by purchasing this electric energy from our projects opposed to operating its own power plants to produce the same amount of electric 72 energy. The variable components typically include fuel costs and selected operation and maintenance expenses. These costs may be indexed to the utility's cost of fuel and/or selected inflation indices. Capacity payments are based on a project's proven capability to reliably make electric capacity available, whether or not the project is called to deliver electric energy. Capacity payments compensate a project for specified fixed costs that are incurred independent of the amount of energy sold by the project. Such fixed costs include taxes, debt service and distributions to the project's owners. To receive capacity payments, there are typically minimum performance standards that must be met, and often there is a performance range that further influences the amount of capacity payments. Steam produced from our cogeneration facilities is sold to industrial steam users, such as petroleum refineries or companies involved in the enhanced recovery of oil through steam flooding of oil fields, under long term steam sales contracts. Steam payments are generally based on formulas that reflect the cost of water, fuel and capital to us. In some cases, we have provided steam purchasers with discounts from their previous costs for producing this steam and/or have partially indexed steam payments to other indices including specified oil prices. The majority of 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 Exelon Generation to make a capacity payment for the plants under contract and an energy payment for the electricity produced by these plants. Exelon Generation has the option to terminate two of the three agreements in their entirety or with respect to any generating unit or units in each of 2002, 2003 and 2004. The capacity payments provide the Illinois Plants revenue for fixed charges, and the energy payments compensate the Illinois Plants for variable costs of production. If Exelon Generation does not fully dispatch the 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. MERCHANT PLANTS During 1999, we acquired the Homer City, Fiddler's Ferry and Ferrybridge plants producing approximately 5,868 MW, which sell capacity, energy and, in some cases, other services on a competitive basis under bilateral arrangements or through centralized power pools that provide an institutional framework for price setting, dispatch and settlement procedures. Electric power generated at the Homer City plant is sold under bilateral arrangements with utilities and power marketers under short term contracts with terms of two years or less, or to the PJM or the NYISO. These pools have short term markets, which establish an hourly clearing price. The Homer City plant is situated in the PJM control area and is physically connected to high voltage transmission lines serving both the PJM and NYISO markets. The Homer City plant can also transmit power to the Midwestern United States. Power from the Fiddler's Ferry and Ferrybridge and First Hydro projects is sold into the United Kingdom electricity market. The electricity trading mechanism in the U.K. that provided for the sale of energy to a pool has recently been replaced with trading arrangements using bilateral contracts. See discussion of the new electricity trading arrangement in "Management's Discussion and Analysis of Financial Condition and Results of Operations--Market Risk Exposures--United Kingdom." Under the new trading arrangements, our indirect U.K. subsidiary, Edison First Power Limited, is required to contract with specific purchasers for the sales of energy produced by its Ferrybridge and Fiddler's Ferry stations. Under the new system, a generator must deliver, and a consumer must take delivery, in accordance with their contracted agreements or face the assessment of energy imbalance charges by the 73 systems operator. Edison First Power believes that a consequence of this will be to increase greatly the motivation of parties to contract in advance in order to lock in an agreed upon price for, and quantity of, energy. As a result of the introduction of the new electricity trading arrangements, forecasts of future electricity prices in the markets into which Edison First Power sells its power vary significantly. Recent experience by Edison First Power has shown that this arrangement has placed significant downward pressure on prices to be paid by purchasers of energy in the future, although it is uncertain how the new trading arrangements will affect prices in the long-term. Edison Mission Energy is currently considering the sale of the Ferrybridge and Fiddler's Ferry plants. The Loy Yang B plant sells its electrical energy through a centralized electricity pool, which provides for a system of generator bidding, central dispatch and a settlements system based on a clearing market for each half-hour of every day. The National Electricity Market Management Company, operator and administrator of the pool, determines a system marginal price each half-hour. To mitigate our exposure to price volatility of the electricity traded into the pool, the Loy Yang B plant has entered into a number of financial hedges. From May 8, 1997 to December 31, 2000, approximately 53% to 64% of the plant output sold was hedged under vesting contracts, with the remainder of the plant capacity hedged under the State Hedge. The State Hedge agreement with the State Electricity Commission of Victoria is a long-term contractual arrangement based upon a fixed price commencing May 8, 1997 and terminating October 31, 2016. The State Government of Victoria, Australia guarantees the State Electricity Commission of Victoria's obligations under the State Hedge. From January 2001 to July 2014, approximately 77% of the plant output sold is hedged under the State Hedge. From August 2014 to October 2016, approximately 56% of the plant output sold is hedged under the State Hedge. Additionally, the Loy Yang B plant has entered into a number of fixed forward electricity contracts with terms of up to two years expiring on various dates through December 31, 2002, and which will further mitigate against the price volatility of the electricity pool. PROJECT DEVELOPMENT AND FINANCING PROJECT DEVELOPMENT The development of power generation projects, whether through new construction or the acquisition of existing assets, involves numerous elements, including evaluating and selecting development opportunities, evaluating regulatory and market risks, designing and engineering the project, acquiring necessary land rights, permits and fuel resources, obtaining financing, managing construction and, in some cases, obtaining power and steam sales agreements. We initially evaluate and select potential development projects based on a variety of factors, including the reliability of technology, the strength of the potential partners, the feasibility of the project, the likelihood of obtaining a long term power purchase agreement or profitably selling power without this agreement, the probability of obtaining required licenses and permits and the projected economic return. During the development process, we monitor the viability of our projects and make business judgments concerning expenditures for both internal and external development costs. Completion of the financing arrangements for a project is generally an indication that business development activities are substantially complete. The selection of power generation technology for a particular project is influenced by various factors, including regulatory requirements, availability of fuel and anticipated economic advantages for a particular application. In the past we have relied on acquisitions to expand our portfolio of power projects. As a result of the California power crisis, our current focus is on operating our existing portfolio and focusing our development activities on expanding our generation capacity at existing sites rather than pursuing acquisition and development opportunities at our historical level. Upon resolution of the California power crisis, we plan to focus to a greater extent on the development of new projects. 74 PROJECT FINANCING Each project we develop requires a substantial capital investment. Permanent project financing is often arranged immediately prior to the construction of the project. With limited exceptions, this debt financing is for approximately 50% to 80% of each project's costs and is structured on a basis that is non-recourse to us and our other projects. In addition, the collateral security for each project's financing generally has been limited to the physical assets, contracts and cash flow of that project and our ownership interests in that project. In general, each of our direct or indirect subsidiaries is organized as a legal entity separate and apart from us and our other subsidiaries. Any asset of any of these subsidiaries may not be available to satisfy our obligations or those of any of our other subsidiaries. However, unrestricted cash or other assets that are available for distribution by a subsidiary may, subject to applicable law and the terms of financing arrangements of these subsidiaries, be advanced, loaned, paid as dividends or otherwise distributed or contributed to us. The ability to arrange project financing and the cost of such financing are dependent upon numerous factors, including general economic and capital market conditions, the credit attributes of a project, conditions in energy markets, regulatory developments, credit availability from banks or other lenders, investor confidence in the industry, us and other project participants, the continued success of our other projects, and provisions of tax and securities laws that are conducive to raising capital. Our financial exposure in any equity investment is generally limited by contractual arrangement to our equity commitment, which is usually about 20% to 50% of our share of the aggregate project cost. In some cases, we provide additional credit support to projects in the form of debt service reserves, contingent equity commitments, revenue shortfall support or other arrangements designed to provide limited support. PERMITS AND APPROVALS Because the process for obtaining initial environmental, siting and other governmental permits and approvals is complicated and lengthy, often taking a year or longer, we seek to obtain all permits, licenses and other approvals required for the construction and operation of a project, including siting, construction and environmental permits, rights of way and planning approvals, early in the development process for a project. See "--Regulatory Matters--General." Emission allowances were acquired by us as part of the acquisition of the Illinois Plants and the Homer City plant. Emission allowances are required by our facilities in order to be certified by the local environmental authorities and are required to be maintained throughout the period of operation of those facilities located in Pennsylvania and Illinois. We purchase additional emission allowances when necessary to meet the environmental regulations. We also use forward sales and purchases of emission allowances, together with options, to achieve our objective of stabilizing and enhancing the operations from these merchant plants. CONSTRUCTION, OPERATIONS & MAINTENANCE AND MANAGEMENT In the project implementation stage, we often provide construction management, start up and testing services. The detailed engineering and construction of the projects typically are performed by outside contractors under fixed price, turnkey contracts. Under these contracts, the contractor generally is required to pay liquidated damages to us in the event of cost overruns, schedule delays or the project's failure to meet specified capacity, efficiency and emission standards. As a project goes into operation, operation and maintenance services are provided to the project by one of our operation and maintenance subsidiaries or another operation and maintenance contractor. The projects that we operated in 2000 achieved an average 82% availability. Availability is a 75 measure of the weighted average number of hours each generator is available for generation as a percentage of the total number of hours in a year. An executive director generally manages the day-to-day administration of each project. Management committees comprised of the project's partners generally meet monthly or quarterly to review and manage the operating performance of the project. MARKETING AND RISK MANAGEMENT When making sales under negotiated contracts, it is our policy to deal with investment grade counterparties or counterparties that provide equivalent credit support. Exceptions to the policy are granted only after thorough review and scrutiny by our Risk Management Committee. Most entities that have received exceptions are organized power pools and quasi-governmental agencies. We hedge a portion of the electric output of our merchant plants in order to stabilize and enhance the operating revenues from merchant plants. When appropriate, we manage the "spark spread," or margin, which is the spread between electric prices and fuel prices and use forward contracts, swaps, futures, or options contracts to achieve those objectives. Our power marketing and trading organization, Edison Mission Marketing & Trading, markets and trades electric power and energy related commodity products, including forwards, futures, options and swaps. It also provides services and price risk management capabilities to the electric power industry. Price risk management activities include the restructuring of power sales and power supply agreements. We generally balance forward sales and purchase contracts to mitigate market risk and secure cash flow streams. Edison Mission Marketing & Trading is divided into front-, middle-, and back-office segments, with specified duties segregated for control purposes. The personnel of Edison Mission Marketing & Trading have a high level of knowledge of utility operations, fuel procurement, energy marketing and futures and options trading. We have systems in place which monitor real time spot and forward pricing and perform option valuations. We also have a wholesale power scheduling group that operates on a 24 hour basis. Energy trading and price 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 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. We perform 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, we supplement 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. FUEL SUPPLY MANAGEMENT We seek to enter into long term contracts to mitigate the risks of fluctuations in prices for coal, oil, gas and fuel transportation. We believe, however, that our financial condition will not be substantially adversely affected by these fluctuations for our non-merchant plants because our long term contracts to sell power and steam typically are structured so that fluctuations in fuel costs will produce similar fluctuations in electric energy and/or steam revenues. The degree of linkage between these 76 revenues and expenses varies from project to project, but generally permits the projects with long term contracts to operate profitably under a wide array of potential price scenarios. REGIONAL OVERVIEW OF BUSINESS SEGMENTS As of June 30, 2001, we have ownership or leasehold interests in the following domestic operating projects:
PRIMARY ELECTRIC NET ELECTRIC ELECTRIC OWNERSHIP CAPACITY CAPACITY LOCATION PURCHASER(4) TYPE OF FACILITY(5) INTEREST (IN MW) (IN MW) ------------- ------------ ------------------- ---------- -------- ------------ AMERICAS: American Bituminous(1).......... West Virginia MPC Waste Coal 50% 80 40 Brooklyn Navy Yard(2)........... New York CE Cogeneration/EWG 50% 286 143 Coalinga(1)..................... California PG&E Cogeneration 50% 38 19 Commonwealth Atlantic(3)........ Virginia VEPCO EWG 50% 340 170 EcoElectrica(1)(3).............. Puerto Rico PREPA Cogeneration 50% 540 270 Gordonsville(1)(3).............. Virginia VEPCO Cogeneration/EWG 50% 240 120 Harbor(1)....................... California Pool EWG 30% 80 24 Homer City(1)................... Pennsylvania Pool EWG 100% 1,884 1,884 Illinois Plants Illinois EG EWG 100% 9,539 9,539 (12 projects)(1).............. James River(3).................. Virginia VEPCO Cogeneration 50% 110 55 Kern River(1)................... California SCE Cogeneration 50% 300 150 March Point I................... Washington PSE Cogeneration 50% 80 40 March Point II.................. Washington PSE Cogeneration 50% 60 30 Mid-Set(1)...................... California PG&E Cogeneration 50% 38 19 Midway-Sunset(1)................ California SCE Cogeneration 50% 225 112 Nevada Sun-Peak(3).............. Nevada SPR EWG 50% 210 105 Saguaro(1)(3)................... Nevada SPR Cogeneration 50% 90 45 Salinas River(1)................ California PG&E Cogeneration 50% 38 19 Sargent Canyon(1)............... California PG&E Cogeneration 50% 38 19 Sunrise(1)...................... California CDWR EWG 50% 320 160 Sycamore(1)..................... California SCE Cogeneration 50% 300 150 Watson.......................... California SCE Cogeneration 49% 385 189 ------ ------ Total Americas.............. 15,221 13,302 ====== ======
- ------------------------------ (1) Operated by subsidiaries or affiliates of Edison Mission Energy; all other projects are operated by unaffiliated third parties. (2) Currently offered for sale. (3) Subsequent to June 30, 2001, an agreement to sell our project interest was executed, with completion subject to satisfaction of closing conditions. (4) Electric purchaser abbreviations are as follows: CDWR California Department of Water Resources PREPA Puerto Rico Electric Power Authority CE Consolidated Edison Company of New PSE Puget Sound Energy, Inc. York, Inc. EG Exelon Generation Company SCE Southern California Edison Company MPC Monongahela Power Company SPR Sierra Pacific Resources PG&E Pacific Gas & Electric Company VEPCO Virginia Electric & Power Company Pool Regional electricity trading market
(5) All the cogeneration projects are gas fired facilities except for the James River project, which uses coal. All the exempt wholesale generator (EWG) projects are gas fired facilities, except for the Homer City plant and six of the Illinois Plants, which use coal. 77 As of June 30, 2001, we have ownership or leasehold interests in the following international operating projects:
NET ELECTRIC ELECTRIC PRIMARY ELECTRIC OWNERSHIP CAPACITY CAPACITY LOCATION PURCHASER(3) INTEREST (IN MW) (IN MW) ------------ ---------------- ---------- -------- -------- EUROPE: Derwent(1)....................................... England SE(4) 33% 214 71 Doga(1).......................................... Turkey TEAS 80% 180 144 Ferrybridge(2)................................... England Various 100% 1,989 1,989 Fiddler's Ferry(2)............................... England Various 100% 1,995 1,995 First Hydro (2 projects)......................... Wales Various 100% 2,088 2,088 Iberian Hy-Power I (5 projects).................. Spain FECSA 100%(7) 43 39 Iberian Hy-Power II (13 projects)................ Spain FECSA 100% 43 43 ISAB............................................. Italy GRTN 49% 512 251 Roosecote........................................ England NORWEB(5) 100% 220 220 ------ ------ Total Europe................................... 7,284 6,840 ====== ====== ASIA PACIFIC: Contact (9 projects)............................. New Zealand Pool 51%(8) 2,247 1,033 Kwinana(1)....................................... Australia WP 70% 116 81 Loy Yang B....................................... Australia Pool(6) 100% 1,000 1,000 Paiton(1)........................................ Indonesia PLN 40% 1,230 492 TriEnergy........................................ Thailand EGAT 25% 700 175 ------ ------ Total Asia Pacific............................. 5,293 2,781 ------ ------ Total International............................ 27,798 22,923 ====== ======
- ------------------------------ (1) Operated by subsidiaries or affiliates of Edison Mission Energy; all other projects are operated by unaffiliated third parties. (2) Currently offered for sale. (3) Electric purchaser abbreviations are as follows: EGAT Electricity Generating Authority of Thailand Pool Electricity trading market for England, FECSA Fuerzas Electricas de Cataluma, S.A. Wales, Australia and New Zealand GRTN Gestore Rete Transmissione Nazionale SE Southern Electric plc. NORWEB North Western Electricity Board TEAS Turkiye Elektrik Urehm A.S. PLN PT PLN WP Western Power
(4) Sells to the pool with a long-term contract with SE. (5) Sells to the pool with a long-term contract with NORWEB. (6) Sells to the pool with a long-term contract with the State Electricity Commission of Victoria. (7) Minority interest in three projects. (8) Minority interest in one project. AMERICAS As of June 30, 2001, we had 33 operating projects in this region, all of which are presently located in the United States and its territories. Our Americas region is headquartered in Irvine, California with additional offices located in Chicago, Illinois; Boston, Massachusetts; and Washington, D.C. The region-specific strategy for the Americas region is: (i) to pursue the acquisition and development of existing generating assets from utilities, industrial companies and other independent power producers throughout the region, though to a lesser extent than we had in the past and (ii) to market energy and conduct risk management activities centered around our merchant plants. 78 In March 1999, we acquired 100% of the 1,884 MW Homer City Electric Generating Station for approximately $1.8 billion. This facility is a coal-fired plant in the mid-Atlantic region of the United States and has direct, high voltage interconnections to both the New York Independent System Operator, which controls the transmission grid and energy and capacity markets for New York State and is commonly known as the NYISO, and the Pennsylvania-New Jersey-Maryland Power Pool, which is commonly known as the PJM. We operate the plant, which we believe is one of the lowest-cost generation facilities in the region. In December 1999, we acquired the fossil-fuel generating plants of Commonwealth Edison, a subsidiary of Exelon Corporation, which are collectively referred to as the Illinois Plants, totaling 6,841 MW of generating capacity, for approximately $4.1 billion. We operate these plants, which provide access to the Mid-America Interconnected Network and the East Central Area Reliability Council. In connection with this transaction, we entered into power purchase agreements with Commonwealth Edison with a term of up to five years. Subsequently, Commonwealth Edison assigned its rights and obligations under these power purchase agreements to Exelon Generation Company, LLC. Concurrently with this acquisition, we assigned our right to purchase the Collins Station, a 2,698 MW gas and oil-fired generating station located in Illinois, to third party lessors. After this assignment, we entered into a lease of the Collins Station with a term of 33.75 years. The aggregate MW either purchased or leased as a result of these transactions is 9,539 MW. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Acquisitions, Dispositions and Sale-Leaseback Transactions--Sale-Leaseback Transactions" for a description of the Powerton and Joliet sale-leaseback transactions. In September 2000, we completed a transaction with P&L Coal Holdings Corporation and Gold Fields Mining Corporation (Peabody) to acquire the trading operations of Citizens Power LLC and a minority interest in structured transaction investments relating to long-term power purchase agreements. As a result of this acquisition, we have expanded our trading operations beyond the traditional marketing of our electric power. On November 17, 2000, we completed a transaction with Texaco Power & Gasification Holdings Inc. to purchase a proposed 560 MW gas-fired combined cycle project to be located in Kern County, California, referred to as the Sunrise project. The acquisition includes all rights, title and interest held by Texaco in the Sunrise project, except that Texaco had an option to repurchase at cost a 50% interest in the project prior to its commercial operation which commenced on June 27, 2001. On June 25, 2001, Texaco exercised its option and repurchased a 50% interest for $84 million. As part of our acquisition of the Sunrise project, we also: (i) acquired from Texaco two gas turbines for the project and (ii) granted Texaco an option to acquire a 50% interest in 1,000 MW of future power plant projects we designate. The Sunrise project consists of two phases, with Phase I, a single-cycle gas-fired facility (320 MW), completed on June 27, 2001, and Phase II, conversion to a combined-cycle gas-fired facility (560 MW), currently scheduled to be completed in June 2003. On June 25, 2001, we entered into a long-term power purchase agreement with the California Department of Water Resources. In November 1999, we completed the sale of a portion of our interest in Four Star to a company in which we hold a 50% interest. Net proceeds from the sale were $20.5 million. We recorded an after-tax gain on the sale of our investment of approximately $30 million. Our net ownership interest in Four Star was reduced from 50% at December 31, 1998 to 34% as a result of the transaction. In December 1999 and May and July 2000, we purchased additional shares of stock of Four Star Oil & Gas Company, increasing our ownership interest to 38%. On December 31, 2000, shares of convertible preferred shares were converted to common shares, reducing our net ownership interest to 36%. In 1988, we formed a wholly-owned subsidiary, Mission Energy Fuel Company, to develop and invest in fuel interests. Since that time, Mission Energy Fuel has invested in a number of oil and gas 79 properties and a production company. Oil and gas produced from the properties are generally sold at a spot or short-term market price. EUROPE, CENTRAL ASIA, MIDDLE EAST AND AFRICA As of June 30, 2001, we had 26 operating projects in this region that are located in the U.K., Turkey, Spain and Italy. Our Europe, Central Asia, Middle East and Africa region is headquartered in London, England with additional offices located in Italy, Spain and Turkey. The London office was established in 1989. The region is characterized by a blend of both mature and developing markets. In July 1999, we acquired 100% of the Ferrybridge and Fiddler's Ferry coal-fired power plants located in the U.K. with a total generating capacity of 3,984 MW from PowerGen UK plc for approximately $2.0 billion. Ferrybridge, located in West Yorkshire, and Fiddler's Ferry, located in Warrington, are in the middle of the order in which plants are called upon to dispatch electric power. The financial performance of the Fiddler's Ferry and Ferrybridge power plants has not met our expectations, largely due to lower energy power prices resulting primarily from increased competition, warmer-than-average weather and uncertainty surrounding the new electricity trading arrangements. As a result, Edison First Power deferred some environmental capital expenditure milestone requirements in the original capital expenditure program set forth in the financing documents. The original capital expenditure program has been revised, and this revision has been agreed to by the financing parties. In addition, in July 2001, the financing parties waived technical defaults under the financing documents and a default under the financing documents resulting from the fact that due to this reduced financial performance, Edison First Power's debt service coverage ratio during 2000 declined below the threshold set forth in the financing documents. We cannot assure you that Edison First Power's creditors will continue to waive its non-compliance with the requirements under the financing documents or that Edison First Power will satisfy the financial ratios in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Subsidiary Financing Plans--Status of Edison First Power Loan." 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. Despite the breaches under the financing documents, Edison First Power's debt service coverage ratio for 2000 exceeded 1:1. 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. In March 2001 L61 million was paid by Edison First Power to meet its semi-annual debt service requirements. Another of our indirect subsidiaries, EME Finance UK Limited, is the borrower under the facility made available for the purposes of funding coal and capital expenditures related to the Fiddler's Ferry and Ferrybridge power plants. At June 30, 2001 L58 million was outstanding for coal purchases and zero was outstanding to fund capital expenditures under this facility. EME Finance UK Limited on-lends any drawings under this facility to Edison First Power. The financing parties of this facility have also issued letters of credit directly to Edison First Power to support their obligations to lend to EME Finance UK Limited. EME Finance UK Limited's obligations under this facility are separate and apart from the obligations of Edison First Power under the financing documents related to the acquisition of these plants. We have guaranteed the obligations of EME Finance UK Limited under this facility, including any letters of credit issued to Edison First Power under the facility, for the amount of L359 million, and our guarantee remains in force notwithstanding any breaches under Edison First Power's acquisition financing documents. 80 During October 1999, we completed the acquisition of the remaining 20% of the 220 MW natural gas-fired Roosecote project located in England. Consideration for the remaining 20% consisted of a cash payment of approximately $16.0 million, or 9.6 million pounds sterling. In March 2000, we completed a transaction with UPC International Partnership CV II to acquire Edison Mission Wind Power Italy B.V., formerly known as Italian Vento Power Corporation Energy 5 B.V., which owns a 50% interest in a series of power projects that are in operation or under development in Italy. All the projects use wind to generate electricity from turbines. The electricity is sold under fixed price, long-term tariffs. Assuming all the projects under development are completed, currently scheduled for 2002, the total capacity of these projects will be 283 MW. The total purchase price was 90 billion Italian Lira (approximately $44 million at December 31, 2000), with equity contribution obligations of up to 33 billion Italian Lira (approximately $16 million at December 31, 2000), depending on the number of projects that are ultimately developed. As of December 31, 2000, our payments in respect of these projects included $27 million toward the purchase price and $13 million in equity contributions. ASIA PACIFIC As of June 30, 2001, we had 13 operating projects in this region that are located in Australia, Indonesia, Thailand and New Zealand. Our Asia Pacific region is headquartered in Singapore with additional offices located in Australia, Indonesia and the Philippines. In February 2001, we completed the acquisition of a 50% interest in CBK Power Co. Ltd. in exchange for $20 million. CBK Power has entered into a 25-year build-rehabilitate-transfer-and-operate agreement with National Power Corporation related to the 728 MW Caliraya-Botocan-Kalayaan (CBK) hydroelectric project located in the Philippines. Financing for this $460 million project has been completed with equity contributions of $117 million (our 50% share is $58.5 million) required to be made upon completion of the rehabilitation and expansion, currently scheduled in 2003, and debt financing has been arranged for the remainder of the cost for this project. In May 1999, we completed a transaction with the government of New Zealand to acquire 40% of the shares of Contact Energy Limited. The remaining 60% of Contact Energy's shares were sold in an overseas public offering resulting in widespread ownership among the citizens of New Zealand and offshore investors. These shares are publicly traded on stock exchanges in New Zealand and Australia. Since the date of acquisition, we have increased our share of ownership in Contact Energy to 51.2%. Contact Energy owns and operates hydroelectric, geothermal and natural gas-fired power generating plants primarily in New Zealand with a total current generating capacity of 2,247 MW, of which our share is 1,033 MW. In addition, Contact Energy has expanded into the retail electricity and gas markets in New Zealand since 1998 through acquisition of regional electricity supply and retail gas supply businesses. See "--Regulatory Matters--Recent Foreign Regulatory Matters--New Zealand." Our wholly-owned subsidiary owns a 40% interest in PT Paiton Energy, which owns a 1,230 MW coal-fired power plant in operation in East Java, Indonesia, which is referred to as the Paiton project. Our investment in the Paiton project was $503 million at June 30, 2001. Under the terms of a long-term power purchase agreement between Paiton Energy and PT PLN, the state-owned electric utility company, PT PLN is required to pay for capacity and fixed operating costs once each unit and the plant achieve commercial operation. As of December 31, 2000, PT PLN had not paid invoices amounting to $814 million for capacity charges and fixed operating costs under the power purchase agreement. Paiton Energy is in continuing negotiations on a long-term restructuring of the tariff under the power purchase agreement. Paiton Energy and PT PLN agreed on an interim agreement for the period through December 31, 2000 and on a Phase I Agreement for the period from January 1, 2001 through June 30, 2001. The Phase I Agreement provides for fixed monthly payments aggregating $108 million 81 over its six-month duration and for the payment for energy delivered to PT PLN from the plant during this period. PT PLN made all fixed and energy payments due under the interim agreement and has made all fixed payments due under the Phase I Agreement totaling $108 million as scheduled. Paiton Energy received lender approval of the Phase I Agreement, and Paiton Energy has also entered into a lender interim agreement under which lenders have effectively agreed to interest-only payments and to deferral of principal repayments while Paiton Energy and PT PLN seek a long-term restructuring of the tariff. The lenders have agreed to extend that agreement through December 31, 2001. Paiton Energy and PT PLN intended to complete the negotiations of the future phases of a new long-term tariff during the six-month duration of the Phase I Agreement. Although Paiton Energy and PT PLN did not complete negotiations on a long-term restructuring of the tariff by June 30, 2001, Paiton Energy and PT PLN have signed an agreement providing for an extension of the Phase I Agreement from July 1, 2001 to September 30, 2001. Paiton Energy is continuing to generate electricity to meet the power demand in the region and believes that PT PLN will continue to agree to make payments for electricity on an interim basis beyond June 30, 2001 while negotiations regarding long-term restructuring of the tariff continue. Although completion of negotiations may be delayed, Paiton Energy continues to believe that negotiations on the long-term restructuring of the tariff will be successful. All arrears under the power purchase agreement continue to accrue, minus the fixed monthly payments actually made under the year 2000 interim agreement and under the Phase I Agreement, with the payment of these arrears to be dealt with in connection with the overall long-term restructuring of the tariff. In this regard, under the Phase I Agreement, Paiton Energy has agreed that, so long as the Phase I Agreement is complied with, it will seek to recoup no more than $590 million of the above arrears, the payment of which is to be dealt with in connection with the overall tariff restructuring. Any material modifications of the power purchase agreement resulting from the continuing negotiation of a new long-term tariff could require a renegotiation of the Paiton project's debt agreements. The impact of any such renegotiations with PT PLN, the Government of Indonesia or the project's creditors on our expected return on our investment in Paiton Energy is uncertain at this time; however, we believe that we will ultimately recover our investment in the project. MARKETING AND RISK MANAGEMENT ACTIVITIES We use a disciplined approach to energy marketing and risk management that is centered around our merchant generation assets and is designed primarily to stabilize and enhance the financial performance of those facilities. We generally attempt to balance forward sales and purchase contracts to mitigate market risk and secure cash flow streams. These activities enhance the operational and financial performance of our facilities and reduce our exposure to energy price fluctuations. SEASONALITY Due to warmer weather during the summer months, electric revenues generated from the Homer City plant and the Illinois Plants are usually higher during the third quarter of each year. In addition, our third quarter revenues from energy projects are materially higher than other quarters of the year due to a significant number of our domestic energy projects located on the West Coast of the United States, which generally have power sales contracts that provide for higher payments during summer months. The First Hydro plants, Ferrybridge and Fiddler's Ferry plants and the Iberian Hy-Power plants provide for higher electric revenues during the winter months. COMPETITION We compete with many other companies, including multinational development groups, equipment suppliers and other independent power producers, including affiliates of utilities, in selling electric power and steam. We also compete with electric utilities in obtaining the right to install new generating 82 capacity. Over the past decade, obtaining a power sales contract with a utility has generally become a progressively more difficult, expensive and competitive process. Many power sales contracts are now awarded by competitive bidding, which both increases the costs of obtaining these contracts and decreases the chances of obtaining these contracts. We evaluate each potential project in an effort to determine when the probability of success is high enough to justify expenditures in developing a proposal or bid for the project. Amendments to the Public Utility Holding Company Act of 1935 made by the Energy Policy Act have increased the number of competitors in the domestic independent power industry by reducing restrictions applicable to projects that are not qualifying facilities under the Public Utility Regulatory Policies Act. Retail wheeling of power, which is the offering by utilities of unbundled retail distribution service, could also lead to increased competition in the independent power market. See "--Regulatory Matters--Retail Competition." REGULATORY MATTERS GENERAL Our operations are subject to extensive regulation by governmental agencies in each of the countries in which we conduct operations. Our domestic operating 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, and use of electric energy, capacity and related products, including ancillary services from, our projects. 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. 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 facility and that the facility then operate in compliance with these permits and approvals. While we believe the requisite approvals for our existing projects have been obtained and that our business is operated in substantial compliance with applicable laws, we 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 our international projects is subject to the energy and environmental laws and regulations of the foreign country in which this 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 certain 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 83 enactment of the Public Utility Regulatory Policies Act of 1978 and the adoption of regulations thereunder 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 certain 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 (i) sequentially produce both useful thermal energy, such as steam, and electric energy, (ii) meet specified operating standards, and energy efficiency standards when oil or natural gas is used as a fuel source and (iii) not be controlled, or more than 50% owned by one or more 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 such entities. 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 thereof 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, provided that 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 provided, 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 such 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 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 thereunder, 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, 84 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 our operating projects, including the Homer City plant, the Illinois Plants, 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. Our future 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, our ultimate 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, we are 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 are we a holding company under the Public Utility Holding Company Act, because our 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 we are currently developing or proposing to acquire will be non-qualifying facility independent power projects. We intend 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 our becoming a holding company subject to registration and regulation under the Public Utility Holding Company Act and could trigger defaults under the covenants in our project agreements. Becoming a holding company could, on a retroactive basis, lead to, among other things, fines and penalties and could cause certain of our 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 85 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 thereunder. 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 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 we have 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 we 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, we 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 such 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, we cannot assure you that the costs incurred in connection with the project could be recovered through sales to other purchasers. Moreover, our 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 us, or claims by a utility customer for the refund of payments previously made. We endeavor to develop our qualifying facility projects, monitor regulatory compliance by these projects and choose our 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 86 subject to risks of events outside of our 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 this type of event, we 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 we own, operate or have investments in use natural gas as their primary fuel. Under the Natural Gas Act, the Federal Energy Regulatory Commission has jurisdiction over certain 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 or be licensed to sell electricity 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. Various states that have adopted electric restructuring plans have enacted caps on the rates that may be charged to retail customers. The duration of those caps vary from state to state. A state's public utility commission also has the authority to determine avoided costs for qualifying facilities and may have the authority 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. Independent power projects under certain circumstances also may be consumers of electric power and energy under tariff rates subject to state commission jurisdiction. 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 we believe that these attempts are not common, and that the state public utility commission may not have any jurisdiction to modify the terms of the wholesale power sales, we cannot assure you that the power sales contracts of our 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 87 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, however, uphold reasonable monitoring of qualifying facility operating data. Other states, like New York and Virginia, have also instituted qualifying facility monitoring programs. We buy and transport the natural gas used at our 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 the 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 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 CALIFORNIA POWER CRISIS--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. 88 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 April 26, 2001, the Federal Energy Regulatory Commission ordered price mitigation measures, or price caps, for power sales in the California spot market during emergency periods only; on June 19, 2001, the price mitigation measures were expanded to apply during all periods and to cover the entire eleven-state Western region. The price mitigation measures end on September 30, 2002. On January 4, 2001, the California Public Utilities Commission authorized an interim surcharge on customers' bills, subject to refund, which was to be applied only to ongoing power procurement costs and 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. After extensive settlement negotiations failed to produce a global settlement, on July 25, 2001 the Federal Energy Regulatory Commission ordered that refunds may be due from sellers who engaged in transactions in these markets from October 2, 2000 through June 20, 2001, at levels in excess of the requirements in the April 26 and July 19 orders (with certain modifications), and ordered an evidentiary hearing to determine the required refunds. A separate proceeding was also instituted to evaluate the potential for refunds in the Pacific Northwest. Further 89 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 April 3, 2001, the California Public Utilities Commission adopted an order instituting an investigation. The order reopens past Commission decisions authorizing California investor-owned utilities to form holding companies and initiates an investigation into: - whether the holding companies violated requirements to give priority to the capital needs of their respective utility subsidiaries; - whether ring-fencing actions by Edison International and PG&E Corporation and their respective non-utility affiliates (including us) also violated 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. The Memorandum signed by Edison International and Southern California Edison with the California Department of Water Resources calls for the Commission to adopt a decision clarifying that the first priority condition in Southern California Edison's holding company decision refers to equity investment, not working capital for operating costs. On June 6, 2001, in response to motions filed by the three holding companies (including Edison International) to dismiss the investigation for lack of subject matter jurisdiction, the Commission issued for comment a draft decision, which concludes, among other matters, that applicable law permits the Commission, even if the normal common law prerequisites for piercing the corporate structures are absent, to disregard the corporate forms within the holding company system "to reach the assets of or challenge the behaviors of entities within the holding company system" in order to protect ratepayers. Commissioner Henry Duque has issued a draft alternate decision that would grant the three holding companies' motions to dismiss the order as to themselves, finding lack of subject matter jurisdiction over them, and would direct the Commission's general counsel to file an action in state court to enforce the holding company conditions, if necessary. The alternate, as well as the draft decision that would deny the motions to dismiss, are presently on the Commission's agenda for its October 11 meeting. Either would require a vote of 3 out of 5 commissioners in order to be adopted. We are not a party to this investigatory proceeding. We cannot predict whether, when or in what form this order will be adopted, or what direct or indirect effects any subsequent action taken by the Commission in such proceeding or in any other action or proceeding, in reliance on the principles articulated in this order and in other applicable authority, may have on Edison International or us and our subsidiaries. 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. As a result of this decision, Southern California Edison paid in full for power delivered after March 27, 2001, and Pacific Gas and Electric paid for power delivered after April 6, 2001, the date of its bankruptcy petition. This decision did not address payment to the qualifying facilities for amounts due prior to March 27, 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 at 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, 90 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 our 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 our California partnerships. RECENT FOREIGN REGULATORY MATTERS UNITED KINGDOM--The new electricity trading arrangements provide for, among other things, the establishment of a spot market or voluntary short-term power exchanges operating from a year or more in advance to 3 1/2-hours before a trading period of 1/2 hour; a balancing mechanism to enable the system operator to balance generation and demand and resolve any transmission constraints; a mandatory settlement process for recovering imbalances between contracted and metered volumes with strong incentives for being in balance; and a Balancing and Settlement Code Panel to oversee governance of the balancing mechanism. Contracting over time periods longer than the day-ahead market is not directly affected by the proposals. Physical bilateral contracts have replaced the prior financial contracts for differences, but function in a similar manner. However, it remains difficult to evaluate the future impact of the new electricity trading arrangement. A key feature of the arrangements is to require firm physical delivery, which means that a generator must deliver, and a consumer must take delivery, against their contracted positions or face assessment of energy imbalance penalty charges by the system operator. A consequence of this should be to increase greatly the motivation of parties to contract in advance and develop forwards and futures markets of greater liquidity than at present. Recent experience has been that the new electricity trading arrangements have placed a significant downward pressure on forward contract prices. Furthermore, another consequence may be that counterparties may require additional credit support, including parent company guarantees or letters of credit. Legislation in the form of the Utilities Act, which was approved July 28, 2000, provided for the implementation of the new electricity trading arrangements and the necessary amendments to generators' licenses. The legislation providing for implementation of the new arrangements, the Utilities Act 2000, sets a principal objective for the Gas and Electric Market Authority to "protect the interests of consumers...where appropriate by promoting competition...." This represents a shift in emphasis toward the consumer interest. But this is qualified by a recognition that license holders should be able to finance their activities. The Act also contains new powers for the Secretary of State to issue guidance to the Gas and Electric Market Authority on social and environmental matters, changes to the procedures for modifying licenses and a new power for the Gas and Electric Market Authority to impose financial penalties on companies for breach of license conditions. We will be monitoring the operation of these new provisions. NEW ZEALAND--The New Zealand Government has been undergoing a steady process of electric industry deregulation since 1987. Reform in the distribution and retail supply sector began in 1992 with legislation that deregulated electricity distribution and provided for competition in the retail electric supply function. The New Zealand Energy Market, established in 1996, is a voluntary competitive wholesale market which allows for the trading of physical energy on a half-hourly basis. The Electricity Industry Reform Act, which was passed in July 1998, was designed to increase competition at the wholesale generation level by splitting up Electricity Company of New Zealand Limited, the large state-owned generator, into three separate generation companies. The Electricity Industry Reform Act also prohibits the ownership of both generation and distribution assets by the same entity. The New Zealand Government commissioned an inquiry into the electricity industry in February 2000. This Inquiry Board's report was presented to the government in mid-2000. The main focus of the report was on the monopoly segments of the industry, transmission and distribution, with substantial limitations being recommended in the way in which these segments price their services in 91 order to limit their monopoly power. Recommendations were also made with respect to the retail customer in order to reduce barriers to customers switching. In addition, the Board made recommendations in relation to the wholesale market's governance arrangements with the purpose of streamlining them. The recommended changes are now being progressively implemented. 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 us. A 1999 decision by the United States Court of Appeals for the Eighth 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. When the entity providing transmission service is not a jurisdictional public utility under the Federal Power Act, it will be required by the Federal Energy Regulatory Commission's pro forma tariff adopted in Order No. 888 et seq. to submit an open access transmission tariff to the Federal Energy Regulatory Commission as a condition to taking service under a public utility's open access transmission tariff. Nevertheless, the Federal Energy Regulatory Commission's authority over such non-jurisdictional transmission providers, including those from whom we purchase transmission service, and its ability to enforce the open access requirements is limited. Accordingly, we and other transmission customers of such non-jurisdictional entities do not have the same assurances of open access as we would with regard to jurisdictional entities. In this regard, we note that both Southern California Edison and another California investor-owned utility, San Diego Gas & Electric Company, have agreed to sell their respective electric transmission facilities to an agency of the State of California, and that such an agency would not be subject to the Federal Energy Regulatory Commission's jurisdiction. 92 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, we expect 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. We believe that, as a predominantly low cost producer of electricity, we will ultimately benefit from any increased competition that may arise from the opening of the retail market. Although our exempt wholesale generators are forbidden under the Public Utility Holding Company Act from selling electric power in the retail market, our 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. We also believe we will compete effectively as a wholesale supplier to power marketers serving the newly-open retail markets. ENVIRONMENTAL REGULATION We are subject to environmental regulation by federal, state and local authorities in the United States and foreign regulatory authorities with jurisdiction over projects located outside 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 operations. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations, and future proceedings that 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. The Clean Air Act provides the statutory framework to implement a program for achieving national ambient air quality standards in areas exceeding such standards and provides for maintenance of air quality in areas already meeting such 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. We expect that compliance with the Clean Air Act and the regulations and revised State Implementation Plans developed as a consequence of the 93 Act will result in increased capital expenditures and operating expenses. We expect to spend approximately $34 million for the final two quarters of 2001 and $12 million in 2002 to install upgrades to the environmental controls at the Homer City plant to control sulfur dioxide and nitrogen oxide emissions. Similarly, we anticipate upgrades to the environmental controls at the Illinois Plants to control nitrogen oxide emissions to result in expenditures of approximately $22 million for the final two quarters of 2001 and $386 million for the 2002--2005 period. In addition, at the Ferrybridge and Fiddler's Ferry plants we anticipate environmental costs arising from plant modification of approximately $18 million for the final two quarters of 2001 and $21 million for the 2002--2005 period. We own an indirect 50% interest in EcoElectrica, L.P., a limited partnership which owns and operates a liquefied 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 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, including the prior owners of the Homer City plant, 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 Company 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 repowering 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 to 15 years. The settling utilities have also agreed to pay civil penalties ranging from $3.5 million to $8.5 million. Prior to our 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 our United States facilities. However, 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. We cannot assure you that 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, 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. In May 2001, President Bush issued a directive for a 90-day review of new source review "interpretation and implementation" by the Administrator of the Environmental Protection Agency and the Secretary of the U.S. Department of Energy. President Bush also directed the Attorney General to review ongoing new source review legal actions to "ensure" they are "consistent with the Clean Air Act and its 94 regulations." Both actions were recommendations detailed within the Bush Administration's "National Energy Policy Task Force Report." 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 EPA 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 particulate matter ambient air quality standard is potentially subject to further judicial proceedings, the impact of this standard on 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 us or our affiliates 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 we cannot evaluate the potential impact on the operations of our facilities. In June 2001, Illinois passed legislation mandating the Illinois Environmental Protection Agency to evaluate and issue a report to the Illinois legislature addressing the need for further emissions controls on fossil fuel-fired electric generating stations, including the potential need for additional controls on nitrogen oxides, sulfur dioxide and mercury. The study, which is to be submitted between September 30, 2003 and September 30, 2004, also requires an evaluation of incentives to promote renewable energy and the establishment of a banking system for certifying credits from voluntary reductions of greenhouse gases. The law allows the Illinois Environmental Protection Agency to propose regulations based on its findings no sooner than ninety days after the issuance of its findings, and requires the Illinois Pollution Control Board to act within one year on such proposed regulations. Until the Illinois Environmental Protection Agency issues its findings and proposes regulations in accordance with the findings, if such regulations are proposed, we cannot evaluate the potential impact of this legislation on the operations of our facilities. Since the adoption of the United Nations Framework Convention 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 has yet to be submitted to the U.S. Senate for ratification. In March 2001, the Bush Administration announced that the United States would not ratify the Kyoto Protocol, but would 95 instead offer an alternative. Various bills have been, and are expected to be, introduced in Congress to address some of these implementing guidelines and other aspects of climate change. Apart from the Kyoto Protocol, we may be impacted by future federal or state legislation relating to controlling greenhouse gas emissions. Notwithstanding the Bush Administration position, in July 2001, environment ministers from around the world met in Bonn, Germany and reached a compromise agreement on the mechanics and rules of the Kyoto Protocol. The compromise agreement is believed to clear the way for countries to begin the treaty ratification process. The United States was the sole country not to embrace the agreement. We either have an equity interest in or own and operate generating plants in the following countries: - - Australia - Spain - - Indonesia - Thailand - - Italy - Turkey - - New Zealand - The United Kingdom - - Philippines - The United States
With the exception of Turkey, all of the countries identified have ratified the UN Framework Convention on Climate Change, as well as signed the Kyoto Protocol. None of the countries have ratified the Kyoto Protocol, but, with the exception of the United States, all are expected to do so by the end of 2002. For the treaty to come into effect, it must be ratified by approximately 55 countries, representing at least 55% of the greenhouse gas emissions of the developed world. All of the countries, with the exception of Indonesia, the Philippines and Thailand, are classified as Annex 1 or "developed" countries and are subject to national greenhouse gas emission reduction targets during the period of 2008--2012 (e.g., Phase 1). Each nation is actively developing policies and measures meant to assist it with meeting the individual national emission targets as set out within the Kyoto Protocol. If we do become subject to limitations on emissions of carbon dioxide from our fossil fuel-fired electric generating plants, these requirements could have a significant economic impact on their operations. The Environmental Protection Agency proposed rules establishing standards for the location, design, construction and capacity of cooling water intake structures at new facilities, including steam electric power plants. Under the terms of a consent decree entered into by the U.S. District Court for the Southern District of New York in RIVERKEEPER, INC. V. WHITMAN, these regulations must be adopted by November 9, 2001. The consent decree also requires the agency to propose similar regulations for existing facilities by February 28, 2002, and finalize those regulations by August 28, 2003. Until the final standards are promulgated, we cannot determine their impact on our facilities or estimate the potential cost of compliance. 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, we are unaware of any material liabilities under CERCLA or similar state statutes; however, we cannot assure you that we will not incur CERCLA liability or similar state law liability in the future. EMPLOYEES At June 30, 2001, Edison Mission Energy employed 3,493 people, all of whom were full time employees and approximately 537, 147 and 1,347 of whom were covered by collective bargaining 96 agreements in the United Kingdom, Australia and the United States, respectively. We believe we have good relations with our employees. However, our subsidiary, Midwest Generation and the union which represents the employees at the Illinois Plants are currently in negotiations to replace the now expired collective bargaining agreement, covering wages and working conditions. Although we cannot predict the outcome of these negotiations, the union authorized a strike, which began on June 28, 2001. Midwest Generation has contingency plans in place and is operating the Illinois Plants during the strike. We believe that the impact of the strike on the operations of the Illinois Plants will not be material. Furthermore, Paiton Energy was sued in the Central Jakarta District Court by the PLN Labor Union in April 2001. PT PLN, the Indonesian Minister of Mines and Energy and the former President Director of PT PLN are also named as defendants in the suit. The union seeks to set aside the power purchase agreement between Paiton Energy and PT PLN and the interim agreement between Paiton Energy and its lenders, as well as damages and other relief. The initial preliminary hearing was held on April 30, 2001 in Jakarta. Paiton Energy and the other defendants filed challenges to jurisdiction and moved for a dismissal of the suit, but such actions were denied by an order dated July 23, 2001. Paiton Energy has filed a notice of appeal. Paiton Energy believes, based upon discussions with its Indonesian counsel, that the suit is without merit. LEGAL PROCEEDINGS PMNC LITIGATION In February 1997, a civil action was commenced in the Superior Court of the State of California, Orange County, entitled THE PARSONS CORPORATION AND PMNC V. BROOKLYN NAVY YARD COGENERATION PARTNERS, L.P., MISSION ENERGY NEW YORK, INC. AND B-41 ASSOCIATES, L.P., Case No. 774980, in which the plaintiffs asserted general monetary claims under the Construction Turnkey Agreement in the amount of $136.8 million. Brooklyn Navy Yard has also filed an action entitled BROOKLYN NAVY YARD COGENERATION PARTNERS, L.P. V. PMNC, PARSONS MAIN OF NEW YORK, INC., NAB CONSTRUCTION CORPORATION, L.K. COMSTOCK & CO., INC. AND THE PARSONS CORPORATION, in the Supreme Court of the State of New York, Kings County, Index No. 5966/97 asserting general monetary claims in excess of $13 million under the Construction Turnkey Agreement. On March 26, 1998, the Superior Court in the California action granted PMNC's motion for attachment in the amount of $43 million against Brooklyn Navy Yard and attached three Brooklyn Navy Yard bank accounts totaling approximately $0.5 million. On the same day, the court stayed all proceedings in the California action pending the New York action. Brooklyn Navy Yard appealed the attachment order, and on August 24, 2001, the California Court of Appeal heard arguments in the appeal by Brooklyn Navy Yard and Mission Energy New York from the attachment order. The court took the matter under submission and a ruling is expected within the next few months. PMNC's motion to dismiss the New York action was denied by the New York Supreme Court and further denied on appeal in September 1998. On March 9, 1999, Brooklyn Navy Yard filed a motion for partial summary judgment in the New York action. The motion was denied and Brooklyn Navy Yard has appealed. The appeal and the commencement of discovery were suspended until June 2000 to allow for voluntary mediation between the parties. The mediation ended unsuccessfully on March 23, 2000. On November 13, 2000, a New York appellate court issued a ruling granting summary judgment in favor of Brooklyn Navy Yard, striking PMNC's cause of action for quantum meruit, and limiting PMNC to its claims under the construction contract. Discovery is continuing. The court has recommended and the parties have agreed to pursue mediation in the fall of 2001. We agreed to indemnify Brooklyn Navy Yard and our partner in the venture from all claims and costs arising from or in connection with this litigation. We believe that the outcome of this litigation will not have a material adverse effect on our consolidated financial position or results of operations. 97 ECOELECTRICA POTENTIAL ENVIRONMENTAL PROCEEDING We own an indirect 50% interest in EcoElectrica, L.P., a limited partnership which owns and operates a liquefied 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 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. At June 30, 2001, no loss accrual had been recorded by EcoElectrica. We do not believe the outcome of this matter will have a material adverse effect on our consolidated financial position or results of operations. For information regarding the disposition of EcoElectrica, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Acquisitions, Dispositions and Sale-Leaseback Transactions--Dispositions." OUR RELATIONSHIP WITH AFFECTED AFFILIATES Edison Mission Energy is an indirect subsidiary of Edison International. Edison International is a holding company. Edison International is also the corporate parent of Southern California Edison, an electric utility that buys and sells power in California. Both Edison International and Southern California Edison have faced and continue to face material operating disruptions as a result of the California power crisis. For a description of the California power crisis, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--The California Power Crisis and Our Response." We are also included in the consolidated federal income tax and combined state franchise tax returns of Edison International. We calculate our income tax provision on a separate company basis under a tax sharing arrangement with The Mission Group, which in turn has an agreement with Edison International. Tax benefits generated by us and used in the Edison International consolidated tax return are recognized by us without regard to separate company limitations. 98 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS Our directors are elected by, and serve until their successors are elected by, our sole stockholder. Our officers are elected from time to time by the board of directors and hold office at the discretion of the board of directors. Set forth below are our current directors and executive officers and their ages and positions with us as of August 27, 2001.
NAME AGE POSITION - ---- -------- -------------------------------------------------------- John E. Bryson....................... 58 Director, Chairman of the Board Dean A. Christiansen................. 42 Director Theodore F. Craver, Jr............... 49 Director Bryant C. Danner..................... 63 Director Alan J. Fohrer....................... 50 Director, President and Chief Executive Officer Robert M. Edgell..................... 54 Executive Vice President and Division President of Edison Mission Energy, Asia Pacific William J. Heller.................... 44 Senior Vice President and Division President of Edison Mission Energy, Europe, Central Asia, Middle East and Africa Ronald L. Litzinger.................. 42 Senior Vice President Worldwide Operations Georgia R. Nelson.................... 51 Senior Vice President and President of Midwest Generation EME, LLC Kevin M. Smith....................... 43 Senior Vice President and Chief Financial Officer Raymond W. Vickers................... 58 Senior Vice President and General Counsel
Described below are the principal occupations and business activities of our directors and executive officers for the past five years, in addition to their positions indicated above. MR. BRYSON has been Director and Chairman of the Board of Edison Mission Energy since January 2000. Mr. Bryson was Director of Edison Mission Energy from January 1986 to January 1998. Mr. Bryson has been Director and Chairman of the Board of Mission Energy Holding since its formation on June 8, 2001. Mr. Bryson has been President of Edison International since January 2000 and Chairman of the Board and Chief Executive Officer of Edison International since 1990. Mr. Bryson served as Chairman of the Board, Chief Executive Officer and a Director of Southern California Edison from 1990 to January 2000. Mr. Bryson is a director of The Boeing Company, The Times Mirror Company, and Pacific American Income Shares, Inc. and LM Institutional Fund Advisors I, Inc. MR. CHRISTIANSEN has been Director of Edison Mission Energy since January 15, 2001 and serves as Edison Mission Energy's independent director. Mr. Christiansen has been President of Lord Securities since October 2000 and has been President of Acacia Capital since May 1990. Mr. Christiansen has been a Director of Capital Markets Engineering & Trading, New York since August 1999 and has been Director of Structural Concepts Corporation of Muskegon, MI since May 1995. MR. CRAVER has been Director of Edison Mission Energy since January 15, 2001. Mr. Craver has been Director and Chief Executive Officer of Mission Energy Holding since its formation on June 8, 2001. Mr. Craver has been Senior Vice President, Chief Financial Officer and Treasurer of Edison International since January 2000. Mr. Craver has been Chairman of the Board and Chief Executive Officer of Edison Enterprise since September 1999. Mr. Craver served as Senior Vice President and Treasurer of Edison International from February 1998 to January 2000. Mr. Craver served as Senior Vice President and Treasurer of Southern California Edison from February 1998 to September 1999. Mr. Craver served as Vice President and Treasurer of Edison International and Southern California 99 Edison from September 1996 to February 1998. Mr. Craver was Executive Vice President and Corporate Treasurer of First Interstate Bancorp from September 1990 to April 1996. MR. DANNER has been Director of Edison Mission Energy since May 1993. Mr. Danner has been Director of Mission Energy Holding since its formation on June 8, 2001. Mr. Danner has been Executive Vice President and General Counsel of Edison International since June 1995. Mr. Danner was Executive Vice President and General Counsel of Southern California Edison from June 1995 until January 2000. Mr. Danner was Senior Vice President and General Counsel of Edison International and Southern California Edison from July 1992 until May 1995. MR. EDGELL has been Executive Vice President of Edison Mission Energy since April 1988. Mr. Edgell served as Director of Edison Mission Energy from May 1993 to January 2001. Mr. Edgell was named Division President of Edison Mission Energy's Asia Pacific region in January 1995. MR. FOHRER has been Director, President and Chief Executive Officer of Edison Mission Energy since January 2000. Mr. Fohrer has been Director of Mission Energy Holding since its formation on June 8, 2001. From 1998 to 2000, Mr. Fohrer served as Chairman of the Board of Edison Mission Energy. From 1993 to 1998, Mr. Fohrer served as Vice Chairman of the Board of Edison Mission Energy. Mr. Fohrer was Executive Vice President and Chief Financial Officer of Edison International and was Executive Vice President and Chief Financial Officer of Southern California Edison from June 1995 until January 2000. Effective February 1996 and June 1995, Mr. Fohrer also served as Treasurer of Southern California Edison and Edison International, respectively, until August 1996. Mr. Fohrer was Senior Vice President, Treasurer and Chief Financial Officer of Edison International, and Senior Vice President and Chief Financial Officer of Southern California Edison from January 1993 until May 1995. Mr. Fohrer was Edison Mission Energy's interim Chief Executive Officer between May 1993 and August 1993. From 1991 until 1993, Mr. Fohrer was Vice President, Treasurer and Chief Financial Officer of Edison International and Southern California Edison. MR. HELLER has been Senior Vice President and Division President of Edison Mission Energy, Europe, Central Asia, Middle East and Africa since February 2000. Mr. Heller was elected Director of Edison Mission Energy's Board, effective December 9, 1999, and subsequently resigned effective February 7, 2000. Mr. Heller was Senior Vice President of Strategic Planning and New Business Development for Edison International from January 1996 until February 2000. Prior to joining Edison International, Mr. Heller was with McKinsey and Company, Inc. from 1982 to 1995, serving as principal and head of McKinsey's Los Angeles Energy Practice from 1991 to 1995. MR. LITZINGER has been Senior Vice President, Worldwide Operations, of Edison Mission Energy since June 1999. Mr. Litzinger served as Vice President-O&M Business Development from December 1998 to May 1999. Mr. Litzinger has been with Edison Mission Energy since November 1995 serving as both Regional Vice President, O&M Business Development and Manager, O&M Business Development until December 1998. Prior to joining Edison Mission Energy, Mr. Litzinger was a Reliability Supervisor with Texaco Refining and Marketing, Inc. from March 1995 to October 1995 and prior to that held numerous management positions with Southern California Edison since June 1986. MS. NELSON has been Senior Vice President of Edison Mission Energy since January 1996 and has been President of Midwest Generation EME, LLC since May 1999. From January 1996 until June 1999, Ms. Nelson was Senior Vice President, Worldwide Operations. 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. MR. SMITH has been Senior Vice President and Chief Financial Officer of Edison Mission Energy since May 1999. Mr. Smith has also been Senior Vice President and Chief Financial Officer of Mission 100 Energy Holding since its formation on June 8, 2001. Mr. Smith served as Treasurer of Edison Mission Energy from 1992 to 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. MR. VICKERS has been Senior Vice President and General Counsel of Edison Mission Energy since March 1999. Mr. Vickers has been Senior Vice President and General Counsel of Mission Energy Holding since its formation on June 8, 2001. Prior to joining Edison Mission Energy, Mr. Vickers was a partner with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP concentrating on international business transactions, particularly cross-border capital markets and investment transactions, project implementation and finance. Mr. Vickers originally joined Skadden, Arps, Slate, Meagher & Flom LLP in 1989 as resident partner in the Hong Kong office. COMPENSATION OF DIRECTORS Our directors do not receive any compensation for serving on our board of directors or attending meetings thereof, except that our independent director receives customary compensation. 101 CERTAIN TRANSACTIONS AND RELATIONS WITH AFFILIATES Specified administrative services such as payroll and employee benefit programs, all performed by Edison International or Southern California Edison employees, 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 (operating revenues, operating expenses, total assets and number of employees). In addition, services of Edison International or Southern California Edison employees are sometimes directly requested by us and these services are performed for our benefit. Labor and expenses of these directly requested services are specifically identified and billed at cost. We have entered into a tax sharing agreement with The Mission Group, which in turn has entered into a tax sharing agreement with Edison International. For a further discussion of this agreement, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Intercompany Tax Sharing Payments." We hold interests in eight partnerships that own power plants in California. Four of these partnerships are parties to power purchase agreements with Southern California Edison. Edison Mission Operation & Maintenance, Inc., our indirect, wholly-owned subsidiary, has entered into operation and maintenance agreements with partnerships in which we have a 50% or less ownership interest. Pursuant to the negotiated agreements, Edison Mission Operation & Maintenance performs all operation and maintenance activities necessary for the production of power by these partnerships' facilities. The agreements will continue until terminated by either party. Edison Mission Operation & Maintenance pays for all costs incurred with operating and maintaining the facilities and may also earn an incentive compensation as set forth in the agreements. In July 1999, we made an interest-free loan to Georgia R. Nelson, Senior Vice President of Edison Mission Energy and President of Midwest Generation EME, LLC, in the amount of $179,800 in exchange for a note executed by Ms. Nelson and payable to Edison Mission Energy 365 days following the conclusion of her assignment in Chicago, Illinois. In October 2000, we made a loan to Gregory C. Hoppe who at that time was Vice President and Director, Australia, in the amount of $350,000 in exchange for a secured promissory note executed by Mr. Hoppe and payable to Edison Mission Energy at simple interest of 6.37%. The entire note, together with accrued interest, is due January 2002. Mr. Hoppe is no longer an employee of Edison Mission Energy. 102 DESCRIPTION OF THE NOTES IN THIS "DESCRIPTION OF THE NOTES," REFERENCES TO "WE," "OUR," "OURS" AND "US" REFER ONLY TO EDISON MISSION ENERGY, AND NOT TO ANY OF OUR DIRECT OR INDIRECT SUBSIDIARIES OR AFFILIATES. THE FOLLOWING DESCRIPTION IS A SUMMARY OF PROVISIONS OF THE INDENTURE AND THE NOTES. IT IS NOT A COMPLETE DESCRIPTION OF THE NOTES AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY, REFERENCE TO THE NOTES AND THE INDENTURE. WE URGE YOU TO READ THE INDENTURE AND THE NOTES BECAUSE THEY, AND NOT THIS DESCRIPTION, DEFINE YOUR RIGHTS AS A HOLDER OF THESE NOTES. YOU MAY OBTAIN A COPY OF THE INDENTURE AND THE NOTES FROM US BY WRITING TO US AT 18101 VON KARMAN AVENUE, SUITE 1700, IRVINE, CALIFORNIA 92612. GENERAL We issued the original notes and will issue the exchange notes under the indenture, dated as of August 10, 2001, between us and The Bank of New York, as trustee. Reference to the notes includes the exchange notes unless the context otherwise requires. The notes are our unsecured senior obligations and rank equally in right of payment with all of our other unsubordinated indebtedness. Because we conduct substantially all of our business through numerous subsidiaries, all existing and future liabilities of our direct and indirect subsidiaries are and will be effectively senior to the notes with respect to the assets and cash flows of those subsidiaries. The notes are not guaranteed by, and are not otherwise obligations of, our project subsidiaries and project affiliates, or our other direct and indirect subsidiaries and affiliates. We issued the original notes in an offering exempt from registration, in aggregate principal amount of $400,000,000. We may, without the consent of the holders, increase such principal amount in the future on the same terms and conditions and with the same CUSIP number as the notes being offered in this exchange offer. The notes will mature on August 15, 2008 and will bear interest at the rate of 10% per annum. We will pay interest on the notes on each February 15 and August 15, beginning on February 15, 2002, to the holders of record on the immediately preceding February 1 and August 1. Interest on the notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from August 10, 2001. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. The original notes are in denominations of $100,000 and any integral multiple of $1,000 in excess thereof. REDEMPTION We may redeem the notes at any time, in whole or in part, at a redemption price equal to: - the greater of: (1) 100% of the principal amount of the notes being redeemed; or (2) the sum of the 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, accrued and unpaid interest, if any, on the principal amount of notes being redeemed to the redemption date. "Remaining Scheduled Payments" means, with respect to each note that we are redeeming, the remaining scheduled payments of the principal and interest on that note that would be due after the related redemption date if we were not redeeming that note. However, if the redemption date is not a 103 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 that note to the redemption date. "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 Treasury 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. "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 provided to the trustee in respect of the notes to be redeemed on the applicable redemption date. "Reference Treasury Dealer Quotation" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by us, 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 us 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 us. If Credit Suisse First Boston Corporation ceases to be a primary U.S. Government securities dealer, we will appoint in its place another nationally recognized investment banking firm that is a primary U.S. Government securities dealer. We will give notice to The Depository Trust Company ("DTC") and holders of definitive notes at least 30 days (but not more than 60 days) before we redeem the notes. If we redeem only some of the notes, DTC's practice is to choose by lot the amount to be redeemed from the notes held by each of its participating institutions. DTC will give notice to these participants, and these participants will give notice to any "Street Name" holders of any indirect interests in the notes according to arrangements among them. These notices may be subject to statutory or regulatory requirements. We will not be responsible for giving notice of a redemption of the notes to anyone other than DTC and holders of definitive notes. CERTAIN COVENANTS RESTRICTIONS ON LIENS We will agree not to: (X) pledge, mortgage, hypothecate or permit to exist any mortgage, pledge or other lien upon any property at any time directly owned by us to secure any indebtedness for money borrowed which is incurred, issued, assumed or guaranteed by us ("Indebtedness"), or (Y) cause or permit any of our subsidiaries to pledge, mortgage, hypothecate or permit to exist any mortgage, pledge or other lien upon any property at any time directly owned by them to secure any Indebtedness of ours, 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 104 secured; PROVIDED, HOWEVER, that the restrictions set forth in clauses (X) and (Y) above will not apply to, or prevent the creation or existence of: (1) liens existing at the original date of issuance of the notes; (2) purchase money liens which do not exceed the cost or value of the purchased property; (3) other liens not to exceed 10% of our Consolidated Net Tangible Assets, PROVIDED that: (A) neither we nor our subsidiaries will be permitted to create or to permit to exist any liens to secure our Indebtedness in reliance upon this item (3) until the earlier to occur of: (x) the first date on or after the second anniversary of the consummation of the offering of the notes 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, we and our subsidiaries will 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 our subsidiaries on the capital stock or assets of any project subsidiary in order to secure any Indebtedness that we incur (other than Indebtedness the proceeds of which are used to finance the equity contributed by us, or loans made by us, to a project) in order to finance or refinance any acquisition, development, construction, expansion, operation or maintenance of such project subsidiary. "Consolidated Net Tangible Assets" means, as of any date of determination, the total amount of all our assets, determined on a consolidated basis in accordance with generally accepted accounting principles as of such date, less the sum of: (a) our consolidated current liabilities, determined in accordance with generally accepted accounting principles, and (b) our 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. If we propose to pledge, mortgage or hypothecate any property at any time directly owned by us to secure any Indebtedness, other than as permitted by clauses (1) through (5) of the second previous paragraph, we will agree to give prior written notice thereof to the trustee, who will give notice to the holders of notes, and we will further agree, prior to or simultaneously with such pledge, mortgage or hypothecation, effectively to secure all the notes equally and ratably with such Indebtedness. Except as set forth above, this covenant will not restrict the ability of our 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. 105 MERGER, CONSOLIDATION, SALE, LEASE OR CONVEYANCE We will agree not to merge or consolidate with or into any other person and we will agree not to sell, lease or convey all or substantially all our assets to any person, unless (1) we are the continuing corporation, or the successor corporation or the person that acquires all or substantially all our 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 our obligations under the notes and the indenture, (2) immediately after such merger, consolidation, sale, lease or conveyance, there is no default or Event of Default (as defined below) under the indenture, (3) if, as a result of the merger, consolidation, sale, lease or conveyance, any or all of our property would become the subject of a lien that would not be permitted by the indenture, we secure the notes equally and ratably with the obligations secured by that lien and (4) we deliver or cause 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 the indenture. 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 our assets as provided above, and other than assets we are required to sell to conform with governmental regulations, we 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 such sales during the most recent 12-month period would exceed 10% of our Consolidated Net Tangible Assets (as defined above) 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% limitation if the proceeds are invested in assets in similar or related lines of our business; and, provided further, that we may sell or otherwise dispose of assets in excess of this 10% limitation if we retain the proceeds from such sales or dispositions, which are not reinvested as provided above, as cash or cash equivalents or if we use the proceeds from such sales to purchase and retire notes or to reduce or retire Indebtedness ranking equal in right of payment to the notes or indebtedness of our subsidiaries. REPORTING OBLIGATIONS We will agree to furnish or cause to be furnished to holders of notes copies of our annual reports and of the information, documents and other reports that we are required to file with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act within 15 days after we file them with the Securities and Exchange Commission. ADDITIONAL COVENANTS Subject to certain exceptions and qualifications, we will agree in the indenture to do, among other things, the following: (1) deliver to the trustee copies of all reports that we file with the Securities and Exchange Commission; (2) deliver to the trustee annual officers' certificates with respect to our compliance with our obligations under the indenture; (3) maintain our corporate existence, subject to the provisions described above relating to mergers and consolidations; (4) pay our taxes when due, except when we are contesting such taxes in good faith; and 106 (5) following the effectiveness of any registration statement filed by us pursuant to the registration rights agreement, we will maintain our status as a reporting company under the Exchange Act whether or not the Securities and Exchange Commission rules and regulations require us to maintain that status and file copies of all such information and reports with the Securities and Exchange Commission within the time periods specified in the rules and regulations (unless the Securities and Exchange Commission will not accept the filing of the applicable reports) or pay an additional interest rate on the notes in the amount of one half of one percent (50 basis points) per annum. MODIFICATION OF THE INDENTURE The indenture will contain provisions permitting us and the trustee, with the consent of the holders of at least a majority in aggregate principal amount of notes then outstanding, to modify or amend the indenture or the rights of the holders of notes. However, no such modification or amendment may, without the consent of the holder of each outstanding note affected thereby: (a) change the stated maturity of the principal of, or extend the time of payment of interest on, any note; (b) reduce the principal amount of, or interest on, any note; (c) change the place or currency of payment of principal of, or interest on, any note; (d) reduce any amount payable upon the redemption of any note; or (e) impair the right to institute suit for the enforcement of any payment on or with respect to any note. In addition, without the consent of the holders of all notes then outstanding, no such modification or amendment may: (x) reduce the percentage in principal amount of outstanding notes the consent of whose holders is required for modification or amendment of the indenture; (y) reduce the percentage in principal amount of outstanding notes necessary for waiver of compliance with certain provisions of the indenture or for waiver of certain defaults; or (z) modify such provisions with respect to modification and waiver. The holders of at least a majority in principal amount of the outstanding notes may waive our compliance with certain restrictive provisions of the indenture. The holders of a majority in principal amount of the outstanding notes may waive any past default under the indenture, except a default in the payment of principal or interest and certain covenants and provisions of the indenture which cannot be amended without the consent of the holder of each outstanding note affected. We and the trustee may, without the consent of any holder of notes, amend the indenture and the notes for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision thereof, or in any manner that we and the trustee may determine is not inconsistent with the indenture and the notes and will not adversely affect the interest of any holder of notes. EVENTS OF DEFAULT Each of the following will be an "Event of Default" under the indenture: (a) our failure to pay any interest on any note when due, which failure continues for 30 days; or (b) our failure to pay principal or premium when due; or 107 (c) our failure to perform any other covenant in the notes or the indenture for a period of 90 days after the trustee or the holders of at least 25% in aggregate principal amount of the notes gives us written notice of our failure to perform; or (d) an event of default occurring under any of our instruments under which there may be issued, or by which there may be secured or evidenced, any Indebtedness for money borrowed 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: (i) Indebtedness which is payable solely out of the property or assets of a partnership, joint venture or similar entity of which we or any of our 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 us; or (ii) Indebtedness, excluding (i) above, not exceeding $20,000,000; or (e) one or more nonappealable final judgments, decrees or orders of any court, tribunal, arbitrator, administrative or other governmental body or similar entity for the payment of money aggregating more than $20,000,000 shall be rendered against us (excluding the amount thereof covered by insurance) and shall remain undischarged, unvacated and unstayed for more than 90 days, except while being contested in good faith by appropriate proceedings; or (f) certain events of bankruptcy, insolvency or reorganization in respect of us. If any Event of Default (other than an Event of Default due to certain events of bankruptcy, insolvency or reorganization) has occurred and is continuing, either the trustee or the holders of not less than 25% in principal amount of the notes outstanding under the indenture may declare the principal of all notes under the indenture and interest accrued thereon to be due and payable immediately. The trustee will be entitled, subject to the duty of the trustee during a default to act with the required standard of care, to be indemnified by the holders of notes before proceeding to exercise any right or power under the indenture at the request of such holders. Subject to such provisions in the indenture for the indemnification of the trustee and certain other limitations, the holders of a majority in principal amount of the notes then outstanding may 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. No holder of notes may institute any action against us under the indenture (except actions for payment of overdue principal or interest) unless: (1) such holder previously has given the trustee written notice of the default and continuance thereof; (2) the holders of not less than 25% in principal amount of the notes then outstanding have requested the trustee to institute such action and offered the trustee reasonable indemnity; (3) the trustee has not instituted such action within 60 days of the request; and (4) the trustee has not received direction inconsistent with such written request from the holders of a majority in principal amount of the notes then outstanding. 108 DEFEASANCE AND COVENANT DEFEASANCE DEFEASANCE We 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 we have made the deposit referred to below, and the provisions of the indenture will cease to be applicable with respect to the notes (except for, among other matters, certain obligations to register the transfer of or exchange of the notes, to replace stolen, lost or mutilated notes, to maintain paying agencies and to hold funds for payment in trust) if: (A) we have deposited with the trustee, in trust, money and/or certain U.S. government obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the notes at the time such payments are due in accordance with the terms of the indenture; (B) we have delivered to the trustee: (i) an opinion of counsel to the effect that note holders will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance 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 upon a ruling of the Internal Revenue Service to the same effect or a change in applicable federal income tax law or related treasury regulations after the date of the indenture; and (ii) an opinion of counsel to the effect that the defeasance trust does not constitute an "investment company" within the meaning of the Investment Company Act of 1940 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; (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, will 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 we are a party or by which we are bound; and (D) if at such time the notes are listed on a national securities exchange, we have delivered to the trustee an opinion of counsel to the effect that the notes will not be delisted as a result of such deposit and discharge. DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT The provisions of the indenture will cease to be applicable with respect to: (x) the covenants described in "--Certain Covenants" (other than those with respect to the maintenance of our existence and those described under the first paragraph of the caption "--Certain Covenants--Merger, Consolidation, Sale, Lease or Conveyance" and other than those described in clauses (2)-(5) under "--Certain Covenants--Additional Covenants"); (y) clause (c) in "--Events of Default" with respect to such covenants; and 109 (z) clauses (d) and (e) in "--Events of Default" upon (1) the deposit with the trustee, in trust, of money and/or certain U.S. government obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the notes, (2) the satisfaction of the conditions described in clauses (B)(ii), (C) and (D) of the preceding paragraph, and (3) our delivery to the trustee of an opinion of counsel to the effect that, among other things, the holders of the notes will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance 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 and defeasance had not occurred. DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT If we exercise our option to omit compliance with certain covenants and provisions of the indenture as described in the immediately preceding paragraph and the notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money and/or U.S. government obligations on deposit with the trustee may not be sufficient to pay amounts due on the notes at the time of acceleration resulting from such Event of Default. In such event, we will remain liable for such payments. BOOK-ENTRY; DELIVERY AND FORM The certificates representing the exchange notes will be issued in fully registered form. Except as described below, the exchange notes initially will be represented by one or more global notes, in definitive, fully registered form without interest coupons. The global notes will be deposited with the trustee as custodian for DTC and registered in the name of Cede & Co. or another nominee as DTC may designate. DTC has advised us as follows: - DTC is a limited purpose trust 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 pursuant to the provision of Section 17A of the Exchange Act. - DTC was created to hold securities for its participants and to 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 other organizations. Indirect access to the DTC system is available to others, including 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 notes, DTC or its custodian will credit, on its internal system, the respective principal amounts of the exchange notes represented by the global notes to the accounts of persons who have accounts with DTC. Ownership of beneficial interests in the global notes will be limited to persons who have accounts with DTC or persons who hold interests through the persons who have accounts with DTC. Persons who have accounts with DTC are referred to as "participants." Ownership of beneficial interests in the global notes will be shown 110 on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee, with respect to interests of participants, and the records of participants, with respect to interests of persons other than participants. So long as DTC or its nominee is the registered owner or holder of the global notes, DTC or the nominee, as the case may be, will be considered the sole record owner or holder of the exchange notes represented by the global notes for all purposes under the indenture and the exchange notes. No beneficial owners of an interest in the global notes will be able to transfer that interest except according to DTC's applicable procedures, in addition to those provided for under the indenture. Owners of beneficial interests in the global notes will not: - be entitled to have the exchange notes represented by the global notes registered in their names, - receive or be entitled to receive physical delivery of certificated notes in definitive form, and - be considered to be the owners or holders of any exchange notes under the global notes. Accordingly, each person owning a beneficial interest in the global notes must rely on the procedures of DTC 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 notes under the global notes. We understand that under existing industry practice, in the event an owner of a beneficial interest in the global notes desires to take any action that DTC, as the holder of the global notes, is entitled to take, DTC would authorize the 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 notes represented by the global notes will be made to DTC or its nominee, as the case may be, as the registered owner of the global notes. Neither we, the trustee, 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 notes or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. We expect that DTC or its nominee, upon receipt of any payment of principal of, premium, if any, or interest on the global notes will credit participants' accounts with payments in amounts proportionate to their respective beneficial ownership interests in the principal amount of the global notes, as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the global notes held through 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. Transfer between participants in DTC will be effected in the ordinary way in accordance with DTC rules. If a holder requires physical delivery of notes in certificated form for any reason, including to sell notes to persons in states which require the delivery of the notes or to pledge the notes, a holder must transfer its interest in the global notes in accordance with the normal procedures of DTC and the procedures described in the indenture. Unless and until they are exchanged in whole or in part for certificated exchange notes in definitive form, the global notes may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC. Beneficial owners of exchange notes registered in the name of DTC or its nominee will be entitled to be issued, upon request, exchange notes in definitive certificated form. 111 DTC has advised us that DTC will take any action permitted to be taken by a holder of notes, including the presentation of notes for exchange as described below, only at the direction of one or more participants to whose account the DTC interests in the global notes are credited. Further, DTC will take any action permitted to be taken by a holder of notes only in respect of that portion of the aggregate principal amount of notes as to which the participant or participants has or have given that direction. Although DTC has agreed to these procedures in order to facilitate transfers of interests in the global notes among participants of DTC, it is under no obligation to perform these procedures, and may discontinue them at any time. Neither we nor the trustee will have any responsibility for the performance by DTC 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 notes may, upon request to the trustee, exchange the beneficial interest for exchange notes in the form of certificated notes. Upon any issuance of certificated notes, the trustee is required to register the certificated notes 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 DTC is at any time unwilling or unable to continue as a depositary for the global notes, and a successor depositary is not appointed by us within 90 days, we will issue certificated notes in exchange for the global notes. 112 EXCHANGE OFFER; REGISTRATION RIGHTS As part of the sale of the original notes, under a registration rights agreement, dated as of August 10, 2001, we agreed with the initial purchasers in the offering of the original notes, for the benefit of the holders of the notes, 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 agreed to use our reasonable best efforts to cause to become effective a registration statement with respect to a registered offer to exchange the original notes for a like amount of the exchange notes that are identical in all material respects to the restricted original notes. We agreed to bear all expenses incurred in connection with our obligations under the registration rights agreement. Once this registration statement is declared effective, we will offer the exchange notes in return for surrender of the original notes. 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 note holders and the period ending when the last remaining original note is tendered into the exchange offer. For each original note surrendered to us under the exchange offer, the original note holder will receive exchange notes in an equal principal amount. Interest on each exchange note will accrue from the last date on which interest was paid on the original note so surrendered or, if no interest has been paid, since August 10, 2001. In the event that we reasonably determine in good faith that (1) the exchange notes 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 notes or (3) the exchange offer may not be made in compliance with applicable laws, we will use our reasonable best efforts, subject to customary representations and agreements of the note holders, to have a shelf registration statement covering the resale of the original notes declared effective and kept effective until August 10, 2003, subject to specified exceptions. We will, in the event of a shelf registration, provide to each note holder copies of the prospectus, notify each note holder when a registration statement for the notes has become effective and take other actions as are appropriate to permit resale of the notes. In the event that the exchange offer registration statement does not become effective on or prior to the 270th day after the date of original issue of the notes, the annual interest rates on the notes will be increased by 0.50% per annum from and after that date to, but excluding, the date the registration statement becomes effective and the exchange offer is commenced or a shelf registration statement becomes effective. 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 notes 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 and an exchange offer has commenced or a shelf registration statement has become effective (or, if earlier, the end of such period specified by the registration rights agreement). Such additional interest will be paid to note holders on a regular distribution date. The interest rate on the notes will be increased by 0.50% per annum if we cease to maintain our status as a reporting company 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 notes shall be 0.50% per annum. Each note holder, other than specified holders, who wishes to exchange its original notes for exchange notes in the exchange offer will be required to represent that: - it is not our affiliate; - any exchange notes to be acquired by it will be acquired in the ordinary course of business; and 113 - 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 notes. A note holder that sells its notes under a shelf registration generally: - would be required to be named as a selling holder in the related prospectus and to deliver a prospectus to purchasers; - will be subject to certain 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 note holder, including specified indemnification obligations. 114 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following summary describes certain material United States federal income tax considerations of the acquisition, ownership and disposition of the exchange notes. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and judicial decisions as of the date hereof, all of which may be repealed, revoked or modified with possible retroactive effect. This discussion does not deal with holders that may be subject to special tax rules (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions, dealers in securities or currencies, holders whose functional currency is not the United States dollar or holders who will hold the exchange notes as a hedge against currency risks or as part of a straddle, synthetic security, conversion transaction or other integrated investment comprised of the notes and one or more other investments). The summary is applicable only to purchasers that acquired the original notes pursuant to the offering at the initial offering price and who will hold the exchange notes as capital assets within the meaning of Section 1221 of the Code. This summary is for general information only and does not address all aspects of United States federal income taxation that may be relevant to holders of the exchange notes in light of their particular circumstances, and it does not address any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. Prospective holders should consult their own tax advisors as to the particular tax consequences to them of acquiring, holding or disposing of the exchange notes. As used herein, the term "United States Holder" means a beneficial owner of a note that is (i) a citizen or resident of the United States for United States federal income tax purposes, (ii) a corporation or partnership (or any entity treated as a corporation or partnership for United States federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income tax without regard to its source or (iv) a trust if (x) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (y) the trust has a valid election in effect under applicable United States Treasury regulations to be treated as a United States Holder. If a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a holder of the notes, the United States federal income tax treatment of a partner in such a partnership will generally depend on the status of the partner and the activities of the partnership. Partners in such a partnership should consult their own tax advisors as to the particular federal income tax consequences applicable to them. A "Non-United States Holder" is any beneficial holder of a note that is not a United States Holder. For United States federal income tax purposes, a beneficial owner of an original note will not recognize any taxable gain or loss on the exchange of the original notes for exchange notes under the exchange offer, and a beneficial owner's tax basis and holding period in the exchange notes will be the same as in the original notes. UNITED STATES HOLDERS Stated interest on an exchange note generally will be taxable to a United States Holder as ordinary income at the time it accrues or is received in accordance with the United States Holder's method of accounting for United States federal income tax purposes. Upon the sale, exchange, redemption, retirement or other disposition of an exchange note, a United States Holder generally will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange, redemption, retirement or other disposition (not including amounts attributable to accrued but unpaid interest, which will be taxable as ordinary income) and such United States Holder's adjusted tax basis in the exchange note. A United States Holder's adjusted tax basis in 115 an exchange note will, in general, be the United States Holder's adjusted tax basis in the original note exchanged for the exchange note, less any principal payments received by such holder. Such gain or loss will generally be capital gain or loss. Capital gain recognized by an individual investor upon a disposition of an exchange note that has been held for more than 12 months will generally be subject to a maximum tax rate of 20% or, in the case of an exchange note that has been held for 12 months or less, will be subject to tax at ordinary income tax rates. A United States Holder's holding period for an exchange note will include the holding period of the original note exchanged for the exchange note. NON-UNITED STATES HOLDERS Under present United States federal income tax law, subject to the discussion of backup withholding and information reporting below: (a) payments of interest on the exchange notes to any Non-United States Holder will not be subject to United States federal income, branch profits or withholding tax provided that (i) the Non-United States Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote, (ii) the Non-United States Holder is not a bank receiving interest on an extension of credit pursuant to a loan agreement entered into in the ordinary course of its trade or business, (iii) the Non-United States Holder is not a controlled foreign corporation that is related to us (directly or indirectly) through stock ownership, (iv) such interest payments are not effectively connected with a United States trade or business, (v) the Non-United States Holder is not a foreign tax exempt organization or foreign private foundation for United States federal income tax purposes and (vi) certain certification requirements are met. Such certification will be satisfied if the beneficial owner of the exchange note certifies on IRS Form W-8 BEN or a substantially similar substitute form, under penalties of perjury, that it is not a United States person and provides its name and address, and (x) such beneficial owner files such form with the withholding agent or (y) in the case of an exchange note held through a foreign partnership or intermediary, the beneficial owner and the foreign partnership or intermediary satisfy certification requirements of applicable United States Treasury regulations; and (b) a Non-United States Holder will not be subject to United States federal income or branch profits tax on gain realized on the sale, exchange, redemption, retirement or other disposition of an exchange note, unless (i) the gain is effectively connected with a trade or business carried on by such holder within the United States or, if a treaty applies (and the holder complies with applicable certification and other requirements to claim treaty benefits), is generally attributable to a United States permanent establishment maintained by the holder, or (ii) the holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other requirements are met. An exchange note held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to United States federal estate tax with respect to an exchange note as a result of such individual's death, provided that (i) the individual does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote and, (ii) the interest accrued on the exchange note was not effectively connected with the conduct of a United States trade or business. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, payments of interest and the proceeds of the sale, exchange, redemption, retirement or other disposition of the exchange notes payable by a United States paying agent or other United States intermediary will be subject to information reporting. In addition, backup withholding will generally apply to these payments if (i) in the case of a United States Holder, the holder fails to provide an 116 accurate taxpayer identification number, or fails to certify that such holder is not subject to backup withholding or fails to report all interest and dividends required to be shown on its United States federal income tax returns, or (ii) in the case of a Non-United States Holder, the holder fails to provide the certification on IRS Form W-8BEN described above or otherwise does not provide evidence of exempt status. Certain United Status Holders (including, among others, corporations) and Non-United States Holders that comply with certain certification requirements are not subject to backup withholding. Any amount paid as backup withholding will be creditable against the holder's United States federal income tax liability provided that the required information is timely furnished to the IRS. Holders of exchange notes should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption. 117 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. 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 notes received in exchange for original notes where the original notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of at least 120 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 notes may be required to deliver a prospectus. We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes 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 notes 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 notes. Any broker-dealer that resells exchange notes 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 notes may be deemed to be an underwriter within the meaning of the Securities Act, and any profit on the resale of exchange notes 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 notes that were received by it for its own account in the exchange offer and any broker-dealer that participates in a distribution of those notes 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 notes. 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 original notes 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 noteholder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction. For a period of at least 120 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. We agree to pay all expenses incident to the exchange offer, including the expenses of one counsel for the holders of the notes, other than commissions or concessions of any brokers or dealers. We will indemnify the holders of the notes, including any broker-dealers, against various liabilities, including liabilities under the Securities Act. 118 LEGAL MATTERS The legality of the exchange notes will be passed upon for Edison Mission Energy by Skadden, Arps, Slate, Meagher & Flom LLP. EXPERTS The consolidated financial statements and schedules 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 is incorporated by reference in this prospectus and elsewhere in the registration statement, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. 119 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 notes in any jurisdiction where it is unlawful. The information in this prospectus is current as of , 2001. However, you should realize that our affairs may have changed since the date of this prospectus. [EDISON MISSION ENERGY LOGO] PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS We are a California corporation. Article VI of our Bylaws provide, in effect, that, to the extent and under the circumstances permitted by Section 317 of the California Corporations Code, we 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 our 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 indemnify for these expenses which this 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. Article IV of our Certificate of Incorporation relieves our directors from monetary damages to us or our 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, (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, II-1 (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. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 1.1 Purchase Agreement, dated as of August 7, 2001, among Edison Mission Energy and Credit Suisse First Boston Corporation, BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen Securities Corporation, TD Securities (USA) Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf).* 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.
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 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. 3.1.3 Certificate of Amendment of Articles of Incorporation of Edison Mission Energy dated July 2, 2001, incorporated by reference to Exhibit 3.1.3 to Edison Mission Energy's 10-Q for the quarter ended June 30, 2001. 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. 4.1 Indenture, dated as of August 10, 2001, among Edison Mission Energy and The Bank of New York as Trustee. * 4.1.1 Form of 10% Senior Note due 2008 (included in Exhibit 4.1). * 4.2 Registration Rights Agreement, dated as of August 7, 2001, among Edison Mission Energy, Credit Suisse First Boston Corporation, BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen Securities Corporation, TD Securities (USA) Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf). * 4.3 Indenture, dated as of April 5, 2001, among Edison Mission Energy and United States Trust Company of New York as Trustee, incorporated by reference to Exhibit 4.20 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.3.1 Form of 9.875% Senior Note due 2011 (included in Exhibit 4.1 to Edison Mission Energy's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 24, 2001.)
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 4.4 Registration Rights Agreement, dated as of April 2, 2001, among Edison Mission Energy and Credit Suisse First Boston Corporation and Westdeutsche Landesbank Girozentrale (Dusseldorf) as representatives of the Initial Purchasers, 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 April 24, 2001. 4.5 Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Powerton Trust I, as Owner Lessor, incorporated by reference to Exhibit 4.9 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.5.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.5 hereto, incorporated by reference to Exhibit 4.9.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.6 Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Joliet Trust I, as Owner Lessor, incorporated by reference to Exhibit 4.10 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.6.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.6 hereto, incorporated by reference to Exhibit 4.10.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.7 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, incorporated by reference to Exhibit 4.11 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.8 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, incorporated by reference to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.8.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.12.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.9 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, incorporated by reference to Exhibit 4.13 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 4.9.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.9 hereto, incorporated by reference to Exhibit 4.13.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.10 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. 4.11 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. 4.11.1 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. 4.11.2 Second Supplemental Indenture, dated as of August 8, 1995, to Indenture dated as of November 30, 1994 between Edison Mission Energy and The First National Bank of Chicago, as Trustee.* 4.12 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. 4.12.1 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. 4.13 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. 4.14 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. 4.14.1 Schedule identifying substantially identical agreements to Promissory Note constituting Exhibit 4.14 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.15 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. 5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Edison Mission Energy, as to the legality of the Notes 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.
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 10.15.2 Amendment Two to Second Amended and Restated U.S. $425 million Bank of America, N.A. Credit Agreement, dated as of May 30, 2001, incorporated by reference to Exhibit 10.15.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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. 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.
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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 (File 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. 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.
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 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.
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 10.54 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. 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.
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 10.60.2 Amendment No. 2 to the Debt Service Reserve Guarantee, dated as of March 18, 2001, made by Edison Mission Energy in favor of United States Trust Company of New York, incorporated by reference to Exhibit 10.60.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 10.60.3 Bond 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 10.60.2 to Amendment No. 1 of Edison Mission Holding Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 10.60.4 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.
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EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 10.61.2 Amendment Two to Credit Agreement, dated as of March 15, 2001, by and among Edison Mission Energy, certain commercial lending institutions, and Citicorp USA, Inc., as Administrative Agent, incorporated by reference to Exhibit 10.61.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 10.61.3 Amendment Three to the U.S. $595 million Credit Agreement, dated as of May 30, 2001, by and among Edison Mission Energy, certain commercial lending institutions, and Citicorp USA, Inc., as Administrative Agent, incorporated by reference to Exhibit 10.61.3 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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 July 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. 10.64.1 Amendment One to Coal and Capex Facility Agreement, dated as of May 29, 2001, by and among Edison Mission Energy Finance UK Limited and Barclays Bank PLC, as Facility Agent, incorporated by reference to Exhibit 10.64.1 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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. 10.65.2 Amendment Two to Guarantee by Edison Mission Energy Supporting the Facility Agreement, dated as of May 29, 2001, incorporated by reference to Exhibit 10.65.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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-11
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. 10.84.2 Amendment Two to the U.S. $255 million Credit Agreement, dated as of May 30, 2001, by and among Edison Mission Energy, Certain Commercial Lending Institutions and Bank of America, N.A. as Administrative Agent, incorporated by reference to Exhibit 10.84.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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.
II-12
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 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 Supplemental Agreement, dated as of May 30, 2001, to Amendment Two to the Second Amended and Restated U.S. $425 million Bank of America, N.A. Credit Agreement dated as of May 30, 2001, Amendment Three to the U.S. $595 million Credit Agreement dated as of May 30, 2001 and Amendment Two to the U.S. $255 million Credit Agreement dated as of May 30, 2001, incorporated by reference to Exhibit 10.91 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 12.1 Statement regarding the computation of ratio of earnings to fixed charges for Edison Mission Energy.* 21.1 List of Subsidiaries of Edison Mission Energy.* 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 The Bank of New York for the 10% Senior Notes.* 99.1 Form of Letter of Transmittal.*
II-13
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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-14 ITEM 22. UNDERTAKINGS (a) The undersigned Registrant hereby undertakes: Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has 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 Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant 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 Registrant will, unless in the opinion of its 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 Registrant hereby undertakes: (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 SEC 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 Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, 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, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement II-15 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 Registrant hereby undertakes 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 Registrant hereby undertakes 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 Registrant hereby undertakes 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-16 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 29th day of August, 2001. EDISON MISSION ENERGY (Registrant) By: /s/ KEVIN M. SMITH ----------------------------------------- Kevin M. Smith SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALAN J. FOHRER Director, Chief Executive Officer, August 29, 2001 ------------------------------------ and President (Principal Executive Alan J. Fohrer Officer) /s/ KEVIN M. SMITH Senior Vice President and Chief August 29, 2001 ------------------------------------ Financial Officer (Principal Kevin M. Smith Financial and Accounting Officer) /s/ JOHN E. BRYSON Director and Chairman of the Board August 29, 2001 ------------------------------------ John E. Bryson /s/ BRYANT C. DANNER Director August 29, 2001 ------------------------------------ Bryant C. Danner
II-17 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 1.1 Purchase Agreement, dated as of August 7, 2001, among Edison Mission Energy and Credit Suisse First Boston Corporation, BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen Securities Corporation, TD Securities (USA) Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf).* 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. 3.1.3 Certificate of Amendment of Articles of Incorporation of Edison Mission Energy dated July 2, 2001, incorporated by reference to Exhibit 3.1.3 to Edison Mission Energy's 10-Q for the quarter ended June 30, 2001. 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. 4.1 Indenture, dated as of August 10, 2001, among Edison Mission Energy and The Bank of New York as Trustee. * 4.1.1 Form of 10% Senior Note due 2008 (included in Exhibit 4.1). * 4.2 Registration Rights Agreement, dated as of August 7, 2001, among Edison Mission Energy, Credit Suisse First Boston Corporation, BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen Securities Corporation, TD Securities (USA) Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf). * 4.3 Indenture, dated as of April 5, 2001, among Edison Mission Energy and United States Trust Company of New York as Trustee, incorporated by reference to Exhibit 4.20 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.3.1 Form of 9.875% Senior Note due 2011 (included in Exhibit 4.1 to Edison Mission Energy's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 24, 2001.) 4.4 Registration Rights Agreement, dated as of April 2, 2001, among Edison Mission Energy and Credit Suisse First Boston Corporation and Westdeutsche Landesbank Girozentrale (Dusseldorf) as representatives of the Initial Purchasers, 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 April 24, 2001. 4.5 Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Powerton Trust I, as Owner Lessor, incorporated by reference to Exhibit 4.9 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 4.5.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.5 hereto, incorporated by reference to Exhibit 4.9.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.6 Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Joliet Trust I, as Owner Lessor, incorporated by reference to Exhibit 4.10 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.6.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.6 hereto, incorporated by reference to Exhibit 4.10.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.7 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, incorporated by reference to Exhibit 4.11 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.8 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, incorporated by reference to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.8.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.12.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.9 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, incorporated by reference to Exhibit 4.13 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.9.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.9 hereto, incorporated by reference to Exhibit 4.13.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 4.10 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. 4.11 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.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 4.11.1 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. 4.11.2 Second Supplemental Indenture, dated as of August 8, 1995, to Indenture dated as of November 30, 1994 between Edison Mission Energy and The First National Bank of Chicago, as Trustee.* 4.12 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. 4.12.1 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. 4.13 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. 4.14 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. 4.14.1 Schedule identifying substantially identical agreements to Promissory Note constituting Exhibit 4.14 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.15 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. 5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Edison Mission Energy, as to the legality of the Notes 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. 10.8 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.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 10.15.2 Amendment Two to Second Amended and Restated U.S. $425 million Bank of America, N.A. Credit Agreement, dated as of May 30, 2001, incorporated by reference to Exhibit 10.15.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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. 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).
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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 (File 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. 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.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 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. 10.54 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.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 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.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 10.60.2 Amendment No. 2 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, incorporated by reference to Exhibit 10.60.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 10.60.3 Bond 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 10.60.2 to Amendment No. 1 of Edison Mission Holding Co.'s Registration Statement on Form S-4 to the Securities and Exchange Commission on February 8, 2000. 10.60.4 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. 10.61 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. 10.61.2 Amendment Two to Credit Agreement, dated as of March 15, 2001, by and among Edison Mission Energy, certain commercial lending institutions, and Citicorp USA, Inc., as Administrative Agent, incorporated by reference to Exhibit 10.61.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 10.61.3 Amendment Three to the U.S. $595 million Credit Agreement, dated as of May 30, 2001, by and among Edison Mission Energy, certain commercial lending institutions, and Citicorp USA, Inc., as Administrative Agent, incorporated by reference to Exhibit 10.61.3 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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 July 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. 10.64.1 Amendment One to Coal and Capex Facility Agreement, dated as of May 29, 2001, by and among Edison Mission Energy Finance UK Limited and Barclays Bank PLC, as Facility Agent, incorporated by reference to Exhibit 10.64.1 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 10.65.2 Amendment Two to Guarantee by Edison Mission Energy Supporting the Facility Agreement, dated as of May 29, 2001, incorporated by reference to Exhibit 10.65.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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. 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.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 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. 10.84.2 Amendment Two to the U.S. $255 million Credit Agreement, dated as of May 30, 2001, by and among Edison Mission Energy, Certain Commercial Lending Institutions and Bank of America, N.A. as Administrative Agent, incorporated by reference to Exhibit 10.84.2 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 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. 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.
EXHIBIT NO. DESCRIPTION - --------------------- ----------- 10.91 Supplemental Agreement, dated as of May 30, 2001, to Amendment Two to the Second Amended and Restated U.S. $425 million Bank of America, N.A. Credit Agreement dated as of May 30, 2001, Amendment Three to the U.S. $595 million Credit Agreement dated as of May 30, 2001 and Amendment Two to the U.S. $255 million Credit Agreement dated as of May 30, 2001, incorporated by reference to Exhibit 10.91 to Edison Mission Energy's Form 10-Q for the quarter ended June 30, 2001. 12.1 Statement regarding the computation of ratio of earnings to fixed charges for Edison Mission Energy.* 21.1 List of Subsidiaries of Edison Mission Energy.* 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 The Bank of New York for the 10% Senior Notes.* 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 3 a2057631zex-1_1.txt EXHIBIT 1.1 Exhibit 1.1 EXECUTION COPY $400,000,000 EDISON MISSION ENERGY 10% Senior Notes Due August 15, 2008 PURCHASE AGREEMENT August 7, 2001 CREDIT SUISSE FIRST BOSTON CORPORATION BMO NESBITT BURNS CORP. SALOMON SMITH BARNEY INC. SG COWEN SECURITIES CORPORATION TD SECURITIES (USA) INC. WESTDEUTSCHE LANDESBANK GIROZENTRALE (DUSSELDORF) c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Ladies and Gentlemen: Edison Mission Energy, a California corporation (the "COMPANY"), proposes, subject to the terms and conditions stated herein, to issue and sell to Credit Suisse First Boston Corporation ("CSFBC"), BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen Securities Corporation, TD Securities (USA) Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf), the initial purchasers (the several "PURCHASERS") $400,000,000 principal amount of its 10% Senior Notes Due August 15, 2008 (the "NOTES") to be issued under an Indenture to be dated as of August 10, 2001 (the "INDENTURE"), by and between the Company and Bank of New York, as trustee (the "TRUSTEE"). The Company hereby agrees with the several Purchasers as follows: 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and agrees with, the several Purchasers that: (a) The Company has prepared a preliminary offering circular dated August 1, 2001 (as it may be amended or supplemented, the "PRELIMINARY OFFERING CIRCULAR") and a final offering circular dated August 7, 2001 (as it may be amended or supplemented, the "OFFERING CIRCULAR") relating to the Notes. For purposes of this Agreement, the Preliminary Offering Circular and the Offering Circular shall include any documents or portions thereof incorporated by reference therein as set forth under the caption "Incorporation of Documents by Reference" 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 a material fact necessary 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 to make the statements therein, in the light of the circumstances under which they were made, not misleading; PROVIDED that the Company makes no representation or warranty as to information contained in or omitted from the Preliminary Offering Circular or the Offering Circular in reliance upon and in conformity with written information furnished to the Company by any Purchaser through CSFBC specifically for inclusion therein, it being understood and agreed that the only such information is that described as such in SECTION 6(b) hereof. Except as disclosed in the Offering Circular, on the date of this Agreement, the Company'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 the Company with the Commission or sent to its 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) The Company 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 the Company and its subsidiaries, taken as a whole, or on the ability of the Company to perform its obligations under the Financing Documents, as hereinafter defined, (a "MATERIAL ADVERSE EFFECT"). Each subsidiary of the Company 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. The Company and each subsidiary of the 2 Company 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. One hundred percent of the outstanding shares of capital stock of the Company are owned by Mission Energy Holding Company, a Delaware corporation. All of the outstanding shares of capital stock of the Company 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 the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free and clear from liens, encumbrances and defects except as pledged to lenders in connection with financings involving the Company's subsidiaries as permitted under the terms of the Notes as described in the Offering Circular. (c) The Company has all power and authority necessary to execute and deliver this Agreement, the Notes, the Indenture, the Exchange Notes referred to in the Offering Circular (the "EXCHANGE NOTES") and the Registration Rights Agreement referred to in the Offering Circular (the "REGISTRATION RIGHTS AGREEMENT" and, together with this Agreement, the Notes, the Exchange Notes and the Indenture, the "FINANCING DOCUMENTS") and to perform its obligations hereunder and thereunder. The execution, delivery and performance by the Company of the Financing Documents and its compliance with the provisions hereof and thereof will not breach or (except as contemplated by the Financing Documents) result in the creation or imposition of any lien, charge or encumbrance upon any material asset of 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 or by-laws of the Company or similar organizational documents of any subsidiary thereof or any agreement, indenture or other instrument to which the Company or any subsidiary thereof is a party or by which the Company or any subsidiary thereof is bound (in each case which is material to the Company or any subsidiary thereof) or to which any Material Asset is subject, or any law, order, rule, regulation, judgment or decree of any court or governmental agency having jurisdiction over the Company or any subsidiary thereof or any Material Asset of 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 the Company with, any court, governmental agency or body or third party is required in connection with the issuance and sale of the Notes by the Company or the execution, delivery and performance by the Company of the Financing Documents, 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. (d) Neither the Company nor any subsidiary thereof is in violation of its corporate charter, by-laws or other organizational documents. Except as described in or contemplated by the Offering Circular, none of the Company or any of its 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 3 agreement, understanding or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its 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. (e) Except as described in or contemplated by the Offering Circular, each of the Company and its subsidiaries (i) has properly obtained each consent, license, approval, registration, permit, certification, determination or other authorization (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. (f) Except as described in or contemplated by the Offering Circular, each of the Company and its subsidiaries 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 the Company and its subsidiaries taken as a whole, free and clear of all liens, encumbrances and claims which would materially interfere with the conduct of the business of the Company and its subsidiaries, taken as a whole, as described in the Offering Circular. The Company and its subsidiaries are presently conducting their respective 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 the Company and its subsidiaries 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. (g) Arthur Andersen LLP, whose report is incorporated by reference into the Offering Circular, is and was, during the period covered by its report, independent with respect to the Company and its subsidiaries within the meaning of the Exchange Act. (h) The Indenture and the Registration Rights Agreement have been validly authorized by the Company and, when the Notes are delivered and paid for pursuant to this Agreement, will have been duly executed and delivered, and (assuming the due authorization, execution and delivery thereof by the other parties thereto), will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective 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 4 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; the Notes and the Exchange Notes (as defined in the Registration Rights Agreement) have been validly authorized by the Company, and, in the case of the Notes, upon payment therefor on the Closing Date as provided herein, or, in the case of the Exchange Notes, upon their issuance pursuant to the Exchange Offer (as defined in the Registration Rights Agreement), will be duly executed, authenticated, issued and delivered, and will constitute legal and valid obligations of the Company entitled to the benefits of the Indenture and enforceable in accordance with their terms, 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; the summary descriptions contained in the Offering Circular of the Notes, the Exchange Notes, the Indenture and the Registration Rights Agreement conform in all material respects to these documents. (i) This Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Purchasers, constitutes the legal, valid and binding obligation of the Company, enforceable against 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. (j) Except as described in the Offering Circular, there is no litigation, proceeding or investigation pending before or by any court or governmental agency or any arbitrator or otherwise or, to the knowledge of the Company, threatened, against the Company or any of its subsidiaries 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. (k) The consolidated financial statements (including the related notes) of the Company included in the Offering Circular or incorporated by reference therein comply as to form in all material respects with the requirements applicable to registration statements on Form S-3 under the Securities Act of 1933, as amended (the "SECURITIES ACT") and present fairly in all material respects the financial condition, results of operations and changes in financial position of the Company, 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 the 5 Company, 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. (l) Except as disclosed in the Offering Circular, since the date of the latest audited financial statements included in the Offering Circular or incorporated by reference therein, there has been no Material Adverse Effect, nor, to the Company's knowledge, any development or event involving a prospective Material Adverse Effect. Except as disclosed in or contemplated by the Offering Circular and except for the dividends each in the amount of $32.5 million paid on EME's common stock on each of February 28, 2001 and May 25, 2001, since the date of such financial statements there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its equity capital. (m) Neither the Company nor any of its 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 the Company's behalf has made offers or sales of securities under circumstances that would require the registration of the Notes under the Securities Act. (n) The Company is not 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 it a closed-end investment company required to be registered, but not registered, thereunder; and the Company is not and, after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Offering Circular under the caption "Use of Proceeds," the Company will not be an "investment company" as defined in the Investment Company Act. (o) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Notes 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. (p) 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 Notes are offered and sold in the manner contemplated by the Offering Circular, the offer and sale of the Notes 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 an indenture in respect of the Notes under the Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT"). (q) Neither the Company nor any of its affiliates, nor (assuming the accuracy of the representations and warranties of the Purchasers set forth herein) any person acting on its or their behalf (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 Notes or any security of the same class 6 or series as the Notes or (ii) has offered or will offer or sell the Notes (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. The Company, its affiliates and (assuming the accuracy of the representations and warranties of the Purchasers set forth herein) any person acting on its or their behalf have complied and will comply with the offering restriction requirements of Regulation S in connection with the offering of Notes outside the United States. The Company has not entered and will not enter into any contractual relationship with respect to the distribution of the Notes except for this Agreement. (r) The proceeds to the Company from the offering of the Notes will not be used in a manner which would violate Regulations T, U or X of the Federal Reserve Board. (s) Neither the Company nor any of its subsidiaries is or will, solely as a result of their participation in the transactions contemplated by the Operative Documents or their ownership, use or operation of the projects described in the Offering Circular under the heading "Regional Overview of Business Segments," be subject to (i) regulation under the Public Utility Holding Company Act of 1935, as amended ("PUHCA") as a "public utility company," a "holding company," or a "subsidiary" or an "affiliate" of a holding company, except that each of the Company and its subsidiaries is a "subsidiary" and an "affiliate" under PUHCA of Edison International, a California corporation, 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, or (ii) regulation under the Federal Power Act ("FPA"), except (A) for such rules or regulations applicable to "exempt wholesale generators" ("EWGs") under Section 32 of PUHCA and "qualifying facilities" ("QFs") under the Public Utility Regulatory Policies Act of 1978 ("PURPA") and (B) each of the EWG and power marketer subsidiaries of the Company is a "public utility," as such term is defined under the FPA, but each such subsidiary has been granted authority under Section 205 of the FPA to sell electric energy, capacity and ancillary services; or (iii) state laws and regulations in respect of the rates or the financial or organizational regulation of utilities except that certain subsidiaries of the Company are subject to state laws applicable to entities that make retail sales of electric energy and other energy-related services ("Retail Service Providers"), EWGs, "foreign utility companies" under Section 33 of PUHCA, or QFs, and to the extent that any subsidiary of the Company is a Retail Service Provider, that subsidiary has been granted all requisite authority under applicable state laws and regulations to make sales of electric energy and other energy-related services as a Retail Service Provider. In addition, none of the Purchasers will, solely as a result of purchasing and/or reselling the Notes pursuant to this Agreement, be a "public utility company," an "electric utility company," a "gas utility company," a "holding company," a "subsidiary" or an "affiliate" under PUHCA, or otherwise subject to regulation under PUHCA, the FPA, PURPA, or rate, financial or organizational regulation under any state law or regulation. 7 (t) (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 the Company have been duly filed, (ii) all Taxes due on the Tax Returns referred to in clause (i) that are required to be paid or withheld by the Company (the "COMPANY TAXES") have been paid or withheld in full, (iii) all deficiencies asserted or assessments made against the Company with respect to Tax Returns as a result of an examination of such Tax Returns referred to in clause (i) have been 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 the Company's books. (u) Except as disclosed in the Offering Circular, neither the Company nor any of its subsidiaries 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 the Company has no knowledge of any pending investigation which might lead to such a claim. (v) The Company and its subsidiaries 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 the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (w) The Company is subject to Section 13 or 15(d) of the Exchange Act. (x) 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 8 import and together with the regulations thereunder ("ERISA"), to which the Company, any subsidiary thereof or any member of a controlled group of corporations treated as a single employer together with 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 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 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 .13, .14, .16, .18, .19 or .20 of Pension Benefit Guaranty Corporation Reg. Section 2615; (x) a complete or partial withdrawal from any "multiemployer plan," as defined in Section 4001(a)(3) of ERISA (the "MULTIEMPLOYER PLAN"), by the Company, any subsidiary thereof or any member of the Controlled Group; (y) any liability of the Company, any subsidiary thereof or any member of the Controlled Group under ERISA if the Company, any subsidiary thereof or any member of the Controlled Group under ERISA 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 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. (y) The proceeds from the sale of Notes will be utilized by the Company as described under the section of the Offering Circular entitled "Use of Proceeds." 2. PURCHASE, SALE AND DELIVERY OF NOTES. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Purchasers, and the Purchasers agree, severally and not jointly, to purchase from the Company, at an aggregate purchase price of 99.25% of the principal amount thereof plus accrued interest from August 10, 2001 to the Closing Date (as hereinafter defined) (the "PURCHASE PRICE"), the respective principal amounts of the Notes set forth opposite the names of the several Purchasers on SCHEDULE 1 hereto. The Company shall not be obligated to deliver any Notes to be delivered, except upon payment of all of the Notes to be purchased on the Closing Date as provided herein. The Company will deliver against payment of the Purchase Price the Notes in the form of one or more permanent global Notes in definitive form (the "GLOBAL NOTES") deposited 9 with the Trustee as custodian for The Depository Trust Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent Global Notes will be held only in book-entry form through DTC, except in the limited circumstances described in the Offering Circular. Payment of the Purchase Price for the Notes 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 CSFBC drawn to the order of the Company, at the office of Latham & Watkins, 885 Third Avenue, New York, New York 10022 at 9:30 A.M., (New York time), on August 10, 2001 or at such other place or time not later than seven full business days thereafter as CSFBC and the Company determine, such time being herein referred to as the "CLOSING DATE", against delivery to the Trustee, as custodian for DTC, of the Global Notes representing all of the Notes. The Global Notes will be made available for inspection at the above office of Latham & Watkins at least 24 hours prior to the Closing Date. Notwithstanding the foregoing, any Notes sold to Institutional Accredited Investors (as hereinafter defined) pursuant to SECTION 3(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 Notes to be purchased by the Purchasers hereunder and to be offered and sold by it in reliance on Rule 144A under the Securities Act. 3. REPRESENTATIONS BY PURCHASERS; RESALE BY PURCHASERS. (a) Each Purchaser severally represents and warrants to the Company that it is an "accredited investor" within the meaning of Regulation D under the Securities Act. (b) Each Purchaser severally acknowledges that the Notes 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 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 Notes, and will offer and sell the Notes, as part of its distribution at any time 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 Notes, 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 Notes 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 10 Purchaser or its representative and the Company, prior to the consummation of any sale of Notes to such Institutional Accredited Investor, a Purchaser's Letter in substantially the form included in the Offering Circular (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 Notes except for any such arrangements with the other Purchaser or affiliate thereof or with the prior written consent of the Company. (e) Each Purchaser severally agrees that it and each of its affiliates has not offered and sold the Notes and will not offer or sell the Notes 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, 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 Notes, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Notes has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. (f) Each Purchaser 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 Notes will not offer or sell any Notes 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 of 1986 with respect to anything done by it in relation to the Notes 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 Notes 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. 4. CERTAIN AGREEMENTS OF THE COMPANY. The Company agrees with the Purchasers that: (a) The Company will advise the Purchasers promptly of any proposal to amend or supplement the Offering Circular and will not effect such amendment or supplementation without the Purchasers' consent. If, at any time prior to the completion of the resale of the Notes by the Purchasers, any event occurs as a result of which, in the reasonable judgment of the Company, 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 11 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, the Company promptly will notify the Purchasers of such event and promptly will prepare, at the Company's own expense, an amendment or supplement which will correct such statement or omission or effect such compliance. Neither the Purchasers' consent to, nor their delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in SECTION 5. (b) The Company will furnish to the Purchasers 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 the Purchasers reasonably request, and the Company will furnish to the Purchasers on the date hereof two copies of the Offering Circular certified as being true, complete and correct by a duly authorized officer of 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 the Company is not subject to Section 13 or 15(d) of the Exchange Act, and for so long as the sale of the Notes is reliant upon the exception afforded by Rule 144A, the Company will promptly furnish or cause to be furnished to the Purchasers and, upon the request of holders and prospective purchasers of the Notes, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Notes 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 Notes. The Company will pay the expenses of printing and distributing to the Purchasers and such holders and purchasers all such documents. (c) The Company will arrange for the qualification of the Notes for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as the Purchasers designate and will continue such qualifications in effect so long as required for the resale of the Notes by the Purchasers, provided that the Company will not be required to qualify as a foreign corporation in any jurisdiction in which it is not now qualified or to file a general consent to service of process in any such jurisdiction. (d) During the period of three years hereafter, the Company will furnish to the Purchasers as soon as available after the end of each fiscal year, a copy of such notices and reports as it is required to deliver to the Trustee or any holder of the Notes under SECTION 3.4 of the Indenture, and the Company will furnish to each Purchaser (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to shareholders and (ii) from time to time, such other information concerning the Company as the Purchasers may reasonably request. (e) During the period of two years after the Closing Date, the Company will, upon request, furnish to each Purchaser and any holder of Notes a copy of the restrictions on transfer applicable to the Notes. 12 (f) During the period of two years after the Closing Date (or such other period as the Commission may specify for the unrestricted resale of Notes which constitute "restricted securities" under Rule 144 under the Securities Act ("Rule 144")), the Company will not, and will not permit any of its affiliates (as defined in Rule 144) to, resell any of the Notes 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, the Company will not 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 the Company is not, and will not become, a closed-end investment company required to be registered, but not registered, under the Investment Company Act. (h) The Company will pay all expenses incidental to the performance of its obligations under this Agreement, the Indenture and the other Financing Documents, including (i) the fees and expenses of the Trustee and its counsel, (ii) all expenses in connection with the execution, issue, authentication, packaging, initial delivery, preparation and printing of the Notes, the Indenture, the other Financing Documents, the Preliminary Offering Circular, the Offering Circular and amendments and supplements thereto and any other document relating to the issuance, offer, sale and delivery of the Notes and the Exchange Notes and (iii) the cost of any advertising approved by the Company in connection with the issue of the Notes. The Company agrees to pay for any reasonable expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Notes for sale under the laws of such jurisdictions in the United States and Canada as CSFBC designates and the printing of memoranda relating thereto, and for any fees charged by investment rating agencies for the rating of the Notes and the Exchange Notes. The Company agrees to reimburse the Purchasers for all reasonable travel expenses of the Purchasers and the Company's officers and employees and any other reasonable expenses of the Purchasers and the Company incurred in connection with attending or hosting meetings with prospective purchasers of the Notes from the Purchasers. The Company agrees to pay for expenses incurred in distributing Preliminary Offering Circulars and Offering Circulars (including any amendments and supplements thereto) to the Purchasers and for the reasonable fees and expenses of counsel to the Purchasers. (i) In connection with the offering of the Notes, until the earlier of (x) 180 days following the Closing Date and (y) the date the Purchasers shall have notified the Company of the completion of the resale of the Notes, neither the Company nor any of its 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 Notes or attempt to induce any person to purchase any Notes; and neither the Company nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Notes. (j) The Company will not, until 30 days following the Closing Date, without the prior written consent of the Purchasers, pursuant to Rule 144A, Regulation S or an 13 offering registered under the Securities Act, offer, sell or contract to sell or otherwise dispose of, directly or indirectly, or announce the offering of, any debt securities issued or guaranteed by the Company (other than the Notes). The Company will not, at any time, offer, sell, contract to sell, pledge or otherwise dispose of, directly or 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 Notes. 5. CONDITIONS OF THE OBLIGATIONS OF THE PURCHASERS. The respective obligations of the Purchasers to purchase and pay for the Notes will be subject to the accuracy as of the date hereof and as of the Closing Date of the representations and warranties made by 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 the Company made pursuant to the provisions hereof, to the performance by the Company of its 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 confirming that they are independent certified public accountants with respect to the Company under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA"), and its interpretations and rulings, and to the effect that: (i) in their opinion the financial statements examined by them and incorporated by reference into the Offering Circular comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published rules and regulations thereunder (ii) they have performed the procedures specified by the AICPA for a review of interim financial information as described in Statement of Auditing Standards No. 71, Interim Financial Information, on the unaudited financial statements incorporated by reference into the Offering Circular; (iii) on the basis of the review referred to in clause (i) above, a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) any material modifications should be made to the unaudited financial statements incorporated by reference into the Offering Circular for them to be in conformity with generally accepted accounting principles; (B) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three days 14 prior to the date of this Agreement, there was any change in the capital stock or any increase in long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets or stockholder's equity, as compared with amounts shown on the latest balance sheet incorporated by reference into the Offering Circular; or (C) for the period from the closing date of the latest income statement incorporated by reference into the Offering Circular to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year, in total operating revenues or in net income; except in the case of clauses (B) and (C) above, for changes, increases or decreases which the Offering Circular or documents incorporated by reference therein disclose have occurred or may occur or which are described in such letter; (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Offering Circular and the documents incorporated by reference therein (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter; (v) they have read the unaudited pro forma statement of capitalization included in the Offering Circular and have inquired of certain officials of the Company about the basis for their determination of the pro forma adjustments and have proved the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the unaudited pro forma statement of capitalization; and (vi) on the basis of the review referred to in clause (v) above, nothing came to their attention that caused them to believe that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of the pro forma statement of capitalization. (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 the judgment of CSFBC, is material and adverse and makes it inadvisable to proceed with completion of the offering or sale of and payment for the Notes as contemplated in the Offering 15 Circular; (ii) any change, or any development or event involving a prospective change, in or affecting the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries, taken as a whole, which, in the judgment of a majority in interest of the Purchasers, including CSFBC, materially impairs the investment quality of the Notes or is material and adverse and makes it inadvisable to proceed with completion of the offering or sale of and payment for the Notes as contemplated in the Offering Circular; (iii) any downgrading in the rating of any debt securities of 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 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 the Company or Edison International, Inc. ("EIX") on any exchange or in the over the counter market; (v) the occurrence of any voluntary or involuntary bankruptcy or similar proceeding, filing or similar process by or against Southern California Edison Company or EIX, (vi) any banking moratorium declared by U.S. Federal or New York State authorities; or (vii) 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 change in financial markets or substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers, including CSFBC, the effect of any such outbreak, escalation, declaration, change, calamity or emergency makes it inadvisable to proceed with completion of the offering or sale of and payment for the Notes as contemplated in the Offering Circular. (c) The Company shall have furnished to the Purchasers a certificate, dated as of the Closing Date, of its Chief Executive Officer or Chief Financial Officer and a Vice President stating that (i) the representations and warranties of the Company contained in this Agreement are true and correct as of the 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), (ii) the Company has complied with all its agreements and has satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Date contained herein and (iii) subsequent to the respective dates of the most recent financial statements incorporated by reference in the Offering Circular, there has been no Material Adverse Effect, nor any development or event involving a prospective Material Adverse Effect, except as described in or contemplated by the Offering Circular. (d) The Purchasers shall have received a letter, dated the Closing Date, of Arthur Andersen LLP that meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three days prior to the Closing Date for the purposes of this subsection. 16 (e) The Purchasers shall have received (i) an opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the Company, in form and substance reasonably satisfactory to the Purchasers, regarding the likelihood that the assets and liabilities of the Company would be consolidated with those of EIX if EIX were to be subject to bankruptcy proceedings and (ii) an opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the Company, in form and substance reasonably satisfactory to the Purchasers, to the following effect: (i) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of California and has the corporate power and authority to execute, deliver and perform its obligations under each of the Operative Documents, as defined in the opinion, and to carry on its business and to own, lease and operate its properties as described in the Offering Circular. (ii) The Purchase Agreement has been duly authorized, executed and delivered by the Company. (iii) The issuance and sale of the Notes and the Exchange Notes have been duly authorized by the Company, and when the Notes are duly authenticated in accordance with the terms of the Indenture and delivered to and paid for by the Purchasers as contemplated by the Purchase Agreement, the Notes will be valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). (iv) The Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance, or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). (v) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that (a) enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance, or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in 17 equity) and (b) the enforceability of indemnification and contribution provisions may be limited by federal and state securities laws or the public policies underlying such laws. (vi) The issuance and sale of the Notes by the Company, the execution and delivery of each of the Purchase Agreement, the Indenture and the Registration Rights Agreement by the Company, the compliance by the Company with the terms thereof and the consummation by the Company of the transactions contemplated thereby will not (i) require any consent, approval, authorization, or other order of, or qualification with, any Governmental Authorities, (ii) conflict with the corporate charter or the by-laws, (iii) constitute a violation of or default under the terms of any Applicable Contract, as defined in the opinion, (except that such counsel will not express any opinion as to any covenant, restriction or provision of any such agreement or instrument with respect to financial covenants, ratios or tests or any aspect of the financial condition or results of operations of the Company) or (iv) violate or conflict with, or result in any contravention of, any Applicable Law, as defined in the opinion, or any Applicable Order, as defined in the opinion. Such counsel will note that, for the purposes of clause (i) of this paragraph (vi), such counsel will not express any opinion with respect to the United States federal securities laws, which are addressed in paragraph (vii) below, or as to any state or foreign securities or Blue Sky laws or any opinion as to any registrations, qualifications, filings and orders required in connection with the registration obligations of the Company under the Registration Rights Agreement. (vii) Assuming (i) the accuracy of the representations and warranties of the Company set forth in Section 1 of the Purchase Agreement and of the Purchasers' representations and warranties set forth in Section 3 of the Purchase Agreement, (ii) the due performance by the Company of the agreements set forth in Section 4 of the Purchase Agreement, (iii) the Purchasers' compliance with the offering and transfer procedures and restrictions described in the Offering Circular, (iv) the accuracy of the representations and agreements made in accordance with the Purchase Agreement and the Offering Circular by purchasers to whom the Purchasers initially resell the Notes and (v) that purchasers to whom the Purchasers initially resell the Notes receive a copy of the Offering Circular prior to such sale, the offer, sale and delivery of the Notes to the Purchasers, and purchase of the Notes by the Purchasers, in the manner contemplated by the Purchase Agreement and the Offering Circular, and the initial resale of the Notes by the Purchasers in the manner contemplated in the Offering Circular and the Purchase Agreement, do not require registration under the Securities Act, and the Indenture does not require qualification under the Trust Indenture Act of 1939, as amended, it being understood that such counsel will not express any opinion as to any subsequent resale of any Note. (viii) The Company is not and, solely after giving effect to the offering and sale of the Notes and the application of the net proceeds thereof as described in the Offering Circular, will not be subject to registration and regulation as an 18 "investment company," as such term is defined in the Investment Company Act of 1940, as amended. (ix) The Notes and the Indenture conform, in all material respects, to the descriptions thereof contained in the Offering Circular. (x) In addition, such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants of the Company, the Purchasers and representatives of the Purchasers' counsel, at which the contents of the Offering Circular (which, for purposes of the opinion, will include certain information specifically incorporated by reference therein) and related matters were discussed and, although such counsel is not passing upon, and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Offering Circular and has made no independent check or verification thereof, on the basis of the foregoing, no facts have come to such counsel's attention which have led such counsel to believe that the Offering Circular, as of its date and as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that such counsel does not express any opinion or belief with respect to the financial statements, schedules and other financial or statistical data included therein or excluded therefrom. (f) The Purchasers shall have received an opinion, dated the Closing Date, of Crystal Needham, Regional Vice President, Legal, of the Company, in form and substance reasonably satisfactory to the Purchasers, to the following effect: (i) The Company is duly qualified to do business as a foreign corporation in good standing in all jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification. (ii) To the best of such counsel's knowledge, there are no legal or governmental proceedings pending or threatened against the Company or any of its subsidiaries or to which any of their respective Material Assets is subject, that are not disclosed in the Offering Circular and which are reasonably likely to have a Material Adverse Effect or to materially affect the issuance of the Notes or the consummation of the other transactions contemplated by the Operative Documents. (iii) The Purchase Agreement has been duly authorized, executed and delivered by the Company. (iv) The issuance and sale of the Notes and the Exchange Notes have been duly authorized by the Company. (v) The Indenture has been duly authorized, executed and delivered by the Company. 19 (vi) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company. (vii) The issuance and sale of the Notes by the Company, the execution and delivery of each of the Purchase Agreement the Indenture and the Registration Rights Agreement by the Company, the compliance by the Company with the terms thereof and the consummation by the Company of the transactions contemplated thereby will not (i) except as completed on or prior to the Closing Date require any consent, approval, authorization, or other order of, or qualification with, any court, regulatory body, administrative agency, or governmental body of any state or the United States of America having jurisdiction over the Company (other than any registrations, qualifications, filings and orders required in connection with the registration obligations of the Company under the Registration Rights Agreement), (ii) conflict with the Articles of Incorporation, by-laws or other organizational documents of the Company or any of its subsidiaries, (iii) to the best of such counsel's knowledge, constitute a violation of or default under the terms or provisions of any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument, in each case which is material to the Company and its subsidiaries, taken as a whole, to which the Company or its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject (except that such counsel does not express any opinion as to any covenant, restriction or provision of any such agreement or instrument with respect to financial covenants, ratios or tests or any aspect of the financial condition or results of operations of the Company or any of its subsidiaries) or (iv) violate or conflict with, or result in any contravention of, any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their Material Assets. Such counsel will note that, for the purposes of clause (i) of this paragraph (vii), such counsel does not express any opinion with respect to the United States federal securities laws or any state or foreign securities or Blue Sky laws. (viii) Except as disclosed in the Offering Circular, the Company and its subsidiaries (a) have obtained each Governmental Approval which is material to the ownership of their respective properties or to the conduct of their businesses as described in the Offering Circular and (b) are in compliance with all terms and conditions of such Governmental Approvals, except (x) in either case, where the failure to do so is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, (y) for Governmental Approvals that may be required for future activities which are ordinarily deemed to be ministerial in nature and which are anticipated to be obtained in the ordinary course, and (z) for Governmental Approvals for activities that are not yet required which have not yet been obtained but which have been or will be applied for in the ordinary course and which are anticipated to be obtained in the ordinary course. 20 (g) The Purchasers shall have received an opinion, dated the Closing Date, of John P. Mathis, Associate General Counsel, Regulatory Affairs, of the Company, in form and substance reasonably satisfactory to the Purchasers, to the following effect: (i) Neither the Company nor any of its subsidiaries is or will, solely as a result of their participation in the transactions contemplated by the Operative Documents or their ownership, use or operation of the projects described in the Offering Circular under the heading "Regional Overview of Business Segments," be subject to (i) regulation under PUHCA as a "public utility company," a "holding company," or a "subsidiary" or an "affiliate" of a holding company, except that each of the Company and its subsidiaries is a "subsidiary" and an "affiliate" under PUHCA of Edison International, a California corporation, 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, or (ii) regulation under the FPA, except (A) for such rules or regulations applicable to EWGs under Section 32 of PUHCA and QFs under PURPA and (B) each of the EWG and power marketer subsidiaries of the Company is a "public utility," as such term is defined under the FPA, but each such subsidiary has been granted authority under Section 205 of the FPA to sell electric energy, capacity and ancillary services; or (iii) state laws and regulations in respect of the rates or the financial or organizational regulation of utilities except that certain subsidiaries of the Company are subject to state laws applicable to Retail Service Providers, EWGs, "foreign utility companies" under Section 33 of PUHCA, or QFs, and to the extent that any subsidiary of the Company is a Retail Service Provider, that subsidiary has been granted all requisite authority under applicable state laws and regulations to make sales of electric energy and other energy-related services as a Retail Service Provider. In addition, none of the Purchasers will, solely as a result of purchasing and/or reselling the Notes pursuant to this Agreement, be a "public utility company," an "electric utility company," a "gas utility company," a "holding company," a "subsidiary" or an "affiliate" under PUHCA, or otherwise subject to regulation under PUHCA, the FPA, PURPA, or rate, financial or organizational regulation under any state law or regulation. (h) The Purchasers shall have received an opinion, dated the Closing Date, from Emmet, Marvin & Martin, counsel to the Trustee, in respect of the enforceability of the Financing Documents to which the Trustee is a party and the authentication of the Notes by the Trustee, which opinion shall be satisfactory in all respects to the Purchasers and their counsel. (i) The Purchasers shall have received from Latham & Watkins, special counsel for the Purchasers, such opinion or opinions as the Purchasers reasonably request, dated the Closing Date, with respect to the Offering Circular and certain other matters, and the Company shall have furnished to such counsel such documents as it requests for the purpose of enabling it to pass upon such matters. (j) The Company and CSFBC shall have entered into the Registration Rights Agreement and the Purchasers shall have received counterparts, conformed as executed, 21 thereof and each other document entered into by the Company in connection with the transactions contemplated by this Agreement. (k) There shall exist at and as of the Closing Date no conditions that would constitute an Event of Default (or an event that with notice or the lapse of time, or both, would constitute an Event of Default) under the Indenture. (l) (i)(A) Moody's Investors Services, Inc. ("MOODY'S") shall have delivered to the Company and the Purchasers a final rating letter, setting forth a rating of Baa3 or better with respect to the Notes, and (B) Standard & Poor's Ratings Services ("S&P") shall have delivered to the Company and the Purchasers a final rating letter, setting forth a rating of BBB- or better with respect to the Notes, (ii) each of Moody's and S&P shall have delivered to the Company a letter confirming the ratings with respect to the other debt securities of the Company after giving effect to the transactions contemplated in this Agreement 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 Notes or any other debt securities of the Company. (m) The Notes shall have been accepted for settlement through the facilities of DTC, the Euroclear System or Clearstream Banking S.A., as applicable, for "book-entry" transfer of the Notes. (n) 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 the Company as of the Closing Date, duly authorizing the execution, delivery and performance of this Agreement and any other documents executed by or on behalf of it in connection with this Agreement, (ii) certified copies of its organizational documents and, (iii) if applicable, incumbency certificates or certified copies of powers-of-attorney, if any, pursuant to which officers of such entity shall execute this Agreement and any other documents executed by or on behalf of it in connection with this Agreement. (o) The Purchasers shall have received, in form and substance satisfactory to the Purchasers, copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. 6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company will indemnify and hold harmless each Purchaser, its 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 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 of the information incorporated 22 by reference therein, or any related Preliminary Offering Circular or any of the information 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 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 the Company's failure to perform its obligations under SECTION 4(a) of this Agreement, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER, that the Company 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 CSFBC 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 Notes 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 Notes. (b) Each Purchaser will, severally and not jointly, indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which 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 CSFBC specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by 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: the third paragraph, the second sentence of the fourth paragraph, the sixth paragraph, the second sentence of the eighth paragraph, the ninth paragraph, the tenth paragraph and the last paragraph under the caption "Plan of Distribution;" PROVIDED, 23 HOWEVER, that the Purchasers shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under SECTION 4(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 reasonably 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 indemnifying party or the indemnified 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 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 the Company on the one hand and the Purchasers on the other from the offering of the Notes or (ii) if the allocation provided by clause (i) above is not 24 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 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 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 the Company bear to the total discounts and commissions received by the Purchasers from 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 the Company on the one hand or the Purchasers on the other hand 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 Notes 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 are not joint. (e) The obligations of the Company under this Section shall be in addition to any liability which 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 Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act. 7. DEFAULT OF PURCHASERS. If any Purchaser or Purchasers default in its or their obligations to purchase Notes hereunder and the aggregate principal amount of Notes that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total principal amount of Notes, CSFBC may make arrangements satisfactory to the Company for the purchase of such Notes 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 Notes that such defaulting Purchasers agreed but failed to purchase. If any Purchaser or Purchasers so default and the aggregate principal amount of Notes with respect to which such default or defaults occur exceeds 10% of the total principal amount of Notes and arrangements satisfactory to CSFBC and the Company for the purchase of such Notes by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the 25 part of any non-defaulting Purchaser or the Company, except as provided in SECTION 8. 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. 8. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective indemnities, agreements, representations, warranties and other statements of the Company and its officers and of the 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, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Notes. If this Agreement is terminated pursuant to SECTION 7 or if for any reason (including the failure by the Company to satisfy any condition pursuant to SECTION 5 hereof), the purchase of the Notes by the Purchasers is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to SECTION 4 and the respective obligations of the Company and the Purchasers pursuant to SECTION 6 shall remain in effect. If the purchase of the Notes by the Purchasers is not consummated for any reason, other than solely as a result of the termination of this Agreement pursuant to Section 7 or the occurrence of any event specified in clause (iv), (vi) or (vii) of Section 5(b), the Company will reimburse the Purchasers for all out-of-pocket expenses (including reasonable fees and disbursements of one separate counsel) reasonably incurred by them in connection with the offering of the Notes. 9. 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: Transactions Advisory Group or, if sent to the Company, 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. 10. 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 6, and no other person will have any right or obligation hereunder, except that holders of Notes shall be entitled to enforce the agreements for their benefit contained in the second and third sentences of SECTION 4(b) hereof against the Company as if such holders were parties thereto. 11. REPRESENTATION OF PURCHASERS. CSFBC will act for the several Purchasers in connection with this purchase, and any action under this Agreement taken by CSFBC will be binding upon all the Purchasers. 12. 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. 13. 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. 26 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. 27 Exhibit 1.1 EXECUTION COPY 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 between the Company and the several Purchasers in accordance with its terms. Very truly yours, EDISON MISSION ENERGY By:/s/ G. Gary Garcia -------------------------- Name: G. Gary Garcia Title: Treasurer The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION BMO NESBITT BURNS CORP. SALOMON SMITH BARNEY INC. SG COWEN SECURITIES CORPORATION TD SECURITIES (USA) INC. WESTDEUTSCHE LANDESBANK GIROZENTRALE (DUSSELDORF) By: CREDIT SUISSE FIRST BOSTON CORPORATION By:/s/ James Bartlett ----------------------------- Name: James Bartlett Title: Director SCHEDULE 1
Purchaser Principal Amount of Notes --------- ------------------------- Credit Suisse First Boston Corporation $200,000,000 BMO Nesbitt Burns Corp. 40,000,000 Salomon Smith Barney Inc. 40,000,000 SG Cowen Securities Corporation 40,000,000 TD Securities (USA) Inc. 40,000,000 Westdeutsche Landesbank Girozentrale (Dusseldorf) 40,000,000 ========== Total $400,000,000
2 EX-4.1 4 a2057631zex-4_1.txt EXHIBIT 4.1 Exhibit 4.1 Reconciliation and tie between Indenture, between Edison Mission Energy and The Bank of New York, dated as of August 10, 2001 (the "Indenture"), and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Indenture.
Trust Indenture Act of 1939 Section Indenture Section ----------------------------------- ----------------- 310(a)(1) 5.8 310(a)(2) 5.8 312(a) 2.5 313 5.12 314(a)(1) 3.4 (a)(2) 3.4 (a)(3) 5.12 (a)(4) 3.3 (c)(1) 11.5 (c)(2) 11.5 (e) 11.5 315(a) 5.1(a) (c) 5.1 (d) 5.1(a) 316(a)(1) 4.8 (b) 4.10 (c) 6.2 317(a) 4.2 (b) 2.4 318(a) 11.10
EXECUTION COPY ================================================================================ INDENTURE DATED AS OF AUGUST 10, 2001, between EDISON MISSION ENERGY and THE BANK OF NEW YORK, as Trustee ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS.............................................................................................1 Section 1.1 Certain Terms Defined..................................................................1 ARTICLE 2 THE NOTES...............................................................................................9 Section 2.1 Form and Dating........................................................................9 Section 2.2 Execution and Authentication...........................................................10 Section 2.3 Registrar and Paying Agent.............................................................10 Section 2.4 Paying Agent to Hold Money in Trust....................................................11 Section 2.5 Holder Lists...........................................................................11 Section 2.6 Transfer and Exchange..................................................................12 Section 2.7 Replacement Notes......................................................................24 Section 2.8 Outstanding Notes......................................................................25 Section 2.9 Temporary Notes........................................................................25 Section 2.10 Cancellation...........................................................................25 Section 2.11 Defaulted Interest.....................................................................25 ARTICLE 3 COVENANTS OF THE COMPANY................................................................................26 Section 3.1 Payment of Principal and Interest......................................................26 Section 3.2 Appointment to Fill Vacancy in Office of Trustee.......................................26 Section 3.3 Certificate to Trustee, Notices of Defaults............................................26 Section 3.4 Reports by the Company.................................................................27 Section 3.5 Restrictions on Liens..................................................................27 Section 3.6 Maintenance of Corporate Existence.....................................................29 Section 3.7 Taxes..................................................................................29 ARTICLE 4 EVENTS OF DEFAULT AND REMEDIES OF THE TRUSTEE AND NOTEHOLDERS...........................................29 Section 4.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default..................29 Section 4.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt..........................31 Section 4.3 Application of Proceeds................................................................33 Section 4.4 Suits for Enforcement..................................................................34 Section 4.5 Restoration of Rights on Abandonment of Proceedings....................................34 Section 4.6 Limitations of Suits by Noteholders....................................................34 Section 4.7 Powers and Remedies Cumulative, Delay or Omission Not Waiver of Default................35 Section 4.8 Control by Noteholders.................................................................35 Section 4.9 Waiver of Past Defaults................................................................36 Section 4.10 Rights of Holders to Receive Payment...................................................36 i ARTICLE 5 CONCERNING THE TRUSTEE..................................................................................36 Section 5.1 Duties and Responsibilities of the Trustee During Default and Prior to Default.........36 Section 5.2 Certain Rights of the Trustee..........................................................37 Section 5.3 Trustee Not Responsible for Recitals, Disposition of Notes or Application of Proceeds Thereof.......................................................................39 Section 5.4 Trustee and Agents May Hold Notes; Collections, Etc....................................39 Section 5.5 Moneys Held by Trustee.................................................................39 Section 5.6 Compensation and Indemnification of Trustee and Its Prior Claim........................40 Section 5.7 Right of Trustee to Rely on Officers' Certificate, Etc.................................40 Section 5.8 Persons Eligible for Appointment as Trustee............................................40 Section 5.9 Resignation and Removal, Appointment of Successor Trustee..............................41 Section 5.10 Acceptance of Appointment by Successor Trustee.........................................42 Section 5.11 Merger, Conversion, Consolidation or Succession to Business of Trustee.................42 Section 5.12 Reports by Trustee.....................................................................43 Section 5.13 No Liability for Clean-up of Hazardous Materials.......................................43 Section 5.14 Appointment of Co-Trustee..............................................................43 Section 5.15 Individual Rights of Trustee...........................................................44 ARTICLE 6 CONCERNING THE NOTEHOLDERS..............................................................................44 Section 6.1 Evidence of Action Taken by Noteholders................................................44 Section 6.2 Proof of Execution of Instruments and of Holding of Notes Record Date..................45 Section 6.3 Holders to Be Treated as Owners........................................................45 Section 6.4 Notes Owned by Company Deemed Not Outstanding..........................................45 Section 6.5 Right of Revocation of Action Taken....................................................46 ARTICLE 7 SUPPLEMENTAL INDENTURES.................................................................................46 Section 7.1 Supplemental Indentures Without Consent of Noteholders.................................46 Section 7.2 Supplemental Indentures With Consent of Noteholders....................................47 Section 7.3 Effect of Supplemental Indenture.......................................................48 Section 7.4 Documents to Be Given to Trustee.......................................................48 Section 7.5 Notation of Notes in Respect of Supplemental Indentures................................48 ARTICLE 8 MERGER, CONSOLIDATION, SALE, LEASE OR CONVEYANCE........................................................49 Section 8.1 Covenant Not to Merge, Consolidate, Sell, Lease or Transfer Assets Except Under Certain Conditions...............................................................49 Section 8.2 Successor Corporation Substituted......................................................49 Section 8.3 Opinion of Counsel to Trustee; Officers' Certificate...................................50 ARTICLE 9 SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS...............................................50 Section 9.1 Satisfaction and Discharge of Indenture................................................50 Section 9.2 Application by Trustee of Funds Deposited for Payment of Notes.........................51 Section 9.3 Repayment of Moneys Held by Paying Agent...............................................51 ii Section 9.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years..............51 Section 9.5 Defeasance and Discharge of Indenture..................................................52 Section 9.6 Defeasance of Certain Obligations......................................................53 ARTICLE 10 REDEMPTION OF NOTES....................................................................................54 Section 10.1 Optional Redemption....................................................................54 Section 10.2 Notes Redeemed in Part.................................................................54 Section 10.3 Notice of Redemption...................................................................55 Section 10.4 Notes Selected For Redemption..........................................................55 Section 10.5 Payment of Notes Called for Redemption.................................................56 ARTICLE 11 MISCELLANEOUS PROVISIONS...............................................................................56 Section 11.1 Incorporators, Shareholders, Officers, Directors and Employees of Company Exempt from Individual Liability.......................................................56 Section 11.2 Provisions of the Indenture for the Sole Benefit of Parties and Noteholders............56 Section 11.3 Successors and Assigns of Company Bound by Indenture...................................57 Section 11.4 Notices and Demands on Company, Trustee and Noteholders................................57 Section 11.5 Statements to Be Contained in Officers' Certificates and Opinions of Counsel...........57 Section 11.6 Payments Due on Saturdays, Sundays and Holidays........................................58 Section 11.7 New York Law to Govern.................................................................58 Section 11.8 Counterparts...........................................................................59 Section 11.9 Effect of Headings.....................................................................59 Section 11.10 Trust Indenture Act....................................................................59 Section 11.11 Waiver of Jury Trial...................................................................59
EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR iii INDENTURE, dated as of August 10, 2001, between EDISON MISSION ENERGY, a California corporation (the "COMPANY"), and THE BANK 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. "144A GLOBAL NOTE" means a global note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "ADDITIONAL NOTES" means Notes (other than the Initial Notes) issued under this Indenture in accordance with Section 2.2 hereof, as part of the same series as the Initial Notes. "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 time 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. 2 "COMPARABLE TREASURY PRICE" means the average of three Reference Treasury Dealer Quotations provided to 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 101 Barclay Street Floor 21 West, New York, New York 10286. "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. 3 "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. "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. 4 "INITIAL NOTES" means the first $400,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof. "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. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture. "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. 5 "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. "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 Company, 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 Company by a Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business day preceding the redemption date. 6 "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 August 10, 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, and, with respect to any Additional Notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTE" means a global Note bearing the Private Placement Legend and deposited with or on behalf of the Depositary and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "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" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "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. 7 "RESTRICTED PERIOD" means the 40-day restricted period as defined in Regulation S. "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. "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. 8 "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 aggregate principal amount of Notes that may be issued hereunder shall be unlimited. 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 of outstanding Notes represented thereby may from time to time be reduced or increased, as 9 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 Notes for original issue up to the aggregate principal amount stated in such Authentication Order. 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 may change any Paying Agent or Registrar without notice to any Holder. The Company shall 10 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 10 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. 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 11 with TIA Section 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 Section 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 SECTION 2.9 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 accordance with the transfer restrictions set forth in the Private Placement Legend; PROVIDED, HOWEVER, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or 12 for the account or benefit of a U.S. Person (other than an Initial Purchaser). 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 another Restricted Global Note if the transfer complies with the requirements of SECTION 2.6(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in a 144A 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; (B) if the transferee will take delivery in the form of a beneficial interest in a Regulation S Global Note by virtue of the exemption from the registration requirements of the Securities Act afforded by Regulation S, then the 13 transferor must deliver a certificate in the form of EXHIBIT B hereto, including the certifications in item (2) thereof. (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. 14 (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 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; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; 15 (F) 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; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (3)(c) 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 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 16 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, 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 17 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; (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; or (F) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the appropriate Restricted Global Note. (ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note 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; 18 (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 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 19 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; (C) if the transfer will be made to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (A) and (B) above, the transferor must deliver a certificate to the effect set forth in EXHIBIT B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; and (D) 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 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; 20 (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 authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. 21 (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) IN 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, (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 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 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 22 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 10.2 hereof). 23 (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. 24 SECTION 2.8 OUTSTANDING NOTES. 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, 25 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 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 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. 26 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 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, 27 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; (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 August 10, 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. 28 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 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 29 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 Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes (including Additional Notes, if any) 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 (including Additional Notes, if any) then 30 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 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 31 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 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, 32 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. 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; 33 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. 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 34 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. 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 35 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 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. 36 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 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. SECTION 5.2 CERTAIN RIGHTS OF THE TRUSTEE. Subject to SECTION 5.1 hereof: (a) the Trustee may conclusively rely 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; 37 (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; (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; 38 (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; (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; (l) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other person appointed with due care pursuant to the provisions hereunder to act hereunder; and the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. 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 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 39 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 , including taxes (other than taxes based on the income of the Trustee), 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 termination or 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 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 40 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 Section 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; 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 41 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. 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. 42 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. SECTION 5.13 NO LIABILITY FOR CLEAN-UP OF HAZARDOUS MATERIALS. In the event that the Trustee is required to acquire title to an asset for any reason, or take any managerial action of any kind in regard thereto, in order to carry out any fiduciary or trust obligation for the benefit of another, which in the Trustee's sole discretion may cause the Trustee to be considered an "owner or operator" under the provisions of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) 42 U.S.C. Section 9601, et seq., or otherwise cause the Trustee to incur liability under CERCLA or any other federal, state or local law, the Trustee reserves the right to, instead of taking such action, either resign as Trustee pursuant to the provisions hereunder or arrange for the transfer of the title or control of the asset to a court appointed receiver. The Trustee shall not be liable to the Company or any other person for any environmental claims or contribution actions under any federal, state or local law, rule or regulation by reason of the Trustee's actions and conduct as authorized, empowered and directed hereunder or relating to the discharge, release or threatened release of hazardous materials into the environment. SECTION 5.14 APPOINTMENT OF CO-TRUSTEE. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of any State) denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture, and in particular in case of the enforcement thereof on default, or in case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted or take any action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an individual or institution as a separate or co-trustee. The following provisions of this Section are adopted to these ends. 43 In the event that the Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and only to the extent that the Trustee by the laws of any jurisdiction (including particularly any State) is incapable of exercising such powers, rights and remedies and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them. Should any instrument in writing from the Company be required by the separate or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Company at the expense of the Company; provided, that if an Event of Default shall have occurred and be continuing, if the Company does not execute any such instrument within fifteen (15) days after request therefor, the Trustee shall be empowered as an attorney-in-fact for the Company to execute any such instrument in the Company's name and stead. In case any separate or co-trustee or a successor to either shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate or co-trustee. SECTION 5.15 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes, may make loans to, accept deposits from and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any agent of the Trustee may do the same with like rights and duties. 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. 44 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 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 45 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. 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 46 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 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 47 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 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 48 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. (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. 49 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 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 50 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 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. 51 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. 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 52 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; (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 5.8 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 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 53 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 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. 54 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 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. If notice of redemption is to be given by the Trustee in the name of the Company, the Company will, at least 40 calendar days prior to the date fixed for redemption, notify the Trustee of such redemption date and of the principal amount of Notes to be redeemed. 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 NOTES SELECTED FOR REDEMPTION. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a PRO RATA basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or 55 whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 10.5 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, DIRECTORS AND EMPLOYEES 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, director or employee, 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. 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 56 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. All notices and other communications delivered hereunder shall be deemed effective upon receipt. 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 required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. 57 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 NEW 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 58 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. SECTION 11.11 WAIVER OF JURY TRIAL. Each of the Company and the Trustee 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 Indenture, the Notes or the transactions contemplated hereby. 59 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/ Steven D. Eisenberg ----------------------------------- Name: Steven D. Eisenberg Title: Vice President and Associate General Counsel THE BANK OF NEW YORK, as Trustee By: /s/ MaryBeth Lewicki ----------------------------------- Name: MaryBeth Lewicki Title: Vice President 60 EXHIBIT A [Face of Note] - -------------------------------------------------------------------------------- CUSIP/CINS ____________ ISIN ____________ 10% Senior Notes due 2008 No. $ EDISON MISSION ENERGY promises to pay to _____________ or registered assigns, the principal sum of __________________________________ on August 15, 2008. Interest Payment Dates: February 15 and August 15 Record Dates: February 1 and August 1 Dated: August 10, 2001 EDISON MISSION ENERGY By: _____________________________________ Name: Title: By: _____________________________________ Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: THE BANK OF NEW YORK, as Trustee By: ________________________________ Authorized Signatory [Back of Note] 10% Senior Notes due 2008 [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 10% per annum from August 10, 2001 until maturity. The Company will pay interest semi-annually in arrears on February 15 and August 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 August 10, 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 February 15, 2002. 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 February 1 or August 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 2.11 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. A-2 3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company 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 August 10, 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 Sections 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. 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 (including Additional Notes, if any) at the time Outstanding, evidenced as provided in the Indenture, the Indenture or any supplemental indentures or the rights of the Holders of the Notes may be modified by the Company and the Trustee; 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 A-3 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 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 (including Additional 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. A-4 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), 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 dated as of August 10, 2001, between the Company and the parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall have the rights set forth in one or more registration rights agreements, if any, between the Company and the other parties thereto, relating to rights given by the Company to the purchasers of any Additional Notes (collectively, 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 The Bank of New York 101 Barclay Street Floor 21 West New York, NY 10286 Re: 10% SENIOR NOTES DUE AUGUST 15, 2008 Reference is hereby made to the Indenture, dated as of August 10, 2001 (the "INDENTURE"), between Edison Mission Energy, as issuer (the "COMPANY"), and The Bank of New York, 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 REGULATION S 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 B-1 a person in the United States and (x) at the time the buy order was originated, the Transferee was 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, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). 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 Regulation S 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; or (c) |_| such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) |_| such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of B-2 less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in 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 be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities Act. 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 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] B-3 By: ------------------------------- Name: Title: Dated: ------------- B-4 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) |_| a beneficial interest in the: (i) |_| 144A Global Note (CUSIP _________), or (ii) |_| Regulation S 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) |_| 144A Global Note (CUSIP _________), or (ii) |_| Regulation S Global Note (CUSIP _________), or (iii)|_| 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-5 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, California 92612 The Bank of New York 101 Barclay Street Floor 21 West New York, NY 10286 Re: 10% SENIOR NOTES DUE AUGUST 15, 2008 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of August 10, 2001 (the "INDENTURE"), between Edison Mission Energy, as issuer (the "COMPANY"), and The Bank 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 C-1 EXHIBIT C hereby certifies (i) the 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 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 [CHECK ONE]|_|144A Global Note, |_|Regulation S Global Note, 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 C-2 EXHIBIT C 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: --------------------- C-3 EXHIBIT D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Edison Mission Energy 18101 Von Karman Avenue, Suite 1700 Irvine, California 92612-1046 Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Attention: Transactions Advisory Group Dear Sirs: We are delivering this letter in connection with an offering of $400,000,000 of 10% Senior Notes due August 15, 2008 (the "Notes") of Edison Mission Energy, a California corporation (the "Company"), 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 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 Notes 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 Notes 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 Notes, we will acquire Notes 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 Notes; (v) we are not acquiring the Notes with a view to distribution thereof or with any present intention of offering or selling any of the Notes, except inside the United States in accordance with Rule 144A under the Securities Act or outside the United States under Regulation S under the Securities Act, as provided 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 Notes and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask questions of representatives of the Company and D-1 EXHIBIT D receive answers thereto, as we deem necessary in connection with our decision to purchase the Notes. We understand that the Notes 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 Notes have not been registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any Notes, that if in the future we decide to resell, pledge or otherwise transfer the Notes, the Notes may be offered, resold, pledged or otherwise transferred only (i) 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, (ii) outside the United States in a transaction in accordance with Rule 904 under the Securities Act, (iii) under an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available) or (iv) under 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 or any other applicable jurisdiction. We understand that the registrar and transfer agent for the Notes will not be required to accept for registration of transfer any Notes 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 Notes acquired by us will be in the form of definitive physical certificates and 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: D-2 EX-4.2 5 a2057631zex-4_2.txt EXHIBIT 4.2 Exhibit 4.2 EXECUTION COPY $400,000,000 EDISON MISSION ENERGY 10% Senior Notes due August 15, 2008 REGISTRATION RIGHTS AGREEMENT August 10, 2001 Credit Suisse First Boston Corporation BMO Nesbitt Burns Corp. Salomon Smith Barney Inc. SG Cowen Securities Corporation TD Securities (USA) Inc. Westdeutsche Landesbank Girozentrale (Dusseldorf) c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Ladies and Gentlemen: In connection with the issue and sale of $400 million in aggregate principal amount of 10% Senior Notes due August 15, 2008 (the "INITIAL NOTES") issued by Edison Mission Energy, a California corporation (the "COMPANY"), pursuant to the terms of the Indenture (as defined below) and as an inducement to Credit Suisse First Boston Corporation and BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen Securities Corporation, TD Securities (USA) Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf) (the "INITIAL PURCHASERS") to enter into the Purchase Agreement, dated August 7, 2001 (the "PURCHASE AGREEMENT"), among the Company and the Initial Purchasers, the Company hereby agrees to provide the registration rights set forth in this Registration Rights Agreement (this "AGREEMENT") for the benefit of the holders of the Initial Notes. The execution of this Agreement is a condition to the purchase of the Initial Notes under the Purchase Agreement. SECTION 1. DEFINITIONS. Capitalized terms used herein without definition shall have the respective meanings ascribed thereto, whether expressly or by reference to another agreement or document, in the Indenture. 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 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 mean the date of the initial issuance and sale of the Initial Notes. "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. "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. "EXCHANGE NOTES" shall have the meaning set forth in Section 2(a) of this Agreement. A "HOLDER" of Registrable Notes 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 Notes 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 Notes) has not become effective and (ii) the Registrable Notes are not the subject of an Initial Shelf Registration Statement which has become effective; or (b) the Exchange Notes offered in exchange for the Registrable Notes 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 Notes) but which ceased to be effective or usable in connection with resales of Registrable Notes for any reason prior to the end of the Exchange Period; or (c) the Registrable Notes are the subject of an Initial Shelf Registration Statement or Subsequent Shelf Registration Statement which was effective but which has ceased to be effective or usable in connection with resales of Registrable Notes for any reason prior to the end of the Effective Period. 2 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 Notes exchanged for such Registrable Notes) shall become effective and an Exchange Offer for such Registrable Notes shall have commenced or (ii) an Initial Shelf Registration Statement covering such Registrable Notes 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 Notes offered in exchange for such Initial Notes) shall become effective and an Exchange Offer for such Registrable Notes shall have commenced pursuant to an Exchange Offer Registration Statement or (ii) an Initial Shelf Registration Statement covering such Registrable Notes 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 Notes shall become effective. "INDENTURE" shall mean the Indenture, dated as of August 10, 2001, and as further amended or supplemented from time to time in accordance with the terms thereof, between the Company and the Trustee, and pursuant to which the Initial Notes and any Exchange Notes are to be issued. "INITIAL PURCHASERS" shall have the meaning set forth in the first paragraph of this Agreement. "INITIAL NOTES" 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. "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. "RECORDS" shall have the meaning set forth in Section 5(m) of this Agreement. "REGISTRABLE NOTES" shall mean the Initial Notes upon original issuance thereof and at all times subsequent thereto until, in the case of any such Initial Note, (i) a Registration Statement 3 covering such Initial Note, or the Exchange Note to be exchanged for such Initial Note (and, in the case of any Resale Note, any resale thereof), has been declared effective and such Initial Note has been disposed of or exchanged (or, in any case where such Registration Statement covers the resale of Resale Notes, such Initial Note has been exchanged and the Resale Note received therefor has been resold), as the case may be, in accordance with such effective Registration Statement, (ii) such Initial Note is sold in compliance with Rule 144 or would be permitted to be sold pursuant to Rule 144(k), (iii) such Initial Note 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 Company and such Initial Note 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 Note ceases to be outstanding. "REGISTRATION STATEMENT" shall mean any registration statement (including any Shelf Registration Statement) of the Company that covers any of the Registrable Notes or the Exchange Notes, 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 Notes held by a Restricted Person unless such Registration Statement covers the resale of Resale Notes to be received by such Restricted Person pursuant to such Exchange Offer and any such Initial Notes shall continue to be Registrable Notes. "RESALE INITIAL PURCHASER" shall have the meaning set forth in Section 8(a) of this Agreement. "RESALE NOTES" shall mean any Exchange Note 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 Note has been resold by such Restricted Person. "RESTRICTED PERSON" shall mean (a) any Affiliate of the Company, (b) any Initial Purchaser or (c) any Affiliate of any Initial Purchaser (other than Affiliates of such Initial Purchaser that (i) are acquiring Exchange Notes in the ordinary course of business and do not have an arrangement with any Person to distribute Exchange Notes and (ii) may trade such Exchange Notes 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. "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. 4 "SPECIAL COUNSEL" shall mean Latham & Watkins, special counsel to the Initial Purchasers, or any other firm acceptable to the Company, acting as special counsel to the holders of Registrable Notes or Exchange Notes. "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. "TRUSTEE" shall mean The Bank of New York, its successors and any successor trustee under the Indenture. "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 Company determines in good faith that the Exchange Offer shall not be permissible under applicable law or Commission policy, the Company 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 Notes (subject to Section 2(c)) for a like aggregate principal amount of debt securities of the Company in all material respects substantially identical to the Initial Notes (the "EXCHANGE NOTES") (and which are entitled to the benefits of the Indenture, which shall be qualified under the TIA in connection with such registration, or a trust indenture which is substantially identical in all material respects to the Indenture), other than (i) such changes to the Indenture or any such substantially identical indenture as the Trustee and the Company may deem necessary in connection with the Trustee's 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 Indenture. 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 Notes by any Restricted Person, in the manner or manners designated by them which, in any event, is reasonably acceptable to the Company. Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each holder of Registrable Notes electing to exchange the Initial Notes for Exchange Notes (assuming that such holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Notes in the ordinary course of such holder's business and has no arrangements with any person to participate in the distribution of the Exchange Notes and is not prohibited by any law or policy of the Commission from participating in the Exchange Offer) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. 5 The Company shall use its 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 Note is tendered into the Exchange Offer and (B) 30 days from the date notice is mailed to the holders of Initial Notes (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 Notes (including, subject to the time periods set forth herein, any Resale Notes and including, subject to the time periods set forth herein, any resales by broker-dealers that receive Exchange Notes 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. The Company shall make the Prospectus contained in the Exchange Offer Registration Statement and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Notes for a period of not less than 120 days after the consummation of the Exchange Offer. Upon consummation of the Exchange Offer, the Company shall deliver to the Trustee under the Indenture for cancellation all Initial Notes 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 Company promptly after reselling all Resale Notes held by such Restricted Person which are covered by any such Registration Statement. Each holder of Registrable Notes 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, (ii) any Exchange Notes to be received by it shall be acquired in the ordinary course of its business, (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 Notes and (iv) if such holder is a broker-dealer, that it will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a Prospectus in connection with any resale of such Exchange Notes. Upon consummation of an Exchange Offer in accordance with this Section 2 and compliance with the other provisions of this Section 2, the Company shall, subject to Sections 2(b) and 2(c), have no further obligation to register Registrable Notes 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. (b) In the event that the Company reasonably determines in good faith that (i) the Exchange Notes would not, upon receipt in the Exchange Offer by any holder of Registrable Notes (other than any Restricted Person and other than any holder who is not acquiring such Exchange Notes in the ordinary course of business or who has an arrangement with any person to participate in the distribution of such Exchange Notes), 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 6 may not be made in compliance with applicable laws, then the Company shall promptly deliver notice thereof (the "SHELF NOTICE") to the holders of the Registrable Notes and the 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 Company shall not have any further obligation under this Section 2. (c) In the event that the Company reasonably determines in good faith that (i) the Exchange Notes 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 prospectus 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 Notes by Restricted Persons, then the Company shall promptly deliver a Shelf Notice to the Restricted Persons who are holders of Registrable Notes and to the Trustee, and the Company shall thereafter file an Initial Shelf Registration Statement with respect to any such Registrable Notes 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 Notes 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 Notes 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 Notes 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 Company shall not have any further obligation under this Section 2 with respect to the filing of an offer to exchange the Registrable Notes 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 Notes by Restricted Persons); PROVIDED that the provisions of this Section 2 shall otherwise remain in full force and effect with respect to Registrable Notes held by any person other than a Restricted Person. SECTION 3. SHELF REGISTRATION; REGISTRABLE NOTES. With respect to the Registrable Notes, if a Shelf Notice is delivered in accordance with Section 2(b) or 2(c) of this Agreement, then the Company shall comply with the following provisions of this Section 3: (a) INITIAL SHELF REGISTRATION. The Company 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 Notes (or, if a Shelf Notice is delivered solely pursuant to Section 2(c), all of the Registrable Notes held by any Restricted Persons) (the "INITIAL SHELF REGISTRATION STATEMENT"); PROVIDED, HOWEVER, that no holder shall be entitled to have its Registrable Notes 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 Company (after conferring with counsel), and such holder shall not be entitled 7 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 Company all information required to be disclosed in order to make the information previously furnished to the Company by such holder not materially misleading. The Initial Shelf Registration Statement shall be an appropriate form permitting registration of such Registrable Notes for resale by the holders thereof in the manner or manners reasonably designated by them (but excluding any Underwritten Offerings). The Company shall use its 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 Notes 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 Notes covered by the Initial Shelf Registration Statement have been sold or (2) a Subsequent Shelf Registration Statement covering all of such Registrable Notes remaining unsold has been declared effective under the Securities Act or (3) all Registrable Notes may be sold pursuant to subsection (k) of Rule 144. Notwithstanding any other provision hereof, the Company 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 Company 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 Company promptly thereafter complies 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 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 Notes, 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 Company 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 Notes pursuant to Rule 415 covering all of such Registrable Notes remaining unsold (a "SUBSEQUENT SHELF REGISTRATION STATEMENT"). If a Subsequent Shelf Registration Statement is declared effective, the Company shall use its 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 8 Statement to the date of the effectiveness of the 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 Company acknowledges and agrees that the Initial Purchasers (and any subsequent holders of the Initial Notes) have acquired the Initial Notes in reliance on the covenant of the Company to use its 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 Company further acknowledges and agrees that the failure of the Company to fulfill such covenants will have an adverse effect on the holders of the Initial Notes. Therefore, the Company agrees 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 Notes) shall accrue with respect to the Initial Notes 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 Notes shall then be continuing), at the rate of one half of one percent (0.50%) per annum, which additional interest shall be payable by the Company to the holders of all Initial Notes at the times, in the manner and subject to the same terms and conditions set forth in the Indenture, as nearly as may be, as though the interest rates provided in such Initial Notes had been increased by one half of one percent (0.50%) per annum. Subject to the provisions of this Section 4, the Company agrees that it shall be liable to the holders of all Initial Notes for the payment of any and all additional interest on the Initial Notes that shall accrue pursuant to this Section 4. Any such additional interest accrued on any such Initial Notes 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 Date, if such Cure Date is a record date) to the holders of record of such Initial Notes on such record date. (b) The Company shall promptly notify the holders of the Initial Notes and the Trustee of the occurrence of any Illiquidity Event of which it has knowledge. Notwithstanding the foregoing, the Company shall not be required to pay the additional interest described in clause (a) of this Section 4 to a holder with respect to the Registrable Notes 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 Company may reasonably request, with reasonable prior written notice, for use in the Shelf Registration Statement or any Prospectus included therein to the extent the Company reasonably determines 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 Notes or Exchange Notes pursuant to Sections 2 and 3 hereof, the Company shall use 9 its reasonable best efforts to effect such registration to permit the sale of such Registrable Notes or Exchange Notes in accordance with any permitted intended method or methods of disposition thereof, and pursuant thereto the Company 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 its 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 Company shall afford any Restricted Person which is a holder of Registrable Notes or Exchange Notes and the Special Counsel, upon such holder's written request to the Company, 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 Company shall afford the Special Counsel for all holders of the Registrable Notes 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 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 Notes covered thereby set forth therein; (c) if a Shelf Registration Statement is filed pursuant to Section 3 hereof, notify the selling holders of Registrable Notes promptly after the Company becomes aware thereof, and confirm such notice in writing, (i) when 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 Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes 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 Company 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 10 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 Company after receipt of such notice) and (vi) if the Company reasonably determines 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 its 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 Notes 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 Notes 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 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 Notes 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 Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling holders of Registrable Notes and the underwriters, if any, in connection with the offering and sale of the Registrable Notes covered by such Prospectus and any amendment or supplement thereto; (g) prior to any public offering of Registrable Notes, register or qualify, or cooperate with the selling holders of Registrable Notes, 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 Notes 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 Notes are offered other than through an Underwritten Offering, the Company agrees to cause its 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 jurisdictions of the Registrable Notes covered by the applicable Registration Statement; provided, however, that the Company will not be required to qualify as a foreign corporation, 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 Trustee and the selling holders of Registrable Notes to facilitate the timely preparation 11 and delivery of certificates representing Registrable Notes 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 Notes 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 Notes, 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 which they were made, not misleading. If the Company so notifies 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 Company, until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (j) use its reasonable best efforts to cause the Registrable Notes covered by the Registration Statement to continue to be rated by the rating agencies that initially rated the Initial Notes 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 Company to maintain the rating of such Registrable Notes at the rating given to the Initial Notes); (k) prior to the effective date of the first Registration Statement relating to the Registrable Notes or the Exchange Notes, as the case may be, (i) provide the 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 Notes or Exchange Notes 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 Notes; (m) in the event of any Underwritten Offering (which shall only be undertaken at the option of the Company), 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 Notes 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 Company (collectively, the "RECORDS"), and cause the officers, directors and employees of the Company 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 Company shall receive an agreement in writing from the Special Counsel agreeing that any information that is designated in writing by the 12 Company, 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 Notes) and by any holders of Registrable Notes 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 Company, 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 result of a disclosure by any Inspector or any such holder of Registrable Notes in violation of this Section 5(m) or (iv) such information is approved for release by the Company, in writing; (n) use its best efforts to cause the Indenture 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 Trustee under the Indenture and the holders of the Registrable Notes to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause such 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 Indenture or the trust indenture provided for in Section 2 to be so qualified in a timely manner; (o) otherwise use its 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 Notes held by Restricted Persons as provided in Section 2, and, in connection with such resales 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 Notes under this Section 5 in connection with a Shelf Registration Statement. Without limiting the generality of the foregoing, the Company agrees to fulfill its obligations set forth in Sections 5(a), (b), (c), (d), (e), (f), (h), (i), (l) and (m) with respect to any such Registration Statement filed pursuant to Section 2 insofar as it covers such resales. The Company may require each seller of Registrable Notes as to which any registration is being effected, as a condition thereto, to furnish to the Company such information regarding the holder and the distribution of such Registrable Notes as the Company may, from time to time, request in writing, including without limitation stating (i) that it is not an Affiliate of the Company, (ii) the amount of Registrable Notes held by such holder prior to the Exchange Offer, (iii) the amount of Registrable Notes 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 Notes to be issued, and (iv) that it is acquiring the Exchange Notes in its ordinary course of business, and to covenant and agree to promptly notify the Company if any such information so provided by such seller ceases to be true and correct and will promptly thereafter furnish the 13 Company with corrected information. The Company may exclude from such registration the Registrable Notes of any Person who fails to furnish such information within a reasonable time after receiving such request. Each holder of Registrable Notes agrees by acquisition of such Registrable Notes that, upon receipt of any notice from the Company 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 Notes covered by such Registration Statement or Prospectus until such holder is advised in writing (the "ADVICE") by the Company 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 Company, such holder will deliver to the Company (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 Notes current at the time of receipt of such notice, or certify in writing as to the destruction thereof. In the event the Company 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 Notes 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 Initial Purchasers acknowledge that it is the position of the staff of the Commission that any broker-dealer that receives Exchange Notes for its own account in exchange for Registrable Notes pursuant to the Exchange Offer must deliver a prospectus in connection with any resale of such Resale Notes. By so acknowledging, such Initial Purchasers shall not be deemed to admit that, by delivering a prospectus, it is an underwriter within the meaning of the Securities Act. Each Initial Purchaser shall notify the Company promptly upon the completion of the resale of the Resale Notes received by such Initial Purchaser pursuant to the Exchange Offer. SECTION 7. REGISTRATION EXPENSES. The Company shall bear all expenses incurred in connection with the performance of its obligations under Sections 2, 3 and 4; PROVIDED, HOWEVER, that the Company 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 Company opts for an Underwritten Offering, the Company 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 Notes or the Exchange Notes). SECTION 8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to (A) indemnify and hold harmless each holder of Registrable Notes (including any Initial Purchaser which holds Registrable Notes, including Resale Notes, for its own account (each, a "RESALE INITIAL 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 14 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 Notes 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 the Company 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 Company 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 Notes or the Exchange Notes, 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 Notes or the Exchange Notes, as the case may be, and such final Prospectus would have cured the untrue statement or omission giving rise to such losses if the Company had previously furnished copies thereof to such holder. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) As a condition to the inclusion of a holder's Registrable Notes in a Registration Statement, such holder shall agree to (i) indemnify and hold harmless the Company and each person who controls the Company 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 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 Notes 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 15 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 Notes 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 Notes, the resale) of the Registrable Notes 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 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 each 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 Company 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 Company 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 16 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 Notes be required to contribute any amount which is in excess of (i) the aggregate principal amount of Initial Notes sold or exchanged by such holder less (ii) the amount of any damages that such person has otherwise been required to pay by 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 the Company 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 Company, 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 Notes, the Initial Purchasers, the Company or any of the officers, directors or controlling persons referred to in this Section 8 and will survive the sale (or, in the case of Resale Notes, the resale) by a holder of Registrable Notes of such Registrable Notes. 17 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 Company, unless such holder (a) agrees to sell such holder's Initial Notes 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 Notes are sold to the Initial 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 Company to register the Initial Notes 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 Company neither has, 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 Notes 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 Company has obtained the written consent of holders of at least a majority of the then outstanding aggregate principal amount of the Registrable Notes (or, after the consummation of any Exchange Offer in accordance with Section 2, of Exchange Notes); 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 Company 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 Notes 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 Notes may be given by holders of at least a majority in aggregate principal amount of the Registrable Notes 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 foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Resale Initial Purchasers and that does not directly or indirectly affect the rights of holders of Registrable Notes or Exchange Notes may be given by each of the Resale Initial Purchasers affected thereby. 18 (c) NOTICES. All notices and other communications (including, without limitation, any notices or other communications to the 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 Notes, at the most current address given by such holder to the Company in accordance with the provisions of this Section 11(c), which address initially is, with respect to the Initial Purchasers, at the address set forth in the Purchase Agreement and thereafter at the address for such holders of Registrable Notes set forth in the Security Register applicable to such Registrable Notes; and (ii) if to the Company, initially at the address 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 Trustee at the address specified in the Indenture. (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 Company thereto, subsequent holders of Registrable Notes. (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 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. 19 (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) NOTES HELD BY THE COMPANY, ETC. Whenever the consent or approval of holders of a specified percentage of principal amount of Registrable Notes is required hereunder, Registrable Notes held by the Company or any of its Affiliates (other than subsequent holders of Registrable Notes if such subsequent holders are deemed to be Affiliates solely by reason of their holdings of such Registrable Notes) shall not be counted in determining whether such consent or approval was given by the holders of such required percentage. 20 Exhibit 4.2 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers and the Company in accordance with its terms. Very truly yours, EDISON MISSION ENERGY By:/s/ Steven Eisenberg ----------------------------------- Name: Steven Eisenberg Title: Vice President and Associate General Counsel The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written CREDIT SUISSE FIRST BOSTON CORPORATION BMO NESBITT BURNS CORP. SALOMON SMITH BARNEY INC. SG COWEN SECURITIES CORPORATION TD SECURITIES (USA) INC. WESTDEUTSCHE LANDESBANK GIROZENTRALE (DUSSELDORF) By: CREDIT SUISSE FIRST BOSTON CORPORATION By:/s/ James Bartlett --------------------------------------- Name: James Bartlett Title: Director EX-4.11-2 6 a2057631zex-4_112.txt EXHIBIT 4.11.2 Exhibit 4.11.2 - ------------------------------------------------------------------------------- MISSION ENERGY COMPANY AND THE FIRST NATIONAL BANK OF CHICAGO, as Trustee SECOND SUPPLEMENTAL INDENTURE Dated as of August 8, 1995 TO INDENTURE Dated as of November 30, 1994 8 1/2% Junior Subordinated Deferrable Interest Debentures, Series B, Due 2025 - ------------------------------------------------------------------------------- SECOND SUPPLEMENTAL INDENTURE, dated as of August 8, 1995 (the "Second Supplemental Indenture"), between Mission Energy Company, a California corporation (the "Company"), and The First National Bank of Chicago, a national banking association, as trustee (the "Trustee") under the Indenture dated as of November 30, 1994 between the Company and the Trustee (the "Indenture"). All capitalized terms used and not defined herein have the meanings assigned to then in the Indenture. WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of its junior subordinated debentures (the "Debentures"), said Debentures to be issued from time to time in one or more series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount that may be authenticated and delivered thereunder as provided in the Indenture; and WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its Debentures to be known as its 8 1/2% Junior Subordinated Deferrable Interest Debentures, Series B, Due 2025 (the "Series B Debentures"), the form and substance of such Series B Debentures and the terms, provisions and conditions thereof to be set forth as provided in the Indenture and this Second Supplemental Indenture; and WHEREAS, Mission Capital, L.P., a Delaware limited partnership ("Mission Capital"), has offered to the public its 8 1/2% Cumulative Monthly Income Preferred Securities, Series B (the "Series B Preferred Securities"), representing limited partner interests in Mission Capital, and proposes to invest the proceeds from such offering in the Series B Debentures; and WHEREAS, upon the occurrence of a Special Event (as defined in the Amended and Restated Agreement of Limited Partnership of Mission Capital, dated November 30, 1994 (the "Limited Partnership Agreement"), the Company may dissolve Mission Capital and cause to be distributed to the holders of the Series B Preferred Securities, on a PRO RATA basis, Series B Debentures (a "Dissolution Event"); and WHEREAS, the Company desires and has requested the Trustee to join with it in the execution and delivery of this Second Supplemental Indenture, and all requirements necessary to make this Second Supplemental Indenture a valid instrument, in accordance with its terms, and to make the Series B Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized; NOW, THEREFORE, in consideration of the purchase and acceptance of the Series B Debentures by the holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Series B Debentures and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: ARTICLE I General Terms and Conditions of the Series B Debentures Section 1.01 There shall be and is hereby authorized a series of Debentures designated the "8 1/2% Junior Subordinated Deferrable Interest Debentures, Series B, Due 2025", limited in aggregate principal amount to (i) $62,500,000, plus (ii) the amount of capital contributions made by the Company from time to time as General Partner of Mission Capital, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Series B Debentures. The Series B Debentures shall mature and the principal shall be due and payable, together with all accrued and unpaid interest thereon, including Additional Interest (as hereinafter defined) on August 31, 2025, and shall be issued in the form of registered Series B Debentures without coupons. Section 1.02 Except as provided in Section 1.03 herein, the Series B Debentures shall be issued in definitive form. Principal and interest on the Series B Debentures issued in definitive form will be payable, the transfer of such Series B Debentures will be registrable and such Series B Debentures will be exchangeable for Series B Debentures bearing identical terms and provisions at the office or agency of the Company in the Borough of Manhattan, the City and State of New York; PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the sole holder of the Series B Debentures is Mission Capital, the payment of the principal of and interest on (including Additional Interest, if any) on the Series B Debentures will be made at such place and to such account as may be designated by Mission Capital. Section 1.03 In connection with a Dissolution Event, the Series B Debentures in definitive form may be presented to the Trustee by Mission Capital in exchange for a Global Debenture in an aggregate principal amount equal to all Outstanding Series B Debentures, to be registered in the name of the Depositary, or its nominee, and delivered by the Trustee to the Depositary for crediting to the accounts of its participants pursuant to the instructions of Mission Capital. The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery as hereinabove and in the Indenture provided. Payments on the Series B Debentures issued as a Global Debenture and registered in the name of the Depositary or its nominee will be made to the Depositary. The Depositary for the Series B Debentures shall be The Depository Trust Company, New York, New York. Section 1.04 Each Series B Debenture will bear interest at the rate of 8 1/2% per annum from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum, payable (subject to the provisions of Article 3 herein) monthly in 2 arrears on the last day of each calendar month of each year (each, an "Interest Payment Date"), commencing on August 31, 1995, to the person in whose name such Series B Debenture or any predecessor Series B Debenture is registered, at the close of business on the regular record date for such interest installment, which shall be the close of business on the Business Day next preceding that Interest Payment Date. If, pursuant to the provisions of Section 2.11(c) of the Indenture, the Series B Debentures are no longer represented by a Global Debenture, the Company may select a regular record date for such interest installment that shall be any date not later than fifteen days preceding an Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name the Series B Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of the Series B Debentures not less than ten days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Series B Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Series B Debentures is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the applicable Interest Payment Date. If, at any time when Mission Capital is the holder of the Series B Debentures, Mission Capital shall be required to pay any interest on distributions in arrears in respect of the Series B Preferred Securities pursuant to the terms thereof, then the Company will pay as interest (the "Additional Interest") an amount equal to such interest on distributions in arrears. ARTICLE II Mandatory Prepayment and Optional Redemption of the Series B Debentures Section 2.01 If Mission Capital redeems the Series B Preferred Securities in accordance with the terms thereof, the Series B Debentures will become due and payable in a principal amount equal to the aggregate stated liquidation preference of the Series B Preferred Securities so redeemed, together with all accrued and unpaid interest thereon, including Additional Interest, if any. Any payment pursuant to this provision shall be made prior to 12:00 noon, New York City time, on the date of such redemption or at such earlier time as the Company and Mission Capital shall agree. 3 Section 2.02 At such time as there are no Series B Preferred Securities remaining outstanding and subject to the terms of Article Three of the Indenture, the Company shall have the right to redeem the Series B Debentures, in whole or in part, from time to time, on or after August 8, 2000, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon, including any Additional Interest, if any, to the date of such redemption (the "optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days* notice, at the Optional Redemption Price. If the Series B Debentures are only partially redeemed pursuant to this Section, the Debentures will be redeemed PRO RATA, by lot or in such other manner as the Trustee shall deem appropriate and fair in its discretion and that may provide for the selection of a portion or portions (equal to twenty-five U.S. dollars ($25) or any integral multiple thereof); PROVIDED that, if at the time of redemption, the Series B Debentures are registered as a Global Debenture, the Depositary shall determine by lot the principal amount of such Series B Debentures held by each Series B Debentureholder to be redeemed. Section 2.03 If the Company or Mission Capital purchases Series B Preferred Securities by tender, in the open market or by private agreement, the Company shall have the right to redeem Series B Debentures, in an amount not to exceed the aggregate stated liquidation preference of the Series B Preferred Securities so purchased, together with any accrued and unpaid interest thereon, including Additional Interest, if any, to the redemption date. Any payment pursuant to this provision shall be made prior to 12:00 noon, New York City time, on the date of such repurchase, or at such other time as the Company and Mission Capital shall agree. Section 2.04 The Series B Debentures are not entitled to the benefit of any sinking fund or, except as set forth in Section 2.01 herein, any other provision for mandatory prepayment. ARTICLE III Extension of Interest Payment Period Section 3.01 The Company shall have the right, at any time during the term of the Series B Debentures, from time to time to extend the interest payment period of such Series B Debentures for up to 60 consecutive months (the "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest accrued and unpaid thereon (together with interest thereon at the rate specified for the Series B Debentures to the extent permitted by applicable law); PROVIDED, HOWEVER, that, during such Extended Interest Payment Period the Company shall not declare or pay, directly or indirectly, any dividend on, or purchase, acquire or make a liquidation payment with respect to, any of its common or preferred stock, or make any guarantee payments with respect thereto, or acquire for cash or other property any indebtedness of any Affiliate of the Company (other than an Affiliate in which the Company or a Subsidiary of the Company has a direct or indirect equity interest and participates in its management or provides it with operational services) for money borrowed or make any loan or advance 4 to, or guarantee or become contingently liable in respect of indebtedness of, any Affiliate of the Company (other than an Affiliate in which the Company or a Subsidiary of the Company has a direct or indirect equity interest and participates in its management or provides it with operational services). Prior to the termination of any such Extended Interest Payment Period, the Company may further extend such period, PROVIDED that such period together with all such further extensions thereof shall not exceed 60 consecutive months. Upon the termination of any Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof. Section 3.02 (a) If Mission Capital is the sole holder of the Series B Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give both Mission Capital and the Trustee written notice of its selection of such Extended Interest Payment Period one Business Day prior to the earlier of (i) the next succeeding date on which distributions on the Series B Preferred securities are payable or (ii) the date Mission Capital is required to give notice of the record date or the date such distributions are payable to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Series B Preferred Securities, but in any event not less than one Business Day prior to such record date. The Company shall cause Mission Capital to give notice of the Company*s selection of such Extended Interest Payment Period to the holders of the Series B Preferred Securities. (b) If Mission Capital is not the sole holder of the Series B Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the holders of the Series B Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period ten Business Pays prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Series B Debentures, but in any event not less than two Business Days prior to such record date. (c) The month in which any notice is given pursuant to paragraphs (a) or (b) of this Section shall constitute one of the 60 months included in the maximum Extended Interest Payment Period. ARTICLE IV Right of Set-Off Section 4.01 Notwithstanding anything to the contrary in the Indenture or herein, the Company shall have the right to set-off any payment it is otherwise required to make thereunder or hereunder with and to the extent the Company has heretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee Agreement, dated as of November 30, 1994, executed by the Company and 5 furnished to Mission Capital for the benefit of the holders of the Series B Preferred Securities. ARTICLE V Covenant to List on Exchange Section 5.01 If the Series B Debentures are to be issued as a Global Debenture in connection with the distribution of the Series B Debentures to the holders of the Series B Preferred Securities upon a Dissolution Event, the Company will use its best efforts to list such Series B Debentures on the New York Stock Exchange or on such other exchange as the Series B Preferred Securities are then listed and traded. ARTICLE VI Form of Series B Debenture Section 6.01 The Series B Debentures and the Trustee*s Certificate of Authentication to be endorsed thereon are to be substantially in the following forms: (FORM OF FACE OF DEBENTURE) [IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE DEPOSITED WITH THE DEPOSITARY , INSERT -- This Debenture is a Global Debenture within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Debenture is exchangeable for Debentures registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Debenture (other than a transfer of this Debenture as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Debenture is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Debenture issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] 6 No. R-1 $ 64,432,990 CUSIP No. 605051AD3 MISSION ENERGY COMPANY 8 1/2% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE, Series B, DUE 2025 MISSION ENERGY COMPANY, a corporation duly organized and existing under the laws of the State of California (herein referred to as the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to MISSION CAPITAL, L.P. ("Mission Capital") or registered assigns, the principal sum of SIXTY-FOUR MILLION FOUR HUNDRED AND THIRTY-TWO THOUSAND NINE HUNDRED AND NINETY DOLLARS ($64,432,990) on August 31, 2025, and to pay interest on said principal sum from August 8, 1995 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, monthly (subject to deferral as set forth herein) in arrears on the last day of each calendar month of each year commencing August 31, 1995 at the rate of 8 1/2% per annum PLUS Additional Interest, if any, until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Debenture is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Debentures, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, [which shall be the close of business on the Business Day next preceding such Interest Payment Date.] [IF, PURSUANT TO THE PROVISIONS OF SECTION 2.11(C) OF THE INDENTURE, THE SERIES B JUNIOR SUBORDINATED DEBENTURES ARE NO LONGER REPRESENTED BY A GLOBAL DEBENTURE -- which shall be the close of business on the Business Day next preceding such Interest Payment Date.] Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of this series of Debentures not less than ten days prior to such special record date, or may be 7 paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Debenture shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City and State of New York, in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of this Debenture is Mission Capital, L.P. ("Mission Capital") the payment of the principal of (and premium, if any) and interest (including Additional Interest, if any) on this Debenture will be made at such place and to such account as may be designated by Mission Capital. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each holder hereof, by his acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Unless the Certificate of Authentication hereon has been executed by the Trustee referred to on the reverse side hereof, this Debenture shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. The provisions of this Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this instrument to be executed. Dated: August 8, 1995 MISSION ENERGY COMPANY By ------------------------------------------ Attest: By --------------------------------- 8 (FORM OF CERTIFICATE OF AUTHENTICATION) CERTIFICATE OF AUTHENTICATION This is one of the Debentures of the series of Debentures issued under the within-mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO - --------------------------------- -------------------------------- as Trustee or as Authentication Agent By By ----------------------------- -------------------------------- Authorized Signatory Authorized Signatory (FORM OF REVERSE OF DEBENTURE) This Debenture is one of a duly authorized series of Debentures of the Company (the "Debentures") all issued or to be issued in one or more series under and pursuant to an Indenture dated as of November 30, 1994 between the Company and The First National Bank of Chicago, a national banking association, as trustee (the "Trustee", which term includes any successor Trustee under the Indenture), as supplemented by the First Supplemental Indenture dated as of November 30, 1994 between the Company and the Trustee and the Second Supplemental Indenture dated as of August 8, 1995 between the Company and the Trustee (said Indenture, as so supplemented, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. By the terms of the Indenture, the Debentures are issuable in series that may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided. This series of Debentures is limited in aggregate principal amount as specified in the Second Supplemental Indenture. If Mission Capital redeems its 8 1/2% Cumulative Monthly Income Preferred Securities, Series B (the "Series B Preferred Securities") in accordance with the terms thereof, this Debenture will become due and payable in a principal amount equal to the aggregate stated liquidation preference of the Series B Preferred Securities so redeemed, together with any interest accrued thereon, including Additional Interest (the "Mandatory Prepayment"). Any Mandatory Prepayment shall be made prior to 12:00 noon, New York City time, on the date of such redemption or at such earlier time as the Company and Mission Capital shall agree. At such time as there are no Series B Preferred Securities remaining outstanding and subject to the terms of Article Three of the Indenture, the Company shall have the right to redeem this Debenture at the option of the 9 Company, without premium or penalty, in whole or in part at any time on or after August 8, 2000 (an "Optional Redemption"), at a redemption price equal to 100% of the principal amount plus any accrued but unpaid interest, including any Additional Interest, if any, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days* notice, at the Optional Redemption Price. If the Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Debentures will be redeemed PRO RATA, by lot or in such other manner as the Trustee shall deem appropriate and fair in its discretion and that may provide for the selection of a portion or portions (equal to twenty-five U.S. dollars ($25) or any integral multiple thereof); PROVIDED, HOWEVER, that if at the time of redemption the Debentures are registered as a Global Debenture, the Depositary shall determine by lot the principal amount of such Debentures held by each Debentureholder to be redeemed. If the Company or Mission Capital purchases Series B Preferred Securities by tender, in the open market or by private agreement, the Company shall have the right to redeem Debentures, in an amount not to exceed the aggregate stated liquidation preference of the Series B Preferred Securities so purchased, together with any accrued and unpaid interest thereon, including Additional Interest, if any, to the redemption date. In the event of redemption of this Debenture in part only, a new Debenture or Debentures of this series for the unredeemed portion hereof will be issued in the name of the holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for satisfaction and discharge at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth therein. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures of each series affected at the time Outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; PROVIDED, HOWEVER, that no such supplemental indenture shall (i) extend the fixed maturity of any Debentures of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the holder of each Debenture so affected or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Debenture then Outstanding and affected thereby. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of 10 the Debentures of any series at the time Outstanding affected thereby, on behalf of all of the holders of the Debentures of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Debentures of such series. Any such consent or waiver by the registered holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debenture and of any Debenture issued in exchange herefor or in place hereof (whether by registration or transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. The Company shall have the right at any time during the term of the Debentures, from time to time to extend the interest payment period of such Debentures to up to 60 consecutive months (an "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Debentures to the extent that payment of such interest is enforceable under applicable law), PROVIDED that, during such Extended Interest Payment Period the Company shall not declare or pay, directly or indirectly, any dividend on, or purchase, acquire or make a liquidation payment with respect to, any of its common or preferred stock, or make any guarantee payments with respect thereto, or acquire for cash or other property any indebtedness of any Affiliate of the Company (other than an Affiliate in which the Company or a Subsidiary of the Company has a direct or indirect equity interest and participates in its management or provides it with operational services) for money borrowed or make any loan or advance to, or guarantee or become contingently liable in respect of indebtedness of, any Affiliate of the Company (other than an Affiliate in which the Company or a Subsidiary of the Company has a direct or indirect equity interest and participates in its management or provides it with operational services). Prior to the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, PROVIDED that such Period together with all such further extensions thereof shall not exceed 60 consecutive months. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may select a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered holder hereof on the Debenture Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Company in the Borough of Manhattan, the City and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder hereof or his attorney 11 duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any paying agent and any Debenture Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. [The Debentures of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof.] [This Global Debenture is exchangeable for Debentures in definitive form only under certain limited circumstances set forth in the Indenture. Debentures of this series so issued are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof.] As provided in the Indenture and subject to certain limitations herein and therein set forth, Debentures of this series so issued are exchangeable for a like aggregate principal amount of Debentures of this series of a different authorized denomination, as requested by the holder surrendering the same. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to then in the Indenture. ARTICLE VII Original Issue of Series B Debentures Section 7.01 Series B Debentures in the aggregate principal amount of $62,500,000 plus the amount of capital contributions made by the Company from time to time as general partner of Mission Capital, may, upon execution of this Second Supplemental Indenture, or from time to time thereafter, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Debentures to or upon the written order of the Company, 12 signed by its President or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. ARTICLE VIII Miscellaneous Provisions Section 8.01 Except as otherwise expressly provided in this Second Supplemental Indenture or in the form of Series B Debenture or otherwise clearly required by the context hereof or thereof, all terms used herein or in said font of Series B Debenture that are defined in the Indenture shall have the meanings assigned to them therein. Section 8.02 The Indenture, as supplemented by this Second Supplemental Indenture, is in all respects ratified and confinned, and this Second Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. Section 8.03 The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Second Supplemental Indenture. Section 8.04 This Second Supplemental 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 instrument. IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their respective corporate seats ~to be hereunto affixed and attested, on the date or dates indicated in the acknowledgments and as of the day and year first above written. MISSION ENERGY COMPANY By /s/James V. Iaco, Jr. ------------------------------------- Name: James V. Iaco, Jr. Title: Senior Vice President and Chief Financial Officer Attest: /s/H.L. Mortensen - --------------------------- Name: H.L. Mortensen Title: Corporate Secretary 13 THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By ------------------------------------- Attest: - ------------------------------- 14 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss.: On the 7th day of August, 1995, before me personally came James V. Laco, Jr. to me known, who, being by me duly sworn, did depose end say that he is the Senior Vice President and Chief Financial Officer of MISSION ENERGY COMPANY, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument Is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/M.J. Johnson ----------------------------------- M. J. Johnson NOTARY PUBLIC [seal] Commission expires: July 5, 1999 15 IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, on the date or dates indicated in the acknowledgments and as of the day and year first above written. MISSION ENERGY COMPANY By ----------------------------------- Name: Title: Attest: - -------------------------------- Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By /s/ Charlene Mullane ----------------------------------- Attest: /s/ Rod Calero V.P. - -------------------------------- 16 On the 7th day of August, 1995, before me personally came Charlene Mullane to me known, who, being by me duly sworn, did depose and say that he is the Production Officer of THE FIRST NATIONAL BANK OF CHICAGO, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. /s/ Ana Vinaixa -------------------------------------------- Ana Vinaixa NOTARY PUBLIC Commission expires: February 21, 1997 [seal] 17 EX-5.1 7 a2057631zex-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 August 29, 2001 Edison Mission Energy 18101 Von Karman Avenue Irvine, California 92612 Re: Edison Mission Energy REGISTRATION STATEMENT ON FORM S-4 Ladies and Gentlemen: We are acting as special counsel to Edison Mission Energy, a California corporation (the "Company"), in connection with the registration of $400,000,000 aggregate principal amount of the Company's 10% Senior Notes due August 15, 2008 (the "Exchange Notes"). The Exchange Notes are to be issued pursuant to an exchange offer (the "Exchange Offer") in exchange for a like principal amount of the issued and outstanding 10% Senior Notes due August 15, 2008 of the Company (the "Original Notes") under the Indenture, dated as of August 10, 2001 (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee"), as contemplated by the Registra tion Rights Agreement, dated as of August 10, 2001 (the "Registration Rights Agree ment"), by and among the Company, Credit Suisse First Boston Corporation, BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen Securities Corporation, TD Securities (USA) Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf). 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: Edison Mission Energy August 29, 2001 Page 2 (i) the Registration Statement on Form S-4 relating to the Exchange Notes to be filed with the Securities and Exchange Commission (the "Commission") on the date hereof under the Act (the "Registration Statement"); (ii) an executed copy of the Registration Rights Agreement; (iii) an executed copy of the Indenture; (iv) the Amended and Restated Articles of Incorporation of the Company, as amended to date; (v) the By-Laws of the Company, as amended to date; (vi) certain resolutions adopted by the Board of Directors of the Company relating to the Exchange Offer, the issuance of the Original Notes and the Exchange Notes, the Indenture and related matters; (vii) the Form T-1 of the Trustee filed as an exhibit to the Registration Statement; and (viii) the form of the Exchange Notes. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinion 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 certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. In making our examination of documents executed or to be executed, we have assumed that the parties thereto, other than the Company, 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 Edison Mission Energy August 29, 2001 Page 3 effect thereof. 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 the Company and others. Our opinion set forth herein is limited to California 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 when (i) the Registration Statement becomes effective and the Indenture has been qualified under the Trust Indenture Act of 1939, as amended and (ii) the Exchange Notes (in the form examined by us) have been duly executed and authenticated in accordance with the terms of the Indenture and have been delivered upon consummation of the Exchange Offer against receipt of Original Notes surrendered in exchange therefor in accordance with the terms of the Exchange Offer, the Exchange Notes will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (1) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (2) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). In rendering the opinion set forth above, we have assumed that the execution and delivery by the Company of the Indenture and the Exchange Notes and the performance by the Company of its obligations thereunder do not and will not violate, conflict with or constitute a default under any agreement or instrument to which the Company or its properties is subject, except that we do not make this assumption for those agreements and instruments which have been identified to us by the Company as being material to it and which are listed as exhibits to the Registration Statement. Edison Mission Energy August 29, 2001 Page 4 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 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-12.1 8 a2057631zex-12_1.txt EXHIBIT 12.1 Exhibit 12.1 EDISON MISSION ENERGY RATIO OF EARNINGS TO FIXED CHARGES (000s)
Six months Six months ended ended June 30, June 30, 2001 2000 2000 1999 ---------------------------------------------------------------------- Earnings: Income (loss) before taxes and accounting change $ 4,488 $(76,457) $ 180,098 $103,705 Adjustments: Fixed charges, as below 373,906 400,311 797,891 439,300 Interest capitalized (10,030) (7,800) (14,281) (27,471) Equity in earnings of equity method investments (71,807) (27,758) (100,569) (79,433) Dividends from equity method investments 51,930 35,462 121,463 80,891 ---------------------------------------------------------------------- Earnings as adjusted $348,488 $323,758 $ 984,602 $516,992 ====================================================================== Fixed Charges: Interest on indebtedness (expense and capitalized) $343,219 $382,394 $ 729,201 $413,811 Dividends on preferred securities 12,380 16,360 32,075 22,375 Interest portion of rental expense 18,307 1,557 36,615 3,114 ---------------------------------------------------------------------- $373,906 $400,311 $ 797,891 $439,300 ====================================================================== Ratio of Earnings to Fixed Charges 0.93 0.81 1.23 1.18 1998 1997 1996 --------------------------------------------------- Earnings: Income (loss) before taxes and accounting change $202,579 $185,515 $174,110 Adjustments: Fixed charges, as below 260,439 275,426 261,885 Interest capitalized (26,300) (15,000) (64,400) Equity in earnings of equity method investments (45,984) (76,694) (72,272) Dividends from equity method investments 49,208 82,576 72,787 --------------------------------------------------- Earnings as adjusted $439,942 $451,823 $372,110 =================================================== Fixed Charges: Interest on indebtedness (expense and capitalized) $245,220 $260,249 $246,895 Dividends on preferred securities 13,149 13,167 13,100 Interest portion of rental expense 2,070 2,010 1,890 --------------------------------------------------- $260,439 $275,426 $261,885 =================================================== Ratio of Earnings to Fixed Charges 1.69 1.64 1.42
EX-21.1 9 a2057631zex-21_1.txt EXHIBIT 21.1 EXHIBIT 21.1 EDISON MISSION ENERGY LIST OF SUBSIDIARIES -------------------- As of August 29, 2001
ENTITY JURISDICTION OF ORGANIZATION - ------ ---------------------------- Adelaide Ventures Limited Cayman Islands Aguila Energy Company California Anacapa Energy Company California Arrowhead Energy Company (Inactive) California Athens Funding, L.L.C. Delaware Balboa Energy Company California Beheer-en Beleggingsmaatschappij Botara B.V. The Netherlands Beheer-en Beleggingsmaatschappij Jydeno B.V. The Netherlands Blue Ridge Energy Company California Bretton Woods Energy Company California Bretton Woods Funding I, L.L.C. Delaware Camino Energy Company California Capistrano Cogeneration Company California Caresale Services Limited United Kingdom Celtic Offshore Wind Limited United Kingdom Centerport Energy Company California Chesapeake Bay Energy Company California Chester Energy Company California Chestnut Ridge Energy Co. California Chickahominy River Energy Corp. Virginia Citizens Power Holdings One, LLC Delaware Clayville Energy Company California Collins Holdings EME, LLC Delaware Colonial Energy Company (Inactive) California Coronado Energy Company California CP Power Sales Eighteen, L.L.C. Delaware CP Power Sales Fifteen, L.L.C. Delaware CP Power Sales Five, L.L.C. Delaware CP Power Sales Fourteen, L.L.C. Delaware CP Power Sales Nineteen, L.L.C. Delaware CP Power Sales Seventeen, L.L.C. Delaware CP Power Sales Thirteen, L.L.C. Delaware CP Power Sales Twelve, L.L.C. Delaware CP Power Sales Twenty, L.L.C. Delaware Crescent Valley Energy Company California Delaware Energy Conservers, Inc. (Inactive) Delaware Del Mar Energy Company California Desert Sunrise Energy Company (Inactive) Nevada
1
ENTITY JURISDICTION OF ORGANIZATION - ------ ---------------------------- Devereaux Energy Company California East Maine Energy Company (Inactive) California Eastern Sierra Energy Company California EcoElectrica Holdings, Ltd. Cayman Islands EcoElectrica Ltd. Cayman Islands EcoElectrica s.a.r.l. Luxembourg Edison Alabama Generating Company California Edison First Power Holdings I United Kingdom Edison First Power Limited Guernsey Edison Mission Advantage B.V. The Netherlands Edison Mission Ausone Pty. Ltd. Australia Edison Mission De Laide Pty. Ltd. Australia Edison Mission Development, Inc. Delaware Edison Mission Energy Asia Pte Ltd. Singapore Edison Mission Energy Asia Pacific Pte. Ltd. Singapore Edison Mission Energy Australia Limited Australia Edison Mission Energy Australia Pilbara Power Pty Ltd. Australia Edison Mission Energy Fuel California Edison Mission Energy Fuel Company Pte Ltd. Singapore Edison Mission Energy Fuel Resources, Inc. California Edison Mission Energy Fuel Services, LLC Delaware Edison Mission Energy Fuel Transportation, Inc. Delaware Edison Mission Energy Funding Corp. Delaware Edison Mission Energy Holdings Pty. Ltd. Australia Edison Mission Energy Interface Ltd. British Columbia Edison Mission Energy International B.V. The Netherlands Edison Mission Energy Limited United Kingdom Edison Mission Energy Oil & Gas California Edison Mission Energy Petroleum California Edison Mission Energy Services B.V. The Netherlands Edison Mission Energy Services, Inc. California Edison Mission Energy Taupo Limited New Zealand Edison Mission Finance Co. California Edison Mission Holdings Co. California Edison Mission Marketing and Services Limited United Kingdom Edison Mission Marketing & Trading, Inc. California Edison Mission Fuel Resources, Inc. California Edison Mission Fuel Transportation, Inc. California Edison Mission Midwest Holdings Co. Delaware Edison Mission Millennium B.V. The Netherlands Edison Mission Operation & Maintenance, Inc. California Edison Mission Operation & Maintenance Limited United Kingdom Edison Mission Operation & Maintenance Loy Yang Pty Ltd. Australia
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ENTITY JURISDICTION OF ORGANIZATION - ------ ---------------------------- Edison Mission Operation & Maintenance Kwinana Pty Ltd. Australia Edison Mission Operation & Maintenance Services B.V. The Netherlands Edison Mission Operation & Maintenance Services Pte Ltd Singapore Edison Mission Operation & Maintenance (Thailand) Company Ltd. Thailand Edison Mission Overseas Co. Delaware Edison Mission Overseas Ltd. United Kingdom Edison Mission Project Co. Delaware Edison Mission Retail Pty Ltd. Australia Edison Mission Services Limited United Kingdom Edison Mission Utilities Pty Ltd. Australia Edison Mission Vendesi Pty Ltd. Australia Edison Mission Wind Power Italy B.V. The Netherlands El Dorado Energy Company California EME Adelaide Energy Ltd. United Kingdom EME Ascot Limited United Kingdom EME Atlantic Holdings Limited United Kingdom EME Buckingham Limited United Kingdom EME Caliraya B.V. The Netherlands EME CP Holdings Co. Delaware EME del Caribe Cayman Islands EME del Caribe Holdings GmbH Austria EME Desarrello Espana S.L. Spain EME Eastern Holdings Co. Delaware EME Finance UK Limited United Kingdom EME Generation Holdings Limited United Kingdom EME International Dragon Limited United Kingdom EME Investments, LLC Delaware EME Kalayaan B.V. The Netherlands EME Monet Limited United Kingdom EME Philippines O&M Corporation The Philippines EME Precision B.V. The Netherlands EME Royale New Zealand EME Southwest Power Corporation Delaware EME Tri Gen B.V. The Netherlands EME UK International LLC Delaware EME Tri Gen B.V. The Netherlands EME Victoria B.V. The Netherlands EME Victoria Generation Ltd. United Kingdom EMP, Inc. (Inactive) Oregon Energy Generation Finance PLC United Kingdom Enerloy Pty Ltd Australia First Hydro Company United Kingdom
3
ENTITY JURISDICTION OF ORGANIZATION - ------ ---------------------------- First Hydro Finance plc United Kingdom First Hydro Holdings Company United Kingdom First Hydro Renewables Limited United Kingdom First Hydro Renewables (COWL) Limited United Kingdom Four Counties Gas Company (Inactive) California Gippsland Power Pty Ltd Australia Global Generation B.V. The Netherlands Global Power Investors, Inc. California Hancock Generation LLC Delaware Hanover Energy Company California Holtsville Energy Company California Homer City Funding LLC Delaware Homer City Property Holdings, Inc. California Hydro Energy B.V. The Netherlands Iberica de Energias, S.A. Spain Iberian Hy-Power Amsterdam B.V. The Netherlands Indian Bay Energy Company California Jefferson Energy Company (Inactive) California Kings Canyon Energy Company (Inactive) California Kingspark Energy Company California Laguna Energy Company (Inactive) California La Jolla Energy Company (Inactive) California Lakeland Power Ltd. United Kingdom Lakeland Power Development Company United Kingdom Lakeview Energy Company California Latrobe Power Pty. Ltd. Australia Lehigh River Energy Company (Inactive) California Longview Cogeneration Company California Loy Yang Holdings Pty Ltd Australia Loyvic Pty. Ltd. Australia Madera Energy Company California Madison Energy Company California Majestic Energy Limited United Kingdom Maplekey Holdings Ltd. United Kingdom Maplekey UK Finance Limited United Kingdom Maplekey UK Limited United Kingdom MEC Esenyurt B.V. The Netherlands MEC IES B.V. The Netherlands MEC India B.V. The Netherlands MEC Indo Coal B.V. The Netherlands MEC Indonesia B.V. The Netherlands MEC International B.V. The Netherlands MEC International Holdings B.V. The Netherlands
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ENTITY JURISDICTION OF ORGANIZATION - ------ ---------------------------- MEC Laguna B.V. The Netherlands MEC Perth B.V. The Netherlands MEC Priolo B.V. The Netherlands MEC San Pascual B.V. The Netherlands MEC Sidi Krir B.V. The Netherlands MEC Sumatra B.V. The Netherlands MEC Wales B.V. The Netherlands Midwest Generation, LLC Delaware Midwest Generation EME, LLC Delaware Midwest Peaker Holdings, Inc. Delaware Mission Contact Finance Limited New Zealand Mission De Las Estrellas LLC Delaware Mission Del Cielo Inc. Delaware Mission Del Sol, LLC Delaware Mission/Eagle Energy Company (Inactive) California Mission Energy Company (UK) Limited United Kingdom Mission Energy Construction Services, Inc. California Mission Energy Development Australia Pty Ltd Australia Mission Energy Generation, Inc. (Inactive) California Mission Energy Holdings, Inc. California Mission Energy Holdings International, Inc. California Mission Energy Holdings Superannuation Fund Pty Ltd Australia Mission Energy Indonesia (Inactive) California Mission Energy Italia s.r.l. Italy Mission Energy (Kwinana) Pty. Ltd. Australia Mission Energy Mexico (Inactive) California Mission Energy New York, Inc. California Mission Energy Pacific Holdings (formerly EME Pacific Holdings) New Zealand Mission Energy Universal Holdings (formerly EME Universal Holdings) New Zealand Mission Energy Ventures Australia Pty Ltd Australia Mission Energy Wales Company California Mission Energy Westside, Inc. California Mission Hydro (UK) Limited United Kingdom Mission Operations de Mexico, S.A. de C.V. Mexico Mission NZ Operations B.V. The Netherlands Mission Triple Cycle Systems Company California North Jackson Energy Company (Inactive) California Northern Sierra Energy Company California Ortega Energy Company California Panther Timber Company California Paradise Energy Company (Inactive) California Pleasant Valley Energy Company California Pocono Fuels Company California
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ENTITY JURISDICTION OF ORGANIZATION - ------ ---------------------------- Pride Hold Limited United Kingdom P.T. Edison Mission Operation & Maintenance Indonesia Quartz Peak Energy Company California Rapid Energy Limited United Kingdom Rapidan Energy Company California Redbill Contracts Limited United Kingdom Reeves Bay Energy Company California Ridgecrest Energy Company California Rio Escondido Energy Company (Inactive) California Riverport Energy Company California Saltos del Porma S.A. Spain San Gabriel Energy Company (Inactive) California San Joaquin Energy Company California San Juan Energy Company California San Pedro Energy Company California Santa Ana Energy Company California Santa Clara Energy Company California Silver Springs Energy Company California Silverado Energy Company California Sonoma Geothermal Company California South Australian Holdings Limited United Kingdom South Coast Energy Company California Southern Sierra Energy Company California Southern Sierra Gas Company California Southwest Generation B.V. The Netherlands Sunapee Funding I, L.L.C. Delaware Sunrise Power Company, LLC Delaware Thorofare Energy Company (Inactive) California Traralgon Power Pty. Ltd. Australia Valley Power Pty. Ltd. Australia Viejo Energy Company California Vista Energy Company Inactive New Jersey Western Sierra Energy Company California
6 EX-23.1 10 a2057631zex-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 dated March 28, 2001 on the consolidated financial statements of Edison Mission Energy included in Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 2000, incorporated by reference in this registration statement and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Orange County, California August 27, 2001 EX-25.1 11 a2057631zex-25_1.txt EXHIBIT 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) |__| ----------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ----------------------- Edison Mission Energy (Exact name of obligor as specified in its charter) California 95-4031807 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 18101 Von Karman Avenue, Suite 1700 Irvine, California 92612 (Address of principal executive offices) (Zip code) ----------------------- 10% Senior Notes due August 15, 2008 (Title of the indenture securities) ================================================================================ 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.
- ---------------------------------------------- -------------------------------------------- Name Address - ---------------------------------------------- -------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, N.Y. 10006, New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank 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 August, 2001. THE BANK OF NEW YORK By: /s/ MARY LAGUMINA --------------------------------- Name: MARY LAGUMINA Title: VICE PRESIDENT -4- EXHIBIT 7 - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 2001, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts In Thousands -------------- ASSETS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ...... $ 2,811,275 Interest-bearing balances ............................... 3,133,222 Securities: Held-to-maturity securities ............................. 147,185 Available-for-sale securities ........................... 5,403,923 Federal funds sold and Securities purchased under agreements to resell .................................... 3,378,526 Loans and lease financing receivables: Loans and leases held for sale .......................... 74,702 Loans and leases, net of unearned income ................................................ 37,471,621 LESS: Allowance for loan and lease losses .......................................... 599,061 Loans and leases, net of unearned income and allowance .................................. 36,872,560 Trading Assets ............................................. 11,757,036 Premises and fixed assets (including capitalized leases) ................................................. 768,795 Other real estate owned .................................... 1,078 Investments in unconsolidated subsidiaries and associated companies .................................... 193,126 Customers' liability to this bank on acceptances outstanding ............................................. 592,118 Intangible assets Goodwill ................................................ 1,300,295 Other intangible assets ................................. 122,143 Other assets ............................................... 3,676,375 ----------- Total assets ............................................... $70,232,359 ===========
-1- LIABILITIES Deposits: In domestic offices ..................................... $25,962,242 Noninterest-bearing ..................................... 10,586,346 Interest-bearing ........................................ 15,395,896 In foreign offices, Edge and Agreement subsidiaries, and IBFs ................................ 24,862,377 Noninterest-bearing ..................................... 373,085 Interest-bearing ........................................ 24,489,292 Federal funds purchased and securities sold under agreements to repurchase ................................ 1,446,874 Trading liabilities ........................................ 2,373,361 Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases) ............................... 1,381,512 Bank's liability on acceptances executed and outstanding ............................................. 592,804 Subordinated notes and debentures .......................... 1,646,000 Other liabilities .......................................... 5,373,065 ----------- Total liabilities .......................................... $63,658,235 =========== EQUITY CAPITAL Common stock ............................................... 1,135,284 Surplus .................................................... 1,008,773 Retained earnings .......................................... 4,426,033 Accumulated other comprehensive income ..................... 4,034 Other equity capital components ............................ 0 ----------- Total equity capital ....................................... 6,574,124 ----------- Total liabilities and equity capital ....................... $70,232,359 ===========
I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro, Senior Vice President and Comptroller We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. -2- Thomas A. Renyi Gerald L. Hassell Directors Alan R. Griffith - -------------------------------------------------------------------------------- -3- EX-99.1 12 a2057631zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 LETTER OF TRANSMITTAL EDISON MISSION ENERGY OFFER FOR ALL OUTSTANDING 10% SENIOR NOTES DUE AUGUST 15, 2008 IN EXCHANGE FOR 10% SENIOR NOTES DUE AUGUST 15, 2008 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: The Bank of New York, EXCHANGE AGENT BY HAND BEFORE 4:30 P.M.: BY REGISTERED OR CERTIFIED MAIL: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street Seventh Floor E Seventh Floor E New York, NY 10286 New York, NY 10286 Attention: Carolle Montreuil Attention: Carolle Montreuil Reorganization Department Reorganization Department
BY HAND OR OVERNIGHT DELIVERY AFTER 4:30 P.M. ON THE EXPIRATION DATE: The Bank of New York 101 Barclay Street Seventh Floor E New York, NY 10286 Attention: Carolle Montreuil FOR INFORMATION CALL: (212) 815-5920 BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (212) 815-6339 CONFIRM BY TELEPHONE: (212) 815-5920 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 , 2000 (the "Prospectus"), of Edison Mission Energy, a California corporation (the "Company"), and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $400,000,000 of the Company's 10% Senior Notes due August 15, 2008 (the "Exchange Notes") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of the Company's issued and outstanding 10% Senior Notes due August 15, 2008 (the "Original Notes") from the registered holders thereof (the "Holders"). For each Original Note accepted for exchange, the Holder of such Original Note will receive an Exchange Note having a principal amount equal to that of the surrendered Original Note. The Exchange Notes will bear interest from the most recent date to which interest has been paid on the Original Notes or, if no interest has been paid on the Original Notes, from August 10, 2001. Accordingly, registered Holders of Exchange Notes 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 or, if no interest has been paid, from August 10, 2001. Original Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Original Notes whose Original Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Original Notes 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 Notes either if certificates are to be forwarded herewith or if a tender of certificates for Original Notes, 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 Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Original Notes 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 Notes 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 Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Original Notes should be listed on a separate signed schedule affixed hereto.
- ----------------------------------------------------------------------------------------------------------- DESCRIPTION OF ORIGINAL NOTES (1) (2) (3) - ----------------------------------------------------------------------------------------------------------- AGGREGATE PRINCIPAL AMOUNT OF PRINCIPAL NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE ORIGINAL AMOUNT (PLEASE FILL IN, IF BLANK) NUMBER(S)* NOTE(S) TENDERED** - ----------------------------------------------------------------------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- TOTAL - -------------------------------------------------- * Need not be completed if Original Notes 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 Notes represented by the Original Notes indicated in column 2. See Instruction 2. Original Notes 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 NOTES 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 Notes 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 Notes 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 Notes 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 NOTES 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 Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Original Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that such Original Notes 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 Notes.; 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 Notes, it represents that the Original Notes to be exchanged for the Exchange Notes 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 Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Original Notes 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 Notes 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 Notes, with full power of substitution, among other things, to cause the Original Notes 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 Notes, and to acquire Exchange Notes issuable upon the exchange of such tendered Original Notes, 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 Notes acquired in exchange for Original Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned, that neither the Holder of such Original Notes 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 Notes and that neither the Holder of such Original Notes 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 Notes issued pursuant to the Exchange Offer in exchange for the Original Notes 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 Notes 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 Notes. 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 Notes and has no arrangement or understanding to participate in a distribution of Exchange Notes. 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 Notes 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 Notes for its own account in exchange for Original Notes, it represents that the Original Notes to be exchanged for the Exchange Notes 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 Notes; 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 Notes 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 Notes (and, if applicable, substitute certificates representing Original Notes for any Original Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Original Notes, 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 Notes (and, if applicable, substitute certificates representing Original Notes for any Original Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Original Notes." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE ORIGINAL NOTES AS SET FORTH IN SUCH BOX ABOVE. SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Original Notes not exchanged and/or Exchange Notes 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 Notes 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 Notes and/or Original Notes to: Name _______________________________________________________________________ (PLEASE TYPE OR PRINT) __________________________________________________________________________ (PLEASE TYPE OR PRINT) Address ____________________________________________________________________ ____________________________________________________________________________ (ZIP CODE) (COMPLETE SUBSTITUTE FORM W-9) / / Credit unexchanged Original Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. ____________________________________________________________________________ BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER, IF APPLICABLE) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Original Notes not exchanged and/or Exchange Notes 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 Notes" on this Letter above. Mail Exchange Notes and/or Original Notes to: Name _______________________________________________________________________ (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 NOTES 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(S) (DATE:) Area Code and Telephone Number If a holder is tendering any Original Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Original Notes 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 10% SENIOR NOTES DUE AUGUST 15, 2008 OF EDISON MISSION ENERGY IN EXCHANGE FOR THE 10% SENIOR NOTES DUE AUGUST 15, 2008 OF EDISON MISSION ENERGY WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED 1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures. This Letter is to be completed by holders of Original Notes 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 Notes, 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 Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Original Notes 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 Notes 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, (ii) prior to 5:00 P.M., New York City time, on the Expiration Date, the (as defined below) 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 Notes and the amount of Original Notes 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 Notes, 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 Notes, 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 Notes 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 Notes 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 noteholders who tender by book-entry transfer). If less than all of the Original Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Original Notes to be tendered in the box above entitled "Description of Original Notes--Principal Amount Tendered. "A reissued certificate representing the balance of nontendered Original Notes 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 NOTES 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 Notes 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 Notes are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Original Notes 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 Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the Exchange Notes are to be issued, or any untendered Original Notes 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 Notes 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 Notes are tendered: (i) by a registered holder of Original Notes (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 Notes) 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 Notes should indicate in the applicable box the name and address to which Exchange Notes issued pursuant to the Exchange Offer and or substitute certificates evidencing Original Notes 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. Noteholders tendering Original Notes by book-entry transfer may request that Original Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Original Notes 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 Notes 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 Notes. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Original Notes (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 Notes 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 Notes 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 Notes 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 Notes to it or its order pursuant to the Exchange Offer. If, however, Exchange Notes and/or substitute Original Notes 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 Notes tendered hereby, or if tendered Original Notes 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 Notes 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 NOTES 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 Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Original Notes 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 Notes nor shall any of them incur any liability for failure to give any such notice. 9. Mutilated, Lost, Stolen or Destroyed Original Notes. Any holder whose Original Notes 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 Notes 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 Notes 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 Notes to be withdrawn (the "Depositor"), (ii) identify the Original Notes to be withdrawn (including certificate number or numbers and the principal amount of such Original Notes), (iii) contain a statement that such holder is withdrawing his election to have such Original Notes exchanged, (iv) be signed by the holder in the same manner as the original signature on the Letter by which such Original Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer to have the Trustee with respect to the Original Notes register the transfer of such Original Notes in the name of the person withdrawing the tender and (v) specify the name in which such Original Notes are registered, if different from that of the Depositor. If Original Notes 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 Notes 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 Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Original Notes so withdrawn are validly retendered. Any Original Notes 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 Notes 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 Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Original Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Original Notes 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: THE BANK OF NEW YORK - --------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART I: PLEASE TIN: --------------- FORM W-9 PROVIDE YOUR TIN IN SOCIAL SECURITY NUMBER OR DEPARTMENT OF THE TREASURY INTERNAL THE BOX AT RIGHT AND EMPLOYER IDENTIFICATION NUMBER REVENUE SERVICE CERTIFY BY SIGNING AND DATING BELOW. ------------------------------------------------------------------ PART 2--TIN APPLIED FOR / / ------------------------------------------------------------------ PAYER'S REQUEST FOR TAXPAYER CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: IDENTIFICATION NUMBER ("TIN") AND (1) the number shown on this form is my correct TIN (or I am CERTIFICATION waiting for a number to be issued to me), (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 with holding 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 13 a2057631zex-99_2.txt EXHIBIT 99.2 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR EDISON MISSION ENERGY This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Edison Mission Energy (the "Company") made pursuant to the Prospectus, dated , 2001 (the "Prospectus"), if certificates for the outstanding 10% Senior Notes due August 15, 2008 of the Company (the "Original Notes") 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 Bank 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 Notes 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 shall have the respective meanings ascribed to them in the Prospectus. DELIVERY TO: THE BANK OF NEW YORK, EXCHANGE AGENT BY HAND BEFORE 4:30 P.M.: BY REGISTERED OR CERTIFIED The Bank of New York MAIL: Seventh Floor E The Bank of New York New York, NY 10286 Seventh Floor E Attention: Carolle Montreuil New York, NY 10286 Reorganization Department Attention: Carolle Montreuil Reorganization Department
BY HAND OR OVERNIGHT DELIVERY AFTER 4:30 P.M. ON THE EXPIRATION DATE: The Bank of New York Seventh Floor E New York, NY 10286 FOR INFORMATION CALL: (212) 815-5920 BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (212) 815-6339 CONFIRM BY TELEPHONE: (212) 815-5920 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT 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 Notes set forth below pursuant to the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Must be signed by the holder(s) of Original Notes as their name(s) appear(s) on certificates for Original Notes 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. Principal Amount of Original Notes Tendered:(*) $ ------------------- Certificate Nos. (if available): If Original Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number. Total Principal Amount Represented by Original Notes Certificate(s): $ ------------------- Account Number --------------
PLEASE SIGN HERE - ------------------------------------------- Principal Amount at Maturity of Old Notes Tendered:(*) _____________________ ____________________________________________________________________________ Certificate Nos. (if available): ____________________________________________________________________________ If Old Notes will be delivered by book-entry transfer to the Depository Trust Company, provide account number. - ------------------------------------------- - ------------------------------------------- Please Sign Here X __________________________________________________________________________ X __________________________________________________________________________ Signature(s) of Owner(s) or Authorized Signatory ---------------------------------------------- Date _______________________________________________________________________ Area Code and Telephone Number: ____________________________________________________________________________ - ------------------------ * Must be in denominations of principal amount of $1,000 and any integral multiple thereof. Total Principal Amount at Maturity Represented by Old Notes Certificate(s): $___________________________________________________________________________ Account Number _____________________________________________________________ Must be in denominations of principal amount at maturity of $1,000 and any integral multiple thereof. Please Print Name(s) and Address(es) Name(s): ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ Capacity: __________________________________________________________________ Address(es): _______________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ X ______________________________________ _____________________________________ X ______________________________________ _____________________________________ Signature(s) of Owner(s) Date or Authorized Signatory Area Code and Telephone Number: ___________________________________________ Please Print Name(s) and Address(es) Name(s): ________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Capacity: ___________________________________________________________________ Addresses: __________________________________________________________________ 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. GUARANTEE (Not to be Used for Signature Guarantees) 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 Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Original Notes 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 one or more properly and duly executed Letters of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and 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 - ------------------------------------------- ------------------------------------------- Zip Code Name (Please Type of Print) - ------------------------------------------- ------------------------------------------- Area Code and Tel. No. Dated
NOTE: DO NOT SEND THE ORIGINAL NOTES WITH THIS FORM. ORIGINAL NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. EX-99.3 14 a2057631zex-99_3.txt EXHIBIT 99.3 EXHIBIT 99.3 EDISON MISSION ENERGY OFFER FOR ALL OUTSTANDING 10% SENIOR NOTES DUE AUGUST 15, 2008 IN EXCHANGE FOR 10% SENIOR NOTES DUE AUGUST 15, 2008 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 Edison Mission Energy (the "Company") to exchange its 10% Senior Notes due August 15, 2008, which have been registered under the Securities Act of 1933, as amended (the "Exchange Notes"), for its outstanding 10% Senior Notes due August 15, 2008 (the "Original Notes"), 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 10, 2001, by and among the Company and the initial purchasers referred to therein. This material is being forwarded to you as the beneficial owner of the Original Notes held by us for your account but not registered in your name. A TENDER OF SUCH ORIGINAL NOTES 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 Notes 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 Notes 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 Notes 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 Notes. 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 Notes 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 Notes, 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 NOTES. 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 Edison Mission Energy with respect to its Original Notes. This will instruct you to tender the Original Notes 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 Notes held by you for my account as indicated below: 10% Senior Notes due August 15, 2008 $(Aggregate Principal Amount of Original Notes) / / Please do not tender any Original Notes 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 Notes 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 Notes held by us for your account. 2 EX-99.4 15 a2057631zex-99_4.txt EXHIBIT 99.4 EXHIBIT 99.4 EDISON MISSION ENERGY OFFER FOR ALL OUTSTANDING 10% SENIOR NOTES DUE AUGUST 15, 2008 IN EXCHANGE FOR 10% SENIOR NOTES DUE AUGUST 15, 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED To: BROKERS, DEALERS, COMMERCIAL BANKS,TRUST COMPANIES AND OTHER NOMINEES: Edison Mission Energy (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") its 10% Senior Notes due August 15, 2008, which have been registered under the Securities Act of 1933, as amended, for its outstanding 10% Senior Notes due August 15, 2008 (the "Original Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated August 10, 2001 by and among the Company and the initial purchasers referred to therein. We are requesting that you contact your clients for whom you hold Original Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Original Notes registered in your name or in the name of your nominee, or who hold Original Notes 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 Notes 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 Notes 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 The Bank 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 NOTES 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 certificates representing the Original Notes 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 Notes desires to tender, but such Original Notes are not immediately available, or time will not permit such holder's Original Notes 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 Notes 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 Notes 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 Bank 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, EDISON MISSION ENERGY 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-----