-----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, CczCtekNq5mBhlbBMdqdYVfdrgYamJYXYOYphVY2cCXYwKuHnDbW5ku0wVo+3C2L De0XpmYQ+Gg1PDYplxEpmg== 0001017062-00-001179.txt : 20000515 0001017062-00-001179.hdr.sgml : 20000515 ACCESSION NUMBER: 0001017062-00-001179 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-24890 FILM NUMBER: 629999 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 10-Q 1 QUARTERLY REPORT FOR PERIOD ENDED 03/31/2000 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 ------------------ or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- --------------- Commission File Number 1-13434 Edison Mission Energy (Exact name of registrant as specified in its charter) California 95-4031807 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 18101 Von Karman Avenue Irvine, California 92612 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (949) 752-5588 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------ ________ Number of shares outstanding of the registrant's Common Stock as of May 12, 2000: 100 shares (all shares held by an affiliate of the registrant). TABLE OF CONTENTS
Item Page - ---- ---- PART I - Financial Information 1. Financial Statements................................................. 1 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................ 16 PART II - Other Information 6. Exhibits and Reports on Form 8-K..................................... 31 PART III Signatures........................................................... 32
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands)
(Unaudited) Three Months Ended March 31, ----------------------- 2000 1999 ---------- --------- Operating Revenues Electric revenues $ 691,314 $ 196,853 Equity in income from energy projects 29,303 60,745 Equity in income from oil and gas 7,796 3,642 Operation and maintenance services 10,259 8,516 ---------- --------- Total operating revenues 738,672 269,756 ---------- --------- Operating Expenses Fuel 276,299 54,075 Plant operations 187,962 34,371 Operation and maintenance services 7,981 6,470 Depreciation and amortization 102,995 24,146 Administrative and general 34,123 36,497 ---------- --------- Total operating expenses 609,360 155,559 ---------- --------- Operating income 129,312 114,197 ---------- --------- Other Income (Expense) Interest and other income 6,414 7,792 Interest expense (172,971) (44,519) Dividends on preferred securities (8,107) (3,233) ---------- --------- Total other income (expense) (174,664) (39,960) ---------- --------- Income (loss) before income taxes (45,352) 74,237 Provision (benefit) for income taxes (15,191) 16,301 ---------- --------- Income (loss) before change in accounting principle (30,161) 57,936 Cumulative effect on prior years of change in accounting for major maintenance costs, net of tax 17,690 - Cumulative effect on prior years of change in accounting for start-up costs, net of tax - (13,840) ---------- --------- Net Income (Loss) $ (12,471) $ 44,096 ========== =========
The accompanying notes are an integral part of these consolidated financial statements. 1 EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands)
(Unaudited) Three Months Ended March 31, ---------------------- 2000 1999 -------- -------- Net Income (Loss) $(12,471) $ 44,096 Other comprehensive expense, net of tax: Foreign currency translation adjustments, net of income tax benefit of $807 and $1,378 in 2000 and 1999, respectively (43,533) (12,625) -------- -------- Comprehensive Income (Loss) $(56,004) $ 31,471 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 2 PAGE> EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited) March 31, December 31, 2000 1999 ----------- ----------- Assets Current Assets Cash and cash equivalents $ 684,156 $ 398,695 Accounts receivable - trade, net of allowance: 2000 and 1999, $1,126 254,920 254,538 Accounts receivable - affiliates 8,584 9,597 Inventory 323,442 258,864 Prepaid expenses and other 28,576 35,665 ----------- ----------- Total current assets 1,299,678 957,359 ----------- ----------- Investments Energy projects 1,931,503 1,891,703 Oil and gas 48,470 49,173 ----------- ----------- Total investments 1,979,973 1,940,876 ----------- ----------- Property, Plant and Equipment 12,367,928 12,533,413 Less accumulated depreciation and amortization 490,309 411,079 ----------- ----------- Net property, plant and equipment 11,877,619 12,122,334 ----------- ----------- Other Assets Goodwill 284,940 290,695 Deferred financing costs 136,248 133,948 Restricted cash and other 54,666 89,009 ----------- ----------- Total other assets 475,854 513,652 ----------- ----------- Total Assets $15,633,124 $15,534,221 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 3 EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited) March 31, December 31, 2000 1999 ----------- ----------- Liabilities and Shareholder's Equity Current Liabilities Accounts payable - affiliates $ 16,202 $ 7,772 Accounts payable and accrued liabilities 425,318 328,057 Interest payable 92,256 89,272 Short-term obligations 1,190,220 1,122,067 Current maturities of long-term obligations 219,439 225,679 ----------- ----------- Total current liabilities 1,943,435 1,772,847 ----------- ----------- Long-Term Obligations - Affiliate 316,830 78,000 ----------- ----------- Long-Term Obligations Net of Current Maturities 7,365,372 7,361,308 ----------- ----------- Long-Term Deferred Liabilities Deferred taxes and tax credits 1,467,882 1,520,490 Deferred revenue 492,893 534,531 Accrued incentive compensation 206,990 253,513 Other 383,029 468,161 ----------- ----------- Total long-term deferred liabilities 2,550,794 2,776,695 ----------- ----------- Total Liabilities 12,176,431 11,988,850 ----------- ----------- Preferred Securities of Subsidiaries Company-obligated mandatorily redeemable security of partnership holding solely parent debentures 150,000 150,000 Subject to mandatory redemption 198,360 208,840 Not subject to mandatory redemption 118,054 118,054 ----------- ----------- Total preferred securities of subsidiaries 466,414 476,894 ----------- ----------- Commitments and Contingencies (Note 5) Shareholder's Equity Common stock, no par value; 10,000 shares authorized; 100 shares issued and outstanding 64,130 64,130 Additional paid-in capital 2,629,406 2,629,406 Retained earnings 329,769 364,434 Accumulated other comprehensive income (33,026) 10,507 ----------- ----------- Total Shareholder's Equity 2,990,279 3,068,477 ----------- ----------- Total Liabilities and Shareholder's Equity $15,633,124 $15,534,221 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 4 EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited) Three Months Ended March 31, -------------------------- 2000 1999 ----------- ------------ Cash Flows From Operating Activities Net income (loss) $ (12,471) $ 44,096 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Equity in income from energy projects (29,303) (60,745) Equity in income from oil and gas (7,796) (3,642) Distributions from energy projects 31,600 28,888 Depreciation and amortization 102,995 24,146 Deferred taxes and tax credits (44,543) 3,142 Cumulative effect on prior years of change in accounting (17,690) 13,840 Increase in accounts receivable (1,476) (11,947) (Increase) decrease in inventory (64,578) 1,117 Decrease in prepaid expenses and other 7,322 9,180 Increase in accounts payable and accrued liabilities 102,841 34,455 Increase (decrease) in interest payable 7,482 (19,402) Increase (decrease) in accrued incentive compensation (46,523) 10,800 Other, net 4,491 (14,825) ----------- ------------ Net cash provided by operating activities 32,351 59,103 ----------- ------------ Cash Flows From Financing Activities Borrowings long-term obligations 2,101,024 234,878 Payments on long-term obligations (1,767,702) (22,583) Short-term financing, net 51,886 1,496,522 Dividend to parent (22,000) - ----------- ------------ Net cash provided by financing activities 363,208 1,708,817 ----------- ------------ Cash Flows From Investing Activities Investments in and loans to energy projects (52,089) (20,999) Purchase of generating station - (1,800,355) Purchase of acquired companies (8,360) - Capital expenditures (65,151) (27,512) Decrease in restricted cash 32,960 27,527 Other, net (7,989) (12,787) ----------- ------------ Net cash used in investing activities (100,629) (1,834,126) ----------- ------------ Effect of exchange rate changes on cash (9,469) (5,853) ----------- ------------ Net increase (decrease) in cash and cash equivalents 285,461 (72,059) Cash and cash equivalents at beginning of period 398,695 459,178 ----------- ------------ Cash and cash equivalents at end of period $ 684,156 $ 387,119 =========== ============
The accompanying notes are an integral part of these consolidated financial statements. 5 EDISON MISSION ENERGY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 NOTE 1. GENERAL All adjustments, including recurring accruals, have been made that are necessary to present fairly the consolidated financial position and results of operations for the periods covered by this report. The results of operations for the three months ended March 31, 2000, are not necessarily indicative of the operating results for the full year. Our significant accounting policies are described in Note 2 to our Consolidated Financial Statements as of December 31, 1999 and 1998, included in our 1999 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2000. We follow the same accounting policies for interim reporting purposes, with the exception of the change in accounting for major maintenance costs (see Note 2). This quarterly report should be read in connection with such financial statements. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. NOTE 2. CHANGES IN ACCOUNTING Through December 31, 1999 we have accrued for major maintenance costs during the period between turnarounds (referred to as "accrue in advance" accounting method). Such accounting policy has been widely used by independent power producers as well as several other industries. In March 2000, the U.S. Securities and Exchange Commission (SEC) issued a letter to the Accounting Standards Executive Committee, stating its position that the SEC Staff does not believe it is appropriate to use an "accrue in advance" method for major maintenance costs. The Accounting Standards Executive Committee agreed to add accounting for major maintenance costs as part of an existing project and to issue authoritative guidance by August 2000. Due to the position taken by the SEC Staff, we decided voluntarily to change our accounting policy so as to record major maintenance costs as an expense as incurred. Such change in accounting policy is considered preferable based on the recent guidance provided by the SEC. In accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes", we have recorded $17.7 million, after tax, as a cumulative change in the accounting for major maintenance costs during the quarter ended March 31, 2000. Pro forma data has not been provided for prior periods, as the impact would not be material. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities", which became effective in January 1999. The Statement requires that certain costs related to start-up activities be expensed as incurred and that certain previously capitalized costs be 6 expensed and reported as a cumulative change in accounting principle. The impact of adopting SOP 98-5 on our net income in 1999 was an expense of $13.8 million, after-tax. NOTE 3. INVENTORY Inventory is stated at the lower of weighted average cost or market. Inventory at March 31, 2000 and December 31, 1999 consisted of the following: (In millions) (Unaudited) March 31, December 31, 2000 1999 ---- ---- Coal and fuel oil $ 257.2 $ 190.1 Spare parts, materials and supplies 66.2 68.8 ------- ------- Total $ 323.4 $ 258.9 ======= ======= NOTE 4. ACQUISITION 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 of the projects use wind to generate electricity from turbines which is sold under fixed-price, long-term tariffs. Assuming all of the projects under development are completed, currently scheduled for 2002, the total capacity of these projects will be 283 megawatts (MWs). The purchase price is approximately $45 million (90 billion Italian Lira) with equity contribution obligations of up to $17 million (33 billion Italian Lira), depending on the number of projects that are ultimately developed. As of March 2000, payments included $8 million towards the purchase price and $14 million in equity contributions. NOTE 5. COMMITMENTS AND CONTINGENCIES Firm Commitment for Asset Purchase Project Local Currency U.S. ($ in millions) - ------- -------------- -------------------- Italian Wind Projects (i) 74 billion Italian Lira $ 37 (i) Italian Wind Projects are a series of power projects that are in operation or under development in Italy. A wholly owned subsidiary of Edison Mission Energy owns a 50% interest. Purchase payments will continue through 2002, depending on the number of projects that are ultimately developed. 7 Firm Commitments to Contribute Project Equity Projects Local Currency U.S. ($ in millions) -------- -------------- -------------------- ISAB (i) 244 billion Italian Lira $ 121 EcoElectrica (ii) 34 Tri Energy (iii) 25 Italian Wind Projects (iv) 6 billion Italian Lira 3 (i) 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. Equity is scheduled to be contributed in June 2000. (ii) EcoElectrica is a 540-MW liquefied natural gas combined cycle cogeneration facility in Penuelas, Puerto Rico. A wholly owned subsidiary of Edison Mission Energy owns a 50% interest. Commercial operations commenced in March 2000. Equity was contributed in April 2000. (iii) Tri Energy is a 700-MW gas-fired power plant under construction in Ratchaburi Province, Thailand. A wholly owned subsidiary of Edison Mission Energy owns a 25% interest. Equity will be contributed at commercial operation, which is currently scheduled for mid-2000. (iv) Italian Wind Projects are a series of power projects that are in operation or under development in Italy. A wholly owned subsidiary of Edison Mission Energy owns a 50% interest. Equity will be contributed depending on the number of projects that are ultimately developed. 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 has no reason to believe that these events of default will occur to require acceleration of the firm commitments. Contingent Obligations to Contribute Project Equity Projects U.S. ($ in millions) -------- -------------------- Paiton (i) $ 76 Tri Energy (ii) 20 All Other 27 (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. In any and all circumstances, our obligation to contribute contingent equity will not exceed $141 million, of which $65 million has been contributed as of March 31, 2000. 8 As more fully described below under the caption "Other Commitments and Contingencies," PT PLN (Persero) (PLN), formerly referred to as PT Perusahaan Listrik Negara, the main source of revenue for the project, has failed to pay the project in respect of its invoices through February 2000 (with the exception of a partial payment made in June 1999). In February 2000, Paiton Energy entered into an Interim Agreement with PLN which called for a termination of all legal actions by both parties, interim monthly payments through the end of 2000 (total payments US $115 million), dispatch of the facility at partial load and, in addition to the fixed monthly payments, payment for energy actually delivered. To date, PLN has made the fixed monthly payments for the months of March and April, and has paid for energy delivered in the month of March. Paiton Energy will continue to invoice PLN for capacity payments at the rate determined under the power purchase agreement. These invoices (minus the fixed monthly payments received under the Interim Agreement) will accrue and will be dealt with under the overall tariff restructuring negotiations. In October 1999, in response to PLN's failure to pay, Paiton Energy entered into an interim agreement with its lenders (the Lender Interim Agreement) which modified the contingent equity provisions of the Paiton debt documents related to the authorized usage of the monies during the agreed interim period, which extends from October 15, 1999 through July 31, 2000. The Lender Interim Agreement provides, among other things, that contingent equity from us and the other Paiton Energy shareholders shall be contributed from time to time as needed to enable Paiton Energy to pay interim project costs. Interim project costs include interest on project debt and operating costs which become due and payable during the term of the Lender Interim Agreement and other costs related to the construction of the project, provided that in the latter case no more than an aggregate of $30 million of contingent equity can be used for this purpose. The Lender Interim Agreement provides that a portion of the contingent equity (originally $206 million, of which our current unfunded share is $32 million), will become due and payable by the shareholders in the event that certain events of default, other than those specifically waived under the Lender Interim Agreement, occur. The Lender Interim Agreement further provides that all unfunded contingent equity (originally $300 million, of which our current unfunded share is $76 million), will become due and payable by the shareholders in the event that Paiton Energy fails to make any interest payment during the pendency of the Lender Interim Agreement. As of March 31, 2000, Paiton Energy's shareholders have contributed to Paiton $138 million of contingent equity, of which our share is $65 million. The contractor for the Paiton project and Paiton Energy reached a global settlement in principal, the terms of which are being finalized. The global settlement deals with all claims, including contractor claims for retention, costs relating to a dispute involving a slope adjacent to the Paiton site and other cost overruns related to delays in the completion of the construction of the project and Paiton Energy's claims under the construction contract. Terms and conditions of this settlement will require the 9 approval of Paiton Energy's lenders. Paiton Energy is presently discussing this settlement agreement with its lenders and contractor, and expects that an accommodation of lender requirements can be achieved, and therefore that the required lender approval can be obtained. As noted, the shareholders' obligation to contribute contingent equity to Paiton Energy to enable it to pay the contractor for the finally agreed amount is limited to $30 million. Paiton Energy's obligations to the contractor exceed this amount. The shortfall will be met through funds that may be made available to the project and ultimately will be paid out of revenues received as a result of the renegotiation of the power purchase agreement and the project's debt agreements, as more fully discussed under the caption, "Other Commitments and Contingencies." Our contingent equity obligations for the Paiton project are to be cancelled, if unused, as of the later of the date of term financing by the Export-Import Bank of the United States and August 1, 2000. Term financing by the Export-Import Bank of the United States is the subject of a comprehensive set of conditions. The obligation of the Export-Import Bank of the United States to provide term financing was initially scheduled to terminate on October 15, 1999. The Export-Import Bank of the United States agreed to extend the term financing commitment through December 31, 2000 and has determined that the project will need to meet additional terms and conditions for take-out of the construction lenders. Paiton Energy and its lenders expect to enter into discussions in May 2000 with regard to the extension of the Lender Interim Agreement through December 31, 2000 to coincide with the US-EXIM take-out date and the time period of the Interim Agreement with PLN. (ii) Contingent obligations to contribute additional equity to the project relate specifically to an agreement between EME and Banpu Public Company (a project shareholder) to provide certain back-up equity assurances to the project's lenders should Banpu be unable to fund the full portion of its equity when due. At present, we do not anticipate a requirement to fund this additional equity. Other than as noted above, we are not aware, at this time, of any other contingent obligations or obligations to contribute project equity. Other Commitments and Contingencies Subsidiary Indemnification Agreements Some of our subsidiaries have entered into indemnification agreements, under which the subsidiaries 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 March 31, 2000, if payment were required, would be $271 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. 10 Paiton Paiton is a 1,230-MW coal-fired power plant in operation in East Java, Indonesia. A wholly owned subsidiary of Edison Mission Energy owns a 40% interest and has a $453 million investment at March 31, 2000. The project's tariff is higher in the early years and steps down over time. The tariff for the Paiton project includes infrastructure to be used in common by other units at the Paiton complex. The plant's output is fully contracted with the state-owned electricity company, PLN. Payments are in Indonesian Rupiah, with the portion of such payments intended to cover non-Rupiah project costs, including returns to investors, indexed to the Indonesian Rupiah/U.S. dollar exchange rate established at the time of the power purchase agreement in February 1994. The project received substantial finance and insurance support from the Export- Import Bank of the United States, The Export-Import Bank of Japan, the U.S. Overseas Private Investment Corporation and the Ministry of International Trade and Industry of Japan. PLN's payment obligations are supported by the Government of Indonesia. The projected rate of growth of the Indonesian economy and the exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated significantly since the Paiton project was contracted, approved and financed. The Paiton project's senior debt ratings have been reduced from investment grade to speculative grade based on the rating agencies' determination that there is increased risk that PLN might not be able to honor the electricity sales contract with Paiton. The Government of Indonesia has arranged to reschedule sovereign debt owed to foreign governments and has entered into discussions about rescheduling sovereign debt owed to private lenders. Specified events, including those discussed in the paragraph below, which, with the passage of time or upon notice, may mature into defaults of the project's debt agreements have occurred. On October 15, 1999, the project entered into an interim agreement with its lenders pursuant to which the lenders waived such defaults until July 31, 2000. However, this waiver may expire on an earlier date if additional defaults, other than those specifically waived, or other specified events occur. In May 1999, Paiton Energy notified PLN that Unit 7 of the Paiton project achieved commercial operation under terms of the power purchase agreement and, in July 1999, that Unit 8 of the Paiton project had similarly achieved such commercial operation. Because of the economic downturn, PLN is experiencing low electricity demand and PLN had, through February of this year, been dispatching the Paiton plant to zero; however, under the terms of the power purchase agreement, PLN is required to continue to pay for capacity and fixed operating costs once each unit and the plant achieve commercial operation. An invoice for these charges for May 1999 in the amount of $7.8 million was submitted to PLN. The project and PLN met to review the invoice and a partial payment of $2.5 million was subsequently received. The primary reason for the payment shortage was the use of an arbitrary Indonesian Rupiah/U.S. dollar exchange rate of 2,450 Indonesian Rupiah to one U.S. dollar by PLN. The use of this exchange rate is not in agreement with the power purchase agreement, but is the exchange rate on which PLN payments to other independent power producers in Indonesia were then being based. Additional invoices for capacity charges and fixed operating costs in an aggregate 11 amount of $312 million were later submitted to PLN. PLN has yet to make any payments in respect of such latter invoices. In addition, PLN filed a lawsuit contesting the validity of its agreement to purchase electricity from the project. The lawsuit was withdrawn by PLN on January 20, 2000. On February 21, 2000, Paiton Energy and PLN executed an Interim Agreement pursuant to which the power purchase agreement will be administered pending a long-term restructure of the power purchase agreement. Among other things, the Interim Agreement provides for dispatch of the project, fixed monthly capacity payments to Paiton Energy by PLN, the first two payments of which were received totaling $15 million, and the standstill of any further legal proceedings by either party during the term of the Interim Agreement, which runs through December 31, 2000 and may be extended by mutual agreement. PLN and Paiton Energy have agreed that negotiations on a long-term restructuring of the tariff will begin in May 2000. Any material modifications of the power purchase agreement could also require a renegotiation of the Paiton project's debt agreements. The impact of any such renegotiations with 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 the present 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 management and royalty fees. At March 31, 2000, no accrual has been recorded 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. Litigation We are routinely involved in litigation arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, we, based on 12 advice of counsel, do not believe that the final outcome of any pending litigation will have a material adverse effect on our financial position or results of operations. 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. We believe that we will have sufficient liquidity on both a short- and long-term basis to fund pre-financing project development costs, make equity contributions to project subsidiaries, pay our debt obligations and pay other administrative and general expenses as they are incurred from (1) distributions from energy projects and dividends from investments in oil and gas, (2) proceeds from the repayment of loans made by us to our project subsidiaries, and (3) funds available from our revolving credit facility. Environmental Matters or Regulations 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 as of the filing date of this report, 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. We expect that the implementation of Clean Air Act Amendments will result in increased capital expenditures and operating expenses. For example, we spent $77 million in 1999 and expect to spend approximately $139 million for 2000 and $42 million in 2001 to install upgrades to the environmental controls at the Homer City plant to control sulfur dioxide and nitrogen oxide emissions. Similarly, we plan to upgrade the environmental controls at the Illinois Plants to control nitrogen oxide emissions and expect to spend approximately $54 million, $45 million and $80 million for 2000, 2001 and 2002, respectively. In addition, at the Ferrybridge and Fiddler's Ferry plants, we expect to incur environmental costs arising from plant modification, totaling approximately $320 million for the 2000-2004 period. We do not expect these increased capital expenditures and operating expenses to have a material effect on our financial position or results of operation. 13 NOTE 6. BUSINESS SEGMENTS We operate predominately in one line of business, electric power generation, with reportable segments organized by geographic region: United States, Asia Pacific and Europe, Central Asia, Middle East and Africa. Our plants are located in different geographic areas, which mitigate the effects of regional markets, economic downturns or unusual weather conditions.
(In millions) Europe, (Unaudited) Central Asia, Three Months Ended Asia Middle East Corporate/ March 31, 2000 Americas Pacific and Africa Other/(i)/ Total -------------- ---------- --------- ------------- --------- --------- Operating revenues $ 279.7 $ 55.0 $ 404.0 $ -- $ 738.7 Net income (loss) (32.6) (5.3) 58.7 (33.3) (12.5) Total assets $ 7,735.3 $ 2,790.7 $ 5,107.1 $ -- $15,633.1 March 31, 1999 -------------- Operating revenues $ 84.6 $ 50.2 $ 135.0 $ -- $ 269.8 Net income (loss) 30.0 (10.0) 27.2 (3.1) 44.1 Total assets $ 2,973.6 $ 1,745.6 $ 2,212.0 $ -- $ 6,931.2
(i) Includes corporate net interest expense NOTE 7. INVESTMENTS The following table presents summarized financial information of the significant subsidiary investments in energy projects accounted for by the equity method. The significant subsidiary investments include the Cogeneration Group. The Cogeneration Group consists of Kern River Cogeneration Company, Sycamore Cogeneration Company and Watson Cogeneration Company, of which we own 50 percent, 50 percent and 49 percent interests in, respectively. (In millions) (Unaudited) Three Months Ended March 31, -------------------- 2000 1999 ------- ------- Operating Revenues $ 116.5 $ 133.7 Operating Expenses 80.5 79.5 Net Income 35.7 54.8 14 NOTE 8. LONG-TERM INCENTIVE PLAN As disclosed in our Annual Report on Form 10-K, Edison International and Edison Mission Energy have been considering an exchange offer of cash and stock equivalent units, relating to Edison International Common Stock, for outstanding Edison Mission Energy phantom stock options. Such an exchange offer was reviewed and approved by the Edison International Board of Directors at its meetings in January and February 2000, subject to final approval by the Edison International Compensation and Executive Personnel Committee of the offer terms and documentation. The Compensation and Executive Personnel Committee and the Edison International Board of Directors have subsequently concluded that, in view of unexpected events adversely impacting the earnings from merchant plants in the United Kingdom and the price of Edison International stock, it is not advisable to make an exchange offer to the holders of Edison Mission Energy's phantom stock options at this time. Accordingly, the Compensation and Executive Personnel Committee, the Edison International Board of Directors and management are now concentrating on developing methods to be used for valuing the 1999 merchant plant acquisitions for purposes of phantom option exercise windows and on other matters relating to future exercise windows (including other steps necessary to value the project portfolio at December 31, 1999). Upon resolution of the matters noted above, any adjustments which may be required to the accrued incentive liability will be recorded at that time. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains forward-looking statements that reflect Edison Mission Energy's current expectations and projections about future events based on our knowledge of present facts and circumstances and our assumptions about future events. In this discussion, the words "expects," "believes," "anticipates," "estimates," "intends," "plans" and variations of these words and similar expressions are intended to identify forward-looking statements. These statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. The information contained in this discussion is subject to change without notice. Unless otherwise indicated, the information presented in this section is with respect to Edison Mission Energy and its consolidated subsidiaries. General - ------- We are an independent power producer engaged in the business of developing, acquiring, owning and operating electric power generation facilities worldwide. Our current investments include 77 projects totaling 28,827 megawatts (MW) of generation capacity, of which 27,844 MW are in operation and our share is 22,693 MW. 983 MW are under construction of which our share is 317 MW. Our operating revenues are derived primarily from electric revenues and equity in income from energy projects. Consolidated operating revenues also include equity in income from oil and gas investments and revenues attributable to operation and maintenance services. Electric revenues are derived from our majority owned domestic and international entities. Equity in income from energy projects 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. Acquisition - ----------- 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 of the projects use wind to generate electricity from turbines which is sold under fixed-price long-term tariffs. Assuming all of the projects under development are completed, currently scheduled for 2002, the total capacity of these projects will be 283 megawatts (MWs). The purchase price is approximately $45 million (90 billion Italian Lira) with equity contribution obligations of up to $17 million (33 billion Italian Lira), depending on 16 the number of projects that are ultimately developed. As of March 2000, payments included $8 million towards the purchase price and $14 million in equity contributions. Results of Operations - --------------------- Operating Revenues Operating revenues increased $468.9 million for the first quarter of 2000, compared with the first quarter of 1999. The increase resulted from electric revenues from the Ferrybridge and Fiddler's Ferry plants acquired in July 1999, the generating assets acquired from Commonwealth Edison (Illinois Plants) in December 1999, the Homer City plant acquired in March 1999 and the start of commercial operation of the Doga project in May 1999. Equity in income from energy projects decreased during the first quarter of 2000, compared with the same prior year period. This decrease was primarily the result of higher revenues in the first quarter of 1999, first, from several cogeneration projects as the result of a final settlement on energy prices tied to short-run avoided cost with the applicable public utilities and, second, from one cogeneration project as the result of a gain on termination of a power sales agreement. 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, which have power sales contracts that provide for higher payments during the summer months. The First Hydro plant and Ferrybridge and Fiddler's Ferry plants provide for higher electric revenues during the winter months. Operating Expenses Operating expenses increased $453.8 million for the first quarter of 2000, compared with the same prior year period. The increase was due primarily to higher fuel, plant operations and depreciation and amortization expenses as a result of there being no comparable first quarter 1999 expenses for the Ferrybridge and Fiddler's Ferry plants, the Illinois Plants and the Homer City plant or for the Doga project, the first three having been acquired and the latter commencing commercial operation in May 1999. Operating Income Operating income increased $15.1 million for the first quarter of 2000, compared with the same prior year period. The increase was due to operating income from Ferrybridge and Fiddler's Ferry plants and the Homer City plant partially offset by losses from the Illinois Plants and lower equity in income from energy projects discussed above. The operating income from Ferrybridge and Fiddler's Ferry, which is expected to be higher during the winter months, was adversely affected by lower energy prices during the first quarter in 2000 due to warmer than average weather and regulatory uncertainty 17 regarding planned changes in the electricity trading arrangements. Operating losses from the Illinois Plants were due primarily to lower non-summer electricity prices under the power purchase agreement with Commonwealth Edison and lower non-summer generation. Other Income (Expense) Interest expense increased $128.5 million for the first quarter of 2000, compared with the first quarter of 1999. The increase was primarily the result of additional debt financing associated with the acquisition of the Illinois Plants, the Ferrybridge and Fiddler's Ferry plants and the Homer City plant. Provision (Benefit) for Income Taxes During the first quarter of 2000, we recorded an income tax benefit based on projected income for the year and benefits under the tax sharing agreement. The annual effective tax rate for the first quarter of 1999 was 22%. The annual effective tax rate in 1999 was below the Federal statutory rate of 35% due to lower foreign income taxes that result from the permanent reinvestment of earnings from foreign affiliates located in different tax jurisdictions. The annual effective tax rate for the first quarter of 2000 was 33%. The annual effective tax rate is expected to increase from the prior year due to lower foreign income tax benefits from 1999 and higher state income taxes due to the Homer City plant and Illinois Plants. 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 such matters will have a material adverse effect upon our financial condition or results of operations. Cumulative Effect of Change in Accounting Principle Through December 31, 1999 we have accrued for major maintenance costs during the period between turnarounds (referred to as "accrue in advance" accounting method). Such accounting policy has been widely used by independent power producers as well as several other industries. In March 2000, the U.S. Securities and Exchange Commission ("SEC") issued a letter to the Accounting Standards Executive Committee, stating its position that the SEC Staff does not believe it is appropriate to use an "accrue in advance" method for major maintenance costs. The Accounting Standards Executive Committee agreed to add accounting for major maintenance costs as part of an existing project and to issue authoritative guidance by August 2000. Due to the position taken by the SEC Staff, we decided voluntarily to change our accounting policy so as to record major maintenance costs as an expense as incurred. Such change in accounting policy is considered preferable based on the recent guidance provided by the SEC. In accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes", we have 18 recorded $17.7 million, after tax, 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 (SOP) 98-5, "Reporting on the Costs of Start-Up Activities", which became effective in January 1999. The Statement requires that certain costs related to start-up activities be expensed as incurred and that certain previously capitalized costs be expensed and reported as a cumulative change in accounting principle. The impact of adopting SOP 98-5 on our net income in 1999 was an expense of $13.8 million, after-tax. Liquidity and Capital Resources - ------------------------------- For the three months ended March 31, 2000, net cash provided by operating activities decreased to $32.4 million from $59.1 million for the same period in 1999. The 2000 decrease primarily reflects the decrease in net income, higher working capital requirements and payments of accrued incentive compensation. Net cash provided by financing activities totaled $363.2 million during the first quarter of 2000, compared to $1,708.8 million in 1999 for the same period. The decrease is primarily due to the 1999 Edison Mission Energy Holding Co., parent company of Homer City, borrowing of $800 million, our financing of $700 million, and borrowing on the corporate revolver of $220 million, the proceeds of which were used to purchase the Homer City plant. 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 outstanding bank borrowings for the Illinois Plants. In January 2000, one of our foreign subsidiaries borrowed $242.7 million from Edison Capital, an indirect affiliate. In February 2000, a dividend of $22 million was paid to Edison International, our parent company. As of March 31, 2000, we had recourse debt of $2.8 billion, with an additional $6.3 billion of non-recourse debt (debt which is recourse to specific assets or subsidiaries) on our consolidated balance sheet. Net cash used in investing activities decreased to $100.6 million for the three months ended March 31, 2000 from $1,834.1 million for the three months ended March 31, 1999. The decrease is primarily due to the $1.8 billion purchase of Homer City in March 1999. In March 2000, $21.7 million was paid towards the purchase price and contributions for the Italian Wind Projects. We invested $65.2 million and $27.5 million, respectively in the first quarter of 2000 and 1999, in new plant equipment principally related to the Homer City plant and Illinois Plants in 2000 and Doga in 1999. Capital expenditures, including environmental expenditures disclosed under the caption "Environmental Matters or Regulation," in 2000 are expected to approximate $308 million. In addition, we have entered into a reservation agreement with an turbine equipment manufacture to obtain the right to purchase nine turbines at specified delivery dates in 2002 and 2003. We plan to use this equipment in connection with expansion of our gas-fired generation projects in the United States. 19 At March 31, 2000, we had cash and cash equivalents of $684.2 million and had available $74 million of borrowing capacity under a $500 million revolving credit facility that expires in 2001 and $5 million of borrowing capacity under a $700 million commercial paper facility that expires in 2000. The borrowing capacity under the revolving credit facility may be reduced by borrowings for firm commitments to contribute project equity and to fund capital expenditures and construction costs of its project facilities. Firm Commitment for Asset Purchase Project Local Currency U.S. ($ in millions) - ------- -------------- -------------------- Italian Wind Projects (i) 74 billion Italian Lira $ 37 (i) Italian Wind Projects are a series of power projects that are in operation or under development in Italy. A wholly owned subsidiary of Edison Mission Energy 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) - -------- -------------- -------------------- ISAB (i) 244 billion Italian Lira $ 121 EcoElectrica (ii) 34 Tri Energy (iii) 25 Italian Wind Projects (iv) 6 billion Italian Lira 3 (i) 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. Equity is scheduled to be contributed in June 2000. (ii) EcoElectrica is a 540-MW liquefied natural gas combined cycle cogeneration facility in Penuelas, Puerto Rico. A wholly owned subsidiary of Edison Mission Energy owns a 50% interest. Commercial operations commenced in March 2000. Equity was contributed in April 2000. (iii) Tri Energy is a 700-MW gas-fired power plant under construction in Ratchaburi Province, Thailand. A wholly owned subsidiary of Edison Mission Energy owns a 25% interest. Equity will be contributed at commercial operation, which is currently scheduled for mid-2000. (iv) Italian Wind Projects are a series of power projects that are in operation or under development in Italy. A wholly owned subsidiary of Edison Mission Energy owns a 50% interest. Equity will be contributed depending on the number of projects that are ultimately developed. 20 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 has no reason to believe that these events of default will occur to require acceleration of the firm commitments. Contingent Obligations to Contribute Project Equity Projects U.S. ($ in millions) - -------- -------------------- Paiton (i) $ 76 Tri Energy (ii) 20 All Other 27 (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. In any and all circumstances, our obligation to contribute contingent equity will not exceed $141 million, of which $65 million has been contributed as of March 31, 2000. As more fully described below under the caption "Other Commitments and Contingencies," PT PLN (Persero) (PLN), formerly referred to as PT Perusahaan Listrik Negara, the main source of revenue for the project, has failed to pay the project in respect of its invoices through February 2000 (with the exception of a partial payment made in June 1999). In February 2000, Paiton Energy entered into an Interim Agreement with PLN which called for a termination of all legal actions by both parties, interim monthly payments through the end of 2000 (total payments US $115 million), dispatch of the facility at partial load and, in addition to the fixed monthly payments, payment for energy actually delivered. To date, PLN has made the fixed monthly payments for the months of March and April, and has paid for energy delivered in the month of March. Paiton Energy will continue to invoice PLN for capacity payments at the rate determined under the Power Purchase Agreement. These invoices (minus the fixed monthly payments received under the Interim Agreement) will accrue and will be dealt with under the overall tariff restructuring negotiations. In October 1999, in response to PLN's failure to pay, Paiton Energy entered into an interim agreement with its lenders (the Lender Interim Agreement) which modified the contingent equity provisions of the Paiton Energy debt documents related to the authorized usage of the monies during the agreed interim period, which extends from October 15, 1999 through July 31, 2000. The Lender Interim Agreement provides, among other things, that contingent equity from us and the other Paiton Energy shareholders shall be contributed from time to time as needed to enable Paiton Energy to pay interim project costs. Interim project costs include interest on project debt and operating costs which become due and payable during the term of the Lender Interim Agreement and other costs related to the construction of the project, provided that in the latter case no more than an aggregate of $30 million of contingent equity can be 21 used for this purpose. The Lender Interim Agreement provides that a portion of the contingent equity (originally $206 million, of which our current unfunded share is $32 million), will become due and payable by the shareholders in the event that certain events of default, other than those specifically waived under the Lender Interim Agreement, occur. The Lender Interim Agreement further provides that all unfunded contingent equity (originally $300 million, of which our current unfunded share is $76 million), will become due and payable by the shareholders in the event that Paiton Energy fails to make any interest payment during the pendency of the Lender Interim Agreement. As of March 31, 2000, Paiton Energy's shareholders have contributed to Paiton $138 million of contingent equity, of which our share is $65 million. The contractor for the Paiton project and Paiton Energy reached a global settlement in principal, the terms of which are being finalized. The global settlement deals with all claims, including contractor claims for retention, costs relating to a dispute involving a slope adjacent to the Paiton site and other cost overruns related to delays in the completion of the construction of the project and Paiton Energy's claims under the construction contract. Terms and conditions of this settlement will require the approval of Paiton Energy's lenders. Paiton Energy is presently discussing this settlement agreement with its lenders and contractor, and expects that an accommodation of lender requirements can be achieved, and therefore that the Lender approval can be obtained. As noted, the shareholders' obligation to contribute contingent equity to Paiton Energy to enable it to pay the contractor for the finally agreed amount is limited to $30 million. Paiton Energy's obligations to the contractor exceed this amount. The shortfall will be met through funds that may be made available to the project and ultimately will be paid out of revenues received as a result of the renegotiation of the power purchase agreement and the project's debt agreements, as more fully discussed under the caption, "Other Commitments and Contingencies." Our contingent equity obligations for the Paiton project are to be cancelled, if unused, as of the later of the date of term financing by the Export-Import Bank of the United States and August 1, 2000. Term financing by the Export-Import Bank of the United States is the subject of a comprehensive set of conditions. The obligation of the Export-Import Bank of the United States to provide term financing was initially scheduled to terminate on October 15, 1999. The Export-Import Bank of the United States agreed to extend the term financing commitment through December 31, 2000 and has determined that the project will need to meet additional terms and conditions for take-out of the construction lenders. Paiton Energy and its lenders are in discussions with regard to the extension of the Lender Interim Agreement through December 31, 2000 to coincide with the US-EXIM take-out date and the time period of the Interim Agreement with PLN. (ii) Contingent obligations to contribute additional equity to the project relate specifically to an agreement between EME and Banpu Public Company (a project shareholder) to provide certain back-up equity assurances to the project's lenders should Banpu be 22 unable to fund the full portion of its equity when due. At present, we do not anticipate a requirement to fund this additional equity. Other than as noted above, we are not aware, at this time, of any other contingent obligations or obligations to contribute project equity. Other Commitments and Contingencies Subsidiary Indemnification Agreements Some of our subsidiaries have entered into indemnification agreements, under which the subsidiaries 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 March 31, 2000, if payment were required, would be $271 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. Paiton Paiton is a 1,230-MW coal-fired power plant in operation in East Java, Indonesia. A wholly owned subsidiary of Edison Mission Energy owns a 40% interest and has a $453 million investment at March 31, 2000. The project's tariff is higher in the early years and steps down over time. The tariff for the Paiton project includes infrastructure to be used in common by other units at the Paiton complex. The plant's output is fully contracted with the state-owned electricity company, PLN. Payments are in Indonesian Rupiah, with the portion of such payments intended to cover non-Rupiah project costs, including returns to investors, indexed to the Indonesian Rupiah/U.S. dollar exchange rate established at the time of the power purchase agreement in February 1994. The project received substantial finance and insurance support from the Export-Import Bank of the United States, The Export-Import Bank of Japan, the U.S. Overseas Private Investment Corporation and the Ministry of International Trade and Industry of Japan. PLN's payment obligations are supported by the Government of Indonesia. The projected rate of growth of the Indonesian economy and the exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated significantly since the Paiton project was contracted, approved and financed. The Paiton project's senior debt ratings have been reduced from investment grade to speculative grade based on the rating agencies' determination that there is increased risk that PLN might not be able to honor the electricity sales contract with Paiton Energy. The Government of Indonesia has arranged to reschedule sovereign debt owed to foreign governments and has entered into discussions about rescheduling sovereign debt owed to private lenders. Specified events, including those discussed in the paragraph below, which, with the passage of time or upon notice, may mature into defaults of the project's debt agreements have occurred. On October 15, 1999, the project entered into an interim agreement with its lenders pursuant to which the lenders waived 23 such defaults until July 31, 2000. However, this waiver may expire on an earlier date if additional defaults, other than those specifically waived, or other specified events occur. In May 1999, Paiton Energy notified PLN that Unit 7 of the Paiton project achieved commercial operation under terms of the power purchase agreement and, in July 1999, that Unit 8 of the Paiton project had similarly achieved such commercial operation. Because of the economic downturn, PLN is experiencing low electricity demand and PLN had, through February of this year, been dispatching the Paiton plant to zero; however, under the terms of the power purchase agreement, PLN is required to continue to pay for capacity and fixed operating costs once each unit and the plant achieve commercial operation. An invoice for these charges for May 1999 in the amount of $7.8 million was submitted to PLN. The project and PLN met to review the invoice and a partial payment of $2.5 million was subsequently received. The primary reason for the payment shortage was the use of an arbitrary Indonesian Rupiah/U.S. dollar exchange rate of 2,450 Indonesian Rupiah to one U.S. dollar by PLN. The use of this exchange rate is not in agreement with the power purchase agreement, but is the exchange rate on which PLN payments to other independent power producers in Indonesia were then being based. Additional invoices for capacity charges and fixed operating costs in an aggregate amount of $312 million were later submitted to PLN. PLN has yet to make any payments in respect of such latter invoices. In addition, PLN filed a lawsuit contesting the validity of its agreement to purchase electricity from the project. The lawsuit was withdrawn by PLN on January 20, 2000. On February 21, 2000, Paiton Energy and PLN executed an Interim Agreement pursuant to which the power purchase agreement will be administered pending a long-term restructure of the power purchase agreement. Among other things, the Interim Agreement provides for dispatch of the project, fixed monthly capacity payments to Paiton Energy by PLN, the first two payments of which were received totaling $15 million, and the standstill of any further legal proceedings by either party during the term of the Interim Agreement, which runs through December 31, 2000 and may be extended by mutual agreement. PLN and Paiton Energy have agreed that negotiations on a long-term restructuring of the tariff will begin in May 2000. Any material modifications of the power purchase agreement could also require a renegotiation of the Paiton project's debt agreements. The impact of any such renegotiations with 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 24 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 the present 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 management and royalty fees. At March 31, 2000, no accrual has been recorded 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. Litigation We are routinely involved in litigation arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, we, based on advice of counsel, do not believe that the final outcome of any pending litigation will have a material adverse effect on our financial position or results of operations. 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. We believe that we will have sufficient liquidity on both a short- and long-term basis to fund pre-financing project development costs, make equity contributions to project subsidiaries, pay our debt obligations and pay other administrative and general expenses as they are incurred from (1) distributions from energy projects and dividends from investments in oil and gas, (2) proceeds from the repayment of loans made by us to our project subsidiaries, and (3) funds available from our revolving credit facility. MARKET RISK EXPOSURES Edison Mission Energy's primary market risk exposures arise from changes in interest rates, changes in oil and gas prices and electricity pool pricing and fluctuations in foreign currency exchange rates. We manage these risks by using derivative financial instruments in accordance with established policies and procedures. We do not use derivative financial instruments for speculative purposes. 25 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 $5.1 million and $6.2 million of additional interest expense for the three months ended March 31, 2000 and 1999, 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. Commodity Price Risk Electric power generated at our uncontracted 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 market (PJM) or the New York independent system operator (NYISO). 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 "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 plants in the United Kingdom (UK) sell their electrical energy and capacity through a centralized electricity pool, which establishes a half-hourly clearing price, also referred to as the pool price, for electrical energy. The pool price is extremely volatile and can vary by as much as a factor of ten or more over the course of a few hours, due to the large differentials in demand according to the time of day. The First Hydro and Ferrybridge and Fiddler's Ferry plants mitigate a portion of the market risk of the pool by entering into contracts for differences, which are electricity rate swap agreements, related to either the selling or purchasing price of power. These contracts specify a price at which the electricity will be traded, and the parties to the agreement make payments calculated based on the difference between the price in the contract and the pool price for the element of power under contract. These contracts are sold in various structures and act to stabilize revenues or purchasing costs by removing an element of their net exposure to pool price volatility. In July 1998, the UK Director General of Electricity Supply proposed to the Minister for Science, Energy and Industry that the current structure of contracts for differences and compulsory trading via the pool at half-hourly clearing prices bid a day ahead be abolished. The UK Government accepted the proposals in October 1998 subject to certain reservations. Following this, further proposals were published by the Regulator in July and October 1999. The proposals include, among other things, the establishment of voluntary long-term forwards and futures markets, organized by independent market operators and evolving in response to demand; voluntary short-term power exchanges operating from 24 to 4-hours before a trading period; a balancing mechanism to enable 26 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 stronger incentives for being in balance; and a Balancing and Settlement Code Panel to oversee governance of the balancing mechanism. The Minister for Science, Energy and Industry has recommended that the proposal be implemented by the end of October 2000. It is difficult at this stage to evaluate the future impact of the proposals. However, a key feature of the new trading arrangements is to move to firm physical delivery which means that a generator must deliver, and a consumer take delivery, against their contracted positions or face the uncertain consequences of the system operator buying or selling in the balancing market, on their behalf, and passing the costs back to them. A consequence of this will be to increase greatly the motivation of parties to contract in advance. Recent experience has been that this has placed a significant downward pressure on forward contract prices. Legislation in the form of a Utilities Bill, published on January 20, 2000, is being introduced to allow for the implementation of new trading arrangements and the necessary amendments to generators' licenses. A warmer than average winter, the entry of new operations into the generation market, the introduction of the new electricity trading arrangements coupled with uncertainties surrounding the new Utilities Bill and a proposed "good behavior" clause, discussed below, contributed to a drop in electricity market prices in the first quarter of 2000 and have depressed forward prices for winter 2000/2001. As a result of these events, we expect lower than anticipated revenue from our Ferrybridge and Fiddler's Ferry plants. The Utilities Bill is scheduled to become law by July 2000. The core of the proposals is a fair deal for consumers through the provision of proper incentives to innovate and improve efficiency, growth of competition, protection for consumers and contribution of the utilities of a better environment. While the UK Government recognizes the need to strike a balance between consumer and shareholder interest, the proposals have far reaching implications for the utilities sector. In December 1999, the UK Director General of Electricity Supply gave notice of an intention to introduce a new condition into the licenses of a number of generators to curb the perceived exercise of market power in the determination of wholesale electricity prices. The majority of the major generators have accepted the new clauses, including Edison Mission Energy, which has sought and received specific assurances from the Regulator on the definition of market abuse and the way the clauses will be interpreted in the future. 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. 27 Electric power generated at the Illinois Plants is sold under power purchase agreements with Commonwealth Edison, in which Commonwealth Edison will purchase capacity and have 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. Commonwealth Edison will be 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 Commonwealth Edison. The capacity payment will provide the Illinois Plants revenue for fixed charges, and the energy payment will compensate the Illinois Plants for variable costs of production. If Commonwealth Edison 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. 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 is 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 are sold in various structures and are accounted for as electricity rate swap agreements. In addition, the Loy Yang B plant has entered into a State Hedge agreement with the State Electricity Commission of Victoria. The State Hedge 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. Our electric revenues were increased by $36.6 million and $22.1 million for the three months ended March 31, 2000 and 1999, respectively as a result of electricity rate swap agreements and other hedging mechanisms. 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. 28 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. There can be no assurance, 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 and Ferrybridge and Fiddler's Ferry plants in the United Kingdom and the Loy Yang B plant in Australia have been financed in their local currency, pound 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. Based upon these analyses, we believe that the investment returns for the First Hydro, Ferrybridge and Fiddler's Ferry, and Loy Yang B plants are adequately insulated from a broad range of foreign exchange scenarios at this time. 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 domestic operating projects, excluding the Homer City plant and the Illinois Plants, is sold to electric utilities under long-term (typically with terms of 15 to 30-years) power purchase agreements and is expected to result in consistent cash flow under a wide range of economic and operating circumstances. To accomplish this, 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. ENVIRONMENTAL MATTERS OR REGULATIONS - ------------------------------------ 29 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 as of the filing date of this report, 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. We expect that the implementation of Clean Air Act Amendments will result in increased capital expenditures and operating expenses. For example, we spent $77 million in 1999 and expect to spend approximately $139 million for 2000 and $42 million in 2001 to install upgrades to the environmental controls at the Homer City plant to control sulfur dioxide and nitrogen oxide emissions. Similarly, we plan to upgrade the environmental controls at the Illinois Plants to control nitrogen oxide emissions and expect to spend approximately $54 million, $45 million and $80 million for 2000, 2001 and 2002, respectively. In addition, at the Ferrybridge and Fiddler's Ferry plants, we expect to incur environmental costs arising from plant modification, totaling approximately $320 million for the 2000-2004 period. We do not expect these increased capital expenditures and operating expenses to have a material effect on our financial position or results of operation. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", which, as amended, will be effective in January 2001. The Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. A derivative's gains and losses for qualifying hedges offset related results on the hedged item in the income statement and a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. The impact of adopting Statement 133 on our financial statements has not been quantified at this time. 30 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 10.76 Agreement among Edward R. Muller, Edison International and Edison Mission Energy concerning the terms of Mr. Muller's employment separation 10.77 Agreement By and Between S. Linn Williams and Edison Mission Energy dated February 5, 2000 10.78 Form of Agreement for 2000 Employee Awards under the Equity Compensation Plan 10.79 Resolution regarding the computation of disability and survivor benefits prior to age 55 for Alan J. Fohrer 10.80 Shareholder Interest Purchase Agreement dated 3 March 2000 between MEC International B.V. and UPC International Partnership CV II 18.1 Preferability Letter Regarding Change in Accounting Principle for Major Maintenance Costs 27 Financial Data Schedule (b) Reports on Form 8-K The registrant filed the following report on Form 8-K/A during the quarter ended March 31, 2000. Date of Report Date Filed Item Reported -------------- ---------- ------------- July 17, 1999 February 8, 2000 7 31 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Edison Mission Energy -------------------------- (Registrant) Date: May 12, 2000 /s/ KEVIN M. SMITH - ------------------ -------------------------- KEVIN M. SMITH Senior Vice President and Chief Financial Officer 32 EX-10.76 2 AGREEMENT BETWEEN E. MULLER & EDISON INTR'L EXHIBIT 10.76 Execution Copy AGREEMENT By And Among Edward R. Muller Edison Mission Energy And Edison International (As To Certain Sections Only) January 17, 2000 Execution Copy Table of Contents
Page ---- ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS................................................... 1 Section 1.01 Definitions.................................................................. 1 Section 1.02 Interpretive Matters......................................................... 3 ARTICLE 2: EMPLOYMENT AND COMPENSATION......................................................... 4 Section 2.01 Resignation.................................................................. 4 Section 2.02 Further Assurances........................................................... 4 Section 2.03 Effect of Resignation........................................................ 4 Section 2.04 Compensation and Benefits.................................................... 4 Section 2.05 Withholding.................................................................. 7 Section 2.06 Company Property............................................................. 7 Section 2.07 Releases..................................................................... 8 ARTICLE 3: CONSULTING.......................................................................... 8 Section 3.01 Consulting Services.......................................................... 8 Section 3.02 Compensation................................................................. 8 Section 3.03 Expense Reimbursement........................................................ 10 Section 3.04 Indemnity.................................................................... 10 Section 3.05 Relationship Between Parties................................................. 10 Section 3.06 Limitations on Authority..................................................... 11 Section 3.07 Early Termination............................................................ 11 ARTICLE 4: ADDITIONAL COVENANTS OF EXECUTIVE................................................... 12 Section 4.01 Confidentiality.............................................................. 12 Section 4.02 Stock Activity............................................................... 14 Section 4.03 Non-Competition.............................................................. 15 Section 4.04 Non-Solicitation; Non-Disparagement; Non-Interference........................ 16 Section 4.05 Ownership of Works........................................................... 17 Section 4.06 Cooperation With Legal Process............................................... 17 ARTICLE 5: GENERAL PROVISIONS.................................................................. 18 Section 5.01 Opportunity to Review With Counsel........................................... 18 Section 5.02 Choice of Law................................................................ 18 Section 5.03 Remedies..................................................................... 18 Section 5.04 Severability................................................................. 18 Section 5.05 No Amendment; Entire Agreement; No Waiver.................................... 19 Section 5.06 Right Of Offset.............................................................. 19 Section 5.07 Parties of Interest.......................................................... 19 Section 5.08 Notices...................................................................... 19 Section 5.09 Counterparts................................................................. 20 Section 5.10 Publicity.................................................................... 20
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Page ---- Section 5.11 Headings..................................................................... 20 Section 5.12 Attorneys Fees............................................................... 20 Section 5.13 Further Assurances........................................................... 20 Section 5.14 Additional Covenants of the Company.......................................... 20 Section 5.15 Dispute Resolution........................................................... 20 Section 5.16 Approvals.................................................................... 21
SCHEDULE OF ADDRESSES SCHEDULE OF DEFERRED COMPENSATION SCHEDULE OF OTHER TERMINATED BENEFITS SCHEDULE OF POSITIONS SCHEDULE OF RETIREMENT BENEFITS SCHEDULE OF VESTED OPTIONS FORM OF GENERAL RELEASE FORM OF AGE DISCRIMINATION RELEASE ii Execution Copy AGREEMENT THIS AGREEMENT ("Agreement") is entered into as of January 17, 2000 by and among Edward R. Muller (the "Executive"), Edison Mission Energy, a California corporation (the "Company"), and, as to Sections 2.04(d)(in respect of options for Parent company stock) and 3.02(d), Edison International, a California corporation (the "Parent"). RECITALS WHEREAS, the Executive is currently employed as the President and Chief Executive Officer of the Company; and WHEREAS, the Executive and the Company have mutually agreed that Executive will resign from his full-time position at the Company; and WHEREAS, the Company desires to retain certain consultant services of Executive as described and for the term set forth herein; NOW, THEREFORE, in consideration of the mutual agreements and covenants of the parties herein contained, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows. ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS SECTION 1.01 Definitions. As used herein the following terms have the following meanings: (a) "Affiliate" means, with respect to a specified Person, any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. (b) "Agreement" has the meaning specified in the introductory paragraph of this Agreement. (c) "Claims" has the meaning specified in the form of General Releases attached hereto. (d) "Company" has the meaning specified in the introductory paragraph of this Agreement. (e) "Confidential Information" has the meaning specified in Section 4.01(a). 1 (f) "Consulting Services" has the meaning specified in Section 3.01. (g) "Consulting Term" means the period commencing on the Effective Date and ending on the earlier of the second anniversary of the Effective Date or the date on which the Consulting Term is sooner terminated in accordance with the provisions hereof, provided that, if the Consulting Term is otherwise terminated pursuant to Section 3.07(a)(iv), the Consulting Term shall nevertheless be deemed to continue until its originally scheduled expiration date solely for purposes of Section 3.02. (h) "Deferral Plans" means the Edison International Executive Deferred Compensation Plan and the Edison International Option Gain Deferral Plan. (i) "Effective Date" shall be January 18, 2000. (j) "Equity Plans" has the meaning specified in Section 2.04(d). (k) "Executive" has the meaning specified in the introductory paragraph of this Agreement. (l) "Group" means two or more Persons which agree to act together for the purpose of acquiring, holding, voting or disposing of Voting Stock or of acquiring, holding or disposing of any significant subsidiary, or significant amount of assets, of the Company or any Affiliate of the Company. (m) "Materials" has the meaning specified in Section 4.05. (n) "Options" has the meaning specified in Section 2.04(d). (o) "Line of Business" means the construction, development, financing, acquisition, ownership, disposition, operation or maintenance of electrical power generating facilities and/or the transmission or distribution of electrical power or natural gas. (p) "Parent" has the meaning specified in the introductory paragraph of this Agreement. (q) "Person" means and includes an individual, a partnership, a limited liability company, a joint venture, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof or any entity similar to any of the foregoing. (r) "Releasee" has the meaning specified in the form of General Release attached hereto. (s) "Releasor" has the meaning specified in the form of General Release attached hereto. 2 (t) "Schedule of Addresses" means the Schedule of Addresses attached hereto and incorporated herein by reference. (u) "Schedule of Deferred Compensation" means the Schedule of Deferred Compensation attached hereto and incorporated herein by reference. (v) "Schedule of Other Terminated Benefits" means the Schedule of Other Terminated Benefits attached hereto and incorporated herein by reference. (w) "Schedule of Positions" means the Schedule of Positions attached hereto and incorporated herein by reference. (x) "Schedule of Retirement Benefits" means the Schedule of Retirement Benefits attached hereto and incorporated herein by reference. (y) "Schedule of Vested Options" means the Schedule of Vested Options attached hereto and incorporated herein by reference. (z) "Voting Stock" means shares of capital stock of the Parent that are entitled to vote in periodic elections for directors and any shares of capital stock, or similar securities, of any Affiliate of the Parent which are entitled to vote in periodic elections for directors or other similar governing board members. (aa) "Works" has the meaning specified in Section 4.05. SECTION 1.02 INTERPRETIVE MATTERS. In this Agreement, unless the context otherwise requires, the singular shall include the plural, the masculine shall include the feminine and neuter, and vice versa. The terms "includes" or "including" shall mean "including without limitation." References to a Section, Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule of this Agreement, and reference to a given agreement or instrument shall be a reference to that agreement or instrument as modified, amended, supplemented and restated through the date as of which such reference is made. This Agreement and any documents or instruments delivered pursuant hereto shall be construed without regard to the identity of the Person who drafted the various provisions of the same. Each and every provision of this Agreement and such other documents and instruments shall be construed as though the parties participated equally in the drafting of the same. Consequently, the parties acknowledge and agree that any rule of construction that a document is to be construed against the drafting party shall not be applicable either to this Agreement or such other documents and instruments. 3 ARTICLE 2: EMPLOYMENT AND COMPENSATION SECTION 2.01 RESIGNATION. Effective upon the Company's approval and execution of this Agreement, Executive does hereby resign from any and all positions of responsibility or authority at the Company, any subsidiary or Affiliate of the Company, any other entity in which the Company or any of its Affiliates has an investment where Executive's position with such entity is related to such investment, and any division, unit, plan, program, trust, fund, project or other subdivision established, organized or sponsored by the Company or any of its subsidiaries or Affiliates or any such other entity, whether such position is that of an agent, officer, manager, member, partner, executive, trustee, administrator, director or otherwise, provided that with respect to any membership that Executive may have on the board of directors or similar governing board of any publicly traded entity, Executive's resignation shall be deemed deferred until the Company makes written request therefor. Without limiting the generality of the foregoing, Executive hereby resigns from all positions set forth or described in the Schedule of Positions attached hereto and incorporated herein by reference. Notwithstanding the foregoing, if the Effective Date is after the date hereof, then between the date hereof and the Effective Date, Executive shall remain an employee of the Company on administrative leave, entitled to compensation for such period at his current base rate of salary and existing fringe benefits, but it is understood that Executive shall have no authority to bind or to determine or direct any activity of, or represent, the Company or any of its Affiliates during such period. Upon the Effective Date, and without any further action by Executive or the Company, Executive's employment with the Company shall end. SECTION 2.02 FURTHER ASSURANCES. To the extent necessary, Executive agrees from time-to-time, upon the Company's reasonable request, to execute any and all documents as may be necessary or desirable, in the reasonable and good faith judgment of the Company or any of its Affiliates, to further confirm and/or effectuate the aforesaid resignations. SECTION 2.03 EFFECT OF RESIGNATION. Executive and the Company agree that the resignation contained herein arises from the mutual agreement of the Executive and the Company, resulting in a cessation of Executive's continued employment. Accordingly, such resignation shall not be construed or deemed to be a termination of Executive's employment by the Company, whether with or without cause, or to constitute or be deemed to be any breach of any employment or other obligation or duty by either the Executive or by the Company or any of its Affiliates, whether express or implied, for any purpose, provided that for purposes of construing the provisions of any employee benefit plan in which Executive has been a participant, Executive's resignation shall be given the same effect as a termination without cause. SECTION 2.04 COMPENSATION AND BENEFITS. Executive hereby agrees that the following, together with amounts that shall be payable to Executive under Article 3 hereof in respect of Executive's Consulting Services, accurately reflect all of the compensation, 4 benefits or perquisites payable or otherwise to be provided to Executive by the Company and its Affiliates on and after the Effective Date as a result of Executive's employment by and separation from the Company and its Affiliates and that Executive is not entitled to any other compensation, benefits, or perquisites except as set forth in this Agreement: (a) Salary. On the Effective Date, Executive will receive accrued base salary from the end of the immediately preceding payroll period for which payment has been made through the Effective Date. (b) Accrued Vacation. On the Effective Date, the Company will pay Executive such amounts as are due Executive for accrued and unused vacation time in accordance with the Company's usual policies. After the Effective Date, Executive will not accrue or be paid for vacation time in connection with his provision of consulting services to the Company. (c) Executive Incentive Compensation Plan. On the Effective Date, the Company will pay Executive a bonus amount for the 1999 year under the Company's Executive Incentive Compensation Plan equal to a gross amount, before withholding, of Three Hundred Forty-Seven Thousand Two Hundred Fifty Dollars Exactly ($347,250). Executive shall not be entitled to any further payments under the Company's Executive Incentive Compensation Plan, including for any period after 1999. Nothing in this paragraph shall create any inference or expectation regarding bonuses actually to be paid to participants in such Plan for the 1999 year, which may be above or below target amounts for individuals or in the aggregate. (d) Options. For purposes of the vesting of any unvested awards previously made to Executive under the Edison International Equity Compensation Plan or under the Edison International Management and Officer Long-Term Incentive Compensation Plans (the "Equity Plans"), Executive's employment by the Company shall be given the same effect as if Executive had remained regularly employed through the Effective Date. Executive and the Company agree that, as of the Effective Date, Executive's vested options to acquire stock of the Parent and vested phantom options in respect of the Company will be as set forth in the Schedule of Vested Options attached hereto and incorporated herein by reference (the "Options"). From and after the Effective Date, the Executive shall no longer be eligible for grants of any awards under the Equity Plans or under any other long-term incentive plan of the Company or its Affiliates, and except as set forth in Section 3.02, all unvested awards shall terminate as of the Effective Date. On March 16, 2000, the Company shall pay to Executive, by wire transfer in accordance with Executive's reasonable written instructions given at least forty-eight (48) hours in advance, a gross amount, before withholding, that is equal to the difference between $471.0642 per phantom share and the pertinent exercise price of such share as shown on the Schedule of Vested Options for each vested phantom Option of the Company. From and after the date hereof, Executive shall have no further rights or entitlements in respect of such phantom Options or any phantom options in respect of the Company, except as set forth in Section 3.02; provided that if, 5 within six (6) months of the date hereof, the Company or any Affiliate of the Company consummates an exchange offer with holders of phantom options of the Company in which the stated exchange value (before interest and any contingent amounts) per phantom share for purposes of the exchange offer exceeds $471.0642 per phantom share, then, within thirty (30) days following the completion of such exchange offer, the Company shall pay to Executive a gross amount, before withholding, equal to such excess multiplied by the number of vested phantom Options of Executive shown on the Schedule of Vested Options. Following the Effective Date, Options for stock of the Parent listed on the Schedule of Vested Options, shall remain subject to the terms of the award and the Plan under which they were granted, subject to the provisions of Section 3.02. (e) Deferral Plans. The Schedule of Deferred Compensation attached hereto and incorporated herein by reference sets forth, as of the date shown, the vested balance of Executive's deferral account in the Edison International Executive Deferred Compensation Plan and units credited to Executive's stock unit account in the Edison International Option Gain Deferral Plan. All deferred compensation benefits shown on the Schedule of Deferred Compensation, following the Effective Date, shall remain subject to the terms of the Deferred Compensation Plan applicable thereto. (f) Retirement Benefits. The Schedule of Retirement Benefits attached hereto and incorporated herein by reference sets forth, as of the Effective Date, the vested benefits payable to Executive under retirement plans of the Company and its Affiliates in which he has been a participant. All such benefits shown on the Schedule of Retirement Benefits, following the Effective Date, shall remain subject to the terms of the pertinent retirement plan applicable thereto, including the conditions to payment set forth therein. After the Effective Date, there will be no further accrual of benefits for Executive under such retirement plans. (g) Health Benefits. From the Effective Date until eighteen (18) months thereafter, Executive and his family shall remain eligible to continue to participate in medical and dental plans of the Company and its Affiliates on the same basis as if Executive had remained employed by the Company in his current position, provided that Executive shall be responsible for paying the premium costs therefor in accordance with the Company's ordinary practices in respect of former employees, subject to the further provisions of Section 3.02. (h) Other Insurance Coverage. Executive acknowledges that, except as provided in Section 2.04(g) above and Section 3.02(c), no life, health, accident, disability or other insurance policies or health or welfare benefits will be provided for him by the Company or its Affiliates after the Effective Date. (i) Contract Costs. The Company will reimburse Executive for the reasonable fees and costs of any attorney, financial advisor, accountant and/or other professional 6 advising and assisting Executive in the negotiations of this Agreement, up to Twenty-Five Thousand Dollars ($25,000) in the aggregate. (j) Outstanding Expense Reports. Executive agrees to submit to the Company an expense report for all reimbursable and reasonable expenses he has incurred as an employee of the Company no later than the fifteenth business day following the Effective Date, and acknowledges that the business expenses to be contained in such expense report will be the only remaining reimbursable business expenses incurred by Executive while in the Company's employ. The Company will reimburse Executive for such expenses within thirty (30) days of Executive's submission of the report, to the extent such expenses are valid and reimbursable under Company policy. (k) Severance. On the Effective Date, the Company shall make a one- time severance payment to Executive in an amount, prior to withholding, that is equal to Five Hundred Thousand Dollars Exactly ($500,000). (l) Other Compensation. Executive acknowledges that from and after the Effective Date, all other compensation, benefits and perquisites to which he has been entitled as an employee of the Company shall forthwith terminate and that he shall no longer be entitled to receive the same, including without limitation, reimbursement for the costs of a car and driver and for private club memberships. Without limiting the generality of the foregoing, the other benefits and perquisites in which Executive currently participates which shall no longer be available to him after the Effective Date are as set forth in the Schedule of Other Terminated Benefits attached hereto and incorporated herein by reference. SECTION 2.05 WITHHOLDING. Executive agrees that all compensation, benefits and perquisites payable hereunder shall be paid after withholding for taxes which, in the Company's reasonable good faith judgment, are required to be withheld by the Company, including income taxes at the then current published federal and state rate unless Executive elects to use a higher rate. Notwithstanding the foregoing, it is understood that all personal income and related taxes applicable to any and all compensation, benefits and perquisites payable hereunder shall be paid by Executive, and the Company shall not be obligated to pay any such taxes or to provide Executive with funds for the payment of same. SECTION 2.06 COMPANY PROPERTY. Executive agrees to return to the Company, as soon as practicable, but in any event on or prior to the Effective Date, all Company property, including, but not limited to, all keys, credit cards, documents, equipment (including computer and telephone equipment) automobiles, files, data and records of any kind whatsoever that he has in his possession or control (except for any Company property that the Company authorizes Executive in writing to retain for purposes of his providing the Consulting Services hereunder) regardless of the form for storage thereof (whether documentary, on discs or present on other electronic media). The Company agrees to permit Executive to retain copies of documents that are contained in his office files and that are personal 7 in nature, subject to the Company's prior review of such materials and approval of their retention by the Executive. Notwithstanding the foregoing, (a) subject to the Company's satisfaction that all Company information and programs have been removed therefrom, Executive may retain the Company's personal computer currently at Executive's residence, and (b) the Company will cooperate and work together with Executive to facilitate Executive's assumption of the Company's future obligations in respect of the automobile currently leased by the Company for Executive. SECTION 2.07 RELEASES. In further consideration of the Company's entry into this Agreement with Executive and its promise to make payments and to provide benefits hereunder to which Executive is not otherwise entitled, Executive is, concurrent with the Company's execution of this Agreement, delivering to the Company executed copies of the forms of releases attached hereto, respectively, as "Form of General Release" and "Form of Age Discrimination Release." In the event that the Executive exercises his right to rescind the Age Discrimination Release, then notwithstanding any other provision of this Agreement, the Company shall have the right, within five (5) days thereafter, to terminate any and all further obligations of the parties under this Agreement. ARTICLE 3: CONSULTING SECTION 3.01 CONSULTING SERVICES. During the Consulting Term, Executive will, when reasonably requested to do so by the Company's Chairman, Chief Executive Officer or Board of Directors, provide the Company and its officers and directors with strategic consulting and advisory services related to material aspects of the Company's business. All Consulting Services provided hereunder will be provided on an "as requested" basis, subject to Executive's reasonable availability. Without limiting the generality of the foregoing, and subject to the Company's compensating the Executive for additional time as provided for herein, Executive shall not be required to expend more than forty (40) hours per month on providing Consulting Services hereunder. When requested to provide Consulting Services, Executive shall endeavor to do so in a professional, diligent and workmanlike manner, providing the Company and its Affiliates with the benefit of his best, informed and professional judgment. All Consulting Services shall be provided by Executive personally, but Executive shall have the right to obtain the assistance of his employees at no additional cost to the Company. SECTION 3.02 COMPENSATION. In consideration of his providing the Consulting Services and subject to the terms and provisions of this Agreement and Executive's compliance therewith, the Company shall pay to the Executive the following compensation: 8 (a) The Company shall pay Executive a consulting fee at the rate of Three Hundred Thousand Dollars ($300,000) per annum, payable in equal monthly installments on the last day of each month during the Consulting Term (pro-rated for partial months during the Term). (b) In the event that Executive provides more than forty (40) hours of Consulting Services in any calendar month, then the Company shall also pay Executive $[300] for each such additional hour, provided that within thirty (30) days following the close of such month, Executive submits to the Company an invoice setting forth time expended for Consulting Services during such month in reasonable detail and with such supporting documentation as the Company may reasonably request. (c) During the Consulting Term, the Company shall reimburse Executive, or, if requested by Executive, pay directly on Executive's behalf, up to Twenty Thousand Dollars ($20,000) per annum in the aggregate, for Executive's premium costs for health care benefits comparable to those referred to in Section 2.04(g) and premium costs for disability insurance coverage comparable to that now enjoyed by Executive under the Company's long-term disability plan (to the extent commercially available), subject in each case to the Company's receipt from time-to-time and upon request of customary certifications of Executive's ineligibility for health care or disability benefits, as the case may be, under a plan of another employer. (d) Notwithstanding any other provision of the Equity Plans, certain unvested awards of options for Parent company stock granted to the Executive in 1998 and 1999 shall continue to vest as follows. One twenty-fourth (1/24) of the 6,650 currently unvested Parent company options granted to Executive on January 2, 1998, and one twenty-fourth (1/24) of the 17,325 currently unvested Parent company options granted to Executive on January 4, 1999, shall continue to vest at the end of each calendar month completed during the Consulting Term (pro-rated for the partial periods from the Effective Date to January 31, 2000, and from January 1, 2002 to January 18, 2002). Furthermore, the term for the exercise by Executive of any vested options to acquire capital stock of the Parent that are listed on the Schedule of Vested Options or that are vested pursuant to the provisions of this Section 3.02(d) shall be extended to, and including, the 180/th/ day following the end of the Consulting Term. (e) Notwithstanding any other provision of the Equity Plans, certain unvested awards for phantom options in respect of the Company granted to the Executive in 1998 and 1999 shall continue to vest as follows. One twenty-fourth (1/24) of the 3,930 currently unvested phantom options granted to Executive on January 2, 1998, and one twenty-fourth (1/24) of the 8,010 currently unvested phantom options granted to Executive on January 4, 1999, shall continue to vest at the end of each calendar month completed during the Consulting Term (pro- rated for the partial periods from the Effective Date to January 31, 2000, and from January 1, 2002 to January 18, 2002). Within ten (10) days following the close of each calendar month as of the end of which unvested options have vested pur- 9 suant to the preceding sentence, the Company shall pay to Executive a gross amount, before withholding, that is equal to the difference between $471.0642 (subject to adjustment in accordance with the proviso to the penultimate sentence of Section 2.04(d)) for each phantom option that vested at the end of the preceding month under this Section 3.02(e) and the pertinent exercise price thereof. By way of example, if there were 12,000 unvested options, 500 options would vest monthly, and the Company would pay Executive on a monthly basis the excess of $471.0642 (subject to adjustment in accordance with the proviso to the penultimate sentence of Section 2.04(d)) per option over the exercise price of each of such 500 options. (f) The Company may, in its discretion, withhold taxes from amounts due Executive under this Section 3.02 unless and to the extent an acceptable legal opinion is received from Executive's legal counsel to the effect that withholding is either not applicable or not required. SECTION 3.03 EXPENSE REIMBURSEMENT. The Company will reimburse Executive, in accordance with the Company's customary practices, for reasonable and customary out-of-pocket expenses which are pre-approved by the Company and actually incurred and paid by Executive as a result of and directly related to the provision of Consulting Services, provided that such expenses would be reimbursable to management executives of the Company under then prevailing Company policies. In no event shall such expenses include salaries of Executive's employees, or other overhead costs. SECTION 3.04 INDEMNITY. The Company shall indemnify and hold harmless Executive and his Affiliates from and against any and all Claims, actual or threatened (including all expenses incurred in connection therewith as they are incurred) arising from or related to Executive's performance of the Consulting Services, except to the extent that such Claims or threatened Claims arise from or are related to the breach of this Agreement by Executive or the gross negligence or willful misconduct of Executive or his Affiliates, for which Executive shall indemnify and hold harmless the Company and its Affiliates to the same extent as the Company would otherwise be obligated to provide indemnity to Executive. SECTION 3.05 RELATIONSHIP BETWEEN PARTIES. The parties acknowledge and agree that the provision of the Consulting Services shall not create any association, partnership, joint venture, agency or employer and employee relationship between the Company and the Executive. Executive acknowledges that Executive is being engaged as an independent contractor, and Executive will not be eligible for benefits generally available to the employees of the Company. In the performance of the Consulting Services, Executive agrees at his sole cost and expense to materially comply with all applicable laws and with such requirements or restrictions as may be imposed by any governmental authority, including the procurement of any applicable permits and compliance with any applicable laws now or hereafter in effect relating to Executive's provision of Consulting Services or Execu- 10 tive's hiring of any employees in connection therewith, including any applicable workers' compensation, unemployment, and wages and hours laws. SECTION 3.06 LIMITATIONS ON AUTHORITY. Except as may be expressly authorized in writing from time to time by the Company's chief executive officer, Executive agrees that he will not have authority to, and that he will not, in connection with the Consulting Services, (a) enter into any contracts or other undertakings binding on, or imposing any obligations or liabilities on, the Company or any of its Affiliates, or (b) make any representations to any Person(s) that either Executive or any Person acting under his authority has the authority to act for the Company or any of its Affiliates or represent that either Executive or any Person in his employ or under his authority is engaged by the Company or any of its Affiliates in any capacity other than the engagement hereunder as a consultant. SECTION 3.07 EARLY TERMINATION. In addition to any other rights or remedies at law, in equity or pursuant to any other provisions of this Agreement, the consulting relationship created hereby may be terminated as follows: (a) By the Company at any time: (i) Upon written notice to Executive in the event of his material breach or default hereunder, provided that if such material breach or default is curable, then Executive shall have thirty (30) days to cure the default or breach; (ii) Upon written notice to Executive pursuant to the provisions of Section 4.03(a), or in the event of his habitual neglect of duty, or in the event of his failure to follow reasonable instructions consistent with the scope of his engagement from the Company's Chief Executive Officer, Chairman or Board of Directors, or in the event of any gross negligence, willful misconduct or intentionally tortious acts or omissions, or in the event of any acts of material dishonesty, committed by Executive in the course of providing Consulting Services; (iii) Upon the death or permanent disability of Executive (as determined in accordance with the Company's customary policy); or (iv) Upon thirty (30) days' prior written notice to Executive for any other reason or for no reason; or (b) By the Executive, at any time on or after the expiration of six (6) calendar months from the Effective Date, upon thirty (30) days' prior written notice to the Company for any reason or for no reason. In the event of any termination arising under Section 3.07(a)(i), (ii) or (iii) or Section 3.07(b), then and in such event the Company shall be obligated to pay the compensation set 11 forth in Section 3.02 that is due hereunder to the date of termination only and shall have no obligation to provide further compensation thereafter, and all currently unvested options and phantom options shall cease vesting under Sections 3.02(d) and (e) or otherwise as of the end of the calendar month immediately preceding such date of termination, provided that if the Consulting Term has not earlier terminated pursuant to Section 3.07(a)(i) or (ii) or under Section 3.07(b), all then unvested options and phantom options shall vest and be paid upon any termination under Section 3.07(a)(iii). In the event of any termination under Section 3.07(a)(iv), the Company shall remain obligated to continue to provide the compensation to Executive that would otherwise become due thereafter under the terms of Section 3.02 of this Agreement but for such termination, and Executive's rights under Sections 3.02(d) and (e) shall be unaffected by such termination. In the event the Company wishes to obtain insurance for its obligations in the event of Executive's death or disability, Executive agrees to reasonably cooperate with the Company in such endeavor. ARTICLE 4: ADDITIONAL COVENANTS OF EXECUTIVE SECTION 4.01 CONFIDENTIALITY. (a) Executive acknowledges that he has held a sensitive management position with the Company and that, by virtue of having held such position, he has had access to and has learned the Company's and its subsidiaries' and Affiliates' confidential and proprietary information and trade secrets pertaining to its and their past, present, planned or projected operations, results of operations, prospects, processes, know-how, services, projects, strategies, techniques, procedures, financial capabilities, assets, transactions, partners, financing sources and personnel, disclosure of any of which to present or future competitors, investors, partners or the general public would be highly detrimental to the best interests of the Company and its Affiliates. All such confidential and proprietary information to which Executive has had prior access as a result of his position with the Company, and all similar information to which Executive may have access in the future as a result of performing Consulting Services, are herein referred to as "Confidential Information." Examples of such confidential and proprietary information include, but are not limited to, the Company's investigations of and development and analytical work on potential future electric generation assets, both those potentially to be constructed and those potentially to be acquired. Executive further acknowledges and agrees that the right to maintain the confidentiality of such Confidential Information constitutes a proprietary right which the Company and its Affiliates are entitled to protect. (b) Accordingly, without limiting any obligations of Executive arising at law or pursuant to any existing agreement to which Executive is bound, Executive covenants and agrees to and in favor of the Company that, subject to the further provisions of this 12 Agreement, Executive shall not disclose any Confidential Information to any Person other than as approved by the Company in writing in advance in connection with Executive providing Consulting Services hereunder, and Executive shall not use for the Executive's own purposes or for any purpose other than those of the Company and its Affiliates any Confidential Information during the Consulting Term or at any time thereafter until such Confidential Information has been otherwise publicly disclosed. Without limiting the generality of the foregoing, Executive agrees that, except as permitted in writing by the Company, he will not respond to or in any way participate in or contribute to any public discussion, notice or other publicity concerning or in any way related to Confidential Information or, subject to Section 5.10, any matters concerning his employment at the Company. Executive agrees that any disclosure by him of any of the Confidential Information shall constitute a material breach of this Agreement and of his fiduciary obligations to the Company. (c) For purposes of this Section 4.01, "Confidential Information" does not include information which (i) is or becomes generally available to the public other than as a result of disclosure by Executive, or (ii) was within the Executive's possession prior to being furnished to the Executive by or on behalf of the Company or its Affiliates, provided that the Executive did not receive such information in a fiduciary capacity and provided further that the scope of such information was not known to the Executive to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any of its Affiliates or any other Person with respect to such information. (d) If Executive is requested or required (by oral questions, interrogatories, requests for information or documents in connection with any legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any Confidential Information, then Executive shall provide the Company with prompt written notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver from the Company, the Executive is, in the written opinion of counsel reasonably acceptable to the Company (the reasonable attorney's fees and costs of which opinion the Company shall reimburse), legally compelled to disclose Confidential Information to any tribunal or else stand liable for contempt, or suffer other censure or penalty, then Executive may, without liability hereunder, disclose to such tribunal only that portion of the Confidential Information which such counsel advises the Executive is legally required to disclose, provided that Executive exercises commercially reasonable efforts to preserve the confidentiality of the Confidential Information, including, without limitation, by cooperating with the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information by such tribunal. (e) Without limiting the provisions of Section 2.06, all files, forms, brochures, books, materials, written correspondence, memoranda, documents, manuals, computer 13 disks, software products and lists that have in the past or may in the future come into the possession or control of the Executive as a result of his being an employee of or consultant to the Company shall at all times remain as the property of the Company and not of the Executive. At the times required by Section 2.06, upon conclusion of the Consulting Term and at any other time or times demanded by the Company, Executive shall deliver promptly to the Company all such property in the possession of the Executive or directly or indirectly under the control of the Executive. Executive agrees not to make, for the use of the Executive or of any other Person, reproductions or copies of any such property or other property of the Company. (f) Executive agrees that following his employment by the Company, he will not, without the prior written consent of the Chief Executive Officer of the Company, undertake employment or provide services for any Person other than the Company or its Affiliates if the loyal and complete fulfillment of his duties in connection with such employment or services would require him to reveal or otherwise use any Confidential Information in violation of the provisions hereof. SECTION 4.02 STOCK ACTIVITY. Executive hereby agrees that from the date hereof until the second anniversary of the Effective Date, Executive shall not: (a) Acquire, by purchase or otherwise (except pursuant to Executive's participation in employee benefit plans), offer to acquire or obtain the right to acquire, propose to acquire, announce any intention or plan to acquire, or announce or make any request for permission to acquire, directly or indirectly, any shares of Voting Stock, or any other security convertible into or exercisable or exchangeable for Voting Stock, unless (i) following such acquisition and after giving effect thereto, the Executive and any Group of which he is a member, would not be directly or indirectly the beneficial owners of more than five percent (5%) of the outstanding shares of Voting Stock of the Parent, the Company or any Affiliate thereof, as the case may be, and (ii) such acquisitions or offers or agreements to acquire are made in open market transactions (or pursuant to the Equity Plans); (b) Directly or indirectly engage in, or become a member of a Group which is engaging or which subsequently engages in, any tender offer or exchange offer for any shares of Voting Stock; (c) Take any other action, participate in or become a member of any Group, or make any proposal, offer to acquire or obtain a right to acquire, propose to acquire, announce any intention or plan to acquire, or announce or make any request for permission to acquire, directly or indirectly or alone or together with others, control of the Company or of any Affiliate of the Company or of any division, business segment or significant amount of assets of the Company or of any Affiliate of the Company; 14 (d) Enter into any voting agreement or proxy arrangement with respect to shares of Voting Stock, or deposit any shares of Voting Stock into any voting trust or similar entity, as a result of which the voting rights associated with any or all of Executive's Voting Stock are vested in another Person, other than proxies (or their substitutes) designated by the Board of Directors of the issuer of such Voting Stock in proxy material for any meeting of stockholders of such issuer; (e) Conduct or become a participant in any solicitation of proxies with respect to Voting Stock, or make any announcement with respect to any solicitation of proxies, for the purpose of opposing a solicitation (for election of directors or otherwise) approved by a majority of the whole Board of Directors of the issuer of such Voting Stock, or present any proposal, or solicit or become a participant in the solicitation of proxies in favor of a proposal, for action at a meeting of the stockholders of such issuer, which is not approved by a majority of the whole Board of Directors of such issuer; (f) Enter into any plan, agreement or arrangement, or become a member of any Group, for the purpose of engaging in any activity prohibited by the foregoing paragraphs of this Section 4.02; or (g) Assist any other Person in connection with such other Person's engaging in any activity which, if engaged in by the Executive, would constitute a violation of this Section 4.02. SECTION 4.03 NON-COMPETITION. (a) Without limiting the provisions of Sections 4.01. 4.02 and 4.04, and as a further inducement to the Company to enter into this Agreement, Executive agrees that, except as otherwise permitted hereby, until the expiration of six (6) calendar months from the Effective Date, or until the end of the Consulting Term if the Consulting Term ends after the expiration of six (6) calendar months from the Effective Date, Executive shall not, directly or indirectly, for his own account or as agent for another, carry on or participate in the ownership, management or control of, or be employed by, or serve as a director of, or consult for, or license or provide know-how to, or otherwise render services to, or allow his name or reputation to be used in or by, any other present or future business enterprise that, either alone or together with its Affiliates, engages in the Line of Business and competes with current or planned activities of the Company and its Affiliates anywhere in the world without the prior written approval of the Chief Executive Officer of the Company. In the event of any violation of the foregoing, then and in such event the Company may, upon notice to Executive, terminate the consulting relationship between Executive and Company without limiting any other remedies of the Company. 15 (b) Notwithstanding the foregoing, nothing herein shall limit the right of Executive, as an investor, to hold and make investments in securities of any corporation or other entity that competes in the Line of Business with the Company and its Affiliates and that is registered on a national securities exchange or admitted to trading privileges thereon or actively traded in a generally recognized over-the-counter market, provided that the aggregate of all of Executive's beneficial ownership therein does not exceed one percent (1%) of the outstanding equity interests in such corporation or other entity. (c) Executive acknowledges that he considers the restrictions set forth in this Section 4.03 to be reasonable both individually and in the aggregate and that the duration, geographic scope, extent and application of each of such restrictions are no greater than is necessary for the protection of the legitimate interests of the Company and its Affiliates. In the event that any restriction herein shall be found to be void or unenforceable but would be valid or enforceable if some part or parts thereof were deleted or the period or area of application reduced, each of the parties hereby agrees that such restriction shall apply with such modification as may be necessary to make it valid. SECTION 4.04 NON-SOLICITATION; NON-DISPARAGEMENT; NON-INTERFERENCE. During the period that begins on the date hereof and that ends on the second anniversary of the Effective Date, Executive agrees that he will not, directly or indirectly, for his own benefit, for the benefit of any Person other than the Company or its Affiliates, or otherwise: (a) Solicit, encourage or induce, or assist any Person to solicit, encourage or induce, any officer, director, executive or employee of the Company or its Affiliates to leave his or her employment with the Company or its Affiliates for any reason, it being agreed that the foregoing shall not prohibit Executive from soliciting the employment of his current secretarial assistant; (b) Induce or attempt to induce any customer, supplier, financier, government agency, independent contractor, developer, promoter or other Person having any business or regulatory relationship with the Company or any of its Affiliates to cease, reduce or alter the nature, amount or terms of business conducted or regulatory oversight or practices followed with respect to the Company or any of its Affiliates or to engage in any business, regulatory or other activity which might materially harm the Company or any of its Affiliates or which is opposed by the Company and its Affiliates; (c) Make or cause to be made any public statement that is disparaging of the Company or any of its Affiliates or their respective businesses or that materially injures the business or reputation of the Company or any of its Affiliates or their respective businesses; or (d) Directly or indirectly advise, consult or discuss with, provide information to, or assist any Person, including any holder of phantom 16 options in the Company or any advisor or representative of any such holder, or make any comment or offer or provide any opinion or otherwise make statements, concerning the phantom options, or the grant, appreciation, value, or exercise thereof, or any transaction or proposed transaction in respect of such phantom options, including without limitation any planned or actual exchange offer by the Company therefor, or any interpretation or action by the Company planned or actually made with respect to such phantom options, or any claims or proceedings, whether pending or threatened, relating to such phantom options, without the prior written consent of the Chief Executive Officer of the Company, except and to the extent compelled by law. SECTION 4.05 OWNERSHIP OF WORKS. As between the Company and Executive, the Company shall be the sole and exclusive owner, throughout the universe, in perpetuity, of all right, title, interest, benefits and profits of every kind and nature whatsoever, whether now known or unknown, in, to and from all programs, financial or business plans, all non-generic ideas and concepts, logos, discoveries, trade secrets, prospect lists, or other tangible work product and materials (including, without limitation, tangible materials containing market, financial and other research) of every kind and nature whatsoever (collectively, the "Works") written, conceived, developed, furnished or created by or under the auspices of Executive in connection with his performance of duties as an employee of or consultant to the Company, and all results, benefits and proceeds of such Works (all of such Works, results, benefits and proceeds being collectively referred to as the "Materials"). All of such Materials shall constitute a "work made for hire" for the Company within the meaning of the United States Copyright Act of 1976, as amended. In the event that the Materials or any portion thereof are for any reason whatsoever not deemed to be a "work made for hire" for the Company, Executive hereby grants and assigns to the Company all right, title, interest, benefits and profits of every kind and nature whatsoever, whether now known or unknown, in, to and from the Materials. As between the Company and Executive, the Company shall at all times have the perpetual and exclusive right to exploit such Materials and all works derived therefrom throughout the universe, and all revenues and other benefits and profits derived by the Company from such exploitation, as between the Company and Executive, shall be the sole and exclusive property of the Company. Executive agrees to execute, and to cause each of his employees or agents to execute, any and all formal assignments, recordations and any other documents which the Company reasonably deems are necessary or desirable to effectuate and/or evidence the Company's rights in and to the Materials. SECTION 4.06 COOPERATION WITH LEGAL PROCESS. From and after Executive's employment with the Company, the Company shall, consistent with the Company's then existing policies for indemnification of officers, continue to indemnify Executive for his activities as an officer, director and employee of the Company to the extent provided under and permitted by, and subject to the provisions and conditions of, law and the charter documents of the Company in effect at the time, as though Executive remained an officer, 17 director and/or employee of the Company. In return, Executive agrees to provide reasonable cooperation and assistance to the Company, when and as requested by the Company and without charge to the Company except for the Executive's reasonable and bona fide out-of-pocket costs (including reasonable attorney's fees and costs), in connection with any and all pending or threatened claims, proceedings and investigations (whether on behalf of or against the Company) arising out of, or alleged to arise out of, facts or circumstances existing during the term of Executive's employment by the Company. ARTICLE 5: GENERAL PROVISIONS SECTION 5.01 OPPORTUNITY TO REVIEW WITH COUNSEL. Executive represents that he has discussed all aspects of this Agreement with an attorney of his choice, that he has carefully read and fully understands all of the provisions of this Agreement and that he is voluntarily entering into this Agreement. SECTION 5.02 CHOICE OF LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, without reference to the choice of law doctrine of California. SECTION 5.03 REMEDIES. The rights and remedies of each party under this Agreement are not, except as expressly provided herein to the contrary, to the exclusion of each other or of any other rights or remedies of such party. Each party may exercise or decline to exercise any one or more of its rights and remedies without waiver of any such subsequent exercise of such right and remedy or any other rights and remedies of such party. Executive acknowledges that the Company cannot be properly protected from adverse consequences if Executive should default under specified provisions of this Agreement. Accordingly, the Executive agrees that in the event of any breach or threatened breach by Executive of any of the provisions of Sections 3.06, 4.01, 4.02, 4.03, 4.04 or 4.05, the Company, in addition to any other right or relief to which it may be entitled, shall be entitled to an order enjoining such breach or threatened breach and specifically enforcing Executive's compliance with the provisions thereof, Executive agreeing that he is hereby estopped and prohibited from arguing that damages are an adequate remedy for any such breach or threatened breach or that such equitable relief is inappropriate under the circumstances. SECTION 5.04 SEVERABILITY. Without limiting the applicability of Section 4.03(c), if any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the provisions hereof is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order 18 that the provisions hereof are implemented and enforced as originally contemplated to the greatest extent possible. SECTION 5.05 NO AMENDMENT; Entire Agreement; No Waiver. This Agreement and the Schedules and attachments hereto constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, between the parties with respect to the subject matter hereof. Without limiting the generality of the foregoing, Executive specifically represents and acknowledges that in executing this Agreement, he does not rely and has not relied on any representations or statements made by the Company, or any of the Company's agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise. This Agreement may not be amended except by an instrument in writing signed by the parties. Either party may (a) extend the time for the performance of any of the obligations or other acts of the other party, or (b) waive compliance with any of the agreements applicable to the other party contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of a party to assert any of its rights hereunder shall not constitute a waiver of any of such right. SECTION 5.06 RIGHT OF OFFSET. The Company shall have the right to offset against amounts owed Executive by the Company any amounts which, in the future, Executive owes to the Company. SECTION 5.07 PARTIES IN INTEREST. This Agreement may not be assigned or transferred by either party, by operation of law or otherwise, without the prior written consent of the other party (which consent may be granted or withheld in the sole discretion of such other party). This Agreement shall be binding upon and inure solely to the benefit of the parties and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. SECTION 5.08 NOTICES. Any notice, payment, demand, or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to have been delivered, given, and received for all purposes (a) if delivered personally to the Person to whom it is addressed, or (b) when the same is actually received, if sent by a nationally recognized courier service (which provides proof of delivery), by registered or certified mail (postage and charges prepaid), or by facsimile (if such facsimile is followed by a hard copy of the facsimile communication sent promptly thereafter by a nationally recognized courier service (which provides proof of delivery) or registered or certified mail (postage and charges prepaid)), addressed as set forth in the Schedule of Addresses attached hereto and incorporated herein by reference or to such other address as such Person may from time to time specify by due notice. 19 SECTION 5.09 COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 5.10 PUBLICITY. The parties agree that, for a period of at least six (6) months, they will keep the terms, amounts and facts of this Agreement completely confidential, and that they will not during such period disclose any information concerning this Agreement to anyone except their respective attorneys or accountants, including, but not limited to, any past, present or prospective employees of the Company or any of its Affiliates, except in each case as may be required by law, including, without limitation, filings required by the Company and by its parent entity with the Securities and Exchange Commission. Notwithstanding the foregoing, the parties shall mutually agree upon forms for a press release, internal communications and answers to press questions to be used in connection with announcing Executive's resignation. Subject to Executive conforming and limiting his statements to the substance of such mutually agreed upon press release, internal communications and answers to press questions, Executive may respond to press or analyst inquiries concerning his resignation. SECTION 5.11 HEADINGS. The descriptive headings contained in this Agreement and table of contents of this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 5.12 ATTORNEYS FEES. In any litigation or proceeding relating to this Agreement, the prevailing party shall be entitled to recover its costs and reasonable attorney fees. SECTION 5.13 FURTHER ASSURANCES. The parties agree to execute such further instruments and perform such further acts as may be reasonably necessary to carry out the intent and purposes of this Agreement. SECTION 5.14 ADDITIONAL COVENANTS OF THE COMPANY. The Company agrees that, for a period of two (2) years from the Effective Date, the Company and its Affiliates will not publicly issue any press release that disparages, or materially injures the business or reputation of, the Executive, and will make reasonable efforts to prevent their executive officers and official spokespersons from making public statements on behalf of the Company or its Affiliates that are disparaging of Executive or materially injure his business or reputation. The Company further agrees to exercise reasonable efforts to cause personal mail addressed to Executive to be forwarded to him in a timely fashion (Executive agreeing to make reasonable efforts to notify third parties of the change in his business address). SECTION 5.15 DISPUTE RESOLUTION. All disputes arising out of or relating to this Agreement shall be resolved pursuant to the reference procedure set forth in California Code of Civil Procedure 638 et seq. The parties hereby agree to submit to the jurisdiction of 20 the Superior Court of Los Angeles County for such purpose. Either party may initiate the procedure set forth in this Section by providing the other party with notice setting forth the nature of the dispute. The parties shall designate to the Superior Court a referee who is an active attorney or retired judge living in Los Angeles County who shall resolve the dispute. If the parties are unable to designate a referee within 20 days after the receipt of the original referral notice, the parties shall request that the Superior Court appoint a referee. In connection with any proceeding pursuant to this Section, the parties shall have all discovery rights which would have been available had the matters which are the subject of the dispute been decided by the Superior Court. Discovery proceedings may be noticed and commenced immediately after delivery of the original referral notice. The hearing before the referee shall begin no later than 60 days after the receipt of such referral notice. All discovery in connection with the reference procedure shall be concluded no later than 15 days prior to the commencement of the hearing. Judgment upon the award rendered by the referee shall be entered in the Superior Court. Nothing in this Section shall be construed to impair the right of either party to appeal from such judgment. SECTION 5.16 APPROVALS. The effectiveness and implementation of this Agreement are subject to the approval of the Boards of Directors of the Company and the Parent and the Compensation and Executive Personnel Committee of the Board of Directors of the Parent. 21 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. /s/ Edward R. Muller ------------------------------------- Edward R. Muller EDISON MISSION ENERGY By: /s/ John E. Bryson -------------------------------- Title: Chairman ----------------------------- By: /s/ Alan J. Fohrer -------------------------------- Title: /s/ Pres & CEO ----------------------------- With respect to Sections 2.04 and 3.02 only: EDISON INTERNATIONAL By: /s/ John E. Bryson -------------------------------- Title: Chairman ----------------------------- By: /s/ Bryant C. Danner -------------------------------- Title: /s/ Exec VP & General Counsel ----------------------------- 22 SCHEDULE OF ADDRESSES Notices to the Company and to the Parent shall be addressed as follows: Edison International Edison Mission Energy C/O Bryant C. Danner Executive Vice President and General Counsel Edison International 2244 Walnut Grove Avenue Rosemead, California 91770 FAX: (626) 302-4775 Notices to the Executive shall be addressed as follows: Mr. Edward R. Muller 502 20/th/ Street Santa Monica, California 90402 FAX: (310) 394-5756 With a courtesy copy to: Ronald M. Greenberg, Esq. Rosenfeld, Meyer & Susman 9601 Wilshire Blvd., 4/th/ Floor Beverly Hills, California 90210 FAX: (310) 271-6430 SCHEDULE OF DEFERRED COMPENSATION* Balances as of January 10, 2000 Edison 401(k) Savings Plan and Profit Sharing $ 129,460 Executive Deferred Compensation Plan (EDCP) $1,015,808 ---------- Total $1,145,268 ========== *Additional amounts, if any, arising from Profit Sharing amounts for the 1999 year will be added in the ordinary course when calculated. SCHEDULE OF RETIREMENT BENEFITS* Employee Life Insurance Executive Incentive Compensation Plan Long-Term Incentive Compensation Plan Equity Compensation Plan Affiliate Long Term Incentive Program 401(k) Savings Plan Executive Deferred Compensation Plan Option Gain Deferral Plan Executive Retirement Plan Retirement Plan Estate and Financial Planning Comprehensive Disability and Executive Disability Plan Long-Term Disability Dependent Life Insurance Dependent AD&D Insurance Dependent Care Reimbursement Account Vacation Vacation Buying and Selling Holidays Personal Use of Company Car/Auto Allowance/Driver Executive Physical Accidental Death and Dismemberment 24-Hour Business Travel Accident Insurance Club Memberships Health Care Reimbursement Account Preventive Health Care Account Employee Assistance Plan (EAP) Retiree Health Care and Medicare __________________________________ * Executive is entitled to any vested benefits and/or balances in any of the above plans but will have no further entitlements under any of the plans except as otherwise provided in this Agreement. SCHEDULE OF POSITIONS
Company Position ------- -------- Edison Mission Energy Director, President and Chief Executive Officer Edison Mission Energy Global Management, Inc. Director, President and Chief Executive Officer Edison Mission Operation & Maintenance, Inc. Director and President Mission Energy Holdings, Inc. Director and President Edison Mission Energy Australia Limited Director Edison Mission Energy Holdings Pty Ltd Director Edison Mission Operation & Maintenance Director Kwinana Pty Ltd Edison Mission Operation & Maintenance Loy Director Wang Pty Ltd Latrobe Power Pty Ltd Director Loy Yang Holdings Pty Ltd Director Mission Energy Development Australia Pty Ltd Director Mission Energy (Kwinana) Pty Ltd Director Mission Energy Ventures Australia Pty Ltd Director Traralgon Power Pty Ltd Director
In addition, any and all positions of responsibility or authority at any entity appearing on the attached list of subsidiaries. SCHEDULE OF RETIREMENT BENEFITS(1)(2) Projected annual and lump-sum values(3)
Executive Retirement Retirement Plan Plan ----------------- ------------ Annual Value of Life Annuity - ---------------------------- Payment commencing March 1, 2000 N/A 6,360 Payment commencing March 1, 2007 63,720 N/A Lump Sum Value - -------------- As of February 1, 2000 N/A 89,500(4) As of March 1, 2007 730,000(4)(5) N/A
----------------------------- (1) All benefits under these Plans are subject to the express terms of the relevant Plans. (2) Benefit payment commencement on March 1, 2000 for the Retirement Plan and March 1, 2007 (age 55) for the Executive Retirement Plan, assuming final date of employment is during January 2000. (3) Assumes Executive receives a bonus of 75% of base pay (125% of his target bonus of 60%) for 1999. (4) The annuity value of the Retirement Plan is determined as of the assumed payment commencement date using a 6.07% interest rate. The lump sum for the Executive Retirement Plan uses an interest rate of 7.33%. (5) Lump-sum distributions are not available for those employees terminating prior to age 55. This value is shown for illustrative purposes only. SCHEDULE OF VESTED OPTIONS - ---------------------------------------------------------------------------- Date Grant Vesting Grant Vested Grant Type Schedule Price Shares - ---------------------------------------------------------------------------- Options For Parent Company Stock - ---------------------------------------------------------------------------- 8/23/93 EIXD 3 $ 24.4375 20,000 1/3/94 EIXD 3 $ 20.1875 10,000 1/3/94 EIXD 3 $ 20.1875 4,100 1/3/95 EIXD 3 $ 14.5625 10,000 1/2/96 EIXD 3 $ 17.6250 10,200 1/2/97 EIXD 3 $ 19.7500 10,500 1/2/98 EIXD 4 $ 27.2500 6,650 1/4/99 EIX 4 $ 28.1250 3,935 1/4/99 EIXD 4 $ 28.1250 1,840 Total 77,225 - ---------------------------------------------------------------------------- Company Phantom Options - ---------------------------------------------------------------------------- 1/3/94 EME 3 $ 169.2742 17,820 1/3/95 EME 3 $ 154.2317 43,190 1/2/96 EME 3 $ 181.0666 30,800 1/2/97 EME 3 $ 226.6772 22,800 1/4/98 EME 4 $ 313.8153 3,930 1/4/99 EME 4 $ 334.4392 2,670 Total 121,210 GENERAL RELEASE THIS GENERAL RELEASE ("Release") is being delivered as of January 17, 2000 by Edward R. Muller (the "Executive") to Edison Mission Energy, a California corporation (the "Company"), pursuant to Section 2.07 of that certain agreement related to Executive's employment with the Company being executed concurrently herewith by Executive and the Company (the "Agreement"). All capitalized terms not otherwise defined herein have the same meaning as is given to them in the Agreement. (a) Executive, on behalf of himself and his descendants, ancestors, heirs, executors, successors, assigns and administrators (collectively, "Releasor"), hereby releases, remises, acquits and forever discharges, and agrees to indemnify and hold harmless, (x) the Company, (y) each of its Affiliates, and (z) each of its and/or their partners, predecessors, successors, assigns, officers, directors, shareholders, representatives, insurers, attorneys, employees and agents, past, present and future, in their respective capacities as such (collectively, "Releasees"), from and against any and all claims, demands, obligations, causes of action, debts, expenses, damages, judgments, orders and liabilities of whatever kind or nature, in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, matured or unmatured, and whether concealed or hidden (collectively, "Claims"), which Executive now owns or holds or has at any time heretofore owned or held or had, or may at any time own or hold or have, against the Releasees or any of them, including, but not limited to any Claim arising out of or in any way connected to any transactions, occurrences, acts or omissions regarding or relating to his employment with the Company, or the end of his employment with the Company, including, but not limited to, Claims arising from any alleged violation by the Company of any federal, state or local constitutions, statutes, ordinances or common laws, including but not limited to, the California Fair Employment and Housing Act, Employee Retirement Income Security Act, Americans With Disabilities Act and Title VII of the Civil Rights Act of 1964 and/or the Civil Rights Act of 1991. (b) Except for those matters that are expressly excluded, the release set forth herein is intended as a release of all Claims that the Releasor may have against the Releasees or any of them, whether now known or unknown. In furtherance thereof, Executive expressly waives and relinquishes any right to assert hereafter that any claim, demand, obligation and/or cause of action has, through ignorance, oversight, error or otherwise, been omitted from the terms of this Agreement. Executive makes this waiver with full knowledge of his rights, after consulting with legal counsel, and with specific intent to release both his known and unknown claims. Accordingly, Releasor specifically waives all rights and benefits 1 afforded by California Civil Code Section 1542 and does so understanding and acknowledging the significance of such specific waiver of such statutory protection, which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Thus, notwithstanding the foregoing provisions of the California Civil Code, and for the purposes of implementing a full and complete release and discharge of the Releasees, Executive expressly acknowledges that the foregoing release is intended to include in its effect, without limitation, all Claims that Executive does not know or suspect to exist in his favor at the time of the execution hereof, and the foregoing release contemplates the extinguishment of any such Claim or Claims except to the extent expressly set forth herein. Executive further acknowledges that he has been advised to consult with an attorney and is receiving compensation beyond that to which he is entitled. (c) Executive represents and warrants that he has not filed or caused to be filed any complaints or charges against the Company, any of its Affiliates or any of its or their officers, directors, agents, employees or representatives with or before any local, state or federal governmental agency or court or any arbitrator or other tribunal, and no such complaint or charge by or on behalf of the Executive is currently pending. Executive further agrees not to file any complaints, actions or charges of any nature against the Releasees relating to any event or alleged event including, but not limited to, those arising from Executive's employment with and/or separation from employment with the Company, which occurred from the beginning of time until the execution of this Release. (d) Nothing in this Release shall be construed or interpreted as a release, acquittal, discharge or waiver of: (i) Executive's rights to the compensation, reimbursements, benefits and perquisites described in Article 2 of the Agreement; (ii) Any of the Company's other obligations arising under the Agreement; (iii) Any right which Executive now has or may have to claim indemnity (including advancement of expenses) for liabilities in connection with his lawful activities as a director, officer or employee of the Company 2 and certain of its Affiliates, pursuant to the terms of any applicable statute, under any insurance policy, pursuant to the certificate or articles of incorporation, bylaws or similar charter documents of any Releasee, or pursuant to the terms of any applicable indemnification agreement to which Executive and the Company or any Affiliate of the Company are or have been parties; or (iv) Claims arising under the Federal Age Discrimination in Employment Act. (e) The provisions of Section 5.01 through 5.05, 5.07, 5.08, and 5.12 through 5.14 of the Agreement apply to this Release and are incorporated herein by reference as though fully set forth hereat. IN WITNESS WHEREOF, the Executive has executed and delivered this Release as of the day and year first above written. /s/ Edward R. Muller ______________________________________ Edward R. Muller 3 FORM OF AGE DISCRIMINATION RELEASE THIS AGE DISCRIMINATION RELEASE ("Release") is being delivered as of January 17, 2000 by Edward R. Muller (the "Executive") to Edison Mission Energy, a California corporation (the "Company"), pursuant to Section 2.07 of that certain agreement related to Executive's employment with the Company being executed concurrently herewith by Executive and the Company (the "Agreement"). All capitalized terms not otherwise defined herein have the same meaning as is given to them in the Agreement. (a) Executive, on behalf of himself and his descendants, ancestors, heirs, executors, successors, assigns and administrators (collectively, "Releasor"), hereby releases, remises, acquits and forever discharges, and agrees to indemnify and hold harmless, (x) the Company, (y) each of its Affiliates, and (z) each of its and/or their partners, predecessors, successors, assigns, officers, directors, shareholders, representatives, insurers, attorneys, employees and agents, past, present and future, in their respective capacities as such (collectively, "Releasees"), from and against any and all claims, demands, obligations, causes of action, debts, expenses, damages, judgments, orders and liabilities of whatever kind or nature, in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, matured or unmatured, and whether concealed or hidden (collectively, "Claims"), which Executive now owns or holds or has at any time heretofore owned or held or had, or may at any time own or hold or have, against the Releasees or any of them, arising out of or in any way connected to the Federal Age Discrimination in Employment Act. (b) Except for those matters that are expressly excluded, the release set forth herein is intended as a release of all Claims that the Releasor may have against the Releasees or any of them, whether now known or unknown, arising under the Federal Age Discrimination in Employment Act. In furtherance thereof, Executive expressly waives and relinquishes any right to assert hereafter that any such claim, demand, obligation and/or cause of action has, through ignorance, oversight, error or otherwise, been omitted from the terms of this Agreement. Executive makes this waiver with full knowledge of his rights, after consulting with legal counsel, and with specific intent to release both his known and unknown claims. Accordingly, Releasor specifically waives all rights and benefits afforded by California Civil Code Section 1542 and does so understanding and acknowledging the significance of such specific waiver of such statutory protection, which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW 1 OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Thus, notwithstanding the foregoing provisions of the California Civil Code, and for the purposes of implementing a full and complete release and discharge of the Releasees in respect of Claims arising under Federal Age Discrimination in Employment Act, Executive expressly acknowledges that the foregoing release is intended to include in its effect, without limitation, all Claims arising under such Act that Executive does not know or suspect to exist in his favor at the time of the execution hereof, and the foregoing release contemplates the extinguishment of any such Claim or Claims except to the extent expressly set forth herein. (c) Executive acknowledges that as of the date hereof, he will have had at least twenty-one (21) days to consider the terms of the release set forth herein and that he has been advised that he has a period of seven (7) days following his execution of this Release in which to revoke the entire release granted hereby and that any such revocation must be in writing, signed by Executive, and hand delivered to the Chairman of the Board of the Company prior to the expiration of such seven (7) day period. Executive further acknowledges that he has been advised to consult with an attorney and is receiving compensation beyond that to which he is entitled. (d) Executive represents and warrants that he has not filed or caused to be filed any complaints or charges against the Company, any of its Affiliates or any of its or their officers, directors, agents, employees or representatives with or before any local, state or federal governmental agency or court or any arbitrator or other tribunal arising under the Federal Age Discrimination in Employment Act, and no such complaint or charge by or on behalf of the Executive is currently pending. Executive further agrees not to file any such complaints, actions or charges of any nature against the Releasees relating to any event or alleged event including, but not limited to, those arising from Executive's employment with and/or separation from employment with the Company, which occurred from the beginning of time until the execution of this Release. (e) Nothing in this Release shall be construed or interpreted as a release, acquittal, discharge or waiver of: (i) Executive's rights to the compensation, reimbursements, benefits and perquisites described in Article 2 of the Agreement; (ii) Any of the Company's other obligations arising under the Agreement; or 2 (iii) Any right which Executive now has or may have to claim indemnity (including advancement of expenses) for liabilities in connection with his lawful activities as a director, officer or employee of the Company and certain of its Affiliates, pursuant to the terms of any applicable statute, under any insurance policy, pursuant to the certificate or articles of incorporation, bylaws or similar charter documents of any Releasee, or pursuant to the terms of any applicable indemnification agreement to which Executive and the Company or any Affiliate of the Company are or have been parties. (f) The provisions of Section 5.01 through 5.05, 5.07, 5.08, and 5.12 through 5.14 of the Agreement apply to this Release and are incorporated herein by reference as though fully set forth hereat. IN WITNESS WHEREOF, the Executive has executed and delivered this Release as of the day and year first above written. /s/ Edward R. Muller ______________________________________ Edward R. Muller 3 02 EDISON MISSION ENERGY is a California corporation having its principal place of business at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612- 1046. Edison Mission Energy owns the stock of a group of corporations which, primarily through partnerships with non- affiliated entities, are engaged in the business of developing, owning and/or operating cogeneration, geothermal and other energy or energy-related projects pursuant to the Public Utility Regulatory Policies Act of 1978. Edison Mission Energy, through wholly owned subsidiaries, also has ownership interests in a number of independent power projects in operation or under development that either have been reviewed by the Commission's staff for compliance with the Act or are or will be exempt wholesale generators or foreign utility companies under the Energy Policy Act of 1992. In addition, some Edison Mission Energy subsidiaries have made fuel-related investments and a limited number of non-energy related investments. The subsidiaries and partnerships of Edison Mission Energy are listed below. Unless otherwise indicated, all entities are corporations, are organized under the laws of the State of California and have the same principal place of business as Edison Mission Energy. EDISON MISSION ENERGY DOMESTIC COMPANIES: 03 AGUILA ENERGY COMPANY (LP) 04 American Bituminous Power Partners, LP (Delaware limited partnership) 49.5%; 50% with Pleasant Valley 05 American Kiln Partners, LP (Delaware limited partnership) 49.5% of 53% 03 ANACAPA ENERGY COMPANY (GP) 04 Salinas River Cogeneration Company 50% 03 ARROWHEAD ENERGY COMPANY (inactive) 03 BALBOA ENERGY COMPANY (GP) 04 Smithtown Cogeneration, LP (Delaware partnership) 50%; 100% w/Kingspark 03 BERGEN POINT ENERGY COMPANY (GP) 04 TEVCO/Mission Bayonne Partnership (Delaware G.P.) 50% 05 Cogen Technologies NJ Ventures (Delaware G.P.) 0.75% 04 Cogen Technologies NJ Ventures (Delaware G.P.) 0.375% 03 BLUE RIDGE ENERGY COMPANY (GP) 04 Bretton Woods Cogeneration, LP (Delaware limited partnership) 50%; 100% w/Bretton Woods 03 BRETTON WOODS ENERGY COMPANY (GP & LP) 04 Bretton Woods Cogeneration, LP (Delaware LP) 50%; 100% w/Blue Ridge 03 CAMINO ENERGY COMPANY (GP) 04 Watson Cogeneration Company (general partnership) 49% 03 CAPISTRANO COGENERATION COMPANY (GP) 04 James River Cogeneration Company (North Carolina partnership) 50% 03 CENTERPORT ENERGY COMPANY (GP & LP) 04 Riverhead Cogeneration I, LP (Delaware partnership) 50%; 100% w/Ridgecrest 03 CHESAPEAKE BAY ENERGY COMPANY (GP) 04 Delaware Clean Energy Project (Delaware general partnership) 50% 03 CHESTER ENERGY COMPANY (no partners; option Chesapeake,VA) 03 CLAYVILLE ENERGY COMPANY 04 Oconee Energy, LP (Delaware LP) 50%; 100% w/Coronado 03 COLONIAL ENERGY COMPANY (inactive) 03 CORONADO ENERGY COMPANY 04 Oconee Energy, LP (Delaware LP) 50%; 100% w/Clayville 03 DEL MAR ENERGY COMPANY (GP) 04 Mid-Set Cogeneration Company 50% 03 DELAWARE ENERGY CONSERVERS, INC. (Delaware corporation) (inactive) 03 DESERT SUNRISE ENERGY COMPANY (Nevada corporation) (inactive) 03 DEVEREAUX ENERGY COMPANY (LP) 04 Auburndale Power Partners, LP (Delaware LP) 49%; 50% w/El Dorado [see 4.03] 17 03 EASTERN SIERRA ENERGY COMPANY (GP & LP) 04 Saguaro Power Company, LP 50% 03 EAST MAINE ENERGY COMPANY (inactive) [dissolving] 03 EDISON ALABAMA GENERATING COMPANY 03 EDISON MISSION ENERGY FUEL 04 EDISON MISSION ENERGY OIL AND GAS 05 Four Star Oil & Gas Company 50.1% (owns Lost Hills Cogeneration Facility) 04 EDISON MISSION ENERGY PETROLEUM (Gas contracts w/ Tex. Gas Mktg) 04 POCONO FUELS COMPANY (inactive) 04 SOUTHERN SIERRA GAS COMPANY 05 TM Star Fuel Company (general partnership) 50% 03 EDISON MISSION ENERGY FUEL SERVICES, INC. [PowerGen project] 03 EDISON MISSION ENERGY FUNDING CORP. (Delaware corporation) 1% 03 EDISON MISSION ENERGY GLOBAL MANAGEMENT, INC. (Delaware corporation) Address: 04 Majestic Energy Limited (UK private limited company) Address: 05 EME Royale Limited (New Zealand private limited company) Address: 06 Edison Mission Energy Taupo Limited (New Zealand company) 100% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 07 Contact Energy Limited (New Zealand company) 40% Address: Level 1, Harbor City Tower, 29 Brandon Street, Wellington, New Zealand 03 Edison Mission Energy Interface Ltd. (British Columbia company) 04 The Mission Interface Partnership (Province of Ontario G.P.) 50% 03 EDISON MISSION FINANCIAL MARKETING & TRADING CO. 04 EDISON MISSION MARKETING & TRADING, INC. 03 EDISON MISSION HOLDINGS CO. (formerly EME Homer City Holdings Co.) 04 CHESTNUT RIDGE ENERGY COMPANY 100% 05 EME Homer City Generation LP (Pennsylvania) 99%LP 04 EDISON MISSION FINANCE CO. 100% 04 HOMER CITY PROPERTY HOLDINGS, INC. 100% 04 MISSION ENERGY WESTSIDE, INC. 100% 05 EME Homer City Generation LP (Pennsylvania) 1%GP 03 EDISON MISSION OPERATION & MAINTENANCE, INC. (no partnership) 04 Mission Operations de Mexico, S.A. de C.V. 99% 03 EDISON MISSION PROJECT CO. (formerly EME UK International, Inc.) (Delaware corp) 100% 03 EL DORADO ENERGY COMPANY (GP) 04 Auburndale Power Partners, LP (Delaware LP) 1%; 50% w/ Devereaux [see 4.03] 03 EME UK International LLC (Delaware LLC) 100% [owns 100% of Class B Shares of MEC International B.V.] 03 EMP, INC. (Oregon corporation) (GP & LP) (inactive) 03 FOUR COUNTIES GAS COMPANY (inactive) 03 GLOBAL POWER INVESTORS, INC. 03 HANOVER ENERGY COMPANY 04 Chickahominy River Energy Corp. (Virginia corporation) (GP & LP) 05 Commonwealth Atlantic LP (Delaware partnership) [see 4.05] 50% 03 HOLTSVILLE ENERGY COMPANY (GP & LP) 04 Brookhaven Cogeneration, LP (Delaware partnership) 50%; 100% w/Madera 03 INDIAN BAY ENERGY COMPANY (GP & LP) 04 Riverhead Cogeneration III, LP (Delaware partnership) 50%; 100% w/Santa Ana 03 JEFFERSON ENERGY COMPANY (GP & LP) (inactive) 03 KINGS CANYON ENERGY COMPANY (inactive) 03 KINGSPARK ENERGY COMPANY (GP & LP) 04 Smithtown Cogeneration, LP (Delaware partnership) 50%; 100% w/Balboa 03 LAGUNA ENERGY COMPANY (inactive) (former interest in Ambit) 18 03 LA JOLLA ENERGY COMPANY (inactive) (used for Belridge) 03 LAKEVIEW ENERGY COMPANY 04 Georgia Peaker, LP (Delaware LP) 50%; 100% w/Silver Springs 03 LEHIGH RIVER ENERGY COMPANY (inactive) 03 LONGVIEW COGENERATION COMPANY (held for Weyerhauser) 03 MADERA ENERGY COMPANY (GP) 04 Brookhaven Cogeneration, LP (Delaware partnership) 50%; 100% w/Holtsville 03 MADISON ENERGY COMPANY (LP) 04 Gordonsville Energy, LP (Delaware partnership) [see 4.06] 49%; 50% w/Rapidan 03 Midwest Generation EME, LLC (Delaware LLC) 100% 04 Edison Mission Midwest Holdings Co. 100% 05 Edison Mission Overseas Co. (Com Ed project) 100% 06 Edison Mission Overseas Ltd. (Com Ed project) 100% 05 Midwest Generation, LLC (Com Ed project) 100% 03 Mission Capital, LP (Delaware LP) 3%; MIPS partnership 03 MISSION/EAGLE ENERGY COMPANY (inactive) 03 MISSION ENERGY CONSTRUCTION SERVICES, INC. (Provides construction services for Paiton Project) 03 MISSION ENERGY GENERATION, INC. (Inactive) 03 MISSION ENERGY HOLDINGS, INC. 04 Mission Capital, LP (Delaware LP) 97%; MIPS partnership 03 MISSION ENERGY HOLDINGS INTERNATIONAL, INC. [holds all the issued and outstanding stock of MEC International B.V.--see INTERNATIONAL section] 03 MISSION ENERGY INDONESIA (inactive) 03 MISSION ENERGY MEXICO (inactive) formerly the branch office in Mexico (no partnership) 03 MISSION ENERGY NEW YORK, INC. (GP & LP) 04 Brooklyn Navy Yard Cogeneration Partners, LP (Delaware partnership) 50% [see 4.04] 03 MISSION ENERGY WALES COMPANY 04 Mission Hydro Limited Partnership (UK limited partnership) [See International section for structure of Mission Hydro LP] 03 Mission Operations de Mexico, S.A. de C.V. 1% 03 MISSION TRIPLE CYCLE SYSTEMS COMPANY (GP) 04 Triple Cycle Partnership (Texas G.P.) 50% 03 NORTH JACKSON ENERGY COMPANY (inactive) [held for Akso Salt Proj] 03 NORTHERN SIERRA ENERGY COMPANY (GP) 04 Sobel Cogeneration Company (general partnership) 50% 03 ORTEGA ENERGY COMPANY (Mid-County Cogen gas contracts) 03 PANTHER TIMBER COMPANY (GP) 04 American Kiln Partners, LP (Delaware limited partnership) 2% 03 PARADISE ENERGY COMPANY (inactive) 03 PLEASANT VALLEY ENERGY COMPANY (GP) 04 American Bituminous Power Partners, LP (Delaware limited partnership) 0.5%; 50% w/Aguila 05 American Kiln Partners, LP (Delaware Limited Partnership) 0.5% of 53% 03 PRINCE GEORGE ENERGY COMPANY (LP) 04 Hopewell Cogeneration Limited Partnership (Delaware limited partnership) 24.75% 04 Hopewell Cogeneration Inc. (Delaware corporation) 25% 05 Hopewell Cogeneration Limited Partnership (Delaware limited partnership) 1% 03 QUARTZ PEAK ENERGY COMPANY (LP) 04 Nevada Sun-Peak LP (Nevada partnership) [see 4.07] 50% 03 RAPIDAN ENERGY COMPANY (GP) 04 Gordonsville Energy, LP (Delaware partnership) [see 4.06] 1%; 50% w/Madison 03 REEVES BAY ENERGY COMPANY (GP & LP) 04 North Shore Energy LP (Delaware partnership) 50%; 100% w/Santa Clara 05 Northville Energy Corporation (New York corporation) 100% 03 RIDGECREST ENERGY COMPANY (GP) 19 04 Riverhead Cogeneration I, LP (Delaware partnership) 50%; 100% w/Centerport 03 RIO ESCONDIDO ENERGY COMPANY 03 RIVERPORT ENERGY COMPANY (GP & LP) 04 Riverhead Cogeneration II, LP (Delaware partnership) 50%; 100% w/San Pedro 03 SAN GABRIEL ENERGY COMPANY (inactive) (McKenzie gas contracts) 03 SAN JOAQUIN ENERGY COMPANY (GP) 04 Midway-Sunset Cogeneration Company, LP 50% 03 SAN JUAN ENERGY COMPANY (GP) 04 March Point Cogeneration Company 50% 03 SAN PEDRO ENERGY COMPANY (GP) 04 Riverhead Cogeneration II, LP (Delaware partnership) 50%; 100% w/Riverport 03 SANTA ANA ENERGY COMPANY (GP) 04 Riverhead Cogeneration III, LP (Delaware partnership) 50%; 100% w/Indian Bay 03 SANTA CLARA ENERGY COMPANY (GP) 04 North Shore Energy, LP (Delaware partnership) 50%; 100% w/Reeves Bay 05 Northville Energy Corporation (New York corporation) 100% 03 SILVERADO ENERGY COMPANY (GP) 04 Coalinga Cogeneration Company 50% 03 SILVER SPRINGS ENERGY COMPANY 04 Georgia Peaker, LP (Delaware limited partnership) 50%; 100% w/Lakeview 03 SONOMA GEOTHERMAL COMPANY (GP & LP) 04 Geothermal Energy Partners Ltd. (Aidlin) 5%LP 03 SOUTH COAST ENERGY COMPANY (GP) 04 Harbor Cogeneration Company 30% 03 SOUTHERN SIERRA ENERGY COMPANY (GP) 04 Kern River Cogeneration Company (general partnership) 50% 03 THOROFARE ENERGY COMPANY (inactive) 03 VIEJO ENERGY COMPANY (GP) 04 Sargent Canyon Cogeneration Company 50% 03 VISTA ENERGY COMPANY (New Jersey corporation) (inactive) 03 WESTERN SIERRA ENERGY COMPANY (GP) 04 Sycamore Cogeneration Company (general partnership) 50% EDISON MISSION ENERGY INTERNATIONAL COMPANIES: 04 MEC International B.V. (Netherlands corporation) (Holding Company 100% owned by MEC Holdings International, Inc. (California corp.)) Address: Apoliolaan 15, 1077 AB Amsterdam, The Netherlands 05 Adelaide Ventures Ltd. (Cayman Island company) 100% 05 Beheer-en Beleggingsmaatschappij Botara B.V. (LYB Peakers Project) 100% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Valley Power Pty Ltd. (proprietary limited Australia company; LYB Peakers Project) 05 Beheer-en Beleggingsmaatschappij Hagra B.V. 100% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 05 Beheer-en Beleggingsmaatschappij Trepo B.V. 100% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 05 Edison Mission Energy Asia Pte Ltd. (Singapore private company limited by shares) 100% (EME's Regional Asia Pacific Headquarters) Address: 391-B Orchard Road, Ngee Ann City, Tower B, 14th Floor, #14-08/10, Singapore 238874 06 Edison Mission Energy Asia Pacific Pte Ltd. (Singapore corporation) 100% Address: 391-B Orchard Road, Ngee Ann City, Tower B, 14th Floor, #14-08/10, Singapore 238874 06 Edison Mission Energy Fuel Company Pte Ltd. (Singapore corporation) 100% Address: 391-B Orchard Road, Ngee Ann City, Tower B, 14th Floor, #14-08/10, Singapore 238874 20 06 Edison Mission Operation & Maintenance Services Pte Ltd 100% Address: 391-B Orchard Road, Ngee Ann City, Tower B, 14th Floor, #14-08/10, Singapore 238874 06 P.T. Edison Mission Operation and Maintenance Indonesia (Indonesian company) 99% Address: Jl. Gen. A Yani No. 54 Probolinggo, East Java, Indonesia 05 Edison Mission Energy International B.V. (Netherlands company) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 05 Edison Mission Energy Services B.V. (Netherlands company) 100% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 05 Edison Mission Operation & Maintenance Services B.V. (Netherlands company) 100% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Edison Mission Operation & Maintenance (Thailand) 100% 05 EME Tri Gen B.V. 100% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Tri Energy Company Limited (Thai limited liability company) (Tri Energy Project) (equity) 25% [see 4.17] Address: 16th Floor, Grant Amarin Tower, New Petchburi Road, Ratchathewi, Bangkok 10320 Thailand 05 EME Victoria B.V. 100% (inactive) Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 05 Global Generation B.V. 100% Address: Apoliolaan 15, 1077 AB Amsterdam, The Netherlands 06 Caresale Services Limited 06 Edison First Power Holdings I 100% [PowerGen project] 07 Edison Mission Marketing and Services Limited (UK company) 100% 07 EME Finance UK Limited 100% 07 Energy Generation Finance PLC 100% 07 Maplekey Holdings Limited 100% 08 Maplekey UK Finance Limited (UK company) 100% [Steamboat project] 09 Maplekey UK Limited (UK company) 100% [Steamboat project] 10 Edison First Power Limited (Guernsey company) 100% 07 South Australia Holdings Ltd. 100% 08 Edison Mission Ausone Pty Ltd. (Australian company) 100% 08 EME Adelaide Energy Ltd. (UK company) 100% 08 EME Monet Ltd. (UK company) 100% 09 Edison Mission De Laide Pty Ltd. (Australian company) 100% 09 Edison Mission Vendesi Pty Ltd. (Australian company) 100% 09 Edison Mission Utilities Pty. Ltd. (Australian company) 100% 06 Redbill Contracts Limited 100% 05 Hydro Energy B.V. (Netherlands limited liability company) 10% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Iberica de Energias, S.A. (Spain corp) 96.65% [see 4.08] Address: Paseo de Gracia 18, Planta 4, 08007, Barcelona, Spain 07 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain corporation) 91.32% [see 4.09] Address: Paseo de Gracia 18, Planta 4, 08007, Barcelona, Spain 08 Monasterio de Rueda, S.L. (Spain) 100% Address: Paseo de Gracia 18, Planta 4, 08007, Barcelona, Spain 05 Iberian Hy-Power Amsterdam B.V. (Netherlands limited liability company) 100% Address: Strawinskylaan 1725, Amsterdam, NOORD-HOLL 1077 XX 06 Hydro Energy B.V. (Netherlands company) 90% 07 Iberica de Energias, S.A. (Spain corporation) 96.65% [see 4.08] 08 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain corporation) 91.32% [see 4.09] 09 Monasterio de Rueda, S.L. (Spain) 100% 06 Iberica de Energias, S.A. (Spain corporation) 3.35% [see 4.08] 07 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain 21 corporation) 91.32% [see 4.09] 08 Monasterio de Rueda, S.L. (Spain) 100% 05 Latrobe Power Pty. Ltd. (Australian corporation) 99% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 06 Mission Victoria Partnership (Australian partnership) 52.31% (100% w/ Traralgon PPL 46.69% and MEVALP 1%) 07 Latrobe Power Partnership (Australian partnership) 99% (owns 51% of the Loy Yang B facility; 49% to Gippsland 05 Loy Yang Holdings Pty Ltd (Australia corporation) 100% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 06 Edison Mission Energy Holdings Pty Ltd (Australian corp.) 100% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 07 Edison Mission Energy Australia Ltd. (Australian public company) 100% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 08 Latrobe Power Partnership (Australian partnership) 1% % (owns 51% of the Loy Yang B facility; 49% to Gippsland 07 Edison Mission Energy Australia Pilbara Power Pty Ltd. (Australia company) 100% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 07 Edison Mission Operation & Maintenance Kwinana Pty Ltd. (Australia) 100% (Operator of Kwinana Project) Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 07 Edison Mission Operation & Maintenance Loy Yang Pty Ltd. (Australian corporation) 100% Address: P.O. Box 1792, Traralgon, Victoria 3844,Australia 07 Mission Energy Development Australia Pty Ltd. 08 Gippsland Power Pty Ltd 100% (owns 49% of the Loy Yang B facility; 51% to Latrobe Power Partnership) 07 Mission Energy Holdings Superannuation Fund Pty Ltd. (retirement fund required by Australia law) 100% 07 Mission Energy (Kwinana) Pty Ltd. (Australia) 100% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 08 Kwinana Power Partnership (Australian G.P.) 1% Address: Level 23, St. Martins Tower 44 St George's Terrace, Perth WA 6000 06 Latrobe Power Pty. Ltd. (Australian corporation) 1% 07 Mission Victoria Partnership (Australian partnership) 52.31% 08 Latrobe Power Partnership (Australian partnership) 99% (owns 51% of the Loy Yang B facility; 49% to Gippsland 06 Mission Energy Ventures Australia Pty. Ltd. (Australian company) 100% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 07 Mission Victoria Partnership (Australian partnership) 1% 08 Latrobe Power Partnership (Australian partnership) 99% (owns 51% of the Loy Yang B facility; 49% to Gippsland 06 Traralgon Power Pty. Ltd. (Australian corporation) 1% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 07 Mission Victoria Partnership (Australian partnership) 46.69% 08 Latrobe Power Partnership (Australian partnership) 99% (owns 51% of the Loy Yang B facility; 49% to Gippsland 05 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Doga Enerji Uretim Sanayi ve Ticaret L.S. (Turkish corporation) (Project company) 80% 22 Address: Merkez Man, Mahallesi Caddesi 11/8, Esenyurt, Istanbul, Turkey 06 Doga Isi Satis Hizmetleri ve Ticaret L.S. (Turkish corporation) (Heat company) 80% Address: Merkez Man, Mahallesi Caddesi 11/8, Esenyurt, Istanbul, Turkey 06 Doga Isletme ve Bakim Ticaret L.S. (Turkish corporation) (O&M company) 80% Address: Merkez Man, Mahallesi Caddesi 11/8, Esenyurt, Istanbul, Turkey 05 MEC IES B.V. (Netherlands company) (ISAB Project) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 ISAB Energy Services s.r.l. 49% (services co ISAB Project) 05 MEC India B.V. (Netherlands company) (Jojobera Project) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Edison Mission Energy Power (Mauritius corporation) (Branch office in India) Address: Louis Leconte Street, Curepipe, Mauritius 05 MEC Indo Coal B.V. (Netherlands company) (Adaro Project) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 P. T. Adaro Indonesia (equity) 10% Address: Suite 704, World Trade Centre, Jl. Jend. Sudirman Kav. 31, Jakarta 12920 Indonesia 05 MEC Indonesia B.V. (Netherlands company) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 P. T. Paiton Energy Company (Indonesia company) (equity) (Paiton Project) 40% [see 4.11] Address: Menara Batavia, 8th Floor, Jl. K. H. Mas Mansyur Kav. 126, Jakarta 10220 Indonesia 05 MEC International Holdings B.V. (Netherlands corp) 100% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Edison Mission Energy International B.V. (Netherlands company) 1% 06 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 1% 07 Doga Enerji Uretim Sanayi ve Ticaret L.S. (Turkish corporation) (Project company) 80% 07 Doga Isi Satis Hizmetleri ve Ticaret L.S. (Turkish corporation) (Heat company) 80% 07 Doga Isletme Bakim Ticaret L.S. (Turkish corporation) (O&M company) 80% 06 MEC IES B.V. (Netherlands company) (ISAB Project) 1% 07 ISAB Energy Services s.r.l. 49% 06 MEC India B.V. (Netherlands company) 1% 07 Edison Mission Energy Power (Mauritius corporation) 06 MEC Indo Coal B.V. (Netherlands company) (Adaro Project) 1% 07 P. T. Adaro Indonesia (equity) 10% 06 MEC Indonesia B.V. (Netherlands company) 1% 07 P. T. Paiton Energy Company (Indonesia company) (equity) (Paiton Project) 40% [see 4.11] 06 MEC Laguna Power B.V. (Netherlands company) (Thailand Project) 1% 07 Gulf Power Generation Co. Ltd. (Bangkok corporation) 40% 06 MEC Perth B.V. (Netherlands company) (Kwinana Project) 1% 07 Kwinana Power Partnership (Australian G.P.) [see 4.16] 06 MEC Priolo B.V. (Netherlands company) (ISAB Project) 1% 07 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see 4.12] 1% of 49% (quota, not shares) 06 MEC San Pascual B.V. (Netherlands company) 1% 07 San Pascual Cogeneration Company International B.V. 50% 08 San Pascual Cogeneration Company (Philippines) Ltd. (San Pascual Project) (equity) 1%GP and 74%LP 07 Morningstar Holdings B.V. (formerly Beheer-en Beleggingsmaatschappij Vestra B.V.) 50% 06 MEC Sidi Krir B.V. (Netherlands company) 1% 23 06 MEC Sumatra B.V. (Netherlands company) 1% 06 MEC Wales B.V. (Netherlands Company) 1% 07 Mission Hydro Limited Partnership (UK limited partnership) 08 EME Generation Holdings Limited (UK company) 100% 09 Loyvic Pty Ltd. (Australia company) 100% 10 Energy Capital Partnership (Australia partnership) 1% 11 Enerloy Pty Ltd. (Australia company) 100% 09 EME Victoria Generation Limited (UK company) 100% 10 Energy Capital Partnership (Australia partnership 98% 11 Enerloy Pty Ltd. (Australia company) 100% 09 Energy Capital Partnership (Australia partnership) 1%LP 10 Enerloy Pty Ltd. (Australia company) 100% 09 First Hydro Holdings Company (Australia partnership) 99% 10 First Hydro Company [see 4.13] 99% 10 First Hydro Finance plc 11 First Hydro Company [see 4.13] 1% 06 Mission Energy Italia s.r.l. 10% (Office in Italy) 06 P.T. Edison Mission Operation and Maintenance Indonesia (Indonesian company) 1% 05 MEC Laguna Power B.V. (Netherlands co) (Malaya Project) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Gulf Power Generation Co. Ltd. (Bangkok corporation) 40% Address: 888/101 Mahatun Plaza Tower, 10th Floor, Ploenchit, Lumphini, Patumwan, Bangkok 10330 05 MEC Perth B.V. (Netherlands company) (Kwinana Project) 99% 06 Kwinana Power Partnership (Australian G.P.) 99% [See 4.16] Address: Level 23, St. Martins Tower 44 St George's Terrace, Perth WA 6000 05 MEC Priolo B.V. (Netherlands company) (ISAB Project) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see 4.12] 99% of 49% (quota, not shares) Address: Corso Gelone No. 103, Siracusa, Sicily, Italy 05 MEC San Pascual B.V. (Netherlands company) 99% Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands 06 San Pascual Cogeneration Company International B.V. 50% Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands 07 San Pascual Cogeneration Company (Philippines) Ltd (San Pascual Project) (equity) 1%GP and 74%LP Address: Unit 1610/1611, Tower One, Ayala Triangle, Ayala Avenue, 1200 Makati City, Metro Manila, Republic of the Philippines 06 Morningstar Holdings B.V. (formerly Beheer-en Beleggingsmaatschappij Vestra B.V.) 50% Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands 05 MEC Sidi Krir B.V. (Netherlands company) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 05 MEC Sumatra B.V. (Netherlands company) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 05 MEC Wales B.V. (Netherlands company) 99% Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands 06 Mission Hydro Limited Partnership 69% Address: Lansdowne House, Berkeley Square, London W1X5DH England 07 EME Generation Holdings Limited (UK company) 100% 08 Loyvic Pty Ltd. (Australia company) 100% 09 Energy Capital Partnership (Australia partnership) 1% 10 Enerloy Pty Ltd. (Australia company) 100% 08 EME Victoria Generation Limited (UK company) 100% 09 Energy Capital Partnership (Australia partnership 98% 10 Enerloy Pty Ltd. (Australia company) 100% 08 Energy Capital Partnership (Australia partnership) 1%LP 09 Enerloy Pty Ltd. (Australia company) 100% 08 First Hydro Holdings Company (Australia partnership) 99% 24 Address: Lansdowne House, Berkeley Square, London W1X5DH England 09 First Hydro Company [see 4.13] 99% Address: Bala House, St. David's Park Ewloe, Dlwyd, Wales CH5 3XJ 09 First Hydro Finance plc 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 10 First Hydro Company [see 4.13] 1% Address: Bala House, St. David's Park Ewloe, Dlwyd, Wales CH5 3XJ 05 Mission Energy Company (UK) Limited (United Kingdom private limited company) 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 06 Derwent Cogeneration Limited (United Kingdom private limited liability company) (equity) [see 4.14] 33% Address: Lansdowne House, Berkeley Square, London W1X5DH England 06 Edison Mission Energy Limited (UK private limited company) 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 06 Edison Mission Operation & Maintenance Limited (a United Kingdom corporation) 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 06 Edison Mission Services Limited (UK private limited company) 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 06 Mission Hydro (UK) Limited 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 07 First Hydro Holdings Company 1% 08 First Hydro Company [see 4.13] 99% 08 First Hydro Finance plc 100% 09 First Hydro Company [see 4.13] 1% 07 Mission Hydro Limited Partnership 1%GP 08 EME Generation Holdings Limited (UK company) 100% 09 Loyvic Pty Ltd. (Australia company) 100% 10 Energy Capital Partnership (Australia partnership) 1% 11 Enerloy Pty Ltd. (Australia company) 100% 09 EME Victoria Generation Limited (UK company) 100% 10 Energy Capital Partnership (Australia partnership 98% 11 Enerloy Pty Ltd. (Australia company) 100% 09 Energy Capital Partnership (Australia partnership) 1%LP 10 Enerloy Pty Ltd. (Australia company) 100% 09 First Hydro Holdings Company (Australia partnership) 99% 10 First Hydro Company [see 4.13] 99% 10 First Hydro Finance plc 99% 11 First Hydro Company [see 4.13] 1% 06 Mission (No. 2) Limited (UK private limited company) 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 06 Pride Hold Limited (United Kingdom corporation) 99% Address: Lansdowne House, Berkeley Square, London W1X5DH England 07 Lakeland Power Ltd. (United Kingdom private limited liability company) [see 4.15] 80% Address: Roosecote Power Station, Barrow-In-Furness, Cumbria, England LA13 OPX 07 Lakeland Power Development Company (UK corporation) 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 06 Rapid Energy Limited 05 Mission Energy Italia s.r.l. 90% Representative Office in Italy 25 Address: Villa Brasini, Via Flaminia 497, 00191 Rome Italy 05 Pride Hold Limited (United Kingdom corporation) 1% Address: Lansdowne House, Berkeley Square, London W1X5DH England 06 Lakeland Power Ltd. (United Kingdom private limited liability company) [see 4.15] 80% Address: Roosecote Power Station, Barrow-In-Furness, Cumbria, England LA13 OPX 06 Lakeland Power Development Company (UK corporation) 100% Address: Lansdowne House, Berkeley Square, London W1X5DH England 05 Rillington Holdings Limited (Gibraltar) Address: 57/63 Line Wall Road, Gibraltar 06 EcoElectrica S.a.r.l. (Luxemburg) to be dissolved by 08/99 Address: Luxemburg 07 EME del Caribe Holding GmbH (Austria) Address: 4020 Linz, Landstrasse 12, Austria 08 EME del Caribe (Cayman Islands) Address: First Floor, Caledonian House, Mary Street, George Town, Grand Cayman, Cayman Islands 09 EcoElectrica Holdings, Ltd. (Cayman Islands) 50% Address: 1350 GT, The Huntlaw Building, Fort Street, Grand Cayman, Cayman Islands 10 EcoElectrica Ltd. (Cayman Islands) 100% Address: 1350 GT, The Huntlaw Building, Fort Street, Grand Cayman, Cayman Islands 11 EcoElectrica LP (Bermuda partnership) (equity) 1% Address: Plaza Scotiabank, 273 Ponce de Leon Avenue, Suite 902, Hato Rey, Puerto Rico 00918 10 EcoElectrica LP (Bermuda partnership) (equity) 99% Address: Plaza Scotiabank, 273 Ponce de Leon Avenue, Suite 902, Hato Rey, Puerto Rico 00918 05 Southwestern Generation B.V. 100% Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands 05 Traralgon Power Pty. Ltd. (Australian corporation) 99% Address: Southgate Complex, Level 20, Tower East, 40 City Road, South Melbourne, Victoria 3205 06 Mission Victoria Partnership (Australian partnership) 46.69% (100% w/ Latrobe PPL 52.31% and MEVALP 1%) 07 Latrobe Power Partnership (Australian partnership) (owns 49% of the Loy Yang B facility; 51% to Latrobe Power Partnership) 26 EX-10.77 3 AGREEMENT BY & BETWEEN S.L. WILLIAMS & EDISON MS Exhibit 10.77 Execution Copy AGREEMENT By And Between S. Linn Williams And Edison Mission Energy February 5, 2000 Execution Copy Table of Contents
Page ---- ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS......................................... 1 Section 1.01 Definitions...................................................... 1 Section 1.02 Interpretive Matters............................................. 3 ARTICLE 2: EMPLOYMENT AND COMPENSATION............................................... 3 Section 2.01 Resignation...................................................... 3 Section 2.02 Further Assurances............................................... 4 Section 2.03 Effect of Resignation............................................ 4 Section 2.04 Compensation and Benefits........................................ 4 Section 2.05 Withholding...................................................... 8 Section 2.06 Company Property................................................. 8 Section 2.07 Releases......................................................... 8 ARTICLE 3: ADDITIONAL COVENANTS OF EXECUTIVE......................................... 9 Section 3.01 Confidentiality.................................................. 9 Section 3.02 Stock Activity................................................... 11 Section 3.03 Intentionally Omitted............................................ 12 Section 3.04 Non-Solicitation; Non-Disparagement; Non-Interference............ 12 Section 3.05 Ownership of Works............................................... 13 Section 3.06 Cooperation With Legal Process................................... 13 ARTICLE 4: GENERAL PROVISIONS........................................................ 14 Section 4.01 Opportunity to Review With Counsel............................... 14 Section 4.02 Choice of Law.................................................... 14 Section 4.03 Remedies......................................................... 14 Section 4.04 Severability..................................................... 14 Section 4.05 No Amendment; Entire Agreement; No Waiver........................ 14 Section 4.06 Right Of Offset.................................................. 15 Section 4.07 Parties of Interest.............................................. 15 Section 4.08 Notices.......................................................... 15 Section 4.09 Counterparts..................................................... 15 Section 4.10 Publicity........................................................ 16 Section 4.11 Headings......................................................... 16 Section 4.12 Attorneys Fees................................................... 16 Section 4.13 Further Assurances............................................... 16 Section 4.14 Additional Covenants of the Company.............................. 16 Section 4.15 Dispute Resolution............................................... 16 Section 4.16 Approvals........................................................ 17
i Execution Copy SCHEDULE OF ADDRESSES SCHEDULE OF DEFERRED COMPENSATION SCHEDULE OF OTHER TERMINATED BENEFITS SCHEDULE OF RETIREMENT BENEFITS SCHEDULE OF VESTED OPTIONS FORM OF GENERAL RELEASE FORM OF AGE DISCRIMINATION RELEASE ii Execution Copy AGREEMENT THIS AGREEMENT ("Agreement") is entered into as of February 5, 2000 by and between S. Linn Williams (the "Executive") and Edison Mission Energy, a California corporation (the "Company"). RECITALS WHEREAS, the Executive is an American citizen who was hired by the Company in California and employed there during most of his employment with the Company; WHEREAS, the Executive has recently been working for the Company in the United Kingdom as Senior Vice President of the Company with responsibility for its European operations; and WHEREAS, the Company has requested and Executive has agreed to resign from his positions at the Company on the terms set forth herein; NOW, THEREFORE, in consideration of the mutual agreements and covenants of the parties herein contained, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows. ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS SECTION 1.01 DEFINITIONS. As used herein the following terms have the following meanings: (a) "Affiliate" means, with respect to a specified Person, any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. (b) "Agreement" has the meaning specified in the introductory paragraph of this Agreement. (c) "Claims" has the meaning specified in the form of General Release attached hereto. (d) "Company" has the meaning specified in the introductory paragraph of this Agreement. (e) "Confidential Information" has the meaning specified in Section 3.01(a). 1 (f) "Deferral Plans" means the Edison International Executive Deferred Compensation Plan and the Edison International Option Gain Deferral Plan. (g) "Effective Date" shall be February 8, 2000. (h) "Equity Plans" has the meaning specified in Section 2.04(d). (i) "Exchange Offer" means the exchange offer for the Company's phantom options contemplated by that certain memorandum dated January 17, 2000 from Alan J. Fohrer to holders of the Company's phantom options, which is based on an Exchange Offer assumed gross amount of $471.0647 per phantom EME Share (less exercise prices) as the terms of which may be amplified, extended or modified by the Company in the future, but the term "Exchange Offer" shall not include any exchange offer made after the expiration or termination of the first such exchange offer. (j) "Executive" has the meaning specified in the introductory paragraph of this Agreement. (k) "Group" means two or more Persons which agree to act together for the purpose of acquiring, holding, voting or disposing of Voting Stock or of acquiring, holding or disposing of any significant subsidiary, or significant amount of assets, of the Company or any Affiliate of the Company. (l) "Materials" has the meaning specified in Section 3.05. (m) "Options" has the meaning specified in Section 2.04(d). (n) "Parent" means Edison International, a California corporation. (o) "Person" means and includes an individual, a partnership, a limited liability company, a joint venture, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof or any entity similar to any of the foregoing. (p) "Releasee" has the meaning specified in the form of General Release attached hereto. (q) "Releasor" has the meaning specified in the form of General Release attached hereto. (r) "Schedule of Addresses" means the Schedule of Addresses attached hereto and incorporated herein by reference. (s) "Schedule of Deferred Compensation" means the Schedule of Deferred Compensation attached hereto and incorporated herein by reference. 2 (t) "Schedule of Other Terminated Benefits" means the Schedule of Other Terminated Benefits attached hereto and incorporated herein by reference. (u) "Schedule of Retirement Benefits" means the Schedule of Retirement Benefits attached hereto and incorporated herein by reference. (v) "Schedule of Vested Options" means the Schedule of Vested Options attached hereto and incorporated herein by reference. (w) "Voting Stock" means shares of capital stock of the Parent that are entitled to vote in periodic elections for directors and any shares of capital stock, or similar securities, of the Company and any Affiliate of the Parent which are entitled to vote in periodic elections for directors or other similar governing board members. (x) "Works" has the meaning specified in Section 3.05. SECTION 1.02 INTERPRETIVE MATTERS. In this Agreement, unless the context otherwise requires, the singular shall include the plural, the masculine shall include the feminine and neuter, and vice versa. The terms "includes" or "including" shall mean "including without limitation." References to a Section, Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule of this Agreement, and reference to a given agreement or instrument shall be a reference to that agreement or instrument as modified, amended, supplemented and restated through the date as of which such reference is made. This Agreement and any documents or instruments delivered pursuant hereto shall be construed without regard to the identity of the Person who drafted the various provisions of the same. Each and every provision of this Agreement and such other documents and instruments shall be construed as though the parties participated equally in the drafting of the same. Consequently, the parties acknowledge and agree that any rule of construction that a document is to be construed against the drafting party shall not be applicable either to this Agreement or such other documents and instruments. ARTICLE 2: EMPLOYMENT AND COMPENSATION SECTION 2.01 RESIGNATION. Effective upon the Company's approval and execution of this Agreement, Executive does hereby resign from any and all positions of responsibility or authority at the Company, any subsidiary, parent or Affiliate of the Company, any other entity in which the Company or any of its Affiliates has an investment where Executive's position with such entity is related to such investment, and any division, unit, plan, program, trust, fund, project or other subdivision established, organized or sponsored by the Company or any of its subsidiaries, parents or Affiliates or any such other entity, whether such position is that of an agent, officer, manager, member, partner, executive, trustee, 3 administrator, director or otherwise. Notwithstanding the foregoing, if the Effective Date is after the date hereof, then between the date hereof and the Effective Date, Executive shall remain an employee of the Company on administrative leave, entitled to compensation for such period at his current base rate of salary and existing fringe benefits, but it is understood that Executive shall have no authority to bind or to determine or direct any activity of, or represent, the Company or any of its Affiliates during such period. Upon the Effective Date, and without any further action by Executive or the Company, Executive's employment with the Company shall end. SECTION 2.02 FURTHER ASSURANCES. To the extent necessary, Executive agrees from time-to-time, upon the Company's reasonable request, to execute any and all documents as may be necessary or desirable, in the reasonable and good faith judgment of the Company or any of its Affiliates, to further confirm and/or effectuate the aforesaid resignations. SECTION 2.03 EFFECT OF RESIGNATION. Executive and the Company agree that the resignation contained herein arises from the mutual agreement of the Executive and the Company, resulting in a cessation of Executive's continued employment. Such resignation shall be given the same effect as a termination of Executive's employment by the Company without cause for purposes of the Company's benefit plans including the Deferral and Equity Plans, but shall not constitute or be deemed to be any breach of any employment or other obligation or duty by either the Executive or by the Company or any of its Affiliates, whether express or implied, for any purpose. SECTION 2.04 COMPENSATION AND BENEFITS. Executive hereby agrees that the following accurately reflect all of the compensation, benefits or perquisites payable or otherwise to be provided to Executive by the Company and its Affiliates on and after the Effective Date as a result of Executive's employment by and separation from the Company and its Affiliates and that Executive is not entitled to any other compensation, benefits, or perquisites except as set forth in this Agreement: (a) Salary. On the Effective Date, Executive will receive accrued base salary from the end of the immediately preceding payroll period for which payment has been made through the Effective Date. (b) Accrued Vacation. On the Effective Date, the Company will pay Executive such amounts as are due Executive for accrued and unused vacation time in accordance with the Company's usual policies. (c) Executive Incentive Compensation Plan. On the Effective Date, the Company will pay Executive a bonus amount for the 1999 year under the Company's Executive Incentive Compensation Plan equal to a gross amount, before withholding, of One Hundred Seventy-Seven Thousand Five Hundred U.S. Dollars Exactly (U.S.$177,500). Executive shall not be entitled to any further payments under the Company's Executive Incentive Compensation Plan, including for any period after 1999. Nothing in this paragraph shall 4 create any inference or expectation regarding bonuses actually to be paid to participants in such Plan for the 1999 year, which may be above or below target amounts for individuals or in the aggregate. (d) Options. For purposes of the vesting of any unvested awards previously made to Executive under the Edison International Equity Compensation Plan or under the Edison International Management and Officer Long-Term Incentive Compensation Plans (the "Equity Plans"), Executive's employment by the Company shall be given the same effect as if Executive had remained regularly employed through the Effective Date. Executive and the Company agree that, as of the Effective Date, Executive's vested options to acquire stock of the Parent have been exercised in full and that vested phantom options in respect of the Company are as set forth in the Schedule of Vested Options attached hereto and incorporated herein by reference (the "Options"). From and after the Effective Date, the Executive shall no longer be eligible for grants of any awards under the Equity Plans or under any other long-term incentive plan of the Company or its Affiliates, and all unvested awards shall terminate as of the Effective Date. On March 16, 2000, the Company shall pay to Executive, by wire transfer in accordance with Executive's reasonable written instructions given at least forty-eight (48) hours in advance, a gross amount, before withholding, that is equal to the difference between U.S.$441.008 per phantom share and the pertinent exercise price of such share as shown on the Schedule of Vested Options for each vested phantom Option of the Company. From and after the date hereof, Executive shall have no further rights or entitlements in respect of such phantom Options or any phantom options in respect of the Company subject to the following: provided that in the event that (i) such Exchange Offer is closed, and (ii) the terms on which such Exchange Offer is closed provide to holders of phantom options who were employed on the Effective Date (excluding any employee whose employment ends due to death, disability or normal retirement) a non-contingent exchange value per phantom share (excluding interest and anything of value that is subject to vesting on the performance of future services) that exceeds, as of the consummation of the Exchange Offer, U.S.$441.008 per phantom share, then and in such event, within thirty (30) days following the close of such Exchange Offer, the Company shall pay to Executive a gross amount, in cash, before withholding, equal to such excess multiplied by the number of total phantom Options of Executive shown on the Schedule of Vested Options. For the purpose of this section, the Exchange Offer will close when the Company determines that the conditions of the Exchange Offer are met and the Exchange Offer is consummated which is currently contemplated for April 1, 2000. (e) Deferral Plans. The Schedule of Deferred Compensation attached hereto and incorporated herein by reference sets forth, as of the date shown, the vested balance of Executive's deferral account in the Edison International Executive Deferred Compensation Plan and units credited to Executive's stock unit account in the Edison International Option Gain Deferral Plan. All deferred compensation benefits shown on the Schedule of Deferred Compensation, following the Effective Date, shall remain subject to the terms of the Deferred Compensation Plan applicable thereto. 5 (f) Retirement Benefits. The Schedule of Retirement Benefits attached hereto and incorporated herein by reference sets forth, as of the Effective Date, the vested benefits payable to Executive under retirement plans of the Company and its Affiliates in which he has been a participant. All such benefits shown on the Schedule of Retirement Benefits, following the Effective Date, shall remain subject to the terms of the pertinent retirement plan applicable thereto, including the conditions to payment set forth therein. After the Effective Date, there will be no further accrual of benefits for Executive under such retirement plans. (g) Health Benefits. From the Effective Date until eighteen (18) months thereafter, Executive and his family shall remain eligible to continue to participate in medical and dental plans of the Company and its Affiliates on the same basis as if Executive had remained employed by the Company in his current position, provided that Executive shall be responsible for paying the premium costs therefor in accordance with the Company's ordinary practices in respect of former employees. (h) Other Insurance Coverage. Executive acknowledges that, except as provided in Section 2.04(g) above, no life, health, accident, disability or other insurance policies or health or welfare benefits will be provided for him by the Company or its Affiliates after the Effective Date. (i) Contract Costs. The Company will reimburse Executive for the reasonable fees and costs of any attorney, financial advisor, accountant and/or other professional advising and assisting Executive in the negotiations of this Agreement, up to Twenty-Five Thousand U.S. Dollars Exactly (U.S$25,000) in the aggregate. (j) Outstanding Expense Reports. Executive agrees to submit to the Company an expense report for all reimbursable and reasonable expenses he has incurred as an employee of the Company no later than the fifteenth business day following the Effective Date, and acknowledges that the business expenses to be contained in such expense report will be the only remaining reimbursable business expenses incurred by Executive while in the Company's employ. The Company will reimburse Executive for such expenses within thirty (30) days of Executive's submission of the report, to the extent such expenses are valid and reimbursable under Company policy. (k) Severance. As further consideration for Executive's execution of this Agreement, the Company agrees to provide the following severance benefits to Executive: (i) On the Effective Date, the Company shall make a one-time severance payment to Executive in an amount, prior to withholding, that is equal to Three Hundred Seventy-Five Thousand U.S. Dollars Exactly (U.S.$375,000). (ii) The Company currently pays Executive One Thousand Eight Hundred Twenty-Five U.S. Dollars Exactly (U.S.$1,825), before withholding, every other week as an overseas living allowance. The Company shall continue to make such payments 6 until the earlier of (x) the first anniversary of this Agreement, and (y) the relocation of the primary residence of Executive's family back to the United States. (iii) In the event that the primary residence of Executive's family is relocated from London, England to the United States prior to the second anniversary of the date hereof, then the Company shall reimburse the reasonable costs of such relocation in accordance with the usual policies and practices of the Company in respect of similar relocations, including provision of supporting documentation, provided that, the Company's obligation for such reimbursement shall not exceed One Hundred Fifty Thousand U.S. Dollars Exactly (U.S.$150,000) in the aggregate. Notwithstanding the foregoing, such reasonable costs shall not include any costs related to finding or acquiring a residence in the United States and the Company shall have the right to select and/or approve all providers of services to Executive and his family in connection with such relocation if the Company is responsible for the reimbursement of the costs of same. (iv) The Company shall permit Executive and his family to occupy the Company-owned residence currently occupied by Executive and his family until the first anniversary of the date hereof on the same terms and conditions (i.e., rent-free) as such apartment is currently occupied by Executive. If Executive desires to continue to occupy such premises after such date, then he shall so notify the Company in writing no later than November 1, 2000. In such event, from and after the first anniversary of the date hereof, the Executive shall, subject to the availability of and the terms of the lease for such apartment, assume all of the Company's obligations in respect of such apartment and shall pay and discharge the same as and when due or, at the Company's election, reimburse the Company for the actual costs of all such obligations. Executive shall execute customary documents reasonably requested by the Company to memorialize such arrangement. Such arrangement shall be terminable by Executive at any time on sixty (60) days' prior written notice to the Company and shall be terminable by the Company only for Executive's breach of his obligations in respect of such apartment and unless such breach has been cured within thirty (30) days following the Company's written notice of breach, provided that, Executive's right to occupy such premises shall in all events expire on July 31, 2001. If Executive fails timely to notify the Company of his intent to continue to occupy the premises and assume all of the Company's obligations therefor, he shall voluntarily and entirely vacate the premises by the first anniversary of the date hereof. (v) Executive hereby acknowledges that he is not entitled to any of the foregoing severance benefits or compensation described in Section 2.04(k) either by contract or California law. The Company is providing these severance benefits and compensation in consideration for Executive's execution of this Agreement and to compensate him for any alleged and/or claimed losses allegedly due to the resignation of his employment. (vi) If for any reason, any claim, demand, obligation, cause of action, debt, expense, damage, judgment, order or liability is not released or is found to survive the Form of General Release and Form of Age Discrimination Release executed by Ex- 7 ecutive, the full amount of the monetary benefits provided under Section 2.04(k) shall be a credit towards and/or a set off against any monetary or other award on such claim, demand, obligation, cause of action, debt, expense, damage, judgment, order or liability regardless of the jurisdiction, foreign or domestic, in which it arises or is issued. (l) Other Compensation. Executive acknowledges that from and after the Effective Date, all other compensation, benefits and perquisites to which he has been entitled as an employee of the Company shall forthwith terminate and that he shall no longer be entitled to receive the same, including without limitation, reimbursement for the costs of a car and driver and for private club memberships. Without limiting the generality of the foregoing, the other benefits and perquisites in which Executive currently participates which shall no longer be available to him after the Effective Date are as set forth in the Schedule of Other Terminated Benefits attached hereto and incorporated herein by reference. SECTION 2.05 WITHHOLDING. Executive agrees that all compensation, benefits and perquisites payable hereunder shall be paid after withholding for taxes which, in the Company's reasonable good faith judgment, are required to be withheld by the Company, including income taxes at the then current published rates unless Executive elects to use higher rates. Notwithstanding the foregoing, it is understood that all personal income and related taxes applicable to any and all compensation, benefits and perquisites payable hereunder shall be paid by Executive, and the Company shall not be obligated to pay any such taxes or to provide Executive with funds for the payment of same. SECTION 2.06 COMPANY PROPERTY. Subject to Section 2.04(k)(iv), Executive agrees to return to the Company, as soon as practicable, but in any event on or prior to the Effective Date, all Company property, including, but not limited to, all keys, credit cards, documents, equipment (including computer and telephone equipment) automobiles, files, data and records of any kind whatsoever that he has in his possession or control regardless of the form for storage thereof (whether documentary, on discs or present on other electronic media). The Company agrees to permit Executive to retain copies of documents that are contained in his office files and that are personal in nature, subject to the Company's prior review of such materials and approval of their retention by the Executive. Notwithstanding the foregoing, the Company will cooperate and work together with Executive to facilitate Executive's assumption of the Company's future obligations in respect of any automobile currently leased by the Company for Executive if Executive chooses to assume such obligations. SECTION 2.07 RELEASES. In further consideration of the Company's entry into this Agreement with Executive and its promise to make payments and to provide benefits hereunder to which Executive is not otherwise entitled, Executive is, concurrent with the Company's execution of this Agreement, delivering to the Company executed copies of the forms of releases attached hereto, respectively, as "Form of General Release" and "Form of Age Discrimination Release." In the event that the Executive exercises his right to rescind 8 the Age Discrimination Release, then notwithstanding any other provision of this Agreement, the Company shall have the right, within five (5) days thereafter, to terminate any and all further obligations of the parties under this Agreement. ARTICLE 3: ADDITIONAL COVENANTS OF EXECUTIVE SECTION 3.01 CONFIDENTIALITY. (a) Executive acknowledges that he has held a sensitive management position with the Company and that, by virtue of having held such position, he has had access to and has learned the Company's and its subsidiaries' and Affiliates' confidential and proprietary information and trade secrets pertaining to its and their past, present, planned or projected operations, results of operations, prospects, processes, know-how, services, projects, strategies, techniques, procedures, financial capabilities, assets, transactions, partners, financing sources and personnel, disclosure of any of which to present or future competitors, investors, partners or the general public would be highly detrimental to the best interests of the Company and its Affiliates. All such confidential and proprietary information to which Executive has had access as a result of his position with the Company are herein referred to as "Confidential Information." Examples of such confidential and proprietary information include, but are not limited to, the Company's investigations of and development and analytical work on potential future electric generation assets, both those potentially to be constructed and those potentially to be acquired. Executive further acknowledges and agrees that the right to maintain the confidentiality of such Confidential Information constitutes a proprietary right which the Company and its Affiliates are entitled to protect. (b) Accordingly, without limiting any obligations of Executive arising at law or pursuant to any existing agreement to which Executive is bound, Executive covenants and agrees to and in favor of the Company that, subject to the further provisions of this Agreement, Executive shall not disclose any Confidential Information to any Person other than as approved by the Company in writing in advance, and Executive shall not use for the Executive's own purposes or for any purpose other than those of the Company and its Affiliates any Confidential Information until such Confidential Information has been otherwise publicly disclosed. Without limiting the generality of the foregoing, Executive agrees that, except as permitted in writing by the Company, he will not respond to or in any way participate in or contribute to any public discussion, notice or other publicity concerning or in any way related to Confidential Information or, subject to Section 4.10, any confidential matters concerning his employment at the Company. Executive agrees that any disclosure by him of any of the Confidential Information shall constitute a material breach of this Agreement and of his fiduciary obligations to the Company. 9 (c) For purposes of this Section 3.01, "Confidential Information" does not include information which (i) is or becomes generally available to the public other than as a result of disclosure by Executive, or (ii) was within the Executive's possession prior to being furnished to the Executive by or on behalf of the Company or its Affiliates, provided that the Executive did not receive such information in a fiduciary capacity and provided further that the scope of such information was not known to the Executive to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any of its Affiliates or any other Person with respect to such information. (d) If Executive is requested or required (by oral questions, interrogatories, requests for information or documents in connection with any legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any Confidential Information, then Executive shall provide the Company with prompt written notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver from the Company, the Executive is, in the written opinion of counsel reasonably acceptable to the Company (the reasonable attorney's fees and costs of which opinion the Company shall reimburse), legally compelled to disclose Confidential Information to any tribunal or else stand liable for contempt, or suffer other censure or penalty, then Executive may, without liability hereunder, disclose to such tribunal only that portion of the Confidential Information which such counsel advises the Executive is legally required to disclose, provided that Executive exercises commercially reasonable efforts to preserve the confidentiality of the Confidential Information, including, without limitation, by cooperating with the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information by such tribunal. (e) Without limiting the provisions of Section 2.06, all files, forms, brochures, books, materials, written correspondence, memoranda, documents, manuals, computer disks, software products and lists that have in the past or may in the future come into the possession or control of the Executive as a result of his being an employee of or consultant to the Company shall at all times remain as the property of the Company and not of the Executive. At the time required by Section 2.06, and at any other time or times demanded by the Company, Executive shall deliver promptly to the Company all such property in the possession of the Executive or directly or indirectly under the control of the Executive. Executive agrees not to make, for the use of the Executive or of any other Person, reproductions or copies of any such property or other property of the Company. SECTION 3.02 STOCK ACTIVITY. Executive hereby agrees that from the date hereof until the second anniversary of the Effective Date, Executive shall not: (a) Acquire, by purchase or otherwise (except pursuant to Executive's participation in employee benefit plans), offer to acquire or obtain the right to acquire, propose 10 to acquire, announce any intention or plan to acquire, or announce or make any request for permission to acquire, directly or indirectly, any shares of Voting Stock, or any other security convertible into or exercisable or exchangeable for Voting Stock, unless (i) following such acquisition and after giving effect thereto, the Executive and any Group of which he is a member, would not be directly or indirectly the beneficial owners of more than five percent (5%) of the outstanding shares of Voting Stock of the Parent, the Company or any Affiliate thereof, as the case may be, and (ii) such acquisitions or offers or agreements to acquire are made in open market transactions (or pursuant to the Equity Plans); (b) Directly or indirectly engage in, or become a member of a Group which is engaging or which subsequently engages in, any tender offer or exchange offer for any shares of Voting Stock; (c) Take any other action, participate in or become a member of any Group, or make any proposal, offer to acquire or obtain a right to acquire, propose to acquire, announce any intention or plan to acquire, or announce or make any request for permission to acquire, directly or indirectly or alone or together with others, control of the Company or of any Affiliate of the Company or of any division, business segment or significant amount of assets of the Company or of any Affiliate of the Company; (d) Enter into any voting agreement or proxy arrangement with respect to shares of Voting Stock, or deposit any shares of Voting Stock into any voting trust or similar entity, as a result of which the voting rights associated with any or all of Executive's Voting Stock are vested in another Person, other than proxies (or their substitutes) designated by the Board of Directors of the issuer of such Voting Stock in proxy material for any meeting of stockholders of such issuer; (e) Conduct or become a participant in any solicitation of proxies with respect to Voting Stock, or make any announcement with respect to any solicitation of proxies, for the purpose of opposing a solicitation (for election of directors or otherwise) approved by a majority of the whole Board of Directors of the issuer of such Voting Stock, or present any proposal, or solicit or become a participant in the solicitation of proxies in favor of a proposal, for action at a meeting of the stockholders of such issuer, which is not approved by a majority of the whole Board of Directors of such issuer; (f) Enter into any plan, agreement or arrangement, or become a member of any Group, for the purpose of engaging in any activity prohibited by the foregoing paragraphs of this Section 3.02 ; or (g) Assist directly or indirectly any other Person in connection with such other Person's engaging in any activity which, if engaged in by the Executive, would constitute a violation of this Section 3.02. SECTION 3.03 INTENTIONALLY OMITTED. 11 SECTION 3.04 NON-SOLICITATION; NON-DISPARAGEMENT; NON-INTERFERENCE. During the period that begins on the date hereof and that ends on the second anniversary of the Effective Date, Executive agrees that he will not, directly or indirectly, for his own benefit, for the benefit of any Person other than the Company or its Affiliates, or otherwise: (a) Solicit, encourage or induce, or assist any Person to solicit, encourage or induce, any officer, director, executive or employee of the Company or its Affiliates to leave his or her employment with the Company or its Affiliates for any reason, it being agreed that the foregoing shall not prohibit Executive from soliciting the employment of his current secretarial assistant; (b) Induce or attempt to induce any customer, supplier, financier, government agency, independent contractor, developer, promoter or other Person having any business or regulatory relationship with the Company or any of its Affiliates to cease, reduce or alter the nature, amount or terms of business conducted or regulatory oversight or practices followed with respect to the Company or any of its Affiliates or to engage in any business, regulatory or other activity which might materially harm the Company or any of its Affiliates or which is opposed by the Company and its Affiliates; (c) Make or cause to be made any public statement that is disparaging of the Company or any of its Affiliates or their respective businesses or that materially injures the business or reputation of the Company or any of its Affiliates or their respective businesses; or (d) Directly or indirectly advise, consult or discuss with, provide information to, or assist any Person, including any holder of phantom options in the Company or any advisor or representative of any such holder, or make any comment or offer or provide any opinion or otherwise make statements, concerning the phantom options, or the grant, appreciation, value, or exercise thereof, or any transaction or proposed transaction in respect of such phantom options, including without limitation any planned or actual exchange offer by the Company therefor, or any interpretation or action by the Company planned or actually made with respect to such phantom options, or any claims or proceedings, whether pending or threatened, relating to such phantom options, without the prior written consent of the Chief Executive Officer of the Company, except and to the extent compelled by law. SECTION 3.05 OWNERSHIP OF WORKS. As between the Company and Executive, the Company shall be the sole and exclusive owner, throughout the universe, in perpetuity, of all right, title, interest, benefits and profits of every kind and nature whatsoever, whether now known or unknown, in, to and from all programs, financial or business plans, all non-generic ideas and concepts, logos, discoveries, trade secrets, prospect lists, or other tangible work product and materials (including, without limitation, tangible materials containing market, financial and other research) of every kind and nature whatsoever (collectively, the "Works") written, conceived, developed, furnished or created by or under the auspices of Executive in connection with his performance of duties as an employee of or consultant to the Company, and all results, benefits and proceeds of such Works (all of such Works, results, 12 benefits and proceeds being collectively referred to as the "Materials"). All of such Materials shall constitute a "work made for hire" for the Company within the meaning of the United States Copyright Act of 1976, as amended. In the event that the Materials or any portion thereof are for any reason whatsoever not deemed to be a "work made for hire" for the Company, Executive hereby grants and assigns to the Company all right, title, interest, benefits and profits of every kind and nature whatsoever, whether now known or unknown, in, to and from the Materials. As between the Company and Executive, the Company shall at all times have the perpetual and exclusive right to exploit such Materials and all works derived therefrom throughout the universe, and all revenues and other benefits and profits derived by the Company from such exploitation, as between the Company and Executive, shall be the sole and exclusive property of the Company. Executive agrees to execute, and to cause each of his employees or agents to execute, any and all formal assignments, recordations and any other documents which the Company reasonably deems are necessary or desirable to effectuate and/or evidence the Company's rights in and to the Materials. SECTION 3.06 COOPERATION WITH LEGAL PROCESS. From and after Executive's employment with the Company, the Company shall, consistent with the Company's then existing policies for indemnification of officers, continue to indemnify Executive for his activities as an officer, director and employee of the Company to the extent provided under and permitted by, and subject to the provisions and conditions of, law and the charter documents of the Company in effect at the time, as though Executive remained an officer, director and/or employee of the Company. In return, Executive agrees to provide reasonable cooperation and assistance to the Company, when and as requested by the Company and without charge to the Company except for the Executive's reasonable and bona fide out- of-pocket costs (including reasonable attorney's fees and costs), in connection with any and all pending or threatened claims, proceedings and investigations (whether on behalf of or against the Company) arising out of, or alleged to arise out of, facts or circumstances existing during the term of Executive's employment by the Company. Should reasonable cooperation from Executive require more than two (2) consecutive days in any two (2) month period, the Company will provide Executive with reasonable compensation for such excess time actually expended by Executive. ARTICLE 4: GENERAL PROVISIONS SECTION 4.01 OPPORTUNITY TO REVIEW WITH COUNSEL. Executive represents that he has discussed all aspects of this Agreement with an attorney of his choice, that he has carefully read and fully understands all of the provisions of this Agreement and that he is voluntarily entering into this Agreement. 13 SECTION 4.02 CHOICE OF LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, without reference to the choice of law doctrine of California. SECTION 4.03 REMEDIES. The rights and remedies of each party under this Agreement are not, except as expressly provided herein to the contrary, to the exclusion of each other or of any other rights or remedies of such party. Each party may exercise or decline to exercise any one or more of its rights and remedies without waiver of any such subsequent exercise of such right and remedy or any other rights and remedies of such party. Executive acknowledges that the Company cannot be properly protected from adverse consequences if Executive should default under specified provisions of this Agreement. Accordingly, the Executive agrees that in the event of any breach or threatened breach by Executive of any of the provisions of Sections 3.01, 3.02, 3.04 or 3.05 of the Agreement or of any warranty or representation in the Form of General Release or the Form of Age Discrimination Release, the Company, in addition to any other right or relief to which it may be entitled, shall be entitled to an order enjoining such breach or threatened breach and specifically enforcing Executive's compliance with the provisions thereof, Executive agreeing that he is hereby estopped and prohibited from arguing that damages are an adequate remedy for any such breach or threatened breach or that such equitable relief is inappropriate under the circumstances. SECTION 4.04 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the provisions hereof is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the provisions hereof are implemented and enforced as originally contemplated to the greatest extent possible. SECTION 4.05 NO AMENDMENT; ENTIRE AGREEMENT; NO WAIVER. This Agreement and the Schedules and attachments hereto constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, between the parties with respect to the subject matter hereof. Without limiting the generality of the foregoing, Executive specifically represents and acknowledges that in executing this Agreement, he does not rely and has not relied on any representations or statements made by the Company, or any of the Company's agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement, or otherwise. This Agreement may not be amended except by an instrument in writing signed by the parties. Either party may (a) extend the time for the performance of any of the obligations or other acts of the other party, or (b) waive compliance with any of the agreements applicable to the other party contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be 14 bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of a party to assert any of its rights hereunder shall not constitute a waiver of any of such right. SECTION 4.06 RIGHT OF OFFSET. The Company shall have the right to offset against amounts owed Executive by the Company (except for Deferral Plans and Retirement Benefits) any amounts which, in the future, Executive owes to the Company. SECTION 4.07 PARTIES IN INTEREST. This Agreement may not be assigned or transferred by either party, by operation of law or otherwise, without the prior written consent of the other party (which consent may be granted or withheld in the sole discretion of such other party). This Agreement shall be binding upon and inure solely to the benefit of the parties and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. SECTION 4.08 NOTICES. Any notice, payment, demand, or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to have been delivered, given, and received for all purposes (a) if delivered personally to the Person to whom it is addressed, or (b) when the same is actually received, if sent by a nationally recognized courier service (which provides proof of delivery), by registered or certified mail (postage and charges prepaid), or by facsimile (if such facsimile is followed by a hard copy of the facsimile communication sent promptly thereafter by a nationally recognized courier service (which provides proof of delivery) or registered or certified mail (postage and charges prepaid)), addressed as set forth in the Schedule of Addresses attached hereto and incorporated herein by reference or to such other address as such Person may from time to time specify by due notice. SECTION 4.09 COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 4.10 PUBLICITY. Executive represents that neither he nor his representatives have communicated with any past, present or prospective employee of the Company or any of its Affiliates concerning the amounts payable under this Agreement and the parties agree that, for a period of at least six (6) months, they will keep the terms, amounts and facts of this Agreement completely confidential, and that they will not during such period disclose any information concerning this Agreement to anyone except their respective attorneys or accountants, including, but not limited to, any past, present or prospective employees of the Company or any of its Affiliates, except in each case as may be required by law, including, without limitation, filings required by the Company and/or by the Parent with the Securities and Exchange Commission. The parties agree that any press release by 15 the Company in respect of the end of Executive's employment with the Company shall simply refer to the fact that Executive has resigned from the Company. SECTION 4.11 HEADINGS. The descriptive headings contained in this Agreement and table of contents of this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 4.12 ATTORNEYS FEES. In any litigation or proceeding relating to this Agreement, the prevailing party shall be entitled to recover its costs and reasonable attorney fees. SECTION 4.13 FURTHER ASSURANCES. The parties agree to execute such further instruments and perform such further acts as may be reasonably necessary to carry out the intent and purposes of this Agreement. SECTION 4.14 ADDITIONAL COVENANTS OF THE COMPANY. The Company agrees that, for a period of two (2) years from the Effective Date, the Company and its Affiliates will not publicly issue any press release that disparages, or materially injures the business or reputation of, the Executive, and will make reasonable efforts to prevent their executive officers and official spokespersons from making public statements on behalf of the Company or its Affiliates that are disparaging of Executive or materially injure his business or reputation. The Company further agrees to exercise reasonable efforts to cause personal mail addressed to Executive to be forwarded to him in a timely fashion (Executive agreeing to make reasonable efforts to notify third parties of the change in his business address). SECTION 4.15 DISPUTE RESOLUTION. All disputes arising out of or relating to this Agreement shall be resolved pursuant to the reference procedure set forth in California Code of Civil Procedure 638 et seq. The parties hereby agree to submit to the jurisdiction of the Superior Court of Los Angeles County for such purpose. Each party hereby acknowledges that it is waiving any right to a trial by jury. Either party may initiate the procedure set forth in this Section by providing the other party with notice setting forth the nature of the dispute. The parties shall designate to the Superior Court a referee who is an active attorney or retired judge living in Los Angeles County who shall resolve the dispute. If the parties are unable to designate a referee within 20 days after the receipt of the original referral notice, the parties shall request that the Superior Court appoint a referee. In connection with any proceeding pursuant to this Section, the parties shall have all discovery rights which would have been available had the matters which are the subject of the dispute been decided by the Superior Court. Discovery proceedings may be noticed and commenced immediately after delivery of the original referral notice. The hearing before the referee shall begin no later than 60 days after the receipt of such referral notice. All discovery in connection with the reference procedure shall be concluded no later than 15 days prior to the commencement of the hearing. Judgment upon the award rendered by the referee shall be entered in the Superior Court. Nothing in this Section shall be construed to impair the right of either party to appeal from such judgment. 16 SECTION 4.16 APPROVALS. The effectiveness and implementation of this Agreement are subject to the approval of the Board of Directors of the Company and, at the Company's election, the Compensation and Executive Personnel Committee of the Board of Directors of the Parent. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. /s/ S Linn Williams --------------------- S. Linn Williams EDISON MISSION ENERGY By:/s/ Alan J. Fohrer --------------------- Title:Pres & CEO ------------------ By: --------------------- Title: ------------------ 17 SCHEDULE OF ADDRESSES Notices to the Company and to the Parent shall be addressed as follows: Chief Executive Officer Edison Mission Energy 18101 Von Karman Avenue Suite 1700 Irvine, California 92612-1046 FAX: 949-757-0807 Notices to the Executive shall be addressed as follows: 66 Acacia Road London NW8 6 A E United Kingdom FAX: 011-44171-722-0767 With a courtesy copy to: Ronald M. Greenberg, Esq. Rosenfeld, Meyer & Susman 9601 Wilshire Blvd., 4/th/ Floor Beverly Hills, California 90210 FAX: (310) 271-6430 SCHEDULE OF DEFERRED COMPENSATION* Balance as of January 27, 2000: Edison 401(k) Savings Plan and Profit Sharing U.S.$ 77,032 Balance as of January 31, 2000: Executive Deferred Compensation Plan (EDCP) U.S.$588,652 Total U.S.$665,684 * Additional amounts, if any, arising from Profit Sharing amounts for the 1999 year will be added in the ordinary course when calculated. All benefits under these Plans are subject to the expressed terms of the relevant Plans. SCHEDULE OF OTHER TERMINATED BENEFITS* Employee Life Insurance Executive Incentive Compensation Plan Long-Term Incentive Compensation Plan Equity Compensation Plan Affiliate Long Term Incentive Program 401(k) Savings Plan Executive Deferred Compensation Plan Option Gain Deferral Plan Executive Retirement Plan Retirement Plan Estate and Financial Planning Comprehensive Disability and Executive Disability Plan Long-Term Disability Dependent Life Insurance Dependent AD&D Insurance Dependent Care Reimbursement Account Vacation Vacation Buying and Selling Holidays Personal Use of Company Car/Auto Allowance/Driver Executive Physical Accidental Death and Dismemberment 24-Hour Business Travel Accident Insurance Club Memberships Health Care Reimbursement Account Preventive Health Care Account Employee Assistance Plan (EAP) Retiree Health Care and Medicare ________________________ * Executive is entitled to any vested benefits and/or balances in any of the above plans but will have no further entitlements under any of the plans except as otherwise provided in this Agreement. SCHEDULE OF RETIREMENT BENEFITS(1)(2) Projected annual and lump-sum values(3) Executive Retirement Retirement Plan Plan --------------- ---------- Annual Value of Life Annuity - ---------------------------- Payment commencing April 1, 2002 N/A U.S.$6,420 Payment commencing July 1, 2002 U.S.$31,200 N/A Lump Sum Value - -------------- As of March 1, 2000 N/A U.S.$84,000 (4) As of July 1, 2002 U.S.$358,000 (4)(5) N/A - --------------------------- (1) All benefits under these Plans are subject to the express terms of the relevant Plans. (2) Benefit payment commencement on April 1, 2000 for the Retirement Plan and July 1, 2002 (age 55) for the Executive Retirement Plan, assuming last day of employment is during February 2000. (3) Assumes Executive receives a bonus of 50% of base pay (125% of his target bonus of 40%) for 1999. (4) The annuity value of the Retirement Plan is determined as of the assumed payment commencement date using a 6.07% interest rate. The lump sum for the Executive Retirement Plan uses an interest rate of 7.33%. (5) Lump-sum distributions are not available for those employees terminating prior to age 55. This value is shown for illustrative purposes only. SCHEDULE OF VESTED OPTIONS ----------------------------------------------------- Date Grant Vesting Grant Vested Grant Type Schedule Price Shares ----------------------------------------------------- 1/3/95 EME 3 $154.2317 19,890 1/2/96 EME 3 $181.0666 14,700 1/2/97 EME 3 $226.6772 9,900 1/4/98 EME 4 $313.8153 1,610 1/4/99 EME 4 $334.4392 1,150 ------ Total 47,250 FORM OF GENERAL RELEASE THIS GENERAL RELEASE ("Release") is being delivered as of February 5, 2000 by S. Linn Williams (the "Executive") to Edison Mission Energy, a California corporation (the "Company"), pursuant to Section 2.07 of that certain agreement related to Executive's employment with the Company being executed concurrently herewith by Executive and the Company (the "Agreement"). All capitalized terms not otherwise defined herein have the same meaning as is given to them in the Agreement. (a) Executive, on behalf of himself and his descendants, ancestors, heirs, executors, successors, assigns and administrators (collectively, "Releasor"), hereby releases, remises, acquits and forever discharges, and agrees to indemnify and hold harmless, (x) the Company, (y) each of its Affiliates, and (z) each of its and/or their partners, predecessors, successors, assigns, officers, directors, shareholders, representatives, insurers, attorneys, employees and agents, past, present and future, in their respective capacities as such (collectively, "Releasees"), from and against any and all claims, demands, obligations, causes of action, debts, expenses, damages, judgments, orders and liabilities of whatever kind or nature, in law, equity or otherwise, whether arising under the law of any jurisdiction in the United States or of any foreign jurisdiction, whether now known or unknown, suspected or unsuspected, matured or unmatured, and whether concealed or hidden (collectively, "Claims"), which Executive now owns or holds or has at any time heretofore owned or held or had, or may at any time own or hold or have, against the Releasees or any of them, including, but not limited to any Claim arising out of or in any way connected to any transactions, occurrences, acts or omissions regarding or relating to his employment with the Company, or the end of his employment with the Company, including, but not limited to, Claims arising from any alleged violation by the Company of any federal, state or local constitutions, statutes, ordinances or common laws, including but not limited to, the California Fair Employment and Housing Act, Employee Retirement Income Security Act, Americans With Disabilities Act and Title VII of the Civil Rights Act of 1964 and/or the Civil Rights Act of 1991. (b) Except for those matters that are expressly excluded, the release set forth herein is intended as a release of all Claims that the Releasor may have against the Releasees or any of them, whether now known or unknown. In furtherance thereof, Executive expressly waives and relinquishes any right to assert hereafter that any claim, demand, obligation and/or cause of action has, through ignorance, oversight, error or otherwise, been omitted from the terms of this Agreement. Executive makes this waiver with full knowledge of his rights, after consulting with legal counsel, and with specific intent to release both his known and unknown claims. Accordingly, Releasor specifically waives all rights and benefits afforded by California Civil Code Section 1542 and does so understanding and acknowledging the significance of such specific waiver of such statutory protection, which provides as follows: 1 "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Thus, notwithstanding the foregoing provisions of the California Civil Code, and for the purposes of implementing a full and complete release and discharge of the Releasees, Executive expressly acknowledges that the foregoing release is intended to include in its effect, without limitation, all Claims that Executive does not know or suspect to exist in his favor at the time of the execution hereof, and the foregoing release contemplates the extinguishment of any such Claim or Claims except to the extent expressly set forth herein. Executive further acknowledges that he has been advised to consult with an attorney and is receiving compensation beyond that to which he is entitled. Executive acknowledges that he has been advised by his counsel and hereby confirms that his employment by the Company has been and is subject to California law. (c) Executive represents and warrants that he has not filed or caused to be filed any complaints, claim forms or charges against the Company, any of its Affiliates or any of its or their officers, directors, agents, employees or representatives with or before any local, state, federal or foreign governmental agency or court or any arbitrator or other tribunal (including without limitation, any Industrial Tribunal in England or Wales or English Courts), and no such complaint or charge by or on behalf of the Executive is currently pending. Executive further agrees not to file any complaints, claim forms, actions or charges of any nature against the Releasees relating to any event or alleged event including, but not limited to, those arising from Executive's employment with and/or separation from employment with the Company, which occurred from the beginning of time until the execution of this Release. Executive acknowledges that the Company has expressly relied on Executive's representation and warranty in this section in providing compensation and benefits under Article 2 of the Agreement in excess of what he would be entitled to in the absence of the Agreement. Accordingly, Executive acknowledges and agrees that if he should file or pursue any such claim in violation of this section, then the Company shall be entitled to injunctive relief against Executive to prevent him from pursuing any such claim and/or to rescind the Agreement and seek repayment of all such excess compensation and benefits. (d) Nothing in this Release shall be construed or interpreted as a release, acquittal, discharge or waiver of: (i) Executive's rights to the compensation, reimbursements, benefits and perquisites described in Article 2 of the Agreement; (ii) Any of the Company's other obligations arising under the Agreement; 2 (iii) Any right which Executive now has or may have to claim indemnity (including advancement of expenses) for liabilities in connection with his lawful activities as a director, officer or employee of the Company and certain of its Affiliates, pursuant to the terms of any applicable statute, under any insurance policy, pursuant to the certificate or articles of incorporation, bylaws or similar charter documents of any Releasee, or pursuant to the terms of any applicable indemnification agreement to which Executive and the Company or any Affiliate of the Company are or have been parties; or (iv) Claims arising under the Federal Age Discrimination in Employment Act. (e) The provisions of Section 4.01 through 4.05, 4.07, 4.08, and 4.12 through 4.14 of the Agreement apply to this Release and are incorporated herein by reference as though fully set forth hereat. IN WITNESS WHEREOF, the Executive has executed and delivered this Release as of the day and year first above written. /s/ S. Linn Williams ______________________________________ S. Linn Williams 3 FORM OF AGE DISCRIMINATION RELEASE THIS AGE DISCRIMINATION RELEASE ("Release") is being delivered as of February 5, 2000 by S. Linn Williams (the "Executive") to Edison Mission Energy, a California corporation (the "Company"), pursuant to Section 2.07 of that certain agreement related to Executive's employment with the Company being executed concurrently herewith by Executive and the Company (the "Agreement"). All capitalized terms not otherwise defined herein have the same meaning as is given to them in the Agreement. (a) Executive, on behalf of himself and his descendants, ancestors, heirs, executors, successors, assigns and administrators (collectively, "Releasor"), hereby releases, remises, acquits and forever discharges, and agrees to indemnify and hold harmless, (x) the Company, (y) each of its Affiliates, and (z) each of its and/or their partners, predecessors, successors, assigns, officers, directors, shareholders, representatives, insurers, attorneys, employees and agents, past, present and future, in their respective capacities as such (collectively, "Releasees"), from and against any and all claims, demands, obligations, causes of action, debts, expenses, damages, judgments, orders and liabilities of whatever kind or nature, in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, matured or unmatured, and whether concealed or hidden (collectively, "Claims"), which Executive now owns or holds or has at any time heretofore owned or held or had, or may at any time own or hold or have, against the Releasees or any of them, arising out of or in any way connected to the Federal Age Discrimination in Employment Act. (b) Except for those matters that are expressly excluded, the release set forth herein is intended as a release of all Claims that the Releasor may have against the Releasees or any of them, whether now known or unknown, arising under the Federal Age Discrimination in Employment Act. In furtherance thereof, Executive expressly waives and relinquishes any right to assert hereafter that any such claim, demand, obligation and/or cause of action has, through ignorance, oversight, error or otherwise, been omitted from the terms of this Agreement. Executive makes this waiver with full knowledge of his rights, after consulting with legal counsel, and with specific intent to release both his known and unknown claims. Accordingly, Releasor specifically waives all rights and benefits afforded by California Civil Code Section 1542 and does so understanding and acknowledging the significance of such specific waiver of such statutory protection, which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." 1 Thus, notwithstanding the foregoing provisions of the California Civil Code, and for the purposes of implementing a full and complete release and discharge of the Releasees in respect of Claims arising under Federal Age Discrimination in Employment Act, Executive expressly acknowledges that the foregoing release is intended to include in its effect, without limitation, all Claims arising under such Act that Executive does not know or suspect to exist in his favor at the time of the execution hereof, and the foregoing release contemplates the extinguishment of any such Claim or Claims except to the extent expressly set forth herein. Executive acknowledges that he has been advised by his counsel and hereby confirms that his employment by the Company has been and is subject to California law. (c) Executive acknowledges that as of the date hereof, he will have had at least twenty-one (21) days to consider the terms of the release set forth herein and that he has been advised that he has a period of seven (7) days following his execution of this Release in which to revoke the entire release granted hereby and that any such revocation must be in writing, signed by Executive, and hand delivered to the Chairman of the Board of the Company prior to the expiration of such seven (7) day period. Executive further acknowledges that he has been advised to consult with an attorney and is receiving compensation beyond that to which he is entitled. (d) Executive represents and warrants that he has not filed or caused to be filed any complaints or charges against the Company, any of its Affiliates or any of its or their officers, directors, agents, employees or representatives with or before any local, state or federal governmental agency or court or any arbitrator or other tribunal arising under the Federal Age Discrimination in Employment Act, and no such complaint or charge by or on behalf of the Executive is currently pending. Executive further agrees not to file any such complaints, actions or charges of any nature against the Releasees relating to any event or alleged event including, but not limited to, those arising from Executive's employment with and/or separation from employment with the Company, which occurred from the beginning of time until the execution of this Release. Executive acknowledges that the Company has expressly relied on Executive's representation and warranty in this section in providing compensation and benefits under Article 2 of the Agreement in excess of what he would be entitled to in the absence of the Agreement. Accordingly, Executive acknowledges and agrees that if he should file or pursue any such claim in violation of this section, then the Company shall be entitled to injunctive relief against Executive to prevent him from pursuing any such claim and/or to rescind the Agreement and seek repayment of all such excess compensation and benefits. (e) Nothing in this Release shall be construed or interpreted as a release, acquittal, discharge or waiver of: (i) Executive's rights to the compensation, reimbursements, benefits and perquisites described in Article 2 of the Agreement; (ii) Any of the Company's other obligations arising under the Agreement; or 2 (iii) Any right which Executive now has or may have to claim indemnity (including advancement of expenses) for liabilities in connection with his lawful activities as a director, officer or employee of the Company and certain of its Affiliates, pursuant to the terms of any applicable statute, under any insurance policy, pursuant to the certificate or articles of incorporation, bylaws or similar charter documents of any Releasee, or pursuant to the terms of any applicable indemnification agreement to which Executive and the Company or any Affiliate of the Company are or have been parties. (f) The provisions of Section 4.01 through 4.05, 4.07, 5.08, and 4.12 through 4.14 of the Agreement apply to this Release and are incorporated herein by reference as though fully set forth hereat. IN WITNESS WHEREOF, the Executive has executed and delivered this Release as of the day and year first above written. /s/ S. Linn Williams ______________________________________ S. Linn Williams 3 EX-10.78 4 FORM OF AGREEMENT FOR 2000 EMPLOYEE AWARDS EXHIBIT 10.78 [LOGO] EDISON INTERNATIONAL (SM) EQUITY COMPENSATION PLAN 2000 AWARD CERTIFICATE This award is made by Edison International to ((name)) ("Employee") as of ((date)), pursuant to the Equity Compensation Plan. Edison International hereby grants to Employee, as a matter of separate agreement and not in lieu of salary or any other compensation for services the following: -------------------------------------------- The right and option to purchase ( ) shares of authorized Edison International Common Stock at an exercise price of $( ) per share. -------------------------------------------- -------------------------------------------- A target grant of ( ) Performance Shares at an initial value of ( ) per share, the final number and value of which will be contingent upon Edison's relative Total Shareholder return and stock price. -------------------------------------------- This award is made subject to the conditions contained in the 2000 Long-Term Incentives Terms and Conditions statement which is incorporated herein by reference. EDISON INTERNATIONAL By: [Theodore F. Craver, Jr.] - -------------------------------- EDISON INTERNATIONAL 2000 LONG-TERM INCENTIVES TERMS AND CONDITIONS Long-term incentives (LTI) for the year 2000 for eligible persons (Holders) at Edison International (EIX) or its participating affiliates (the Companies, or individually, the Company) include EIX nonqualified stock options to purchase EIX common stock (EIX Options) to be awarded under the Equity Compensation Plan (Plan) and contingent EIX Performance Shares, 50% of which will be payable as Stock Grants under the Plan and 50% of which will be payable in cash outside of the Plan. The LTI are subject to the following terms and conditions: 1. PRICE The exercise price of an EIX Option stated in the award certificate is the average of the high and low sales prices of EIX Common Stock as reported in the Western Edition of The Wall Street Journal for the New York Stock Exchange Composite Transactions for the date of the award. 2. VESTING (a) Subject to the provisions of Section 3, EIX Options may only be exercised or paid to the extent vested. The initial vesting date will be January 2nd of the year following the date of the grant, or six months after the date of the grant, whichever date is later. The EIX Options will vest as follows: . On the initial vesting date, one-fourth of the EIX Options will vest. . On January 2nd of the following year, an additional one-fourth of the EIX Options will vest. . On January 2nd of the following year, an additional one-fourth of the EIX Options will vest . On January 2nd of the fourth year following the date of grant, the balance of the EIX Options will vest. (b) The vested portions of the EIX Options will accumulate to the extent not exercised, and be exercisable by the Holder subject to the provisions of Section 3, in whole or in part, in any subsequent period but not later than the first business day of the 10th calendar year following the date of the award. (c) One-half of the Performance Shares will vest and become payable to the extent earned at the end of the second year of the Performance Period (defined in Section 4) (first payment date). The remaining one-half of the Performance Shares will vest and become payable to the extent earned at the end of the full three-year Performance Period (second payment date). (d) If, during the vesting period or a Performance Period, the Holder retires, terminates employment while on leave with a permanent and total disability, or dies, then the vesting and exercise provisions of this Section 2(d) will apply. The EIX Options will vest to the extent necessary to cause the aggregate amount of vested EIX Options (including any previously exercised) to equal the product of 1/48th of the number of shares granted times the number of full months of service the Holder has completed during the vesting period, and such vested options will be exercisable for the full original term. The Performance Shares will vest on a pro rata basis based on each full month of service the Holder completes during the first two years of the Performance Period for the first payment date, and during the full three-year Performance Period for the second payment date. Performance Shares will be payable to the Holder on such pro rata basis on the applicable payment date to the extent of the EIX total shareholder return (TSR) ranking achieved as specified in Section 4. Notwithstanding the foregoing, the LTI of a Holder who served as a member of the Southern California Edison Company Management Committee (which was dissolved in 1993) will fully vest upon his or her retirement or death, or upon employment termination while on leave of absence with a permanent and total disability. (e) Upon termination of employment during the EIX Option term for any reason other than those specified in Section 2(d), only those EIX Options that have vested as of the prior vesting date may be exercised, and they will be forfeited unless they are exercised within 180 days following the date of termination or by the end of the applicable EIX Option term, if that date is earlier. If such termination occurs (i) during the first two years of the Performance Period, all Performance Shares will be forfeited, or (iii) during the third year of the Performance Period, those Performance Shares subject to payment at the end of the three-year Performance Period will be forfeited. 2 (f) Notwithstanding the foregoing, LTI may vest in accordance with Section 3.4 of the Plan as a result of certain events, including liquidation of EIX or merger, reorganization or consolidation of EIX as a result of which EIX is not the surviving corporation. Upon a change of control of EIX following the occurrence of a Distribution Date, as that term is defined in the Rights Agreement approved by the EIX Board of Directors on November 20, 1996, as amended, the LTI will vest and EIX Options will remain exercisable for at least two years following the Distribution Date. During that period, (i) the Plan may not be terminated, (ii) individual awards may not be cashed out, terminated, or modified without the Holder's consent, and (iii) valuation procedures and exercise periods will occur on a basis consistent with past practice. 3. EIX OPTION EXERCISE (a) The Holder may exercise an EIX Option by providing written notice to EIX on the form prescribed by EIX for this purpose accompanied by full payment of the applicable exercise price. Payment must be in cash, or its equivalent, including EIX Common Stock valued on the exercise date at a per share price equal to the average of the high and low sales prices of EIX Common Stock as reported in the Western Edition of The Wall Street Journal for the New York Stock Exchange Composite Transactions acceptable to EIX. A "cashless" exercise may be accommodated for EIX Options at the discretion of EIX. Until payment is accepted, the Holder will have no rights in the optioned stock. EIX Options may be exercised at any time after they have vested through the first business day of the 10th calendar year following the date of the award except as otherwise provided in Sections 2(e) and 8. (b) The Holder agrees that any securities acquired by him or her hereunder are being acquired for his or her own account for investment and not with a view to or for sale in connection with any distribution thereof and that he or she understands that such securities may not be sold, transferred, pledged, hypothecated, alienated, or otherwise assigned or disposed of without either registration under the Securities Act of 1933 or compliance with the exemption provided by Rule 144 or another applicable exemption under such act. (c) The Holder will have no right or claim to any specific funds, property or assets of EIX as a result of the award. 4. PERFORMANCE SHARES (a) Performance Shares are EIX stock-based units subject to a performance measure based on the percentile ranking of EIX total shareholder return (TSR) compared to the TSR for each stock in the Dow Jones Electric Utilities Group Index over all or part of a three-calendar-year period commencing on January 1/st/ of the year the Performance Shares are granted ("Performance Period"). TSR is calculated using a 20-day trading average on the measurement dates. A target number of contingent Performance Shares will be awarded during the first two months of the Performance Period. The actual amount of Performance Shares to be paid will depend on the EIX TSR percentile ranking. The target number of Performance Shares will be paid if the EIX TSR rank is at the 60/th/ percentile. Payment may range from nothing if the EIX TSR is below the 40/th/ percentile to three times the target number of Performance Shares if the EIX TSR percentile ranking is at the 90th percentile or higher. The payment multiples for the various EIX TSR rankings are as follows: ----------------------------------------------------------------- Performance Share Payment ----------------------------------------------------------------- EIX TSR Rank Payment Multiple/(1)/ ----------------------------------------------------------------- Above 90/th/ Percentile 3 times ----------------------------------------------------------------- 75/th/ to 89/th/ Percentile Between 2 and 3 times ----------------------------------------------------------------- 60/th/ to 74/th/ Percentile Between 1 and 2 times ----------------------------------------------------------------- 40/th/ to 59/th/ Percentile Between 0.25 and 1 times ----------------------------------------------------------------- Below 40/th/ Percentile 0 times ----------------------------------------------------------------- (1) The multiple is interpolated for performance between the points indicated. 3 (b) There will be two performance measurement dates and payment dates during the three-year Performance Period for the initial grant of Performance Shares in the year 2000, each covering one-half of the contingent target Performance Shares awarded. The first measurement and payment date covering the first two years of performance will be the last business day of the second year of the Performance Period, the second measurement and payment date will be the last business day of the Performance Period covering all three years of performance. The applicable target multiple earned as provided in the table above for one-half of the Performance Shares will be paid for each Performance Period to the extent of the EIX TSR percentile ranking achieved on the date of measurement. (c) Each Performance Share earned will be worth one share of EIX Common Stock. One-half of the earned Performance Shares will be paid in EIX Common Stock as a Stock Payment under the Plan. The remaining one-half of the earned Performance Shares will be paid in cash and the value of each Performance Share will be equal to the average of the high and low sales prices per share of EIX Common Stock as reported in the Western Edition of The Wall Street Journal for the New York Stock Exchange Composite Transactions for the measurement date. The shares of EIX Common Stock and the cash payable for the earned Performance Shares will be delivered within 30 days following the end of the Performance Periods described in Section 4(b). 5. DELAYED PAYMENT OR DELIVERY OF LTI GAINS Notwithstanding the terms of any LTI, Holders who are eligible to defer salary under the EIX Executive Deferred Compensation Plan (EDCP) may irrevocably elect to alternatively exercise all or part of any vested EIX Option pursuant to the terms of the Option Gain Deferral Program (OGDP), and/or may irrevocably elect to defer receipt of all or a part of the cash portion of any Performance Shares pursuant to the terms of the EDCP. To make such an election, the Holder must submit a signed agreement in the form approved by the Administrator at least six months prior to the expiration date of the EIX Option, or the payment date of a Performance Share. An EIX Option may not be exercised for six months thereafter except under the limited circumstances specified in the OGDP. Any subsequent exercises or payments will be subject to the terms, conditions and restrictions of the OGDP or the EDCP, as applicable. 6. TRANSFER AND BENEFICIARY (a) The LTI will not be transferable by the Holder. During the lifetime of the Holder, the LTI will be exercisable only by him or her. The Holder may designate a beneficiary who, upon the death of the Holder, will be entitled to exercise the then vested portion of the LTI during the remaining term subject to the provisions of the Plan and these terms and conditions. (b) Notwithstanding the foregoing, EIX Options of the CEOs of EIX, Edison Mission Energy, Edison Capital and Edison Enterprises, the COO of Southern California Edison and the EVPs of EIX are transferable to a spouse, children or grandchildren, or trusts or other vehicles established exclusively for their benefit. Any transfer request must specifically be authorized by EIX in writing and shall be subject to any conditions, restrictions or requirements as the administrator may determine. 8. TERMINATION OF LONG TERM INCENTIVES As set forth in Section 2(e), in the event of termination of the employment of the Holder for any reason other than retirement, permanent and total disability or death of the Holder, EIX Options will terminate 180 days from the date on which such employment terminated, and Performance Shares will be forfeited. In addition, the LTI may be terminated if EIX elects to substitute cash awards as provided under Section 12. 9. TAXES EIX will have the right to retain and withhold the amount of taxes required by any government to be withheld or otherwise deducted and remitted with respect to the exercise of any LTI. In its discretion, EIX may require the Holder to reimburse EIX for any such taxes required to be withheld by EIX and may withhold any distribution in whole or in part until EIX is so reimbursed. In lieu thereof, EIX will have the right to withhold from any other cash amounts due from EIX to the Holder an amount equal to such taxes required to be withheld by EIX, or to retain and withhold a number of shares of EIX Common Stock having a market value equal to such taxes and cancel (in whole or in part) the shares, or to repurchase such shares from the Holder within six months after the shares of Common Stock were acquired by the Holder. Shares withheld or repurchased to reimburse EIX for federal and state income and payroll taxes shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase 4 equal to the aggregate amount of such tax liabilities based on the minimum statutory withholding rates that are applicable to such supplemental taxable income. Each recipient of an EIX Option must attach a statement to his or her federal and state tax returns for the year in which the EIX Option was granted containing certain information specified in tax regulations. A sample statement is attached. 10. CONTINUED EMPLOYMENT Nothing in the award certificate or this Statement of Terms and Conditions will be deemed to confer on the Holder any right to continue in the employ of EIX or an EIX affiliate or interfere in any way with the right of the employer to terminate his or her employment at any time. 11. NOTICE OF DISPOSITION OF SHARES AND SECTION 16 (a) Holder agrees that if he or she should dispose of any shares of stock acquired on the exercise of EIX Options, including a disposition by sale, exchange, gift or transfer of legal title within six months from the date such shares are transferred to the Holder, the Holder will notify EIX promptly of such disposition. (b) If an LTI is granted to a person who later becomes subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended ("Section 16"), the LTI will immediately and automatically become subject to the requirements of Rule 16b-3(d)(3) ("Rule") and may not be exercised, paid or transferred until the Rule has been satisfied. In its sole discretion, the Administrator may take any action to assure compliance with the requirements of the Rule, including withholding delivery to Holder (or any other person) of any security or of any other payment in any form until the requirements of the Rule have been satisfied. The Secretary of Edison International may waive compliance with the requirements of the Rule if he or she determines the transaction to be exempt from the provisions of paragraph (b) of Section 16. 12. AMENDMENT The LTI are subject to the terms of the Plan as amended from time to time. EIX reserves the right to substitute cash awards substantially equivalent in value to the LTI. The LTI may not otherwise be restricted or limited by any Plan amendment or termination approved after the date of the award without the Holder's consent. 13. FORCE AND EFFECT The various provisions herein are severable in their entirety. Any determination of invalidity or unenforceability of any one provision will have no effect on the continuing force and effect of the remaining provisions. 14. GOVERNING LAW The terms and conditions of the LTI will be construed under the laws of the State of California. 15. NOTICE Unless waived by EIX, any notice required under or relating to the LTI must be in writing, with postage prepaid, addressed to: Edison International, Attn: Corporate Secretary, P.O. Box 800, Rosemead, CA 91770. EDISON INTERNATIONAL [Theodore F. Craver, Jr] - ---------------------------------- 5 STATEMENT PURSUANT TO INCOME TAX REGULATION SECTION 1.61-15(C) This statement is attached to my income tax return in compliance with the requirements of Income Tax Regulation (Section)1.61-15(c) relative to a nonqualified stock option I received on ____________________. (1) Name and address of the taxpayer: _________________________ _________________________ _________________________ (2) Description of Securities subject to the option: On ______________________, I was granted a nonqualified stock option covering _______ shares of Edison International common stock. (3) Period during which the option is exercisable: The option vests and becomes exercisable as to one-fourth of the covered shares on January 2nd of the first year after the date of grant (or six months after the date of grant if later) and as to an additional one-fourth on January 2nd of each of the three years thereafter. To the extent vested, the option may be exercised at any time through the first business day of the 10th calendar year following the date of the award. (4) Whether the option had an ascertainable market value: The option did not have a readily ascertainable fair market value on the date of the grant. (5) Whether the option was granted as compensation: The option was granted as compensation and is subject to Reg.(Section)1.61-15(a). Respectfully Submitted, 6 EX-10.79 5 RESOLUTION REGARDING THE COMPUTATION EXHIBIT 10.79 RESOLUTION OF THE COMPENSATION AND EXECUTIVE PERSONNEL COMMITTEES OF THE BOARDS OF DIRECTORS OF EDISON INTERNATIONAL AND SOUTHERN CALIFORNIA EDISON COMPANY Adopted: February 17, 2000 RE: Plan Deviation WHEREAS, Alan J. Fohrer has been elected as chief executive officer of Edison Mission Energy; and WHEREAS, it has been proposed that the benefits that would be payable under the nonqualified executive benefit plans of the companies in the event Mr. Fohrer's employment is terminated prior to age 55 as a result of his death or disability be determined as if he had attained age 55, and the members of the Committees having conferred thereon; NOW, THEREFORE, BE IT RESOLVED, that the nonqualified executive benefit plans of the companies in which Mr. Fohrer participates shall be administered and applied with respect to him as provided above. [Charles D. Miller] - --------------------------------- Chairman of the Committees [M. D. McDonald] - --------------------------------- Counsel EX-10.80 6 SHAREHOLDER INTEREST PURCHASE AGREEMENT EXHIBIT 10.80 EXECUTION COPY _______________________________________ SHAREHOLDER INTEREST PURCHASE AGREEMENT Dated 3 March 2000 Between MEC International B.V. and UPC INTERNATIONAL PARTNERSHIP CV II _______________________________________ SHAREHOLDER INTEREST PURCHASE AGREEMENT THIS SHAREHOLDER INTEREST PURCHASE AGREEMENT ("Agreement") dated 3 March 2000, by and between: MEC International B.V., a limited liability company organized under the laws of The Netherlands ("MECI"); and UPC INTERNATIONAL PARTNERSHIP CV II, a limited partnership established under the laws of the Netherlands Antilles ("UPC"). MECI and UPC are hereinafter jointly referred to as the "Parties" and each of them as a "Party". RECITALS: A. Through its indirectly wholly-owned subsidiary I.V.P.C. 4 S.r.l. (ITALIAN VENTO POWER CORPORATION) ("IVPC4") UPC holds or will hold the rights to several wind energy projects totalling an aggregate of 283.1 MW in various locations in the south of Italy and Sardinia. B. Fifty percent of the quotaholder interest in IVPC4 is held by each of IVPC Energy 5 B.V. ("IEBV5") and IVPC Energy 4 B.V. ("IEBV4"), 100% of the shareholder interests in each of which are held by UPC. C. The Parties contemplate obtaining senior debt financing for the Project in various stages related to specific sites as follows: Stage A consisting of 99,1 MW; Stage B consisting of 122,7 MW; Stage C consisting of 29,7 MW; and Stage D consisting of 31,68 MW. D. Pursuant to the terms hereof, the Parties wish to provide for the purchase by MECI of 100% of the shareholder interest in IEBV5 and thereby a fifty percent (50%) interest in IVPC4 and the Project with the remaining fifty percent (50%) interest in IVPC4 being retained directly or indirectly by UPC and Finance Investment Projects S.r.l. ("FIP") through direct investment in IEBV4. E. The Parties also wish to agree between them certain other matters with respect to the Project. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the Parties hereto hereby agree as follows: 1. DEFINITIONS, INTERPRETATION AND CONDITIONS PRECEDENT 1.1 Definitions and Interpretation: The defined terms and rules of interpretation in Schedule I are hereby incorporated herein. 1.2 Pre -Conditions to MECI's Execution of Agreement. MECI's execution of this Agreement is subject to satisfaction of the conditions precedent specified in this Section 1.2, which MECI now acknowledges, by the execution of this Agreement, have been satisfied or waived (subject to Section 1.3 (e) (iii)): (a) Due Diligence Satisfactory completion of MECI's due diligence of the Project, IEBV5 and IVPC4. (b) Corporate Approvals. Approval of Edison Mission's and Edison International's Board of Directors. (c) Equity Base Case. The Equity Base Case for the Project attached hereto as Schedule II, shows a 15.71% IRR to MECI. (d) Quotaholders Agreement. Agreement on the form of an IVPC4 Quotaholders Agreement, attached hereto as Schedule III. (e) Consulting Services Agreement. Agreement on the form of a Consulting Services Agreement attached hereto as Schedule IV. (f) Share Transfer Agreement on the form of the notarial deed of transfer of shares to effect the transfer of the Interest, to be executed before a Dutch civil law notary (notaris), substantially in the form as attached to this Agreement as Schedule V (the "Notarial Deed"). 1.3 Pre-Conditions to Sale and Purchase of the Interest. MECI's purchase of the Interest is subject to satisfaction of the following conditions precedent: (a) Satisfaction or waiver (provided, however, that any waiver shall require the written approval of MECI, such approval not to be unreasonably withheld or delayed) of all the conditions precedent required for Financial Close and funding of Stages A and B as confirmed in writing by the Senior Lender to IVPC4, except for payment into the Disbursement Account of the Equity for Stages A and B. (b) Execution by UPC of the Consulting Services Agreement. (c) Delivery by UPC of the following financial statements, audited by Reconta Ernst & Young S.p.A. (as to IVPC4) and Rennie and Co. (as to IEBV5 and UPC) in accordance with Applicable GAAP: (i) IVPC4 1999 Year End (for the avoidance of doubt the audited IVPC4 financial statements for 1999 shall include and incorporate the financial statements of IVPC Puglia S.r.l.); (ii) IEBV5 1999 Year End; (iii) UPC 1999 Year End, showing, in each case, no material change from the form of the Financial Statements attached hereto as Schedule VI and attesting, in each case, that the audited statements present fairly, in all material respects, (i) the financial position of each company as of the above dates, and (ii) the results of their operations and cash flows for the year 1999 are in conformity with Applicable GAAP. (d) Confirmation, satisfactory to MECI that the Banking Base Case is consistent with the audited financial statements for IVPC4 referred to in paragraph (c) above (e) Agreement on the form of the documents attached as Schedules hereto: (i) The Parties acknowledge that Schedule I (Definitions and Interpretation), III (Quotaholders Agreement) (except as set out in (iii) below), IV (Consulting Services Agreement), V (Form of Notarial Deed), VIII (Subordinated Loan Agreements), IX (Note and assignment thereof) are in agreed form and that Schedules II (Equity Base Case) (except as set out of 1.3 (f) below), and VII (Garrad Hassan Wind Report) are substantially in agreed form. (ii) MECI acknowledges appropriate delivery of the documents in Schedule VI (Financial Statements). (iii) UPC acknowledges that agreement on the budget attached as Exhibit C to the Quotaholders Agreement, is subject to MECI's sole discretion (acting reasonably). (f) Conformation, satisfactory to MECI, that the fee arrangements between IVPC4 and the Senior Lenders are adequately reflected in the Equity Base Case under the line item referred to as "Front End Fees". 2. PURCHASE AND SALE, CLOSING AND PURCHASE PAYMENT. 2.1 Subject to Sections 1.2 and 1.3 above, MECI hereby agrees to purchase from UPC, and UPC hereby agrees to sell to MECI, 100% of the legal and beneficial interest in the capital of IEBV5 (the "Interest") in accordance with the provisions of this Agreement. 2.2 Following satisfaction of the last of the conditions precedent in Section 1.3 above, the transfer of the Interest shall be perfected by way of a duly executed Notarial Deed and MECI and UPC shall cause IEBV5 and IEBV4, respectively, to execute the Quotaholders Agreement. 2.3 The purchase payment for the Interest shall be Italian lire Ninety Billion, Three Hundred Million (ITL 90,300,000,000), ("Purchase Payment") and shall be paid and adjusted in accordance with the following provisions: (a) Initial Payment. Following execution of the Notarial Deed then, subject to the terms of the Permit Side Letter, MECI shall pay UPC an amount equal to 90% of the Purchase Payment multiplied by the ratio (calculated in MWs) which each Stage so ready for funding bears to the Project (the "Initial Payment"), as follows: (i) not later than noon on the Business Day preceding the date on which IVPC4 is ready to submit the first Borrower's Drawdown Certificate under the Credit Agreement in respect of a Stage, MECI shall wire on behalf of IEBV4 the following amounts (each of them an "Equity Portion") to the Disbursement Account for the purpose of satisfying IEBV4's obligation under the Credit Agreement to fund its portion of Equity for that Stage: ITL 8,532,000,000 for Stage A (or that lower amount, sufficient to complete the equity funding of the portion pertaining to IEBV4, which UPC shall direct in writing to MECI) ITL 18,021,500,000 for Stage B ITL 3,178,000,000 for Stage C ITL 3,290,500,000 for Stage D It is expressly agreed and understood by the Parties that in the event the Credit Agreement is amended to reflect a change in the MWs for Stage C and/or Stage D, then the amounts set forth above for the Equity Portion for Stages C and D (and the corresponding Remaining Portions and Final Payments (both defined below)) shall be adjusted to reflect the MWs actually financed pursuant to the Credit Agreement. (ii) Within three (3) Business Days following receipt of written confirmation from IVPC4 that the amounts included in the first Borrower's Drawdown Certificate for the relevant Stage have been duly received by IVPC4, MECI shall deposit an amount equal to the difference between the relevant Initial Payment and the relevant Equity Portion (the "Remaining Portion") in the UPC Account. (iii) if, for any reason, a drawdown does not occur within two (2) Business Days of a Drawdown Date as specified in the relevant first Borrower's Drawdown Certificate, then UPC shall promptly reimburse to MECI any amounts paid by it pursuant to paragraph (i) above in respect of the relevant Stage. (b) Final Payment. (i) Within three (3) Business Days of IVPC4 advising MECI of the final outcome of the Regearing Test, MECI may conduct a re-run of the Equity Base Case adjusted to take into account the following: (A) the actual starting dates of the commencement of sale of electricity from the turbines; (B) the actual start dates of the CIP6/92 incentive periods and the projected end dates of such periods; (C) the actual megawatts constructed and accepted under the Construction Contract; (D) any reduction in equity cashflows available to MECI resulting from the application by the Agent of Clause 18.2 of the Credit Agreement; (E) the actual timing of MECI's payments pursuant to Clauses 2.3 (a)(i) and (ii) above; (F) any amounts paid or payable by IVPC4 in connection with the provisions of Article 12 of Resolution No. 13/99 of the Authority for the Electricity and Gas plus any increase in revenues provided under CIP6 as compensation for any such amounts and any decrease in costs of interconnection resulting from the implementation of the above Article 12; and (G) the projected timing of the making of the Final Payment (as defined below) by MECI to UPC, and the projected amount that results from the adjustments made pursuant to these subsections (A) through (G) inclusive (for the avoidance of doubt, this may result from an iterative calculation). (ii) Within three (3) Business Days from the completion of the above re- runs, MECI shall present to UPC the results of its re-run of the Equity Base Case (along with an explanation of its application of the adjustments specified in subparagraphs (A) through (G) inclusive above), with a view to agreeing with UPC a revised Equity Base Case (the "Revised Equity Base Case"). Should the Parties fail to reach agreement, the Parties shall defer the final determination of the Revised Equity Base Case (other than in respect of the assumptions under subparagraph (i) (B) above which will be regulated as set forth below) to KPMG, which shall render its decision within ten (10) Business Days. (iii) Should the Revised Equity Base Case show an IRR lower than that specified in Section 1.2(c) above, then the remaining 10% of the Purchase Payment shall be reduced to an amount necessary to restore the IRR to the level specified in Section 1.2(c), down to zero if necessary (the "Reduction"). MECI shall pay UPC the full remaining 10% of the Purchase Payment, less any Reduction (the "Final Payment"), within five (5) Business Days from the final determination of the Revised Equity Base Case. (iv) In the event that UPC and MECI have different CIP6/92 end date projections pursuant to subsection (i) (B) above, then the Final Payment will initially be calculated using MECI's CIP6/92 end dates. Any difference between the Final Payment amount calculated using UPC's end date assumptions and the Final Payment amount using MECI's end date assumptions will be withheld by MECI pending official confirmation of such end dates. If such confirmation is not given within two (2) years of the calculation date, then such amount will no longer be payable to UPC. If such confirmation is provided within two (2) years of the calculation date, then the relevant amount, compounded at 15.71% per annum, shall be released to UPC within five (5) Business Days of such confirmation. 2.4 Put and Call If the drawdown for Stages A and B does not occur within thirty (30) days of submittal of the first Borrower's Drawdown Certificate for those Stages, then MECI shall have the option to put the Interest to UPC for an amount equivalent to the payments which MECI has made pursuant to Sections 2.3(a) and 4.0. If MECI does not make the payments under Sections 2.3(a)(i) and 2.3(a)(ii) for Stages A and B, UPC shall have the option to call the Interest from MECI for an amount equivalent to the payments which MECI has made pursuant to Sections 2.3(a)(i) and 2.3(a)(ii) and 4.0. 2.5 Late Payments Any payment due under this Section 2.0 which is late shall accrue interest until paid at the rate of EURIBOR + 4% per annum. Any undisputed amounts, or uncontested portions of disputed amounts, shall be paid by the relevant Party in accordance with the provisions hereof. 3. EQUITY BASE CASE 3.1 The Parties have agreed on an equity base case for the Project (the "Equity Base Case"), attached hereto as Schedule II which is the Banking Base Case with the following assumptions: (a) wind forecast equal to Hassan Report (attached hereto as Schedule VII) at Financial Close at a 50% probability of exceedance; (b) period of any Franchigia not deducted from net power production; and (c) the timing of the making of the Purchase Payment as specified in Section 2 above. Following the application of the above assumptions and limited to the three-year period ending on 31 December 2002, the Equity Base Case shall also assume that the Total Operation Cost of IVPC4 shall not exceed the following amounts: ITL 349,300,000 during the year 2000; ITL 2,570,500,000 during the year 2001; and ITL 8,145,600,000 during the year 2002. 4. FUNDING OF SUBORDINATED DEBT FOR IVPC4 Concurrently with the wiring of funds under subparagraph 2.3 (a) (i) above for each Stage, MECI shall procure, pursuant to the terms of the subordinated loan agreement in the form attached hereto as Schedule VIII (the "IEBV5 Subordinated Loan Agreement") that IEBV5 extends a subordinated loan to IVPC4 for up to 50% of the equity contribution required to be contributed to IVPC4 with respect to such Stage under the Senior Loan. For the avoidance of doubt, the Equity Portion for each Stage paid by MECI under this agreement shall be those amounts lent by IEBV4 to IVPC4 for such Stage pursuant to the IEBV4 Subordinated Loan Agreement. The Parties expressly agree that either UPC or MECI may propose alternative arrangements with respect to the subordinated loans documented in their respective subordinated loan agreements and, provided that such proposed arrangements comply with the terms of the Finance Documents (including the obtaining of consents, if any, required thereunder), UPC or MECI may implement said alternative arrangements with the consent of the other Party, which consent shall not be unreasonably withheld or delayed. 5. NOTE PAYABLE TO PARENT Simultaneously with the purchase of the Interest and as part of the consideration paid therefor, UPC shall assign to MECI the promissory note dated 1 March 2000 (the "Note") in the principal amount of USD 2,013,339. The agreed form of both the Note and the assignment thereof being attached hereto as Schedule IX. 6. CERTAIN OTHER MATTERS. 6.1 Development Costs (a) Up to Financial Close UPC has been solely responsible for funding all development expenses for the Project through Financial Close, which (together with interest at the rate of EURIBOR plus four percent (4%)) shall be reimbursed from the initial draw of the Senior Loan. To the extent reasonable development expenses have been incurred by other UPC Affiliates, such costs, duly certified by a director of the relevant Affiliate, will be similarly reimbursed at Financial Close. (b) Following Financial Close Reasonable development expenses shall be paid out of the proceeds of the Senior Loan based on actual budget (not to exceed the Banking Base Case budget for such expenses). 6.2 AIP Termination Payment IVPC4 and IVPC Puglia S.r.l. (a company now merged into IVPC4) previously entered into two Associazione in Partecipazione ("AIP Agreements") with an Affiliate of UPC, IVPC Energy 3 B.V. ("IEBV3"). In order to facilitate financing of the Projects IVPC4 and IEBV3 have terminated the AIP Agreements effective 30 November 1999 (the "AIP Termination Agreements"). The AIP Termination Agreements stipulate that all rights of IEBV3 pursuant to the AIP Agreements are terminated in exchange for IVPC4 making a payment to IEBV3 of ITL 2.94 billion. Said AIP termination payment shall be made not earlier than the First Drawdown, provided the Credit Agreement allows for such payment. 6.3 Construction Support MECI shall not have any obligation to provide any credit support with respect to construction of the Project, including for cost overruns. 6.4 Construction Contingency Distribution (a) Subject to Section 6.8.2, any Contingent Payments available for distribution shall be allocated and distributed for the benefit of UPC solely, and neither IEBV5 nor MECI shall be entitled to any portion thereof (except for any amounts equal to 50% of any operating cash flows used by IVPC4 to fund any capital costs or the Debt Reserve Account in respect of the release of any Security Interest in the land of the Project sites, which amounts shall be retained by IEBV5 or MECI), provided, however, that there shall be no distribution of a Contingent Payment in an amount equivalent to: (i) that claimed by any third party against IVPC4 alleging that the Turnkey Construction Contract was awarded in breach of any European Community Directive concerning public or utilities procurement or applicable legislation implementing the same in Italy for so long as such claim is outstanding; and (ii) any claims by any third party against IVPC4 in connection with payments due under the Interconnection Agreements entered into or to be entered into by IVPC4, for so long as such claims are outstanding, (each such retained amount a "Retained Contingency Amount"). For the avoidance of doubt, any Retained Contingency Amount shall be distributable immediately following satisfaction or termination of the above referenced claim(s). (b) Any EU Grants awarded to IVPC4 after the date of this Agreement and not included in the Banking Base Case shall be for the benefit of the UPC solely, and neither IEBV5 nor MECI shall be entitled to any portion thereof. 6.5 Management Responsibility Following Financial Close, UPC, through its Affiliates, will maintain management control of the Project, and as such will have responsibility for the ordinary activities during the construction, post-construction and operational phases of the Project. UPC's Affiliates will act as construction manager and operations and maintenance manager for the Project in accordance with: (i) the management and O&M contracts agreed with the Senior Lender, and (ii) the budget approved by IVPC4. UPC shall cause Manager to issue quarterly O&M reports for the benefit of MECI. 6.6 Retained Ownership (a) UPC and MECI acknowledge that the Quotaholders Agreement attached hereto as Schedule III contains language governing the disposition of the quotas of IVPC4, which language reflects the Parties' intent to restrict subsequent sales of the quotas of IVPC4. UPC and MECI hereby agree to be bound (and to cause each of their affected lower tier companies to be similarly bound) by the terms of the Quotaholders Agreement governing disposition of the quotas of IVPC4 as if each of them individually were a signatory to the Quotaholders Agreement. (b) without limiting the generality of the undertaking under paragraph (a) above, UPC and MECI agree as follows: (i) neither UPC nor MECI shall dispose of the whole or any part of their ownership in IVPC4, whether held directly or indirectly, until 1 September 2004 (the period of time from the effective date of this Agreement to 1 September 2004 is hereafter referred to as the "Hold Period"); (ii) following the Hold Period, each of UPC and MECI grants to the other Party a right of first refusal (to be exercised, to the maximum extent possible, on the same terms as set out in Clause 8(b)(ii) of the Quotaholders Agreement) in respect of any contemplated disposal of all or part of the capital of any Affiliate holding a direct or indirect participation in the Capital of IVPC4. For the avoidance of doubt, both UPC and MECI agree that any of their Affiliates holding at any time a direct or indirect participation in the capital of IVPC4 shall be maintained as a special purpose company which shall hold the quotas of IVPC4 as its sole asset. (c) UPC shall not dispose of any ownership interest in the management and service companies until after the Project shall have produced the first 1,500 GWH. After the end of such period, if UPC and FIP together fail to retain at least a 51% ownership interest in each of the management and service companies, then, upon MECI's request, UPC shall use its IVPC4 board votes to terminate the agreements with such companies. 6.7 FCPA Compliance Each of UPC and MECI shall cause IEBV4, IEBV5, IVPC4 and each of the other UPC Affiliates involved in the Project to comply with applicable provisions of the Foreign Corrupt Practices Act, 15 U.S.C., Section 78a, 78dd-1, 78dd-2, 78ff (the "FCPA"). 6.8 Adjustments of Contingent Payments 6.8.1 If any of the payments and/or allocations provided for under Section 6.4 above is not permitted under Applicable Law, such payments and/or allocations shall not be made and each of MECI and UPC will work together in good faith (and take action to cause IVPC4) to structure payments and distributions from IVPC4 to themselves, and if necessary make payments between themselves regardless of how distributions and/or payments from IVPC4 are made, so that the Parties will accomplish the business purpose of the allocations and/or payments described in this Agreement. Any such payments and/or allocations among IVPC4, UPC and MECI will (a) comply with all Applicable Laws, (b) be structured in a manner which achieves the business purposes described herein in the most mutually tax efficient manner for IVPC4, MECI and UPC, (c) be made on an after-tax basis for the Person making such payment, and (d) not require either MECI or UPC to pay the other party more cash than such Person has remaining after deducting all taxes actually incurred due to the receipt of such funds (directly or indirectly) from IVPC4. 6.8.2 Any funds received by MECI and/or IEBV5 which represent distributions of the Contingent Payments referenced in Section 6.4 above may be held by MECI and/or IEBV5 until the model re-run subsequent to the Regearing Test, provided that such funds are put into an interest earning account and the interest earned on such funds shall be for the benefit of UPC. If as of the date of such model re-run, any third party has not validly challenged the award of EU Grants to IVPC4, then MECI and/or IEBV5, as the case may be, shall immediately release said funds to UPC (plus any interest earned on such amounts). If prior to the Regearing Test, any third party has validly challenged the award of EU Grants to IVPC4, then MECI shall be entitled to retain, for as long as any such challenge is pending, a portion of the Contingent Payment which is otherwise reasonably necessary to compensate it for the potential shortfall in cash flows (calculated on a net present value basis using a 15.71% discount rate, hereinafter called the "NPV Basis") which it would otherwise be entitled to receive pursuant to the terms of this Agreement had said challenge not been brought. Upon final resolution of said challenge (including final appeal by IVPC4 to the highest authority with jurisdiction over the matter), MECI shall pay to UPC: (i) the Contingent Payment amounts withheld (plus accrued interest) in the event that IVPC4 is successful, or (ii) such lesser amount (plus accrued interest), down to zero, as is required to help restore the cash flows (NPV Basis) which MECI would have otherwise received had such challenge to the award of EU Grants to IVPC4 not been successful. 6.9 UNDERTAKINGS 6.9.1 UPC shall cause IVPC4 to comply in all material respects with the provisions of Article 15 of Legislative Decree No. 79 of 16 March 1999. For the avoidance of doubt, MECI shall provide all reasonably practical assistance (excluding the payment of money) to enable UPC to comply with its obligation. 6.9.2 UPC undertakes, at its cost and expense (including payments from Contingent Payments distributable to it), to cause IVPC4 to comply, as appropriate, with Applicable Law relating to height limits and environmental impact assessments with respect to those Projects for which the application for the building permits has been filed after 14 March 1999. For the avoidance of doubt, MECI shall provide all reasonably practical assistance (excluding the payment of money) to enable UPC to comply with its obligation. 7. REPRESENTATIONS AND WARRANTIES 7.1 UPC UPC makes the following representations and warranties as of the date of this Agreement: (a) Organization. UPC (i) is duly constituted, validly existing and in good standing under the laws of the Netherlands Antilles, (ii) is duly qualified, authorized to do business and in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary, and (iii) has all requisite corporate power and authority (1) to carry on its business as now being conducted and as proposed to be conducted by it, (2) to own or hold under lease and operate the property it purports to own or hold under lease, (3) to execute, deliver and perform each Transaction Document to which it is a party, and (4) to take all action as may be necessary to consummate the transactions contemplated thereunder. (b) Authorization; No Conflict. UPC has duly authorized, executed and delivered each Transaction Document to which it is a party, and UPC's execution and delivery thereof, UPC's consummation of the transactions contemplated thereby, and UPC's compliance with the terms thereof do not and will not (i) contravene UPC's charter documents or any Applicable Law binding on UPC or any of UPC's properties, (ii) contravene or result in any breach of or constitute any default under, or result in or require the creation of any lien upon any of UPC's property under any agreement or instrument to which UPC is a party or by which UPC or any of UPC's properties may be bound or affected, and (iii) require the consent or approval of any Person which has not already been obtained. (c) Enforceability. This Agreement and each Transaction Document to which UPC is a party is a legal, valid and binding obligation of UPC enforceable against UPC in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and subject to general equitable principles. (d) With respect to IEBV5: (i) Organization. IEBV5 (A) is a corporation duly constituted, validly existing and in good standing under the laws of The Netherlands, (B) is duly qualified, authorized to do business and in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary, and (C) has all requisite corporate power and authority (1) to carry on its business as now being conducted and as proposed to be conducted by it, (2) to own or hold under lease and operate the property it purports to own or hold under lease, (3) to execute, deliver and perform each Transaction Document to which it is or will become a party, and (4) to take all action as may be necessary to consummate the transactions contemplated thereunder. (ii) Capitalization. The authorized capital stock of IEBV5 consists of 200 shares of common stock, no par value, of which 46 shares are issued and outstanding. All such issued and outstanding shares are validly issued, fully paid and nonassessable and are legally and beneficially owned by UPC free and clear of any Security Interest. No interest in IEBV5 is subject to any option, warrant, right to call or commitment of any kind or character. No convertible bonds, warrants, options or other rights have been issued or are outstanding, which may give right to any Person to subscribe or purchase any part of the Interest or cause new shares to be issued, nor have any resolutions been taken or contracts been entered into which may result in the creation of any of the above rights. (iii) Authorization; No Conflict. IEBV5 has duly authorized, executed and delivered each Transaction Document to which it is a party, and the execution and delivery thereof and the consummation of the transactions contemplated thereby and the compliance with the terms thereof do not and will not (A) contravene its respective charter documents or any Applicable Law binding on it or its respective properties, (B) contravene or result in any breach of or constitute any default under, or result in or require the creation of any lien (other than permitted liens) upon any of its respective properties under any agreement or instrument to which it is a party or by which it or any of its properties may be bound or affected, and (C) require the consent or approval of any Person which has not already been obtained. (iv) Financial Statements. The IEBV5 Financial Statements and all the accounting books and records required by Applicable Law have been prepared in compliance with Applicable Law and Applicable GAAP, are true and complete, and accurately reflect the economic and financial condition of IEBV5 as of the dates they were prepared. There are no liabilities not reflected in the IEBV5 Financial Statements which should have been reflected in accordance with Applicable GAAP. Since 31 December 1999, no events or changes have occurred which have or could materially adversely affect the condition (financial or otherwise) of IEBV5 as reflected in the IEBV5 Financial Statements. (v) Employees. IEBV5 has no employees. To the best of UPC's knowledge, there are no persons who can claim to be employed in any form or manner by IEBV5. To the best of UPC's knowledge, there are no past or present consultants of IEBV5 who could claim the existence of an employment relationship with IEBV5. (vi) Taxes. IEBV5 has complied with all applicable tax, social security and compulsory insurance laws and regulations in force from time to time including all direct and indirect taxes and VAT, or similar charges in any way arising in connection with tax returns, transactions or acts have been regularly paid or reserved; all tax or similar declarations have been properly and timely filed. To the best of UPC's knowledge, there are no pending or announced proceedings or assessments against IEBV5, nor any other claims by the tax or social security authorities with respect to the activities which IEBV5 conducts nor are there any circumstances which could give rise to such claims. All amounts reserved in the IEBV5 Financial Statements for current and deferred tax and social security liabilities are adequate for the payment of all taxes, duties or similar charges, fines and interest for which IEBV5 may be held liable for any reason whatsoever. (vii) Business. As of the date hereof, IEBV5 has no material liabilities except: (i) ownership of the quotas of IVPC4, (ii) the Note (iii) obligations to Executive Management Trust arising under the Management Agreement dated as of 28 July 1998, (iv) those liabilities identified in the IEBV5 Financial Statements, and (v) de-minimus Dutch taxes. (viii) Neither UPC nor any of its owners/partners have made or caused to be made, any elections by or for IVPC4 or agreements between the quotaholders of IVPC4, other than the Entity Classification Election - From 8832 (filed for IVPC4 on 16 February 1997), for the allocation of income, (loss), deductions, investment interest, credits, taxes, distributions and debt between the quotaholders of IVPC4 for U.S. Tax purposes. (e) With respect to IVPC4: (i) Organization. IVPC4 (A) is a corporation duly constituted, validly existing and in good standing under the laws of Italy, (B) is duly qualified, authorized to do business and in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary, and (C) has all requisite corporate power and authority (1) to carry on its business as now being conducted and as proposed to be conducted by it, (2) to own or hold under lease and operate the property it purports to own or hold under lease, (3) to execute, deliver and perform each Transaction Document to which it is or will become a party, and (4) to take all action as may be necessary to consummate the transactions contemplated thereunder. (ii) Capitalization. The authorized capital of IVPC4 consists of 7,520,000 quotas, par value ITL 1,000, of which 7,520,000 quotas are outstanding. All such outstanding quotas are fully paid and nonassessable and are beneficially owned 50% each by IEBV4 and IEBV5 free and clear of any Security Interest. No interest in IVPC4 is subject to any option, warrant, right to call or commitment of any kind or character. No convertible bonds, warrants, options or other rights have been issued or are outstanding, which may give right to any Person to subscribe or purchase any part of the quotas of IVPC4 or cause new quotas to become outstanding, nor have any resolutions been taken or contracts been entered into which may result in the creation of any of the above rights. (iii) Financial Statements. The IVPC4 Financial Statements and all the accounting books and records required by Applicable Law have been prepared in compliance with Applicable Law and Applicable GAAP, are true and complete, and accurately reflect the economic and financial condition of IVPC4 as of the dates they were prepared. There are no liabilities not reflected in the IVPC4 Financial Statements which should have been reflected in accordance with Applicable GAAP. Since 31 December 1999, no events or changes have occurred which have or could materially adversely affect the condition (financial or otherwise) of IVPC4 as reflected in the IVPC4 Financial Statements. (iv) Employees. The employees of IVPC4 have been duly remunerated for all services performed for IVPC4 in accordance with all Applicable Law and the relevant employee contracts. All payments due in relation to severance pay, holidays, insurance, social security contributions and withholding taxes required by Applicable Law and the relevant employment contracts have been regularly effected by IVPC4, or the relevant amounts have been reserved. The salaries and benefits due to each of IVPC4's employees and their relevant position of employment are those which are reflected in the pay registers of IVPC4. There are no other forms of remuneration, insurance, pension or severance pay indemnities, or any agreed items (including fringe benefits) owed to IVPC4's employees other than those prescribed by Applicable Law or the employment contracts with IVPC4. To the best of UPC's knowledge, there are no persons other than those listed in IVPC4 pay registers who can claim to be employed in any form or manner by IVPC4. (v) Taxes. IVPC4 has complied with all Applicable Law regarding tax, social security and compulsory insurance in force from time to time including all direct and indirect taxes and VAT, or similar charges in any way arising in connection with tax returns, transactions or acts have been regularly paid or reserved; all tax or similar declarations have been properly and timely filed. To the best of UPC's knowledge, there are no pending or announced proceedings or assessments against IVPC4, nor any other claims by the tax or social security authorities with respect to the activities which IVPC4 conducts nor are there any circumstances which could give rise to such claims. All amounts reserved in the IVPC4 Financial Statements for current and deferred tax and social security liabilities are adequate for the payment of all taxes, duties or similar charges, fines and interest for which IVPC4 may be held liable for any reason whatsoever. (vi) Environmental/Occupational Safety & Health. There is no apparent visual evidence of environmental contamination at or above the surface of the sites on which the Project shall be located. To UPC's knowledge, there is no underground environmental contamination at any of the sites on which the Project shall be located. IVPC4 has duly complied with all Applicable Laws concerning health and safety in the workplace, and, to the best of UPC's knowledge, there are no pending or threatened claims, proceedings or investigations against IVPC4 in relation thereto. IVPC4 has obtained, or is in the process of applying for, all necessary environmental authorizations, environmental concessions, environmental licenses and environmental permits required for the construction of the Project. (vii) Business. IVPC4 has not conducted any business other than that related to the development, financing, operation or maintenance of the Project, and IVPC4 does not own any interest in any Person. (f) With respect to certain FCPA related matters: (i) None of UPC, IVPC4, IEBV5 or IEBV4 is owned or controlled, in whole or in part, directly or indirectly, by any person with whom a United States Person or a European Community and/or European Union Person is prohibited from conducting business pursuant to applicable United States federal or state laws and regulations or applicable European Community or European Union laws or regulations as they exist on the date of this Agreement. (ii) UPC, in the performance of its obligations with respect to the Project, confirms that none of UPC or any of UPC's Affiliates, directors, officers, employees, or their respective agents, have violated any laws of Italy, The Netherlands, the United States or any other country which prohibit any Person from making any payment of money or providing anything of value, directly or indirectly to any government official, political party or candidate for political office. (iii) Neither UPC, IVPC4, IEBV4, IEBV5 nor any of its directors, officers or senior managers have ever been convicted of a serious criminal offence in Italy, the United States of America or in any other country. Neither UPC, IVPC4, IEBV4, IEBV5 nor any of its directors, officers or senior managers have entered into any agreement relating to the cessation of illegal activities with any governmental entity or political subdivision of the United States government, the Italian government, the Dutch government, the Netherlands Antilles government or the government of any other country. (iv) UPC is 75% Controlled, indirectly, by Mr. James Houston and 25% beneficially owned and Controlled, indirectly, by Mr. and Mrs. Brian Caffyn. All of the shares of UPC controlled by Mr. James Houston are held free and clear of any Security Interest. All of the shares of UPC beneficially owned and Controlled by Mr. and Mrs. Brian Caffyn are held free and clear of any Security Interest that would affect their voting rights in such shares. (g) Litigation. There are no pending or, to the best of UPC's knowledge, threatened actions or proceedings of any kind, including actions or proceedings of or before any Governmental Authority, to which any of UPC or IEBV5 or IVPC4 is a party or is subject, or by which any of the properties of any of them are bound that, if adversely determined to or against UPC or IEBV5 or IVPC4 would have a material adverse effect, nor, to the best of UPC's knowledge, is there any basis for any such action or proceeding. (h) Exactness of the information supplied. To the best of UPC's knowledge, all data and information supplied by UPC or its Affiliates or its consultants to MECI or to its employees, representatives or consultants during the due diligence and the negotiations preceding the execution of this agreement were materially complete, correct and accurate (and no material information was left undisclosed) as of the date the data and/or information was tendered to MECI and there are no material events or information which have occurred or become available between such date and the date of this Agreement which have not been brought in writing to the attention of MECI. 7.2 MECI MECI makes the following representations and warranties as of the date of this Agreement: (a) Organization. MECI (i) is a corporation duly constituted, validly existing and in good standing under the laws of The Netherlands, (ii) is duly qualified, authorized to do business and in good standing in each jurisdiction where the character of its properties or the nature of its activities makes such qualification necessary, and (iii) has all requisite corporate power and authority (1) to carry on its business as now being conducted and as proposed to be conducted by it, (2) to own or hold under lease and operate the property it purports to own or hold under lease, (3) to execute, deliver and perform each Transaction Document to which it is a party, (4) to take all action as may be necessary to consummate the transactions contemplated thereby. (b) Authorization; No Conflict. MECI has duly authorized, executed and delivered each Transaction Document to which it is a party, and neither MECI's execution and delivery thereof nor MECI's consummation of the transactions contemplated thereby nor MECI's compliance with the terms thereof does or will contravene MECI's articles or by-laws, or any Applicable Law binding on MECI, or any of MECI's properties. (c) Enforceability. Each Transaction Document to which MECI is a party is a legal, valid and binding obligation of MECI enforceable against MECI in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights and subject to general equitable principles. (d) Litigation. There are no pending or, to the best of MECI's knowledge, threatened actions or proceedings of any kind, including actions or proceedings of or before any Governmental Authority, to which MECI is a party or is subject, or by which MECI or any of MECI's properties are bound that, if adversely determined to or against MECI, would have a material adverse effect, nor, to the best of MECI's knowledge, is there any basis for any such action or proceeding. 7.3 Indemnity. (a) Without prejudice to all other rights and remedies, if any, available to MECI under Applicable Law and pursuant to this Agreement, UPC hereby agrees to indemnify and hold harmless MECI in respect of any loss or damage suffered by MECI (whether directly or through IVPC4 or IEBV5) to the extent such loss or damage arises out of the breach of the representations and warranties contained in Sections 7.1 (d)(iv), (vi) and (vii), 7.1.(e)(iii) and (v), and 7.1 (f). For the avoidance of doubt, MECI shall not be entitled to double payment of damages in respect of the same event, pursuant to different remedies available under Applicable Law or this Agreement. (b) Every time a fact or event occurs from which a right to compensation pursuant to paragraph (a) may arise, MECI shall give written notice thereof to UPC within ninety days of the day on which it became aware of such fact or event. The notice shall contain the relevant information and the indication of the amount claimed and shall be issued no later than: (i) one hundred and twenty days after the expiration, for statutory limitation, of the claims which may be raised by third Parties, in case of breach to the representations and warranties under Sections 7.1 (d) (vi), 7.1 (e) (v) and 7.1 (f); (ii) 30 June 2003, in respect to claims for which an indemnification may be sought by MECI pursuant to Sections 7.1 (d) (iv) and 7.1 (e) (iii). (iii) 1 March 2001, in respect to claims for which an indemnification may be sought by MECI pursuant to Sections 7.1(d)(vii). (c) Upon receipt of the notice under paragraph (b), MECI and UPC will meet promptly to resolve amicably any dispute relating to the request from MECI for an indemnity pursuant to paragraph (a). If the Parties do not reach an agreement within thirty days of the request of MECI (or within a further period of thirty days in case of mutually agreed extension of the above term) the claim of MECI may be submitted to arbitration pursuant to paragraph 9.10. 8. CONFIDENTIALITY AND PUBLICITY MECI shall keep and ensure that each of its officers, directors, agents, employees and advisers shall keep the UPC Information (as defined below) in strictest confidence, and UPC shall keep and ensure that each of its officers, directors, agents, employees and advisers shall keep the MECI Information (as defined below) in strictest confidence, in each case for use only in connection with the Project. For this purpose, (i) "UPC Information" means the wind data (including the Hassan Report), financial information concerning UPC and its Affiliates, and any other documents or information delivered to MECI in connection with MECI's due diligence and continuing ownership of IVPC4, and "MECI Information" means financial information concerning MECI and its Affiliates (including IEBV5), (ii) the Transaction Documents are both UPC Information and MECI Information, and (iii) any other information disclosed by one party (or their Affiliates) to the other in writing and marked as 'Confidential', or disclosed orally but promptly identified in writing as 'Confidential' shall be confidential information of the disclosing party following receipt of such written identification. Except as required by law, neither party shall issue any statement or communication to the public regarding the transactions contemplated hereunder without the prior written consent of the other party. The confidentiality obligations under Section 8 shall not apply to the following information: (i) information which is or becomes part of the public domain other than as a result of a breach of this Agreement; (ii) information which was known to the receiving party (other than through a breach of this Agreement) before being disclosed to the receiving party by the disclosing party; and (iii) information which is required to be disclosed pursuant to Applicable Law (provided that the disclosing party shall seek to minimise such disclosure). Notwithstanding the above, disclosure of relevant confidential information may be made to any Person (including the Parties): (i) proposing to purchase an interest in the Project, or (ii) who is a potential financing source for the Project or (iii) who is an advisor, Affiliate or employee of any of the above Persons, provided in each case that the party wishing to disclose such confidential information receives the prior written consent of the other party to this Agreement (such consent not to be unreasonably withheld or delayed) and the Person enters into a confidentiality agreement with terms comparable to those specified herein. 9. MISCELLANEOUS 9.1 Notices and Payments. Notices. All notices or other communications required or permitted to be given hereunder shall be in writing, shall be addressed as provided below and shall be considered as properly given (i) if delivered in person, (ii) if sent by overnight delivery service (including Federal Express, ETA, Emery, Purolator, DHL, Air Borne and other similar overnight delivery services), (iii) if overnight delivery services are not readily available, if mailed by first class mail, postage prepaid, registered or certified with return receipt requested or (iv) if sent by telecopy with a confirming copy sent by courier or first class mail as provided in clauses (ii) and (iii). Notice so given shall be effective upon initial receipt by the addressee; provided, however, that if any notice is tendered to an addressee and the delivery thereof is refused by such addressee, such notice shall be effective upon such tender. For the purposes of notice, the addresses of the Parties shall be as set forth below; provided, however, that any party shall have the right to change its address for notice hereunder to any other location by giving of thirty (30) days' prior written notice to the other party in the manner set forth above. The initial addresses of the Parties hereto are as follows: (1) MECI: Landsdown House Berkeley Square London W1X 5DH Attention: General Counsel Fax: +44 171 312 4041 (2) UPC: UPC International Partnership CV II c/o Rennie and Company 1750-1500 West Georgia Street Vancouver, B.C. Canada V6G 2Z6 Attention: David Rennie Peter A. Gish, Esq. Fax: + 1 (604) 681-5803 Payments. All payments required or permitted hereunder shall be made in lawful currency of the Italian Republic to one or more accounts designated by the receiving party pursuant to a notice delivered to the other party in the manner set forth above. 9.2 Waivers. Any Party's failure at any time to require strict performance by the other Party of any of the provisions hereof shall not waive or diminish the first Party's right thereafter to demand strict compliance therewith or with any other provision. None of the conditions or provisions of this Agreement shall be held to have been waived by any act or knowledge of a Party, its agents or employees, but only by an instrument in writing signed by an officer of such Party and delivered to the other Party. 9.3 Survival and Termination of Agreement. All covenants, agreements, representations and warranties made herein and in the certificates and other documents delivered pursuant hereto shall continue in full force and effect so long as any of the rights or obligations remain unsatisfied, whereupon this Agreement shall terminate. 9.4 Successors and Assigns. No assignment or transfer (by operation of law or otherwise) of this Agreement by either Party hereto of any of its rights or duties hereunder may be made without the prior written consent of the other Party hereto, provided that either Party shall have the right to assign its rights and obligations hereunder to an Affiliate. All covenants, promises and agreements by or on behalf of any Party which are contained in this Agreement shall inure to the benefit of the successors and assigns of the other Party. 9.5 Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 9.6 Accounting Terms. All accounting terms not specifically defined herein shall be construed and computed in accordance with Applicable GAAP. 9.7 Headings. Headings in this Agreement are for convenience of reference only and are not part of the substance hereof. 9.8 Counterparts. This Agreement may be executed in any number of identical counterparts, any set of which signed by all the Parties hereto shall be deemed to constitute a complete, executed original for all purposes. 9.9 Good Faith. The Parties hereto shall act in good faith and fair dealing with respect to the transactions contemplated under this Agreement. 9.10 Arbitration. (i) Any controversy, claim or dispute between the Parties arising out of or related to this Agreement or the breach, termination or invalidity hereof, which cannot be settled amicably by the Parties, shall be submitted for arbitration in accordance with the provisions contained herein and in accordance with the International Chamber of Commerce Arbitration Rules of the International Chamber of Commerce of Paris as at present in force ("Rules"). Judgement upon the award rendered by the arbitrators may be entered in any court having jurisdiction. The decision of the arbitrators shall be final, and each of the Parties waives any right to appeal any decision reached by the arbitrators. The arbitrators shall determine all questions of fact and law relating to any controversy, claim or dispute hereunder, including but not limited to whether or not any such controversy, claim or dispute is subject to the arbitration provisions contained herein; (ii) any Party desiring arbitration shall serve on the other Party and any other applicable Person, in accordance with the aforesaid Rules, its notice of arbitration ("Arbitration Notice"), accompanied by the name of the arbitrator selected by the Party serving the Arbitration Notice. Failing the other Party's acceptance of the selected arbitrator or the Parties' agreement on a single mutually acceptable arbitrator, a second arbitrator shall be chosen by the other Party, and a third arbitrator shall be chosen by the two arbitrators so selected and act as presiding arbitrator of the tribunal. If the Party upon whom the Arbitration Notice is served fails to accept the first Party's arbitrator, agree with the first Party upon a single mutually acceptable arbitrator or advise the other Party of its selection within thirty (30) days after the receipt of the Arbitration Notice, the second arbitrator shall be selected by the appointing authority. If the two arbitrators so chosen cannot agree upon a third arbitrator within ten (10) days after the appointment of a second arbitrator, the third arbitrator shall be selected by the International Chamber of Commerce of Paris (the "ICC"), which shall be the appointing authority and administering authority in accordance with the Rules; provided that, the -------- ---- Parties may strike the names of arbitrators proposed by the ICC from a first and a second list to select the third arbitrator, and the ICC shall only select such arbitrator in its discretion if all those proposed by the ICC on the two lists are rejected by the Parties. The arbitration proceedings provided hereunder are hereby declared to be self-executing, and it shall not be necessary to petition a court to compel arbitration ; (iii) all arbitration proceedings shall be held in London, England. The language to be used in the arbitration proceedings shall be English; (iv) a demand for arbitration shall be made within reasonable time after the claim, dispute or other matter in question has arisen and in no event shall it be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statutes of limitations; and (v) if either Party to this Agreement is adjudged to have violated the obligation of acting in good faith imposed by Section 9.9 hereof, the arbitrators shall consider an award of consequential and other appropriate damages against the Party so violating the obligation of acting in good faith. 9.11 Waiver of Jury Trial Each Party hereby knowingly, voluntarily, and intentionally waives any rights they may have to a trial by jury in respect of any litigation based hereon, or arising out of, under, or in connection with, this agreement, or any course or conduct, course of dealing, statements (whether verbal or written), or actions of either Party. This provision is a material inducement for each Party to enter into this Agreement. 9.12 Attorneys' Fees. In a suit or proceeding brought or instituted by any Party to this Agreement to enforce or interpret any of the provisions of this Agreement or on account of any damages sustained by any Party by reason of the violation of another Party of any of the terms or provisions of this Agreement, the prevailing Party shall be entitled to recover reasonable attorneys' fees and expenses in such amount as shall be fixed by the arbitrators. 9.13 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of England, with the exception of the transfer of the Interest, which will be governed by Dutch law. 9.14 Transaction Costs. Each Party shall be responsible for its own costs and expenses (including advisors and counsel) resulting from the evaluation, due diligence and negotiation related to the transaction(s) contemplated by this Agreement. 9.15. Civil Law Notary Nauta Dutilh MECI is aware of the fact that Maitre H.P.Ch. van Dijk or any other civil law notary of Nauta Dutilh, advocates, civil law notaries and tax advisors or any of their deputies (the "Civil Law Notary") is working at Nauta Dutilh, being the offices of the external legal counsel of UPC, IEBV5 (prior to transfer of the shares), and IEBV4 with respect to the share transfer contemplated by this Agreement. With reference to Articles 9 and 10 of the Directives with respect to the co-operation between Civil Law Notaries and Lawyers ("Richtlinnen met betrekking tot vormen van samenwerking van notarissen onderling met advocaten"), as concluded on 1 April 1997 by the board of the Royal Notarial Professional Organization ("Koninklijke Notariele Beroepsorganisatie"), MECI hereby explicitly agrees to the fact that UPC, IEBV5 (prior to transfer of the shares), and IEBV4 will be represented by Nauta Dutilh on account of the share transfers contemplated by the Agreement. IN WITNESS WHEREOF, the Parties have executed this Agreement in Switzerland as of the date and year first written above. MEC INTERNATIONAL B.V. UPC INTERNATIONAL PARTNERSHIP CV II By: _____________________ By:____________________________ James R. Houston Managing Director SCHEDULE I SCHEDULE OF DEFINITIONS AND RULES OF INTERPRETATION Definitions - ----------- "Affiliate" of a Person (the "First Person") means a Person which directly or indirectly Controls, or is Controlled by, or is under common Control with, the First Person, and shall also include any limited partnership of which the First Person or Affiliate thereof is the general partner of the First Person. "AIP Agreement" has the meaning set forth in Section 6.2. "AIP Termination Agreement" has the meaning set forth in Section 6.2. "Applicable GAAP" means generally accepted accounting principles and practices as in effect in the applicable jurisdiction from time to time, consistently applied. "Applicable Law" means all laws, rules, regulations, ordinances, orders, codes, judgements, decrees, injunctions, permits and similar forms of decision of any Governmental Authority having jurisdiction over the matter in question, whether existing as of the date hereof or hereinafter enacted, including relevant European Union laws and regulations, which are applicable to the Person in question. "Banking Base Case" has the meaning provided in Section 3.1. "Borrower's Drawdown Certificate" shall have the meaning provided in the Credit Agreement. "Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in Rome, Milan, New York, London and Amsterdam. "Closing Date" means, for any of the Senior Loan or a Subordinated Loan, the date on which the agreement pertaining to such loan is executed. "Construction Loan" means a construction loan under the Senior Loan. "Contingent Payments" has the meaning provided in the Credit Agreement. "Consulting Services Agreement" means the consulting services agreement in the form attached hereto as Schedule IV to be entered into between IVPC Gestione S.r.l. and Edison Mission Italia S.r.l. "Contractor" means IWT-Italian Wind Technology S.r.l. "Control" of a Person means the ownership, directly or indirectly, of more than fifty percent (50%) of the voting rights for management decision-making purposes of that Person. "Conversion Date" means any date on which a portion of any Construction Loan converts to the relevant Term Loan pursuant to the terms of the Senior Loan, or if such conversion does not occur, then the date when the affected portion of the Project is refinanced, sold or otherwise disposed of. "Costs Side Letter" means the side letter dated 3 March 2000 between the Parties in respect of granted cost limits. "Credit Agreement" means the agreement evidencing the Senior Loan, and any replacement thereto. "Deeds of Pledge" means the deeds of pledge (scrittura per la costituzione di pegno) to be executed by IEBV5 and IEBV4, with respect to their quota interests in IVPC4, in favor of Senior Lender. "Disbursement Account" means the bank account with National Westminster Bank plc, Milan Branch, Via Turati 18, 20121 Milan - IVPC4 Disbursement Account No. 20-50247. "Equity" has the meaning provided in the Credit Agreement. "Equity Portion" has the meaning set forth in Section 2.3. "EU Funds" means amounts awarded and actually delivered to IVPC4 by any Regione or Regioni of the Italian Republic out of funds provided to such Regione or Regioni by the European Union. "Final Payment" has the meaning set forth in Section 2.3. "Finance Document" has the meaning provided in the Credit Agreement. "Financial Close" means the Closing Date for the Credit Agreement. "FIP" means Finance Investment Projects S.r.l. "Franchigia" means the maximum period with no penalties for which the power purchaser under the power purchase agreements is allowed to suspend the power offtake, due to operational and maintenance requirements. "Governmental Authority" means any federal, national, regional, provincial, state or local government authority, agency, court or other body, officer or public entity, including any zoning authority, building inspector, or health or safety inspector. "GWH" means gigawatt hour. "Hassan" means Garrad Hassan and Partners Limited. "Hassan Report" means the wind data report prepared by Hassan in relation to the Project attached hereto as Schedule VII. "Hold Period" has the meaning provided in Section 6.6. "IEBV4" means IVPC Energy 4 B.V., a company organized under the laws of The Netherlands. "IEBV4 Subordinated Loan Agreement" means the loan agreement, attached hereto as Schedule VIII, substantially identical to the IEBV5 Subordinated Loan Agreement to be entered into by IEBV4 and IVPC4. "IEBV5" means IVPC Energy 5 B.V., a company organized under the laws of The Netherlands. "IEBV5 Financial Statements" means the unaudited financial statements of IEBV5 as at 31 December 1999, attached hereto as Schedule VI. "IEBV5 Subordinated Loan Agreement" has the meaning set forth in Section 4.0. "Initial Payment" has the meaning set forth in Section 2.3. "Interest" has the meaning provided in Section 2.1. "IRR" means the internal rate of return on capital for MECI, being the number in the cell adjacent to the cell marked "IRR" in the Equity Base Case. "IVPC4 Financial Statements" means the audited financial statements of IVPC4 as at 31 December 1999, attached hereto as Schedule VI. "IVPC4 Quotaholders Agreement" means the Agreement to be entered into between IEBV4 and IEBV5, attached hereto as Schedule III. "EURIBOR" has the meaning set forth in the Credit Agreement. "Mediocredito" means Mediocredito Centrale S.p.A. a bank organized under the laws of the Italian Republic. "MW" means megawatt. "Net Cash Flow" means Operating Cash Flow less senior debt service. "Note" has the meaning set forth in Section 5.0. "Opened Stage" has the meaning set forth in Section 2.3. "Permit Side Letter" means the side letter dated 3 March 2000 between the Parties in respect of permits. "Person" means any individual, partnership, joint stock company, corporation, trust, unincorporated association or joint venture, a government or any department or agency thereof, or any other entity. "Project" means all of the Stages, collectively, and includes the Rocca San Felice Project. "Purchase Payment" means the amounts referred to in Section 2.3. "Reduction" has the meaning set forth in Section 2.3. "Regearing Test" has the meaning ascribed to it in the Credit Agreement. "Remaining Portion" has the meaning set forth in Section 2.3. "Retained Contingency Amount" set forth in Section 6.4. "Revised Equity Base Case" has the meaning provided in Section 2.3. "Rocca San Felice Project" means the 2.4 MW wind energy project located in the commune of Rocca San Felice. "Rules" has the meaning set forth in Section 9.10. "Senior Lender" means Mediocredito, and includes any successor thereto. "Senior Loan" means any senior secured non-recourse loan. "Stage" or "Stages" has the meaning provided in Recital C. "Subordinated Loans" means the subordinated loans to be extended by IEBV5 and IEBV4 pursuant to the IEBV4 Subordinated Loan Agreement and the IEBV5 Subordinated Loan Agreement. "Term Loan" means a term loan under the Senior Loan for any of Stage A, Stage B, Stage C, and Stage D. "Transaction Documents" means the Shareholder Interest Purchase Agreement, the Subordinated Loan Agreements, and the Deeds of Pledge. "UPC Account" means the bank account with Bank J. Vontobel & Co. Ltd. in the name of UPC International N.V., with the following wire instructions: Chase Manhattan Bank, New York, NY, Swift Code CHASUS33, ABA # 021 0000 21, Bank J. Vontobel & Co. Ltd., Swift Code VONTCHZZ, Account No. 001-1-004298, UPC CV (Attn: Ms. Martina Wurgler). "UPC Financial Statements" means the unaudited financial statements of UPC attached hereto as Schedule VI. Interpretation All capitalised terms not expressly defined in this Agreement shall have the same meaning as in the Credit Agreement. All terms defined in this agreement in the singular form shall have comparable meanings in the plural form and vice versa. All references to "Lira" or "ITL" shall refer to Italian Lira, or equivalent amount in one or more foreign currencies. A reference to an Applicable Law includes any amendment or modification to such Applicable Law. A reference to a Person includes such Person's permitted successors and permitted assigns. The words "include", "includes" and "including" and words of similar import are not limiting or exclusive. A reference in a document to an Article, Section, Exhibit, Schedule, Annex, Attachment or Appendix is to the Article, Section, Exhibit, Schedule, Annex, Attachment or Appendix of such document unless otherwise indicated. In this Agreement, references to Schedules, the Permit Side Letter and the Costs Side Letter shall be deemed incorporated into this Agreement by reference and shall be part hereof. References to any document, instrument or agreement (a) shall include all exhibits, schedules and other attachments thereto, (b) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (c) means such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words "hereof," herein" and "hereunder" and words of similar import when used in any document shall refer to such document as a whole and not to any particular provision of such document. References to "days" means calendar days, unless the term "Business Days" is used. References to a time of day means such time in Milan, Italy unless otherwise specified. This document is the result of negotiations between, and has been reviewed by the Parties hereto and their respective counsel. Accordingly, it shall be deemed to be the product of all Parties thereto, and no ambiguity shall be construed in favor of or against any party. A reference in any representation to "the best of UPC's knowledge" shall mean to the best of UPC's knowledge following appropriate inquiry into the matter in question. SCHEDULE II EQUITY BASE CASE SCHEDULE III QUOTAHOLDERS AGREEMENT SCHEDULE IV CONSULTING SERVICES AGREEMENT SCHEDULE V FORM OF NOTARIAL DEED SCHEDULE VI UPC FINANCIAL STATEMENTS IEBV5 FINANCIAL STATEMENTS IVPC4 FINANCIAL STATEMENTS SCHEDULE VII GARRAD HASSAN WIND REPORT (to be attached) SCHEDULE VIII SUBORDINATED LOAN AGREEMENTS (IEBV4 AND IEBV5) SCHEDULE IX AGREED FORM OF NOTE AND ASSIGNMENT THEREOF EX-18.1 7 PREFERABILITY LETTER REGARDING CHANGE EXHIBIT 18.1 To the Board of Directors of Edison Mission Energy: Re: Form 10-Q Report for the quarter ended March 31, 2000. Gentlemen/Ladies: This letter is written to meet the requirements of Regulation S-K calling for a letter from a registrant's independent accountants whenever there has been a change in accounting principle or practice. We have been informed that, as of March 31, 2000, Edison Mission Energy (the Company) has changed its method for accounting for major maintenance costs from the accrue in advance method of accounting to the expense as incurred method of accounting. According to the management of the Company, while the accrue in advance has been widely used by independent power producers as well as certain other industries, this change was made to conform its policy to the recent position taken by the staff of the Securities and Exchange Commission (SEC), whereby the staff has stated that it does not believe the accrue in advance method of accounting is appropriate. A complete coordinated set of financial and reporting standards for determining the preferability of accounting principles among acceptable alternative principles has not been established by the accounting profession. Thus, we cannot make an objective determination of whether the change in accounting described in the preceding paragraph is to a preferable method. However, we have reviewed the pertinent factors, including those related to financial reporting, in this particular case on a subjective basis, and our opinion stated below is based on our determination made in this manner. We are of the opinion that the Company's change in method of accounting is to an acceptable alternative method of accounting, which, based upon the reasons stated for the change and our discussions with you, is also preferable under the circumstances in this particular case. In arriving at this opinion, we have relied on the business judgment and business planning of your management. We have not audited the application of this change to the financial statements of any period subsequent to December 31, 1999. Further, we have not examined and do not express any opinion with respect to your financial statements for the three months ended March 31, 2000. Very truly yours, Arthur Andersen LLP EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EDISON MISSION ENERGY AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 684,156 0 256,046 1,126 323,442 1,299,678 12,367,928 490,309 15,633,124 1,943,435 7,365,372 348,360 118,054 64,130 2,926,149 15,633,124 0 701,573 0 472,242 0 0 181,078 (45,352) (15,191) (30,161) 0 0 17,690 (12,471) 0 0
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