-----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, AlDS65NnlTxhK+2OXExtnrEjUlMUZL59ZL3RUFTB2yNAyqkL8uLQG51m7/WGRoSa hso9rOCXDQ1rbnwYRoUUFA== 0001047469-04-016386.txt : 20040507 0001047469-04-016386.hdr.sgml : 20040507 20040507145117 ACCESSION NUMBER: 0001047469-04-016386 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040507 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: 1934 Act SEC FILE NUMBER: 000-24890 FILM NUMBER: 04788687 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 a2135451z10-q.htm 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark one)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2004
or
o	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 000-24890

EDISON MISSION ENERGY
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		95-4031807 (I.R.S. Employer Identification No.)
18101 Von Karman Avenue Irvine, California (Address of principal executive offices)		92612 (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 ý NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES o NO ý

Number of shares outstanding of the registrant's Common Stock as of May 7, 2004: 100 shares (all shares held by an affiliate of the registrant).

TABLE OF CONTENTS

		Page
	PART I – Financial Information
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	60
Item 4.	Controls and Procedures	60
PART II – Other Information
Item 6.	Exhibits and Reports on Form 8-K	61
	Signatures	63

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, Unaudited)

			Three Months Ended March 31,
			2004			2003
Operating Revenues
	Electric revenues		$	773,064		$	680,933
	Net gains (losses) from price risk management and energy trading			1,519			(6,830	)
	Operation and maintenance services			8,610			9,357

		Total operating revenues		783,193			683,460

Operating Expenses
	Fuel			293,809			276,887
	Plant operations and transmission costs			217,759			202,826
	Plant operating leases			50,951			51,468
	Operation and maintenance services			7,176			6,379
	Depreciation and amortization			74,004			71,831
	Administrative and general			44,511			38,047

		Total operating expenses		688,210			647,438

	Operating income			94,983			36,022

Other Income (Expense)
	Equity in income from unconsolidated affiliates			64,830			63,837
	Interest and other income			4,954			6,778
	Gain on sale of assets			43,489			—
	Interest expense			(135,548	)		(116,823	)
	Dividends on preferred securities			—			(5,594	)

		Total other income (expense)		(22,275	)		(51,802	)

	Income (loss) from continuing operations before income taxes and minority interest			72,708			(15,780	)
	Provision (benefit) for income taxes			29,068			(11,360	)
	Minority interest			(12,406	)		(4,061	)

Income (Loss) From Continuing Operations				31,234			(8,481	)
	Income from operations of discontinued foreign subsidiaries, net of tax (Note 6)			38			228

Income (Loss) Before Accounting Change				31,272			(8,253	)
	Cumulative effect of change in accounting, net of tax (Note 13)			—			(8,571	)

Net Income (Loss)			$	31,272		$	(16,824	)

The accompanying notes are an integral part of these consolidated financial statements.

EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, Unaudited)

			Three Months Ended March 31,
			2004			2003
Net Income (Loss)			$	31,272		$	(16,824	)
Other comprehensive income (loss), net of tax:
	Foreign currency translation adjustments:
		Foreign currency translation adjustments, net of income tax provision (benefit) of $1,517 and $(965) for the three months ended March 31, 2004 and 2003, respectively		22,306			21,288
	Minimum pension liability adjustment			(348	)		201
	Unrealized gains (losses) on derivatives qualified as cash flow hedges:
		Other unrealized holding losses arising during period, net of income tax benefit of $31,352 and $17,596 for the three months ended March 31, 2004 and 2003, respectively		(46,680	)		(3,147	)
		Reclassification adjustments included in net income (loss), net of income tax benefit of $15,751 and $3,932 for the three months ended March 31, 2004 and 2003, respectively		20,946			(1,269	)

Other comprehensive income (loss)				(3,776	)		17,073

Comprehensive Income			$	27,496		$	249

The accompanying notes are an integral part of these consolidated financial statements

EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, Unaudited)

			March 31, 2004		December 31, 2003
Assets
Current Assets
	Cash and cash equivalents		$	554,808	$	503,910
	Accounts receivable—trade, net of allowance of $7,897 in 2004 and $6,470 in 2003			293,977		353,887
	Accounts receivable—affiliates			29,465		29,987
	Assets under price risk management and energy trading			32,514		48,355
	Inventory			148,946		165,531
	Prepaid expenses and other			153,021		203,704

		Total current assets		1,212,731		1,305,374

Investments in Unconsolidated Affiliates				1,584,312		1,607,226

Property, Plant and Equipment				8,560,622		8,684,811
	Less accumulated depreciation and amortization			1,292,263		1,262,660

		Net property, plant and equipment		7,268,359		7,422,151

Other Assets
	Goodwill			886,593		867,164
	Deferred financing costs			59,862		66,604
	Long-term assets under price risk management and energy trading			108,351		96,990
	Restricted cash			278,445		338,268
	Rent payments in excess of levelized rent expense under plant operating leases			218,067		213,686
	Other long-term assets			164,931		153,933

		Total other assets		1,716,249		1,736,645

Assets of Discontinued Operations				6,218		6,122

Total Assets			$	11,787,869	$	12,077,518

The accompanying notes are an integral part of these consolidated financial statements

EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, Unaudited)

			March 31, 2004			December 31, 2003
Liabilities and Shareholder's Equity
Current Liabilities
	Accounts payable—affiliates		$	1,277		$	3,068
	Accounts payable and accrued liabilities			396,384			479,958
	Liabilities under price risk management and energy trading			262,587			163,199
	Interest payable			93,707			101,169
	Short-term obligations			36,119			52,418
	Current maturities of long-term obligations			838,309			855,845

		Total current liabilities		1,628,383			1,655,657

Long-Term Obligations Net of Current Maturities				5,182,084			5,331,313

Long-Term Deferred Liabilities
	Deferred taxes and tax credits			1,271,418			1,290,059
	Deferred revenue			467,348			577,453
	Long-term incentive compensation			28,890			29,695
	Long-term liabilities under price risk management and energy trading			115,349			138,098
	Junior subordinated debentures			154,639			154,639
	Preferred securities subject to mandatory redemption			166,450			164,050
	Other			322,801			318,219

		Total long-term deferred liabilities		2,526,895			2,672,213

Liabilities of Discontinued Operations				322			581

Total Liabilities				9,337,684			9,659,764

Minority Interest				519,619			514,978

Commitments and Contingencies (Note 8)
Shareholder's Equity
	Common stock, par value $0.01 per share; 10,000 shares authorized; 100 shares issued and outstanding			64,130			64,130
	Additional paid-in capital			2,634,034			2,632,954
	Retained deficit			(741,911	)		(772,397	)
	Accumulated other comprehensive loss			(25,687	)		(21,911	)

Total Shareholder's Equity				1,930,566			1,902,776

Total Liabilities and Shareholder's Equity			$	11,787,869		$	12,077,518

The accompanying notes are an integral part of these consolidated financial statements

EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, Unaudited)

			Three Months Ended March 31,
			2004			2003
Cash Flows From Operating Activities
	Income (loss) from continuing operations, after accounting change, net		$	31,234		$	(17,052	)
	Adjustments to reconcile income to net cash provided by (used in) operating activities:
		Equity in income from unconsolidated affiliates		(64,830	)		(63,837	)
		Distributions from unconsolidated affiliates		26,443			29,946
		Depreciation and amortization		74,004			71,831
		Minority interest		12,406			4,061
		Deferred taxes and tax credits		8,098			(18,011	)
		Gain on sale of assets		(43,489	)		—
		Cumulative effect of change in accounting, net of tax		—			8,571
	Changes in operating assets and liabilities:
		Decrease (increase) in accounts receivable		35,813			(57,473	)
		Decrease in inventory		8,608			18,247
		Decrease (increase) in prepaid expenses and other		(174	)		33,602
		Decrease (increase) in rent payments in excess of levelized rent expense		312			(5,038	)
		Increase (decrease) in accounts payable and accrued liabilities		(71,982	)		12,265
		Decrease in interest payable		(4,229	)		(3,246	)
		Decrease in net assets under risk management		10,562			5,384
	Other operating, net			(15,253	)		(20,758	)

				7,523			(1,508	)
	Operating cash flow from discontinued operations			(135	)		20

		Net cash provided by (used in) operating activities		7,388			(1,488	)

Cash Flows From Financing Activities
	Borrowings on long-term debt and lease swap agreements			22,010			226,797
	Payments on long-term debt agreements			(68,348	)		(36,104	)
	Short-term financing and lease swap agreements, net			(16,354	)		133,624
	Cash dividends to minority shareholders			—			(453	)
	Financing costs			—			(1,098	)

		Net cash provided by (used in) financing activities		(62,692	)		322,766

Cash Flows From Investing Activities
	Investments in and loans to energy projects			6,780			(22,321	)
	Purchase of common stock of acquired companies			—			(274,813	)
	Capital expenditures			(22,097	)		(56,484	)
	Proceeds from return of capital and loan repayments			1,915			11,903
	Proceeds from sale of interest in projects			118,027			—
	Decrease in restricted cash			43,628			3,200
	Investments in other assets			(9,098	)		10,071

				139,155			(328,444	)
	Investing cash flow from discontinued operations			(229	)		4,434

		Net cash provided by (used in) investing activities		138,926			(324,010	)

Effect of exchange rate changes on cash				1,460			9,268
Effect on cash from de-consolidation of subsidiaries				(34,231	)		—

Net increase in cash and cash equivalents				50,851			6,536
Cash and cash equivalents at beginning of period				504,093			647,240

Cash and cash equivalents at end of period				554,944			653,776
Cash and cash equivalents classified as part of discontinued operations				(136	)		(125	)

Cash and cash equivalents of continuing operations			$	554,808		$	653,651

The accompanying notes are an integral part of these consolidated financial statements.

EDISON MISSION ENERGY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(Dollars in millions, Unaudited)

Note 1. General

In the opinion of management, 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, 2004 are not necessarily indicative of the operating results for the full year.

Edison Mission Energy's (EME's) significant accounting policies are described in Note 2 to its Consolidated Financial Statements as of December 31, 2003 and 2002, included in EME's annual report on Form 10-K for the year ended December 31, 2003. EME follows the same accounting policies for interim reporting purposes, with the exception of the change in accounting for variable interest entities (see Note 14). This quarterly report should be read in connection with such financial statements.

Terms used but not defined in this report are defined in EME's annual report on Form 10-K for the year ended December 31, 2003. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. These reclassifications had no effect on net income or shareholder's equity.

EME's independent auditors' audit opinion for the year ended December 31, 2003 contains an explanatory paragraph that indicates the consolidated financial statements included in its 2003 annual report on Form 10-K have been prepared on the basis that EME will continue as a going concern and that the uncertainty about Edison Mission Midwest Holdings' ability to repay or refinance $693 million of debt that matures in December 2004 raises substantial doubt about EME's ability to continue as a going concern. In April 2004, all of the outstanding debt of Edison Mission Midwest Holdings was repaid in full through new financings obtained by Midwest Generation. For further discussion, see Note 15—Subsequent Event.

Note 2. Dispositions

On March 31, 2004, EME completed the sale of its 50% partnership interest in Brooklyn Navy Yard Cogeneration Partners L.P. to a third party for a sales price of approximately $42 million. EME recorded an impairment charge of $53 million during the fourth quarter of 2003 related to the planned disposition of this investment and a pre-tax loss of approximately $4 million during the first quarter of 2004 due to changes in the terms of the sale.

On January 7, 2004, EME completed the sale of 100% of its stock of Edison Mission Energy Oil & Gas, which in turn holds minority interests in Four Star Oil & Gas, to Medicine Bow Energy Corporation. Proceeds from the sale were approximately $100 million. EME recorded a pre-tax gain on the sale of approximately $47 million during the first quarter of 2004.

Note 3. Goodwill and Intangible Assets

Effective January 1, 2002, EME adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 establishes accounting and reporting standards requiring goodwill not to be amortized but rather tested for impairment at least annually at the

reporting unit level. EME will perform its annual evaluation of goodwill on October 1, 2004 or sooner if indicators of impairment exist.

Included in "Other long-term assets" on EME's consolidated balance sheet at March 31, 2004 and December 31, 2003 are customer contracts with a gross carrying amount of $105 million and $104 million, respectively, and accumulated amortization of $14 million and $12 million, respectively. The contracts have a weighted average amortization period of 20 years. For the three months ended March 31, 2004 and 2003, the amortization expense was $2 million and $1 million, respectively. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for fiscal years 2004 through 2008 is approximately $6 million each year.

Changes in the carrying amount of goodwill, by geographical segment, for the three months ended March 31, 2004 are as follows:

	Americas		Asia Pacific		Europe		Total
Carrying amount at December 31, 2003	$	2	$	561	$	304	$	867
Translation adjustments and other		—		11		9		20

Carrying amount at March 31, 2004	$	2	$	572	$	313	$	887

Note 4. Inventory

Inventory is stated at the lower of weighted average cost or market. Inventory at March 31, 2004 and December 31, 2003 consisted of the following:

	March 31, 2004		December 31, 2003
Coal and fuel oil	$	76	$	90
Spare parts, materials and supplies		73		76

Total	$	149	$	166

Note 5. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consisted of the following:

	Currency Translation Adjustments		Unrealized Gains (Losses) on Cash Flow Hedges			Minimum Pension Liability Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2003	$	145	$	(156	)	$	(11	)	$	(22	)
Current period change		22		(26	)		—			(4	)

Balance at March 31, 2004	$	167	$	(182	)	$	(11	)	$	(26	)

The amount of commodity hedges included in unrealized gains (losses) on cash flow hedges, net of tax, at March 31, 2004, was a loss of $84 million. The amount of interest rate hedges included in unrealized gains (losses) on cash flow hedges, net of tax, at March 31, 2004, was a loss of $98 million.

Unrealized losses on commodity hedges included those related to the hedge agreement with the State Electricity Commission of Victoria for electricity prices from the Loy Yang B project in Australia, and Homer City and Midwest Generation forward electricity contracts that did not meet the normal

sales and purchases exception under SFAS No. 133. These losses arise because current forecasts of future electricity prices in these markets are greater than contract prices. Unrealized losses on interest rate hedges included those related to EME's share of interest rate swaps of its unconsolidated affiliates, the Loy Yang B project and the Spanish Hydro project.

As EME's hedged positions are realized, approximately $55 million, after tax, of the net unrealized losses on cash flow hedges at March 31, 2004 are expected to be reclassified into earnings during the next 12 months. Management expects that reclassification of net unrealized losses will offset energy revenue recognized at market prices. The maximum period over which EME has designated a cash flow hedge, excluding those forecasted transactions related to the payment of variable interest on existing financial instruments, is 13 years. Actual amounts ultimately reclassified into earnings over the next 12 months could vary materially from this estimated amount as a result of changes in market conditions.

Note 6. Discontinued Operations

Ferrybridge and Fiddler's Ferry Plants

On December 21, 2001, EME completed the sale of the Ferrybridge and Fiddler's Ferry coal-fired power plants located in the United Kingdom to two wholly owned subsidiaries of American Electric Power. In addition, as part of the transactions, the purchasers acquired other assets and assumed specified liabilities associated with the plants. The sale was the result of a competitive bidding process. EME acquired the plants in 1999 from PowerGen UK plc for £1.3 billion. In accordance with SFAS No. 144, the results of Ferrybridge and Fiddler's Ferry have been reflected as discontinued operations in EME's consolidated financial statements.

The balance sheet at March 31, 2004 and December 31, 2003, is comprised of current assets of $5 million, for each period, and other long-term assets of $1 million, for each period. In addition, there were current liabilities of $1 million at December 31, 2003.

Lakeland Project

In 2001, EME ceased consolidating the activities of Lakeland Power Ltd. when an administrator receiver was appointed following a default by Norweb Energi Ltd, the counterparty to a long-term power sales agreement. The consolidated financial statements have been restated to conform to discontinued operations treatment for all historical periods presented. In 2003, a third party completed the purchase of the Lakeland power plant from the administrative receiver for £24 million. The proceeds from the sale and existing cash were used to fund partial repayment of the outstanding debt owed to secured creditors of the project. Lakeland Power Ltd.'s administrative receiver has filed a claim against Norweb Energi Ltd. for termination of the power purchase agreement. To the extent that Lakeland Power Ltd. receives payment under its claim, such amounts will first be used to repay amounts due to creditors. Any residual amount will be distributed to EME's subsidiary that owns the outstanding shares of Lakeland Power Ltd. There is no assurance that there will be any cash available to distribute from the ultimate resolution of this claim.

Note 7. Employee Benefit Plans

Pension Plans

EME previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $13 million to its United States pension plans in 2004. As of March 31, 2004, $3 million in contributions have been made. EME anticipates that its original expectation will be met by year-end 2004.

Components of pension expense for United States plans are:

	Three Months Ended March 31,
	2004			2003
Service cost	$	4		$	4
Interest cost		2			2
Expected return on plan assets		(1	)		(1	)
Net amortization and deferral		—			—

Total expense	$	5		$	5

EME expects to contribute approximately $4 million to its foreign pension plans in 2004. As of March 31, 2004, $1 million in contributions have been made.

Components of pension expense for foreign plans are:

	Three Months Ended March 31,
	2004			2003
Service cost	$	5		$	4
Interest cost		10			8
Expected return on plan assets		(10	)		(10	)
Curtailment/settlement		—			8
Net amortization and deferral		1			—

Total expense	$	6		$	10

Postretirement Benefits Other Than Pensions

EME previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $1 million to its postretirement benefits other than its pension plan in 2004. As of March 31, 2004, $0.1 million in contributions have been made. EME anticipates that its original expectation will be met by year-end 2004.

Components of postretirement benefits expense are:

	Three Months Ended March 31,
	2004		2003
Service cost	$	—	$	—
Interest cost		1		1
Expected return on plan assets		—		—
Net amortization and deferral		—		—

Total expense	$	1	$	1

Note 8. Commitments and Contingencies

Capital Improvements

At March 31, 2004, EME's subsidiaries had firm commitments to spend approximately $71 million on construction and other capital investments during 2004 through 2008. These expenditures are planned to be financed by existing subsidiary credit agreements and cash generated from these operations. The construction and other capital expenditures primarily relate to the construction of a power plant in New Zealand by Contact Energy and planned improvements at Midwest Generation.

Commercial Commitments

Introduction

EME and certain of is subsidiaries have various financial and performance guarantees and indemnifications which are issued in the normal course of business. As discussed below, these contracts include performance guarantees, standby letters of credit, guarantee of debt and indemnifications.

Standby Letters of Credit

At March 31, 2004, standby letters of credit aggregated $144 million and were scheduled to expire as follows: 2004—$90 million; 2005—$15 million; and 2008 and thereafter—$39 million.

Guarantees and Indemnities

Tax Indemnity Agreements—

In connection with the sale-leaseback transactions that EME has entered into related to the Collins Station, Powerton and Joliet plants in Illinois and the Homer City facilities in Pennsylvania, EME or one of its subsidiaries has entered into tax indemnity agreements. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in each tax indemnity agreement, including specified defaults under the respective leases. The potential indemnity obligations under these tax indemnity agreements could be significant. Due to the nature of these potential obligations, EME cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. EME has not recorded a liability related to these indemnities. In connection with the termination of the lease for the Collins Station (See Note 15—Subsequent Event), Midwest Generation will continue to have obligations under the tax indemnity agreement with the former lease equity investor.

Indemnities Provided as Part of the Acquisition of the Illinois Plants—

In connection with the acquisition of the Illinois Plants, EME agreed to indemnify Commonwealth Edison with respect to environmental liabilities before and after the date of sale as specified in the Asset Sale Agreement dated March 22, 1999. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a requirement by Commonwealth Edison to take all reasonable steps to mitigate losses related to any such indemnification claim. Due to the nature of the obligation under this indemnity, a maximum potential liability cannot be determined. The indemnification for the environmental liabilities referred to above is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Except as discussed below, EME has not recorded a liability related to this indemnity.

Midwest Generation entered into a supplemental agreement with Commonwealth Edison on February 20, 2003 to resolve a dispute regarding interpretation of its reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison 50% of specific existing asbestos claims less recovery of insurance costs, and agreed to a sharing arrangement for liabilities associated with future asbestos related claims as specified in the agreement. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement has a five-year term with an automatic renewal provision (subject to the right to terminate). Payments are made under this indemnity by a valid claim provided from Commonwealth Edison. At March 31, 2004, Midwest Generation had $11 million recorded as a liability related to this matter and had made $1 million in payments.

Indemnity Provided as Part of the Acquisition of the Homer City Facilities—

In connection with the acquisition of the Homer City facilities, EME Homer City Generation L.P. (EME Homer City) agreed to indemnify the sellers with respect to environmental liabilities before and after the date of sale as specified in the Asset Purchase Agreement dated August 1, 1998. EME guaranteed the obligations of EME Homer City. Due to the nature of the obligation under this indemnity provision, it is not subject to a maximum potential liability and does not have an expiration date. Payments would be triggered under this indemnity by a claim from the sellers. EME has not recorded a liability related to this indemnity.

Indemnities Provided under Asset Sale Agreements—

In connection with the sale of assets, EME has provided indemnities to the purchasers for taxes imposed with respect to operations of the asset prior to the sale, and EME or its subsidiaries have received similar indemnities from purchasers related to taxes arising from operations after the sale. EME has also provided indemnities to purchasers for items specified in each agreement (for example, specific pre-existing litigation matters and/or environmental conditions). Due to the nature of the obligations under these indemnity agreements, a maximum potential liability cannot be determined. Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. EME has not recorded a liability related to these indemnities.

Guarantee of Brooklyn Navy Yard Contractor Settlement Payments—

On March 31, 2004, EME completed the sale of 100% of the stock of Mission Energy New York, Inc., which holds a fifty percent partnership interest in Brooklyn Navy Yard Cogeneration Partners, L.P. (referred to as Brooklyn Navy Yard) to BNY Power Partners LLC. Brooklyn Navy Yard

owns a 286 MW gas-fired cogeneration power plant in Brooklyn, New York. In February 1997, the construction contractor asserted general monetary claims under the turnkey agreement against Brooklyn Navy Yard. A settlement agreement was executed on January 17, 2003, and all litigation has been dismissed. EME agreed to indemnify Brooklyn Navy Yard and, in connection with the sale of EME's interest in Brooklyn Navy Yard, BNY Power Partners for any payments due under this settlement agreement, which are scheduled through 2006. At March 31, 2004, EME recorded a liability of $10 million related to this indemnity.

Guarantee of 50% of TM Star Fuel Supply Obligations—

TM Star was formed for the limited purpose of selling natural gas to March Point Cogeneration Company, an affiliate through common ownership, under a fuel supply agreement that extends through December 31, 2011. TM Star had entered into fuel purchase contracts with unrelated third parties to meet a portion of the obligations under the fuel supply agreement. EME had guaranteed 50% of TM Star's obligation under the fuel supply agreement to March Point Cogeneration Company. Due to the nature of the obligation under this guarantee, a maximum potential liability could not be determined. TM Star met its obligations to March Point Cogeneration Company, and, accordingly, no claims against this guarantee were made. TM Star was merged into March Point Cogeneration Company effective as of January 16, 2004, and this guarantee terminated by operation of law as of that date.

Capacity Indemnification Agreements—

EME has guaranteed, jointly and severally with Texaco Inc., the obligations of March Point Cogeneration Company under its project power sales agreements to repay capacity payments to the project's power purchaser in the event that the power sales agreements terminate, March Point Cogeneration Company abandons the project, or the project fails to return to normal operations within a reasonable time after a complete or partial shutdown, during the term of the power contracts. In addition, subsidiaries of EME have guaranteed the obligations of Kern River Cogeneration Company and Sycamore Cogeneration Company under their project power sales agreements to repay capacity payments to the projects' power purchaser in the event that the projects unilaterally terminate their performance or reduce their electric power producing capability during the term of the power contracts. The obligations under the indemnification agreements as of March 31, 2004, if payment were required, would be $172 million. EME has no reason to believe that any of these projects will either cease operations or reduce its electric power producing capability during the term of its power contract.

Bank Indemnity under a Letter of Credit Supporting ISAB Energy's Debt Service Reserve Account—

EME agreed to indemnify its lenders under its credit facilities from amounts drawn on a $26 million letter of credit issued for the benefit of the lenders to ISAB Energy, a 49% unconsolidated affiliate, in lieu of ISAB Energy funding a debt service reserve account using additional equity contributions. Accordingly, a default under ISAB Energy's project debt could result in a draw under the letter of credit. The letter of credit is renewed each six-month period or until ISAB Energy funds the debt service account. The indemnification is subject to the maximum amount drawn under the letter of credit. EME has not recorded a liability related to this indemnity.

Subsidiary Indemnity to Central Maine Power Company for Value of Points of Delivery—

A subsidiary of EME agreed to indemnify Central Maine Power Company against decreases in the value of power deliveries by CL Eight, an unconsolidated affiliate, to Central Maine Power as a result of the implementation of a location-based pricing system in the New England Power Pool. The indemnity has the same term as a power supply agreement between Central Maine Power and CL

Eight, which runs through December 2016. It is not possible to determine potential differences in values between the various points of delivery in New England Power Pool at this time. Due to the nature of this indemnity, a maximum potential liability cannot be determined. To the extent EME's subsidiary would be required to make a payment under this indemnity, it and EME are indemnified by Peabody Energy Corporation pursuant to the 2000 Purchase and Sale Agreement for the acquisition of Citizens Power LLC. EME's subsidiary has not recorded a liability related to this indemnity.

Subsidiary Guarantees for Performance of Unconsolidated Affiliates—

A subsidiary of EME has guaranteed the obligations of an unconsolidated affiliate to make payments to a third party for power delivered under a fixed-price power sales agreement. This agreement runs through 2007. EME believes there is sufficient cash flow to pay the power suppliers, assuming timely payment by the power purchasers. Due to the nature of this indemnity, a maximum potential liability cannot be determined. To the extent EME's subsidiary would be required to make payments under the guarantee, EME's subsidiary and EME are indemnified by Peabody Energy Corporation pursuant to the 2000 Purchase and Sale Agreement for Citizens Power LLC. EME's subsidiary has not recorded a liability related to this indemnity.

Contingencies

Legal Developments Affecting Sunrise Power Company

Sunrise Power Company, in which EME's wholly owned subsidiary owns a 50% interest, sells all its output to the California Department of Water Resources. On May 15, 2002, Sunrise Power Company was served with a complaint filed in the Superior Court of the State of California, City and County of San Francisco, by James M. Millar, "individually, and on behalf of the general public and as a representative taxpayer suit" against sellers of long-term power to the California Department of Water Resources, including Sunrise Power Company. The lawsuit alleges that the defendants, including Sunrise Power Company, engaged in unfair and fraudulent business practices by knowingly taking advantage of a manipulated power market to obtain unfair contract terms. The lawsuit seeks to enjoin enforcement of the "unfair and oppressive terms and conditions" in the contracts, as well as restitution by the defendants of excessive monies obtained by the defendants. Plaintiffs in several other class action lawsuits pending in Northern California have filed petitions seeking to have the Millar lawsuit consolidated with those lawsuits. The defendants in the Millar lawsuit and other class action suits removed all the lawsuits to the U.S. District Court, Northern District of California, and filed a motion to stay all proceedings pending final resolution of the jurisdictional issue. On July 9, 2003, Judge Whaley of the U.S. District Court concluded the federal court lacked jurisdiction and remanded the case to the originating San Francisco Superior Court. Defendants, including Sunrise Power Company, have stipulated to respond to the complaint thirty days after it is assigned to a specific court of the San Francisco Superior Court. In December 2003, James Millar filed a First Amended Class Action and Representative Action Complaint which contains allegations similar to those in the earlier complaint but also alleges a class action. One of the newly added parties has again removed the lawsuit to federal court. After various procedural motions, the case has been assigned to Judge Whaley in San Diego, who will hear plaintiff's motion to remand and any motions to dismiss later this year. EME believes that the outcome of this litigation will not have a material adverse effect on its consolidated financial position or results of operations.

Regulatory Developments Affecting Doga Project

On August 4, 2002, a new Electricity Market License Regulation was implemented in Turkey. The new regulation contains, among other things, a requirement that each generator obtain a generation

license. Historically, Doga's Implementation Contract has been its sole license. The new regulation contemplates an initial fixed license fee and a yearly license fee based on the amount of energy generated, which will increase the project's costs of operation by an undetermined amount. In addition, the new regulation allows the possibility of insertion of provisions in a new license which may be different from those in the Implementation Contract.

The effect of the new regulation is still undetermined, as the new license provisions have not been specified. Doga complied with the new regulation's stipulation to apply for a new generation license by June 2, 2003. The license has not been issued yet. If actions or inactions undertaken pursuant to the new regulation directly or indirectly impede, hinder, prevent or delay the operation of the Doga facility or increase Doga's cost of performing its obligations under its project documents, this may constitute a "risk event" under Doga's Implementation Contract. A risk event may permit Doga to request an increase in its tariff or, under certain circumstances, request a buyout of the project by the Ministry of Energy and Natural Resources.

On October 3, 2002, Doga (and several other power producers in Turkey acting independently) filed a lawsuit in the Danistay, Turkey's high administrative court, against the Energy Market Regulatory Authority seeking both an injunction and permanent invalidation of certain provisions of the new regulation on the grounds of the illegality and unconstitutionality of any new license requirement that does not take into account the vested rights of a company operating pursuant to previously agreed terms of the Implementation Contract.

On May 12, 2003, the Danistay rejected Doga's request for injunctive relief (as well as those of the other power companies with similar claims). On July 10, 2003, Doga appealed the Danistay's ruling. Doga's appeal was heard by the General Council of the Administrative Chambers of Danistay on October 10, 2003 and was rejected. There are no further rights of appeal against the decision regarding the injunction. The Danistay will continue to hear the merits of Doga's lawsuit. A decision is expected to be rendered late in 2004.

Supply Contract from NRG Power Marketing

EMMT is obligated to provide electricity to an unconsolidated 25%-owned affiliate, CL Power Sales Eight, L.L.C., referred to as CL Eight. EMMT has entered into purchase agreements for a portion of the volumes due under the supply contract. Current market prices exceed the price which CL Eight is required to pay to EMMT for the electricity delivered. To the extent EMMT suffers losses as a result of being required to resell such electricity for less than it paid to purchase it, EMMT and EME are indemnified by Peabody Energy Corporation pursuant to the 2000 Purchase and Sale Agreement for the acquisition of Citizens Power LLC.

Income Taxes

EME is, and may in the future be, under examination by tax authorities in varying tax jurisdictions with respect to positions it takes in connection with the filing of its 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 EME's opinion, it is unlikely that the resolution of any such matters will have a material adverse effect upon EME's financial condition or results of operations.

Litigation

EME experiences other routine litigation in the normal course of its business. None of such pending routine litigation is expected to have a material adverse effect on EME's consolidated financial position or results of operations.

Environmental Matters and Regulations

EME is 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. EME believes that it is in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect its financial position or results of operation. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations, future proceedings that may be initiated by environmental authorities, and settlements agreed to by other companies could affect the costs and the manner in which EME conducts its business and could cause it to make substantial additional capital expenditures. There is no assurance that EME would be able to recover these increased costs from its customers or that EME's financial position and results of operations would not be materially adversely affected.

Typically, environmental laws and regulations require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction, operation or modification of a project or generating facility. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed project as well as require extensive modifications to existing projects, which may involve significant capital expenditures. If EME fails to comply with applicable environmental laws, it may be subject to injunctive relief or penalties and fines imposed by regulatory authorities.

Note 9. Business Segments

EME operates predominantly in one line of business, electric power generation, with reportable segments organized by geographic region: Americas, Asia Pacific and Europe. EME's plants are located in different geographic areas, which mitigate somewhat the effects of regional markets, regional

economic downturns or unusual weather conditions. These regions take advantage of the increasing globalization of the independent power market.

Three Months Ended		Americas		Asia Pacific			Europe			Corporate/ Other			Total
March 31, 2004
Operating revenues from consolidated subsidiaries		$	359	$	261		$	161		$	—		$	781
Net gains (losses) from price risk management and energy trading			1		(1	)		2			—			2

	Total operating revenues	$	360	$	260		$	163		$	—		$	783

Income (loss) from continuing operations before income taxes and minority interest		$	83	$	65		$	38		$	(113	)	$	73

March 31, 2003
Operating revenues from consolidated subsidiaries		$	367	$	193		$	132		$	(2	)	$	690
Net gains (losses) from price risk management and energy trading			4		(6	)		(5	)		—			(7	)

	Total operating revenues	$	371	$	187		$	127		$	(2	)	$	683

Income (loss) from continuing operations before income taxes and minority interest		$	39	$	16		$	24		$	(95	)	$	(16	)

Note 10. Investments in Unconsolidated Affiliates

The following table presents summarized financial information of the significant subsidiary investments in unconsolidated affiliates accounted for by the equity method. The significant subsidiary investments include the California Power Group, Watson Cogeneration Company, PT Paiton Energy and ISAB Energy S.r.l. The California Power Group (not a legal entity) consists of Kern River Cogeneration Company, Sycamore Cogeneration Company, Coalinga Cogeneration Company, Mid-Set Cogeneration Company, Salinas River Cogeneration Company, Sargent Canyon Cogeneration Company, and Sunrise Power Company, LLC. For the three months ended March 31, 2003, the significant subsidiary investments also included Four Star Oil & Gas Company. EME sold 100% of its stock of Edison Mission Energy Oil & Gas, which in turn holds minority interests in Four Star Oil & Gas, on January 7, 2004. Therefore, Four Star Oil & Gas is not included in the balances for the three months ended March 31, 2004.

	Three Months Ended March 31,
	2004		2003
Operating revenues	$	517	$	560
Operating income		134		161
Income before accounting change		82		122
Net income		82		104

Note 11. Supplemental Statements of Cash Flows Information

		Three Months Ended March 31,
		2004		2003
Cash paid
	Interest (net of amount capitalized)	$	133	$	111
	Income taxes (receipts)		26		(2	)
	Cash payments under plant operating leases		57		58
Details of assets acquired
	Fair value of assets acquired	$	—	$	333
	Liabilities assumed		—		58

	Net cash paid for acquisitions	$	—	$	275

Non-cash activities from de-consolidation of variable interest entities
	Assets	$	220	$	—
	Liabilities		254		—

Note 12. Stock-based Compensation

Edison International has three stock-based employee compensation plans, which are described more fully in Note 16—Stock Compensation Plans, included in EME's annual report on Form 10-K for the year ended December 31, 2003. EME accounts for those plans using the intrinsic value method. Upon grant, no stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income if EME had used the fair value accounting method.

	Three Months Ended March 31,
	2004			2003
Net income (loss), as reported	$	31		$	(17	)
Add: stock-based compensation expense included in reported net income (loss), net of related tax effects		3			1
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(1	)		(1	)

Pro forma net income (loss)	$	33		$	(17	)

Note 13. Cumulative Effect of Change in Accounting Principle

Effective January 1, 2003, EME adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. As of

January 1, 2003, EME recorded a $9 million, after tax, decrease to net income as the cumulative effect of the adoption of SFAS No. 143.

Note 14. New Accounting Pronouncements

Statement of Financial Accounting Standards Interpretation No. 46

In December 2003, the FASB re-issued Statement of Financial Accounting Standards Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46R). The primary objective of the interpretation is to provide guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights; such entities are known as variable interest entities. Under this interpretation, the primary beneficiary is the variable interest holder that absorbs a majority of expected losses; or if no variable interest holder meets this criteria, then it is the variable interest holder that receives a majority of the expected residual returns. The primary beneficiary is required to consolidate the variable interest entity unless specific exceptions or exclusions are met. This interpretation applies to variable interest entities created after January 31, 2003, and applies to variable interest entities in which EME holds a variable interest that it acquired before February 1, 2003. This interpretation is effective for special purpose entities as of December 31, 2003 and for all other entities as of March 31, 2004.

Variable Interest Entities

EME completed a review of the application of FIN 46R to its subsidiaries and affiliates and concluded that it has variable interests in variable interest entities as defined in this interpretation. The following table summarizes the variable interest entities in which EME has a significant variable interest:

Variable Interest Entity	Location	Investment at March 31, 2004		Ownership Interest at March 31, 2004	Description
Paiton	East Java, Indonesia	$	580	45%	Coal-fired facility
EcoEléctrica	Peñuelas, Puerto Rico		275	50%	Liquefied natural gas cogeneration facility
Watson	Carson, CA		91	49%	Cogeneration facility
Sunrise	Fellows, CA		84	50%	Gas-fired facility
ISAB	Sicily, Italy		84	49%	Gasification facility
CBK	Manila, Philippines		74	50%	Pumped-storage hydro electric facility
Sycamore	Bakersfield, CA		53	50%	Cogeneration facility
Midway-Sunset	Fellows, CA		52	50%	Cogeneration facility
Kern River	Bakersfield, CA		42	50%	Cogeneration facility
IVPC4 Srl	Italy		39	50%	Wind facilities
Doga	Esenyurt, Turkey		24	80%	Cogeneration facility
Tri Energy	Bangkok, Thailand		19	25%	Gas-fired facility

EME has determined that it is not the primary beneficiary in these entities and accordingly, EME will account for its variable interests on the equity method. EME's maximum exposure to loss in these variable interest entities will continue to be generally limited to its investment in these entities.

Deconsolidation of Variable Interest Entities

In accordance with FIN 46R, EME determined that it was not the primary beneficiary of the following two projects due to the provisions of long-term power contracts which are variable interests. Accordingly, EME deconsolidated these projects at March 31, 2004:

•: Doga Project—Based on current guidance related to FIN 46R, the power sales contract with Türkiye Elektrik Dagitim Anonim Sirketi ("TEDAS") is considered a variable interest due to the energy price provisions that absorb the risk of changes in operating costs and the transfer of ownership of the cogeneration plant to TEDAS at the end of the power sales contract. After considering the power sales contract a variable interest, EME determined that it was not the primary beneficiary under FIN 46R and accordingly, deconsolidated this project on March 31, 2004. EME will record its interest in the Doga project on the equity method beginning April 1, 2004.
•: Kwinana Project—Based on current guidance related to FIN 46R, the power sales contracts with British Petroleum Kwinana Refinery and Western Power are considered variable interests due to the energy price provisions that absorb the risk of changes in operating costs. After considering the power sales contracts as variable interests, EME determined that it was not the primary beneficiary under FIN 46R and accordingly, deconsolidated this project on March 31, 2004. EME will record its interest in the Kwinana project on the equity method beginning April 1, 2004. EME's interest in the Kwinana project is not a significant variable interest and, therefore, is not included in the table above.

Note 15. Subsequent Event

EME Financing Developments

On April 27, 2004, EME replaced its $145 million corporate credit facility with a new $98 million secured credit facility. This credit facility matures on April 26, 2007. Loans made under this credit facility bear interest at LIBOR plus 3.50% per annum. As security for its obligations under this credit facility, EME pledged its ownership interests in the holding companies through which it owns its interests in the Illinois Plants, the Homer City facilities, the Westside projects and the Sunrise project. EME also granted a security interest in an account into which all distributions received by it from the Big 4 projects will be deposited. EME will be free to use these proceeds unless and until an event of default occurs under its corporate credit facility.

In addition, EME completed the repayment of the remaining $28 million due under the Coal and Capex facility (guaranteed by EME) in April 2004. Accordingly, this credit agreement has been terminated and EME no longer has a contingent liability related to this credit agreement.

Midwest Generation Financing Developments

On April 27, 2004, Midwest Generation completed a private offering of $1 billion aggregate principal amount of its 8.75% second priority senior secured notes due 2034. Holders of the notes may require Midwest Generation to repurchase the notes on May 1, 2014 and on each one-year anniversary thereafter at 100% of their principal amount, plus accrued and unpaid interest. Concurrently with the issuance of the notes, Midwest Generation borrowed $700 million under a new first priority senior secured institutional term loan facility. The term loans mature on April 27, 2011 and bear interest at LIBOR plus 3.25% per annum. Midwest Generation has agreed to repay $1,750,000 of the term loans on each quarterly payment date. Midwest Generation also entered into a new three-year $200 million working capital facility that replaced a prior facility. The new working capital facility also provides for

the issuance of letters of credit. Midwest Generation used the proceeds of the notes issuance and the term loans to refinance $693 million of indebtedness (plus accrued interest and fees) owed by its direct parent, Edison Mission Midwest Holdings Co., which was guaranteed by Midwest Generation and was due in December of this year, and to make termination payments under the Collins Station lease in the amount of approximately $960 million, including accrued interest and fees.

Midwest Generation is permitted to use the new working capital facility and cash on hand to provide credit support for forward contracts with third party counterparties entered into by Edison Mission Marketing & Trading for capacity and energy generated from the Illinois Plants. Utilization of this credit facility in support of such forward contracts is expected to provide additional liquidity support for implementation of EME's contracting strategy for the Illinois Plants.

The term loan and working capital facility share a first priority lien and the senior secured notes have a second priority lien in a collateral package which consists of, among other things, substantially all of the coal-fired generating plants owned by Midwest Generation and the assets relating to those plants, as well as the equity interests of Midwest Generation and its parent company and the intercompany notes entered into by EME and Midwest Generation in connection with the Powerton-Joliet sale-leaseback transaction.

Termination of the Collins Station Lease

On April 27, 2004, Midwest Generation terminated the Collins Station lease through a negotiated transaction with the lease equity investor. Midwest Generation made a lease termination payment of approximately $960 million, including accrued interest and fees. This amount repaid the $774 million of lease debt outstanding, accrued interest and fees, and the amount owing to the lease equity investor upon an early termination of the lease. Midwest Generation received title to the Collins Station as part of the transaction and, subject to its power purchase agreement with Exelon Generation, plans to abandon the Collins Station or sell it to a third party. EME expects to record a pretax loss of approximately $1 billion (approximately $620 million after tax) during the second quarter ended June 30, 2004, due to termination of the lease and the planned abandonment or sale of the asset. Prior to termination of the lease, EME reached an agreement with the lease equity investors in the Powerton-Joliet leases to waive the net worth covenant included in the EME lease equity guarantee provided to them and, accordingly, the reduction in shareholder equity resulting from the loss on termination of the Collins Station lease did not result in a default under this guarantee.

If termination of the Collins Station lease is followed by abandonment or sale to a third party as currently planned, EME anticipates that the termination payment would result in a substantial income tax deduction, thereby providing additional tax-allocation payments through the income tax-allocation agreement when such loss can be used by Edison International in its consolidated and combined income tax returns.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements. These statements are based on Edison Mission Energy's (EME's) knowledge of present facts, current expectations about future events and assumptions about future developments. Forward-looking statements are not guarantees of performance; they are subject to risks, uncertainties and assumptions that could cause actual future activities and results of operations to be materially different from those set forth in this discussion. Important factors that could cause actual results to differ include risks set forth in "Market Risk Exposures" below, and under "Risks Related to the Business" in the MD&A included in Item 7 of EME's annual report on Form 10-K for the year ended December 31, 2003.

The MD&A of this Form 10-Q discusses material changes in the results of operations, financial condition and other developments of EME since December 31, 2003, and as compared to the three months ended March 31, 2003. This discussion presumes that the reader has read or has access to the MD&A included in Item 7 of EME's annual report on Form 10-K for the year ended December 31, 2003.

The MD&A presents a discussion of management's focus during the first quarter of 2004, and a discussion of EME's financial results and analysis of its financial condition. It is presented in four major sections:

		Page
Management's Overview; Critical Accounting Policies and Estimates		21
Results of Operations		23
Liquidity and Capital Resources		37
Market Risk Exposures		48

MANAGEMENT'S OVERVIEW; CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Overview

Introduction

During the first quarter of 2004, management's focus has been particularly committed to the refinancing of the Illinois Plants and the sale of its international assets.

Completion of Midwest Generation Refinancing

On April 27, 2004, Midwest Generation completed the issuance of $1 billion aggregate principal amount of its 8.75% second priority senior secured notes and entered into a new credit agreement, which includes a $700 million, first priority senior secured term loan facility and a $200 million, first priority senior secured working capital facility. Proceeds from these transactions were used to refinance $693 million of indebtedness (plus accrued interest and fees) and to make termination payments under the Collins Station lease in the amount of approximately $960 million, including accrued interest and fees. The new working capital facility replaced an existing working capital facility. Completion of these financings was a major goal of 2004. See "Liquidity and Capital Resources—Key Financing Developments—Midwest Generation Financing Developments" for further details related to these financings. Also, see "Liquidity and Capital Resources—Termination of the Collins Station Lease" for details related to termination of the Collins Station lease.

EME Financing Developments

On April 27, 2004, EME replaced its $145 million corporate credit facility with a new three-year $98 million secured credit facility. In addition, EME repaid the remaining $28 million due under the Coal and Capex facility (guaranteed by EME) in April 2004. Accordingly, this credit agreement has been terminated and EME no longer has a contingent liability related to this credit agreement.

Selling Some or All of EME's International Operations

As indicated in EME's annual report on Form 10-K, EME has engaged investment bankers to market for sale its international project portfolio. The marketing efforts continue to progress, and an announcement will be made once one or more buyers are selected and successful negotiations are concluded.

Overview of EME's First Quarter Financial Performance

EME's financial performance in the first quarter of 2004 improved over the first quarter of 2003 with a number of important items affecting performance:

•: Power prices for merchant sales from the Illinois Plants improved over 2003 driven largely by higher natural gas prices. During the first quarter of 2004, the average realized price of power sold from the Illinois merchant plants from coal-fired generation was $28.90 compared to $25.48 during the first quarter of 2003.
•: The availability factor of the Illinois Plants related to coal-fired generation was 82.5% during the first quarter of 2004 compared to 74.4% during the first quarter of 2003. EME's Homer City facilities had an unplanned outage related to Unit 1, but maintenance plans were adjusted to bring forward into the first quarter an outage scheduled for May 2004, thereby partially mitigating the impact for the year.
•: EME's international operations were positively affected by strengthening foreign exchange rates.
•: The 2004 results included a pre-tax gain of $47 million from the sale of the company owning EME's interests in Four Star Oil & Gas Company, partially offset by a $4 million loss on the sale of the company holding EME's interest in the Brooklyn Navy Yard project.

Elimination of Restrictions on Dividends to MEHC

EME amended its certificate of incorporation and bylaws to eliminate the so-called "ring-fencing" provisions that were implemented in early 2001 during the California energy crisis. The ring fencing provisions were implemented to protect EME's credit rating from the negative events then affecting Edison International and its subsidiary, Southern California Edison. Management believes that these provisions, which included dividend restrictions and a requirement to maintain an independent director, are no longer necessary.

EME expects to make a dividend of approximately $75 million to its parent, Mission Energy Holding Company, or MEHC, during the next three months in order to provide funds for MEHC to pay its obligations with respect to the exercise by its term loan lenders of a $100 million put option.

Expansion of PJM in Illinois

The Illinois Plants are located within the service territory of Exelon Generation's affiliate, Commonwealth Edison, which on April 27, 2004 was granted approval by the Federal Energy Regulatory Commission, or the FERC, to join the PJM System effective May 1, 2004.

On March 19, 2004, in a separate but related matter, the FERC issued an order having the effect of postponing to December 1, 2004 the effective date for elimination of regional through and out rates in the region encompassed by PJM (as expanded by the addition of Commonwealth Edison and as to be further expanded by the addition of AEP) and the Midwest Independent System Operation, or MISO. The effect of this order is that the so-called rate pancaking was not eliminated prior to Commonwealth Edison's integration into PJM, nor will it be eliminated prior to AEP's scheduled date for integration into PJM. Rate pancaking occurs when energy must move through multiple, separately priced transmission systems to travel from its point of production to its point of delivery, and each transmission owner along the line charges separately for the use of its system. Accordingly, EME will continue to have to pay transmission charges for power sold for delivery outside of Commonwealth Edison's former control area, now known under PJM as PJM's Northern Illinois Control Area, or NICA. The FERC has included in its order a strong statement that the existing through and out rates must be eliminated no later than December 1, 2004. See "Market Risk Exposures—Commodity Price Risks—Americas—Illinois Plants."

EME is continuing to monitor the activities at the FERC related to the expansion of PJM in Illinois and advocate regulatory positions that promote efficient and fair markets in which the Illinois Plants compete.

Dispositions of Investments in Energy Plants

Critical Accounting Policies and Estimates

For a discussion of EME's critical accounting policies, refer to "Critical Accounting Policies and Estimates" on page 47 of EME's annual report on Form 10-K for the year ended December 31, 2003.

RESULTS OF OPERATIONS

Introduction

This section discusses operating results for the first quarters of 2004 and 2003, first from the point of view of EME on a consolidated basis and thereafter with respect to each of the three regional

segments. This section also discusses the effect of new accounting pronouncements on EME's consolidated financial statements. It is organized under the following headings:

		Page
Consolidated Operating Results		24
Regional Operating Results		27
New Accounting Pronouncements		35

Consolidated Operating Results

Net Income (Loss) Summary

Net income (loss) is comprised of the following components:

	Three Months Ended March 31,
	2004		2003
	(in millions)
Income (loss) from continuing operations	$	31	$	(8	)
Cumulative changes in accounting		—		(9	)

Net Income (Loss)	$	31	$	(17	)

EME's income from continuing operations for the first quarter of 2004 was $31 million compared to a loss from continuing operations of $8 million for the first quarter of 2003. The 2004 increase in income from continuing operations from 2003 was primarily due to a $29 million, after tax, gain on the sale of EME's interest in Four Star Oil & Gas, increased profitability at EME's Illinois Plants from higher energy margins, lower interest and operating expenses and improved operating performance from EME's First Hydro plant and the Loy Yang B plant. Partially offsetting these items were higher debt restructuring costs and lower earnings from EME's Homer City facility due to an outage. In addition, the first quarter 2003 earnings included earnings from EME's investment in Four Star Oil & Gas sold on January 7, 2004.

EME's 2003 loss from a change in accounting principle results from the adoption of a new accounting standard for asset retirement obligations. See "—Cumulative Effect of Change in Accounting Principle" for further discussion of this change in accounting.

Operating Revenues

Operating revenues increased 15% for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase was primarily due to increased electric revenues from Contact Energy mostly due to increased retail revenues and an increase in the value of the New Zealand dollar compared to the U.S. dollar. In addition, operating revenues increased due to higher electric revenues from the First Hydro plant primarily due to higher ancillary service revenue and an increase in the average exchange rate of the British pound compared to the U.S. dollar, and higher energy revenues from the Illinois Plants. Partially offsetting these increases were lower electric revenues from the Homer City facilities due to lower generation.

Net gains (losses) from price risk management and energy trading activities are comprised of:

	Three Months Ended March 31,
	2004		2003
	(in millions)
Price risk management	$	1	$	(22	)
Energy trading		1		15

Net gains (losses)	$	2	$	(7	)

Net gains and (losses) from price risk management activities result from recording derivatives at fair value under Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). Included in net gains (losses) from price risk management were:

•: $4 million and $(10) million for the first quarters of 2004 and 2003, respectively, related to the ineffective portion of Homer City and Illinois Plants forward electricity contracts, which are derivatives that qualify as cash flow hedges under SFAS No. 133.
•: $(3) million and $(6) million for the first quarters of 2004 and 2003, respectively, related to the change in the market value of electricity and financial contracts entered into by Contact Energy.
•: $2 million and $(5) million for the first quarters of 2004 and 2003, respectively, related to realized gains (losses) and the change in the market value of commodity contracts entered into by the First Hydro plant for the purchase and sale of electricity that is recorded at fair value under SFAS No. 133, with changes in fair value recorded through the income statement.

Under SFAS No. 133, the portion of a cash flow hedge that does not offset the change in value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings. EME recorded a net gain (loss) of approximately $5 million and $(8) million during the first quarters of 2004 and 2003, respectively, representing the amount of the ineffective portion of the cash flow hedges. The ineffective gains and losses during the first quarters of 2004 and 2003 from Homer City were primarily attributable to changes in the difference between energy prices at PJM West Hub (the delivery point under forward contracts) and the energy prices at the delivery point where power generated by the Homer City facilities is delivered into the transmission system (referred to as the Homer City busbar). See "Market Risk Exposures—Commodity Price Risk—Americas" for more information regarding forward market prices.

The net gains from energy trading activities were primarily the result of net gains from transmission congestion contracts and other power contracts in markets in which EME has power plants. Gains from energy trading activities decreased during the first three months of 2004 primarily due to less congestion in the PJM and New York Independent System Operator (NYISO) markets.

EME's third quarter electric revenues are generally materially higher than revenues related to other quarters of the year because warmer weather during the summer months results in higher electric revenues from the Homer City facilities and the Illinois Plants. By contrast, the First Hydro plants generally have higher electric revenues during their winter months.

Operating Expenses

Fuel costs increased 6% for the first quarter of 2004, compared to the first quarter of 2003. Fuel costs in 2004 increased partially due to increased fuel costs from Contact Energy primarily due to an

increase in the value of the New Zealand dollar compared to the U.S. dollar and increased purchased power costs from the First Hydro plant.

Plant operations and transmission costs increased $15 million for the first quarter of 2004, compared to the first quarter of 2003. Transmission costs were $69 million and $55 million for the first quarters of 2004 and 2003, respectively. The 2004 increase in transmission costs was primarily due to higher retail sales generated by Contact Energy.

Administrative and general expenses increased $6 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase was primarily due to $5 million of costs incurred in 2004, compared to $1 million in 2003, to implement EME's restructuring plan described under "Management's Overview."

Other Income (Expense)

Interest and other income decreased $2 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 decrease was primarily due to lower foreign exchange gains from EME's intercompany loans.

Gains on sale of assets were $43 million in 2004 and none in 2003. Gains on sale of assets in 2004 consisted of a $47 million gain related to the sale of EME's stock of Edison Mission Energy Oil & Gas and a $4 million loss related to the sale of EME's interest in Brooklyn Navy Yard Cogeneration Partners L.P. See "Management's Overview—Dispositions of Investments in Energy Plants" for more information related to these dispositions.

Interest expense increased $19 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase was due to higher levels of borrowings at Contact Energy and a change in classification of dividend payments on preferred securities recorded as interest expense commencing July 1, 2003. In addition, interest expense increased due to the issuance of the $800 million secured loan received by EME's subsidiary, Mission Energy Holdings International, in December 2003 which was mostly offset by lower interest expense at Midwest Generation due to a reduction of approximately $1.0 billion in debt partially from the proceeds of such transaction.

Income Taxes

EME's annual effective tax rate (excluding state tax reallocation benefits and the income tax provision related to the sale of Four Star Oil & Gas) was 41% in each of the first quarters of 2004 and 2003. During the first three months of 2004 and 2003, EME recorded additional state tax benefits, net of federal income taxes, of $2 million and $5 million, respectively, as a result of participation in a tax-allocation agreement with Edison International. During the first quarter of 2004, EME recorded a tax provision of $18 million relating to the sale of 100% of its stock in Edison Mission Energy Oil & Gas, which in turn holds interests in Four Star Oil & Gas.

Minority Interest

Minority interest expense increased $8 million for the first quarter of 2004, compared to the first quarter of 2003. Minority interest primarily relates to the 49% ownership of Contact Energy by the public in New Zealand.

Cumulative Effect of Change in Accounting Principle

Statement of Financial Accounting Standards No. 143

Regional Operating Results

Overview

EME operates predominantly in one line of business, electric power generation, organized by three geographic regions: Americas, Asia Pacific and Europe. Operating revenues are derived from EME's majority-owned domestic and international entities. Intercompany interest expense and income between EME and its consolidated subsidiaries have been eliminated in the following project results, except as described below with respect to loans provided to EME from a wholly owned subsidiary, Midwest Generation. Equity in income from unconsolidated affiliates relates to energy projects where EME's 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 EME has a significant influence but in which it does not have a controlling interest. With respect to entities accounted for under the equity method, EME recognizes its proportional share of the income or loss of such entities.

EME's results of operations for the Doga and Kwinana projects are consolidated for the three months ended March 31, 2004 and 2003. As described under "—New Accounting Pronouncements," EME will record these projects on the equity method of accounting beginning April 1, 2004 and accordingly, future results of operations will only reflect EME's proportional share of the income or loss of such entities.

EME uses the words "earnings" or "losses" in this section to describe income or loss from continuing operations before income taxes and minority interest.

Americas

General

The following section provides a summary of the Americas region's operating results for the first quarters of 2004 and 2003 together with discussions of the contributions by specific projects and of other significant factors affecting these results.

		Three Months Ended March 31,
		2004			2003
		(in millions)
Operating Revenues from Consolidated Subsidiaries
	Illinois Plants	$	235		$	212
	Homer City		118			149
	Other		6			6

		$	359		$	367

Income (Loss) before Taxes and Minority Interest (Earnings/Losses)
	*Consolidated operations*
	Illinois Plants	$	11		$	(42	)
	Homer City		19			46
	Other		(2	)		13
	*Unconsolidated affiliates*
	Big 4 projects		12			17
	Four Star Oil & Gas		47			15
	Sunrise		(4	)		(1	)
	March Point		6			3
	Other		5			(2	)
	*Regional overhead*		(11	)		(10	)

		$	83		$	39

Illinois Plants

			Three Months Ended March 31,
			2004		2003
Statistics – Coal-Fired Generation
	Generation (in GWhr):
		Power purchase agreement		3,022		3,600
		Merchant		4,746		3,204

		Total coal-fired generation		7,768		6,804

	Equivalent Availability(1)			82.5%		74.4%
	Forced outage rate(2)			5.9%		6.7%
	Average realized energy price/MWhr:
		Power purchase agreement	$	17.64	$	18.02
		Merchant	$	28.90	$	25.48

		Total coal-fired generation	$	24.52	$	21.53

Capacity revenues (in millions)			$	26	$	32

(1): The availability factor is determined by the number of megawatt-hours the coal plants are available to generate electricity divided by the product of the capacity of the coal plants (in megawatts) and the number of hours in the period. Equivalent availability captures the impact of the unit's inability to achieve full load, referred to as a derating, as well as outages which result in a complete unit shut down. The coal plants are not available during periods of planned and unplanned maintenance.
(2): Midwest Generation generally refers to unplanned maintenance as a forced outage.

Operating revenues from the Illinois Plants increased $23 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase was primarily due to higher energy revenues due to increased merchant generation at the coal plants released from their power purchase agreement with Exelon Generation and higher merchant energy prices. This increase was partially offset by lower capacity revenues resulting from the reduction in megawatts contracted under the power purchase agreements. The merchant generation currently earns minimal capacity revenues. For more information on the power purchase agreements and wholesale energy markets, see "Market Risk Exposures—Commodity Price Risk—Americas—Illinois Plants."

Earnings from the Illinois Plants increased $53 million for the first quarter of 2004, compared to the first quarter of 2003, due to the following factors:

•: higher revenues as described above;
•: lower depreciation expense due to the elimination of depreciation and amortization on the portion of the eight small peaking plants that were impaired in June 2003; and
•: lower interest expense primarily due to payment of debt during the fourth quarter of 2003.

The earnings (losses) of the Illinois Plants included interest income related to loans to EME of $28 million for each of the first quarters of 2004 and 2003. In August 2000, Midwest Generation, which owns or leases the Illinois Plants, entered into a sale-leaseback transaction of the Powerton-Joliet facilities. The proceeds from the sale of these facilities were loaned to EME, which also provided a

guarantee of the related lease obligations of Midwest Generation. The Powerton-Joliet sale-leaseback is recorded as an operating lease for accounting purposes.

Losses from price risk management activities were $2 million for each of the first quarters of 2004 and 2003. The losses primarily reflect the ineffective portion of forward contracts which are derivatives that qualify as cash flow hedges under SFAS No. 133. See "—Consolidated Operating Results—Operating Revenues" for further information.

Homer City

		Three Months Ended March 31,
		2004		2003
Statistics
	Generation (in GWhr)		3,015		3,620
	Availability(1)		73.6%		88.9%
	Forced outage rate(2)		14.5%		6.7%
	Average realized energy price/MWhr	$	36.63	$	39.82
	Capacity revenues (in millions)	$	8	$	3

(1): The availability factor is determined by the number of megawatt-hours the coal plants are available to generate electricity divided by the product of the capacity of the coal plants (in megawatts) and the number of hours in the period. The coal plants are not available during periods of planned and unplanned maintenance.
(2): Homer City generally refers to unplanned maintenance as a forced outage.

Operating revenues from Homer City decreased $31 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 decrease primarily resulted from lower electric revenues from the Homer City facilities due to lower generation from an unplanned outage at Unit 1 in February 2004.

Earnings from Homer City decreased $27 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 decrease in earnings is due to lower revenues as described above and higher maintenance costs from the outage during the first quarter of 2004. See "Market Risk Exposures—Commodity Price Risk—Americas—Homer City Facilities."

Gains (losses) from price risk management activities were $2 million and $(8) million for the first quarters of 2004 and 2003, respectively. The gains (losses) primarily represent the ineffective portion of forward contracts which are derivatives that qualify as cash flow hedges under SFAS No. 133. See "—Consolidated Operating Results—Operating Revenues" for further discussion.

Big 4 Projects

Earnings from the Big 4 projects decreased $5 million for the first quarter of 2004, compared to the first quarter of 2003. The change in earnings was largely due to planned outages at the Sycamore Cogeneration plant and the Watson Cogeneration plant in March 2004. The earnings from the Big 4 projects included interest expense from Edison Mission Energy Funding of $4 million for each of the first quarters of 2004 and 2003.

Four Star Oil & Gas

EME's share of earnings from Four Star Oil & Gas Company was $15 million for the first quarter of 2003 with no earnings recorded in 2004 from its ownership interest due to the sale of the project. The 2004 earnings represent the gain on sale of 100% of EME's stock of Edison Mission Energy Oil & Gas, which in turn holds minority interests in Four Star Oil & Gas, on January 7, 2004. See "Management's Overview—Dispositions of Investments in Energy Plants."

Sunrise

Losses from the Sunrise project increased $3 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in losses primarily resulted from higher interest expense due to the completion of the Sunrise project financing in September 2003.

March Point

Earnings from March Point increased $3 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in earnings was primarily due to the ineffective portion of fuel contracts entered into by March Point, which are derivatives that qualified as cash flow hedges under SFAS No. 133.

Other

Net earnings from other projects in the Americas region (consolidated subsidiaries and unconsolidated affiliates) decreased $8 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 decrease was primarily due to lower gains from energy trading activities partially offset by higher earnings from the EcoEléctrica project, mostly because of higher operating revenues in 2004 over 2003 resulting from plant outages from November 2002 through February 2003.

Seasonal Disclosure

EME's third quarter equity in income from its domestic energy projects is materially higher than equity in income related to other quarters of the year due to warmer weather during the summer months and because a number of EME's domestic energy projects, located on the West Coast, have power sales contracts that provide for higher payments during the summer months.

Asia Pacific

General

The following section provides a summary of the Asia Pacific region's operating results for the first quarters of 2004 and 2003 together with discussions of the contributions by specific projects and of other significant factors affecting these results.

		Three Months Ended March 31,
		2004			2003
		(in millions)
Operating Revenues from Consolidated Subsidiaries
	Contact Energy	$	187		$	143
	Loy Yang B		55			36
	Other		19			14

		$	261		$	193

Income (Loss) before Taxes and Minority Interest (Earnings/Losses)
	*Consolidated operations*
	Contact Energy(1)	$	26		$	5
	Loy Yang B		17			3
	Other		5			3
	*Unconsolidated affiliates*
	Paiton		19			9
	Other		1			(2	)
	*Regional overhead*		(3	)		(2	)

		$	65		$	16

(1): Income before taxes of Contact Energy represents both EME's 51% ownership and the ownership of minority interest holders on a calendar year basis. The interests of minority shareholders in the after-tax earnings of Contact Energy are reflected in a separate line item in the consolidated statements of income. See "—Consolidated Operating Results—Minority Interest." Contact Energy is a public company in New Zealand and provides shareholders' financial results in accordance with New Zealand accounting standards for its fiscal year ended September 30.

Contact Energy

Operating revenues increased $44 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase was primarily due to higher electricity retail and generation revenues arising from the Taranaki combined-cycle plant purchased in March 2003 and increased number of retail customers in 2003, as well as ongoing strength in retail volumes, tariff adjustments and management of transmission constraints. In addition, there was a 23% increase in the average exchange rate of the New Zealand dollar compared to the U.S. dollar during the first quarter of 2004, compared to the first quarter of 2003.

Earnings from Contact Energy, included in the consolidated statements of income of EME as described above, increased $21 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase is primarily due to increased margins due to the factors described above related to revenues.

Loy Yang B

Operating revenues increased $19 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in operating revenues was primarily due to higher generation in the first quarter of 2004 over the same prior period resulting from a planned outage in March 2003 and a 29% increase in the average exchange rate of the Australian dollar compared to the U.S. dollar during the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase was partially offset by lower pool prices for the power sold into the wholesale energy market.

Earnings from Loy Yang B increased $14 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in earnings is due to higher electric revenues discussed above.

Paiton Energy

Earnings from Paiton Energy increased $10 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in earnings was primarily attributable to increased revenue mostly due to higher availability and an increase in EME's ownership interest (from 40% to 45%) resulting from the additional shares acquired in January 2004. In addition, earnings increased due to a decrease in Indonesian income taxes resulting from interest expense from partner subordinated loans.

Other

Operating revenues from other consolidated subsidiaries in the Asia Pacific region increased $5 million for the first quarter of 2004, compared to the first quarter of 2003. Earnings from other projects in the Asia Pacific region (consolidated subsidiaries and unconsolidated affiliates) increased $5 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in both operating revenues and earnings was primarily due to higher electric revenues from the Kwinana and Valley Power Peaker projects in Australia, principally due to an increase in the value of the Australian dollar compared to the U.S. dollar.

Europe

General

The following section provides a summary of the Europe region's operating results for the first quarters of 2004 and 2003 together with discussions of the contributions by specific projects and of other significant factors affecting these results.

		Three Months Ended March 31,
		2004			2003
		(in millions)
Operating Revenues from Consolidated Subsidiaries
	First Hydro	$	122		$	91
	Doga(1)		29			33
	Other		10			8

		$	161		$	132

Income (Loss) before Taxes and Minority Interest (Earnings/Losses)
	*Consolidated operations*
	First Hydro	$	18		$	5
	Doga		6			4
	Other		4			4
	*Unconsolidated affiliates*
	ISAB		8			11
	Other		7			4
	*Regional overhead*		(5	)		(4	)

		$	38		$	24

(1): Income before taxes of Doga represents both EME's 80% ownership and the ownership of minority interest holders on a calendar year basis. The interests of minority shareholders in the after-tax earnings of Doga are reflected in a separate line item in the consolidated statements of income. See "—Consolidated Operating Results—Minority Interest."

First Hydro

Operating revenues increased $31 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase resulted primarily from higher electric revenues from the First Hydro plant due to higher ancillary services revenues and a 15% increase in the average exchange rate of the British pound compared to the U.S. dollar during the first quarter of 2004, compared to the first quarter of 2003. The First Hydro plant is expected to provide for higher electric revenues during its winter months.

Earnings from First Hydro increased $13 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in earnings is primarily due to higher electric revenues described above and a $2 million gain from price risk management activities for the first quarter of 2004, compared to a $5 million loss from price risk management activities for the first quarter of 2003. First Hydro's gains (losses) from price risk management relate to the change in market value of commodity contracts that are recorded at fair value under SFAS No. 133, with changes in fair value recorded through the income statement.

Doga

Revenues from Doga decreased $4 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 decrease was due to lower natural gas prices. Earnings from Doga increased $2 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in earnings is primarily due to lower plant costs.

ISAB

Earnings from ISAB decreased $3 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 decrease was primarily due to a change in interest rates of interest rate swap contracts that did not qualify for hedge accounting under SFAS No. 133.

Other

Operating revenues from other consolidated subsidiaries in the Europe region increased $2 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in operating revenues was primarily due to increased operating revenues from EME's Spanish Hydro project largely due to higher generation caused by more rainfall in the first quarter of 2004, compared to the first quarter of 2003. Earnings from other projects in the Europe region (consolidated subsidiaries and unconsolidated affiliates) increased $3 million for the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase in earnings was primarily due to increased earnings from EME's Italian Wind project mostly due to higher generation caused by more wind in the first quarter of 2004, compared to the first quarter of 2003.

New Accounting Pronouncements

Statement of Financial Accounting Standards Interpretation No. 46

Variable Interest Entities

following table summarizes the variable interest entities in which EME has a significant variable interest:

Variable Interest Entity	Location	Investment at March 31, 2004		Ownership Interest at March 31, 2004	Description
Paiton	East Java, Indonesia	$	580	45%	Coal-fired facility
EcoEléctrica	Peñuelas, Puerto Rico		275	50%	Liquefied natural gas cogeneration facility
Watson	Carson, CA		91	49%	Cogeneration facility
Sunrise	Fellows, CA		84	50%	Gas-fired facility
ISAB	Sicily, Italy		84	49%	Gasification facility
CBK	Manila, Philippines		74	50%	Pumped-storage hydro electric facility
Sycamore	Bakersfield, CA		53	50%	Cogeneration facility
Midway-Sunset	Fellows, CA		52	50%	Cogeneration facility
Kern River	Bakersfield, CA		42	50%	Cogeneration facility
IVPC4 Srl	Italy		39	50%	Wind facilities
Doga	Esenyurt, Turkey		24	80%	Cogeneration facility
Tri Energy	Bangkok, Thailand		19	25%	Gas-fired facility

Deconsolidation of Variable Interest Entities

•: Doga Project – Based on current guidance related to FIN 46R, the power sales contract with Türkiye Elektrik Dagitim Anonim Sirketi ("TEDAS") is considered a variable interest due to the energy price provisions that absorb the risk of changes in operating costs and the transfer of ownership of the cogeneration plant to TEDAS at the end of the power sales contract. After considering the power sales contract a variable interest, EME determined that it was not the primary beneficiary under FIN 46R and accordingly, deconsolidated this project on March 31, 2004. EME will record its interest in the Doga project on the equity method beginning April 1, 2004.
•: Kwinana Project – Based on current guidance related to FIN 46R, the power sales contracts with British Petroleum Kwinana Refinery and Western Power are considered variable interests due to the energy price provisions that absorb the risk of changes in operating costs. After considering the power sales contracts as variable interests, EME determined that it was not the primary beneficiary under FIN 46R and accordingly, deconsolidated this project on March 31, 2004. EME will record its interest in the Kwinana project on the equity method beginning April 1, 2004. EME's interest in the Kwinana project is not a significant variable interest and, therefore, is not included in the table above.

LIQUIDITY AND CAPITAL RESOURCES

Introduction

The following discussion of liquidity and capital resources is organized in the following sections:

		Page
EME's Liquidity		37
Key Financing Developments		37
Termination of the Collins Station Lease		38
2004 Capital Expenditures		39
EME's Historical Consolidated Cash Flow		39
EME's Credit Ratings		40
EME's Liquidity as a Holding Company		41
Dividend Restrictions in Major Financings		44
Off-Balance Sheet Transactions		47
Environmental Matters and Regulations		47

For a complete discussion of these issues, read this quarterly report in conjunction with EME's annual report on Form 10-K for the year ended December 31, 2003.

EME's Liquidity

At March 31, 2004, EME and its subsidiaries had cash and cash equivalents of $555 million and EME had available a total of $145 million of borrowing capacity under a $145 million corporate credit facility. EME's consolidated debt at March 31, 2004 was $6.1 billion, including $693 million of debt maturing on December 15, 2004 which was owed by EME's largest subsidiary, Edison Mission Midwest Holdings. In addition, EME's subsidiaries had $6.7 billion of long-term lease obligations that are due over periods ranging up to 31 years.

Key Financing Developments

EME Financing Developments

In addition, EME completed the repayment of the remaining $28 million due under the Coal and Capex facility (guaranteed by EME) in April 2004. Accordingly, this credit agreement is terminated and EME no longer has a contingent liability related to this credit agreement.

Midwest Generation Financing Developments

On April 27, 2004, Midwest Generation completed a private offering of $1 billion aggregate principal amount of its 8.75% second priority senior secured notes due 2034. Holders of the notes may

require Midwest Generation to repurchase the notes on May 1, 2014 and on each one-year anniversary thereafter at 100% of their principal amount, plus accrued and unpaid interest. Concurrently with the issuance of the notes, Midwest Generation borrowed $700 million under a new first priority senior secured institutional term loan facility. The term loans mature on April 27, 2011 and bear interest at LIBOR plus 3.25% per annum. Midwest Generation has agreed to repay $1,750,000 of the term loans on each quarterly payment date. Midwest Generation also entered into a new three-year $200 million working capital facility that replaced a prior facility. The new working capital facility also provides for the issuance of letters of credit. Midwest Generation used the proceeds of the notes issuance and the term loans to refinance $693 million of indebtedness (plus accrued interest and fees) owed by its direct parent, Edison Mission Midwest Holdings Co., which was guaranteed by Midwest Generation and was due in December of this year, and to make termination payments under the Collins Station lease in the amount of approximately $960 million, including accrued interest and fees.

Termination of the Collins Station Lease

2004 Capital Expenditures

The estimated capital and construction expenditures of EME's subsidiaries for the final three quarters of 2004 are $72 million. These expenditures are planned to be financed by existing subsidiary credit agreements and cash generated from their operations.

EME's Historical Consolidated Cash Flow

Consolidated Cash Flows from Operating Activities

Net cash provided by (used in) operating activities:

	Three Months Ended March 31,
	2004		2003
	(in millions)
Continuing operations	$	8	$	(2	)

Cash provided by operating activities from continuing operations increased $9 million in the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase is due to income during the quarter of 2004 versus losses during the first quarter of 2003, partially offset by tax-allocation payments of $9 million paid to Edison International during the first three months of 2004, compared to $13 million in tax-allocation payments received by EME from Edison International during the first three months of 2003. For further discussion of the tax-allocation payments, see "—EME's Liquidity as a Holding Company—Intercompany Tax-Allocation Payments."

Consolidated Cash Flows from Financing Activities

Net cash provided by (used in) financing activities:

	Three Months Ended March 31,
	2004			2003
	(in millions)
Continuing operations	$	(63	)	$	323

Cash used in financing activities from continuing operations increased $385 million in the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase was due to a lower level of borrowings in 2004 from 2003, primarily due to $275 million borrowings at Contact Energy used to finance the acquisition of the Taranaki power station combined with net borrowings of $80 million on EME's corporate credit facility in 2003.

Consolidated Cash Flows from Investing Activities

Net cash provided by (used in) investing activities:

	Three Months Ended March 31,
	2004		2003
	(in millions)
Continuing operations	$	139	$	(328	)
Discontinued operations		—		4

	$	139	$	(324	)

Cash provided by investing activities from continuing operations increased $468 million in the first quarter of 2004, compared to the first quarter of 2003. The 2004 increase was due to a combination of the following:

•: $275 million paid in 2003 by Contact Energy for the acquisition of the Taranaki power station.
•: $118 million in proceeds received in 2004 from the sale of 100% of EME's stock of Edison Mission Energy Oil & Gas and the sale of EME's 50% partnership interest in the Brooklyn Navy Yard project.
•: A reduction in investment in new plant and equipment. EME invested $22 million and $56 million in property and equipment during the first quarter of 2004 and 2003, respectively.

EME's Credit Ratings

Overview

Credit ratings for EME and its subsidiaries, Midwest Generation, LLC and Edison Mission Marketing & Trading, are as follows:

		Moody's Rating	S&P Rating
EME		B2	B
Midwest Generation, LLC:
	First priority senior secured rating	Ba3	B+
	Second priority senior secured rating	B1	B-
Edison Mission Marketing & Trading		Not Rated	B

EME cannot provide assurance that its current credit ratings or the credit ratings of its subsidiaries will remain in effect for any given period of time or that one or more of these ratings will not be lowered further. EME notes that these credit ratings are not recommendations to buy, sell or hold its securities and may be revised at any time by a rating agency.

On April 22, 2004, Moody's assigned ratings of "Ba3" and "B1" to Midwest Generation's new first priority senior secured credit facility and second priority senior secured notes, respectively. On April 21, 2004, Standard & Poor's assigned ratings of "B+" and "B-" to Midwest Generation's new first priority senior secured credit facility and second priority senior secured notes, respectively.

EME does not have any "rating triggers" contained in subsidiary financings that would result in EME being required to make equity contributions or provide additional financial support to its subsidiaries.

The credit ratings of EME are below investment grade and, accordingly, EME has agreed to provide support to Edison Mission Marketing & Trading in the form of cash and letters of credit for the benefit of counterparties for its price risk management and domestic trading activities related to accounts payable and unrealized losses ($119 million as of April 30, 2004). As a result of the new working capital facility entered into by Midwest Generation described above, Midwest Generation expects to provide credit support for forward contracts entered into by Edison Mission Marketing & Trading related to the Illinois Plants. A subsidiary of EME has also supported a portion of First Hydro's United Kingdom hedging activities through a cash collateralized credit facility, under which letters of credit totaling £16 million have been issued as of April 30, 2004.

EME anticipates that sales of power from its Illinois Plants, Homer City facilities and First Hydro plants in the United Kingdom may require additional credit support, depending upon market conditions and the strategies adopted for the sale of this power. Changes in forward market prices and margining requirements could further increase the need for credit support for the price risk management and trading activities related to these projects. EME currently projects potential working capital required to support price risk management and trading activity to be between $100 million and $200 million from time to time.

Credit Rating of Edison Mission Marketing & Trading

Pursuant to the Homer City sale-leaseback documents, a below investment grade credit rating of Edison Mission Marketing & Trading restricts the ability of EME Homer City Generation L.P. to enter into permitted trading activities, as defined in the documents, with Edison Mission Marketing & Trading to sell forward the output of the Homer City facilities. These documents include a requirement that the counterparty to such transactions, and EME Homer City, if acting as seller to an unaffiliated third party, be investment grade. EME currently sells all of the output from the Homer City facilities through Edison Mission Marketing & Trading, which has a below investment grade credit rating, and EME Homer City is not rated. Therefore, in order for EME to continue to sell forward the output of the Homer City facilities, either: (1) EME must obtain consent from the sale-leaseback owner participant to permit EME Homer City to sell directly into the market or through Edison Mission Marketing & Trading; or (2) Edison Mission Marketing & Trading must provide assurances of performance consistent with the requirements of the sale-leaseback documents. EME has obtained a consent from the sale-leaseback owner participant that will allow EME Homer City to enter into such sales, under specified conditions. EME Homer City continues to be in compliance with the terms of the consent; however, the consent is revocable. The owner participant has not indicated that it intends to revoke the consent; however, there can be no assurance that it will not do so in the future. Revocation of the consent would not affect trades between Edison Mission Marketing & Trading and EME Homer City that had been entered into while the consent was still in effect. EME is permitted to sell the output of the Homer City facilities into the spot market at any time. See "Market Risk Exposures—Commodity Price Risk—Americas—Homer City Facilities."

EME's Liquidity as a Holding Company

Overview

At March 31, 2004, EME had corporate cash and cash equivalents of $232 million to meet liquidity needs. EME had no borrowings outstanding on the $145 million line of credit in existence on

March 31, 2004. In April 2004, EME terminated the $145 million line of credit and entered into a new three-year $98 million secured line of credit. Cash distributions from EME's subsidiaries and partnership investments, tax-allocation payments from Edison International and unused capacity under its corporate credit facility represent EME's major sources of liquidity to meet its cash requirements. The timing and amount of distributions from EME's subsidiaries may be affected by many factors beyond its control. See "—Dividend Restrictions in Major Financings." In addition, the right of EME to receive tax-allocation payments, and the timing and amount of tax-allocation payments received by EME are subject to factors beyond EME's control. See "—Intercompany Tax-Allocation Payments."

EME's new secured corporate credit facility provides credit available in the form of cash advances or letters of credit. At April 30, 2004, there were no cash advances outstanding or letters of credit outstanding under the credit facility. In addition to the interest payments, EME pays a commitment fee of 0.50% on the unutilized portion of the facility. EME has agreed to maintain a minimum interest coverage ratio and a minimum recourse debt to recourse capital ratio (as such ratios are defined in the credit agreement).

As security for its obligations under its new corporate credit facility, EME pledged its ownership interests in the holding companies through which it owns its interests in the Illinois Plants, the Homer City facilities, the Westside projects and the Sunrise project. EME also granted a security interest in an account into which all distributions received by it from the Big 4 projects will be deposited. EME will be free to use these proceeds unless and until an event of default occurs under its corporate credit facility.

Historical Distributions Received By EME

The following table is presented as an aid in understanding the cash flow of EME and its various subsidiary holding companies which depend on distributions from subsidiaries and affiliates to fund general and administrative costs and debt service costs of recourse debt.

		Three Months Ended March 31,
		2004		2003
		(in millions)
Domestic Projects
Distributions from Consolidated Operating Projects:
	EME Homer City Generation L.P. (Homer City facilities)	$	41	$	21
	Holding companies of other consolidated operating projects		—		1
Distributions from Unconsolidated Operating Projects:
	Edison Mission Energy Funding Corp. (Big 4 Projects)		21		20
	Holding companies for Westside projects		3		9
	Holding companies of other unconsolidated operating projects		1		2

Total Distributions from Domestic Projects		$	66	$	53

International Projects (Mission Energy Holdings International)
Distributions from Consolidated Operating Projects:
	Loy Yang B	$	—	$	12
	Contact Energy		27		16
	Valley Power		4		5
	Kwinana		—		2
	Holding companies of other consolidated operating projects		6		—
Distributions from Unconsolidated Operating Projects:
	IVPC4 (Italian Wind project)		1		3
	Paiton		—		9
	Holding companies of other unconsolidated operating projects		6		—

Total Distributions from International Projects		$	44	$	47

Total Distributions		$	110	$	100

Intercompany Tax-Allocation Payments

EME is included in the consolidated federal and combined state income tax returns of Edison International and is eligible to participate in tax-allocation payments with other subsidiaries of Edison International. These arrangements depend on Edison International continuing to own, directly or indirectly, at least 80% of the voting power of the stock of EME and at least 80% of the value of such stock. A foreclosure by MEHC's financing parties on EME's stock would make EME ineligible to participate in the tax-allocation payments. The arrangements are subject to the terms of tax allocation and payment agreements among Edison International, MEHC, EME, and other Edison International subsidiaries. The agreements to which EME is a party may be terminated by the immediate parent company at any time, by notice given before the first day of the first tax year with respect to which the termination is to be effective. However, termination does not relieve any party of any obligations with respect to any tax year beginning prior to the notice. EME has historically received tax-allocation payments related to domestic net operating losses incurred by EME. The right of EME to receive and the amount and timing of tax-allocation payments are dependent on the inclusion of EME in the consolidated income tax returns of Edison International and its subsidiaries and other factors, including the consolidated taxable income of Edison International and its subsidiaries, the amount of net operating losses and other tax items of EME, its subsidiaries, and other subsidiaries of Edison International and specific procedures regarding allocation of state taxes. EME receives tax-allocation payments for tax losses when and to the extent that the consolidated Edison International group generates sufficient taxable income in order to be able to utilize EME's tax losses in the consolidated income tax returns for Edison International and its subsidiaries. Based on the application of the factors cited above, EME may be obligated during periods it generates taxable income to make payments under the tax-allocation agreements. During the first quarter of 2004, EME paid $9 million in tax-allocation payments to Edison International. During the first quarter of 2003, EME received $13 million in tax-allocation payments from Edison International.

Dividend Restrictions in Major Financings

General

Each of EME's direct or indirect subsidiaries is organized as a legal entity separate and apart from EME and its other subsidiaries. Assets of EME's subsidiaries are not available to satisfy EME's obligations or the obligations of any of its other subsidiaries. However, unrestricted cash or other assets that are available for distribution may, subject to applicable law and the terms of financing arrangements of the parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to EME or to its subsidiary holding companies.

Key Ratios of EME's Principal Subsidiaries Affecting Dividends

Set forth below are key ratios of EME's principal subsidiaries, other than Midwest Generation, for the twelve months ended March 31, 2004:

Subsidiary	Financial Ratio	Covenant	Actual
EME Homer City Generation L.P. (Homer City facilities)	Senior Rent Service Coverage Ratio	Greater than 1.7 to 1	3.43 to 1
Edison Mission Energy Funding Corp. (Big 4 Projects)	Debt Service Coverage Ratio	Greater than or equal to 1.25 to 1	2.58 to 1
Mission Energy Holdings International	Interest Coverage Ratio	Greater than or equal to 1.3 to 1	2.50 to 1(1)
First Hydro Holdings	Interest Coverage Ratio	Greater than 1.2 to 1	1.6 to 1(2)

(1): For more information about the interest coverage ratio, see "—Mission Energy Holdings International Interest Coverage Ratio" below.
(2): Ratio is determined on June 30 and December 31 of each year, therefore actual shown is for the twelve-month period ended December 31, 2003.

For a more detailed description of the covenants binding EME's principal subsidiaries that may restrict the ability of those entities to make distributions to EME directly or indirectly through the other holding companies owned by EME, refer to "Dividend Restrictions in Major Financings" on page 82 of EME's annual report on Form 10-K for the year ended December 31, 2003.

Midwest Generation Financing Restrictions on Distributions

Midwest Generation is no longer bound by the covenants, including restrictions on the ability to make distributions, in the Edison Mission Midwest Holdings credit agreement, which was repaid on April 27, 2004. However, Midwest Generation is now bound by the covenants in its new credit facility and indenture. These covenants include restrictions on the ability to, among other things, incur debt, create liens on its property, merge or consolidate, sell assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions, engage in other lines of business or engage in transactions for any speculative purpose. In addition, the credit facility contains financial covenants binding on Midwest Generation.

Covenants in Credit Facility

In order for Midwest Generation to make a distribution, it must be in compliance with covenants specified under its new credit facility. Compliance with the covenants in its credit facility includes maintaining the following two financial performance requirements:

•: At the end of each fiscal quarter, Midwest Generation's consolidated interest coverage ratio for the immediately preceding four consecutive fiscal quarters must be at least 1.25 to 1. The consolidated interest coverage ratio is defined as the ratio of consolidated net income (plus or minus specified amounts as set forth in the credit agreement), to consolidated interest expense (as more specifically defined in the credit agreement).
•: Midwest Generation's secured leverage ratio for the 12-month period ended on the last day of the immediately preceding fiscal quarter may be no greater than 8.75 to 1. The secured leverage ratio is defined as the ratio of the aggregate principal amount of Midwest Generation secured debt plus all indebtedness of a subsidiary of Midwest Generation, to the aggregate amount of consolidated net income (plus or minus specified amounts as set forth in the credit agreement).

In addition, Midwest Generation's distributions are limited in amount. The aggregate amount of distributions made by Midwest Generation after April 27, 2004 may not exceed the sum of (i) 75% of excess cash flow (as defined in the credit facility) generated since that date, plus (ii) up to 100% of the amount of equity contributions or subordinated loans made by EME or a subsidiary of EME to Midwest Generation after April 27, 2004, but in this latter case only to the extent excess cash flow not used for a dividend under (i) is available for such payments. If Midwest Generation is rated investment grade, the aggregate amount of distributions made by Midwest Generation since April 27, 2004 may not exceed 100% of excess cash flow generated since becoming investment grade.

Covenants in Indenture

Midwest Generation's new indenture contains restrictions on its ability to make a distribution substantially similar to those in the credit facility. Under the indenture, however, failure to achieve the conditions required for distributions will not result in a default, nor does the indenture contain any other financial performance requirements.

Mission Energy Holdings International Interest Coverage Ratio

Under the credit agreement governing its term loan, Mission Energy Holdings International has agreed to a minimum interest coverage ratio of 1.30 to 1 beginning March 2004 for the trailing twelve-month period.

The following table sets forth the major components of the interest coverage ratio for the twelve months ended March 31, 2004 and the year ended December 31, 2003 on a pro forma basis assuming the term loan had been in existence at the beginning of 2003:

		March 31, 2004								December 31, 2003
		Actual			Pro Forma Adjustment		Pro Forma			Actual			Pro Forma Adjustment		Pro Forma
		(in millions)
Funds Flow from Operations
	Historical distributions from international projects(1)	$	155		$	—	$	155		$	158		$	—	$	158
	Other fees and cash payments considered distributions under the term loan		7			—		7			20			—		20
	Administrative and general expenses		(2	)		—		(2	)		(2	)		—		(2	)

Total Flow of Funds from Operations		$	160		$	—	$	160		$	176		$	—	$	176

Term Loan Interest Expense		$	20		$	44	$	64		$	4		$	60	$	64

Interest Coverage Ratio								2.50								2.75

(1): See "—EME's Liquidity as a Holding Company—Historical Distributions Received By EME."
(2): The pro forma adjustment assumes that the $800 million loan was outstanding at the beginning of 2003. Pro forma interest expense was calculated using the interest rate floor of 7% plus amortization of deferred financing costs.

The above details of Mission Energy Holdings International's interest coverage ratio are provided as an aid to understanding the components of the computations that are set forth in the term loan credit agreement. The terms Funds Flow from Operations and Interest Expense are as defined in the term loan and are not the same as would be determined in accordance with generally accepted accounting principles.

Summarized combined financial information (unaudited) of Mission Energy Holdings International, Inc. and its subsidiaries and Edison Mission Project Co. is set forth below:

	Three Months Ended March 31,
	2004		2003
	(in millions)
Revenues	$	423	$	314
Expenses		374		295

Net income (loss)	$	49	$	19

		March 31, 2004		December 31, 2003
		(in millions)
Current assets		$	466	$	628
Noncurrent assets			6,630		6,723

	Total assets	$	7,096	$	7,351

Current liabilities		$	495	$	587
Noncurrent liabilities			4,742		4,994
Minority interest			756		746
Equity			1,103		1,024

	Total liabilities and equity	$	7,096	$	7,351

The majority of noncurrent liabilities are comprised of project financing arrangements that are non-recourse to EME.

Off-Balance Sheet Transactions

For a discussion of EME's off-balance sheet transactions, refer to "Off-Balance Sheet Transactions" on page 96 of EME's annual report on Form 10-K for the year ended December 31, 2003.

Environmental Matters and Regulations

For a discussion of EME's environmental matters, refer to "Environmental Matters and Regulations" on page 98 of EME's annual report on Form 10-K for the year ended December 31, 2003 and the notes to the Consolidated Financial Statements set forth therein. There have been no other significant developments with regard to environmental matters that affect disclosures presented in the annual report.

MARKET RISK EXPOSURES

Introduction

EME's primary market risk exposures are associated with the sale of electricity from and the procurement of fuel for its uncontracted generating plants. These market risks arise from fluctuations in electricity and fuel prices, emission allowances, transmission rights, interest rates and foreign currency exchange rates. EME manages these risks in part by using derivative financial instruments in accordance with established policies and procedures. See "Management's Overview; Critical Accounting Policies and Estimates" and "Liquidity and Capital Resources—EME's Credit Ratings" for a discussion of market developments and their impact on EME's credit and the credit of its counterparties.

This section discusses these market risk exposures under the following headings:

		Page
Commodity Price Risk		48
Credit Risk		55
Interest Rate Risk		56
Foreign Exchange Rate Risk		57
Fair Value of Financial Instruments		58
Regulatory Matters		59

For a complete discussion of these issues, read this quarterly report in conjunction with EME's annual report on Form 10-K for the year ended December 31, 2003.

Commodity Price Risk

General Overview

EME's merchant power plants and energy trading activities expose EME to commodity price risks. Commodity price risks are actively monitored by a risk management committee to ensure compliance with EME's risk management policies. Policies are in place which define risk tolerances for each EME regional business unit. Procedures exist which allow for monitoring of all commitments and positions with regular reviews by the risk management committee. In order to provide more predictable earnings and cash flow, EME may hedge a portion of the electric output of its merchant plants, the output of which is not committed to be sold under long-term contracts. When appropriate, EME manages the spread between electric prices and fuel prices, and uses forward contracts, swaps, futures, or options contracts to achieve those objectives. There is no assurance that contracts to hedge changes in market prices will be effective.

EME's revenues and results of operations of its merchant power plants will depend upon prevailing market prices for capacity, energy, ancillary services, fuel oil, coal and natural gas and associated transportation costs and emission credits in the market areas where EME's merchant plants are located. Among the factors that influence the price of power in these markets are:

•: prevailing market prices for fuel oil, coal and natural gas and associated transportation costs;
•: the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities;
•: transmission congestion in and to each market area;
•: the market structure rules to be established for each market area;

•: the cost of emission credits or allowances;
•: the availability, reliability and operation of nuclear generating plants, where applicable, and the extended operation of nuclear generating plants beyond their presently expected dates of decommissioning;
•: weather conditions prevailing in surrounding areas from time to time; and
•: the rate of electricity usage as a result of factors such as regional economic conditions and the implementation of conservation programs.

A discussion of commodity price risk by region is set forth below.

Americas

Introduction

Electric power generated at EME's domestic merchant plants is generally sold under bilateral arrangements with utilities and power marketers under short-term transactions with terms of two years or less or, as has been the case for the Homer City facilities, to the PJM and/or the NYISO markets. As discussed further below, beginning in 2003, EME has been selling a significant portion of the power generated from its Illinois Plants into wholesale power markets.

EME's merchant operations expose it to commodity price risk, which represents the potential loss that can be caused by a change in the market value of a particular commodity. Commodity price risks are actively monitored by a risk management committee to ensure compliance with EME's risk management policies. Policies are in place which define the risk tolerance for EME's merchant activities. Procedures exist which allow for monitoring of all commitments and positions with regular reviews by the risk management committee. Despite this, there can be no assurance that all risks have been accurately identified, measured and/or mitigated.

Illinois Plants

Energy generated at the Illinois Plants has historically been sold under three power purchase agreements between EME's wholly owned subsidiary, Midwest Generation, and Exelon Generation Company, under which Exelon Generation is obligated to make capacity payments for the plants under contract and energy payments for the energy produced by these plants and taken by Exelon Generation. The power purchase agreements began on December 15, 1999 and expire in December 2004. The capacity payments provide the units under contract with revenue for fixed charges, and the energy payments compensate those units for all, or a portion of, variable costs of production.

Approximately 40% and 58% of the energy and capacity sales from the Illinois Plants in the first quarters of 2004 and 2003, respectively, were to Exelon Generation under the power purchase agreements. As a result of Exelon Generation's election to release units from contract for 2004, Midwest Generation's reliance on sales into the wholesale market increased in 2004 from 2003. As discussed in detail below, 3,859 MW of Midwest Generation's generating capacity remains subject to power purchase agreements with Exelon Generation in 2004. 2004 is the final contract year under these power purchase agreements.

In June 2003, Exelon Generation exercised its option, in accordance with the terms of its power purchase agreement, to contract 687 MW of capacity and the associated energy output (out of a possible total of 1,265 MW subject to option) during 2004 from Midwest Generation's coal-fired units

in accordance with the terms of the existing power purchase agreement related to Midwest Generation's coal-fired generation units. As a result, 578 MW of capacity at the Crawford Unit 7, Waukegan Unit 6 and Will County Unit 3 has not been subject to the power purchase agreement since January 1, 2004. For 2004, Midwest Generation has 2,383 MW of capacity related to its coal-fired generation units under contract with Exelon Generation.

In October 2003, Exelon Generation exercised its option to retain under a power purchase agreement for calendar year 2004 the 1,084 MW of capacity and energy from Midwest Generation's Collins Station. Exelon Generation also exercised its option to release from a related power purchase agreement 302 MW of capacity and energy (out of a possible total of 694 MW subject to the option) from Midwest Generation's natural gas and oil-fired peaking units, thereby retaining under that contract 392 MW of the capacity and energy of such units for calendar year 2004.

The energy and capacity from units not subject to a power purchase agreement with Exelon Generation are sold under terms, including price and quantity, negotiated by Edison Mission Marketing & Trading with customers through a combination of bilateral agreements, forward energy sales and spot market sales. These arrangements generally have a term of two years or less. Thus, EME is subject to market risks related to the price of energy and capacity from those units. EME expects that capacity prices for merchant energy sales will, in the near term, be substantially less than those Midwest Generation currently receives under its existing agreements with Exelon Generation. EME further expects that the lower revenues resulting from this difference will be offset in part by energy prices, which EME believes will, in the near term, be higher for merchant energy sales than those Midwest Generation currently receives under its existing agreements, as indicated below in the table of forward-looking prices. EME intends to manage this price risk, in part, by accessing both the wholesale customer and over-the-counter markets described below as well as using derivative financial instruments in accordance with established policies and procedures.

Presently, the primary markets available to Midwest Generation for wholesale sales of electricity from the Illinois Plants are expected to be direct "wholesale customers" and broker-arranged "over-the-counter customers," and, after May 1, 2004, bilateral and spot sales into the expanded PJM. The most liquid over-the-counter markets in the Midwest region have historically been for sales into the control area of Cinergy, referred to as "Into Cinergy," and, to a lesser extent, for sales into the control areas of Commonwealth Edison and American Electric Power, referred to as "Into ComEd" and "Into AEP," respectively. "Into Cinergy," "Into ComEd" and "Into AEP" are bilateral markets for the sale or purchase of electrical energy for future delivery. Due to geographic proximity, "Into ComEd" has been the primary market for Midwest Generation. Following Commonwealth Edison's joining PJM as of May 1, 2004, sales of electricity from the Illinois Plants now include bilateral and spot sales into PJM, with spot sales being based on locational marginal pricing. These sales will replace sales previously made as bilateral sales and spot sales "Into ComEd." See "—Regulatory Matters" for a more detailed discussion of recent developments regarding Commonwealth Edison's application to join PJM and "—Homer City Facilities" below for a discussion of locational marginal pricing. Performance of transactions in these markets is subject to contracts that generally provide for liquidated damages supported by a variety of credit requirements, which may include independent credit assessment, parent company guarantees, letters of credit, and cash margining arrangements.

The following table depicts the historical average market prices for energy per megawatt-hour "Into ComEd" and "Into Cinergy" for the first three months of 2004. Market prices are included for "Into Cinergy" for illustrative purposes.

	Into ComEd*						Into Cinergy*
Historical Energy Prices	Into ComEd*						Into Cinergy*
Historical Energy Prices	On-Peak(1)		Off-Peak(1)		24-Hr		On-Peak(1)		Off-Peak(1)		24-Hr
January	$	43.30	$	15.18	$	27.88	$	41.97	$	19.17	$	29.46
February		43.05		18.85		29.98		44.42		24.85		33.85
March		40.38		21.15		30.66		41.75		23.88		32.72

Quarterly Average	$	42.25	$	18.39	$	29.51	$	42.71	$	22.63	$	32.01

(1): On-peak refers to the hours of the day between 6:00 a.m. and 10:00 p.m. Monday through Friday, excluding North American Electric Reliability Council (NERC) holidays. All other hours of the week are referred to as off-peak.
*: Source: Energy prices were determined by obtaining broker quotes and other public price sources, for both "Into ComEd" and "Into Cinergy" delivery points.

Midwest Generation intends to hedge a portion of its merchant portfolio risk through Edison Mission Marketing & Trading. To the extent it does not do so, the unhedged portion will be subject to the risks and benefits of spot market price movements. The extent to which Midwest Generation will hedge its market price risk through forward over-the-counter sales depends on several factors. First, Midwest Generation will evaluate over-the-counter market prices to determine whether sales at forward market prices are sufficiently attractive compared to assuming the risk associated with spot market sales. Second, Midwest Generation's ability to enter into hedging transactions will depend upon its and Edison Mission Marketing & Trading's credit capacity and upon the over-the-counter forward sales markets having sufficient liquidity to enable Midwest Generation to identify counterparties who are able and willing to enter into hedging transactions with it. See "—Credit Risk," below.

In addition to the prevailing market prices, Midwest Generation's ability to derive profits from the sale of electricity from the released units will be affected by the cost of production, including costs incurred to comply with environmental regulations. The costs of production of the released units vary and, accordingly, depending on market conditions, the amount of generation that will be sold from the released units is expected to vary from unit to unit. In this regard, Midwest Generation suspended operations of Will County Units 1 and 2 at the end of 2002 pending improvement in market conditions.

Under PJM's proposed revisions to the PJM Tariff, the integration of Commonwealth Edison into PJM could result in market power mitigation measures being imposed on future power sales by Midwest Generation in the Northern Illinois Control Area energy and capacity markets. In addition, power produced by Midwest Generation not under contract with Exelon Generation has been sold in the past using transmission obtained from Commonwealth Edison under its open-access tariff filed with the Federal Energy Regulatory Commission, or the FERC, and the application of the PJM Tariff to Commonwealth Edison's transmission system could also affect the rates, terms and conditions of transmission service received by Midwest Generation. EME and Midwest Generation contested the appropriateness of Commonwealth Edison joining PJM on an "islanded" basis, but such integration was approved by the FERC and was implemented on May 1, 2004. EME and Midwest Generation continue to oppose the imposition of market power mitigation measures proposed by PJM for the Northern Illinois Control Area energy and capacity markets. EME is unable to predict the outcome of these efforts, the effect of integration of Commonwealth Edison into PJM on an "islanded" basis, the timing or effect of integration of American Electric Power into PJM, or any final integration configuration for PJM on the markets into which Midwest Generation sells its power.

In addition to the price risks described previously, Midwest Generation's ability to transmit energy to counterparty delivery points to consummate spot sales and hedging transactions may also be affected by transmission service limitations and constraints and new standard market design proposals proposed by and currently pending before the FERC. Although the FERC and the relevant industry participants are working to minimize such issues, Midwest Generation cannot determine how quickly or how effectively such issues will be resolved.

Homer City Facilities

Electric power generated at the Homer City facilities is sold under bilateral arrangements with domestic utilities and power marketers pursuant to transactions with terms of two years or less, or to the PJM or the NYISO markets. These pools have short-term markets, which establish an hourly clearing price. The Homer City facilities are situated in the PJM control area and are physically connected to high-voltage transmission lines serving both the PJM and NYISO markets.

The following table depicts the average market prices per megawatt-hour in PJM during the first quarters of 2004 and 2003:

	24-Hour PJM Historical Energy Prices*
	2004		2003
January	$	51.12	$	36.56
February		47.19		46.13
March		39.54		46.85

Quarterly Average	$	45.95	$	43.18

*: Energy prices were calculated at the Homer City busbar (delivery point) using historical hourly real-time prices provided on the PJM-ISO web-site.

As shown on the above table, the average historical market prices at the Homer City busbar (delivery point) during the first three months of 2004 were higher than the average historical market prices during the first three months of 2003. Forward market prices in PJM fluctuate as a result of a number of factors, including natural gas prices, transmission congestion, changes in market rules, electricity demand which is affected by weather and economic growth, plant outages in the region, and the amount of existing and planned power plant capacity. The actual spot prices for electricity delivered into these markets may vary materially from the forward market prices set forth in the table below.

Sales made in the real-time or day-ahead market receive the actual spot prices at the Homer City busbar. In order to mitigate price risk from changes in spot prices at the Homer City busbar, EME may enter into forward contracts with counterparties for energy to be delivered in future periods. Currently, there is not a liquid market for entering into forward contracts at the Homer City busbar. A liquid market does exist for a delivery point known as the PJM West Hub, which EME's price risk management activities use to enter into forward contracts. EME's revenues with respect to such forward contracts include:

•: sales of actual generation in the amounts covered by such forward contracts with reference to PJM spot prices at the Homer City busbar, plus,
•: sales to third parties under such forward contracts at designated delivery points (generally the PJM West Hub) less the cost of purchasing power at spot prices at the same designated delivery points to fulfill obligations under such forward contracts.

Under the PJM market design, locational marginal pricing (sometimes referred to as LMP), which establishes hourly prices at specific locations throughout PJM by considering factors including generator bids, load requirements, transmission congestion and losses, has the effect of raising prices at those delivery points affected by transmission congestion. During the past 12 months, an increase in transmission congestion at delivery points east of the Homer City facilities has resulted in prices at the PJM West Hub (which includes delivery points east of the Homer City facilities) being higher than those at the Homer City busbar on an average of two percent.

By entering into forward contracts using the PJM West Hub as the delivery point, EME is exposed to "basis risk," which occurs when forward contracts are executed on a different basis (in this case PJM West Hub) than the actual point of delivery (Homer City busbar). In order to mitigate basis risk resulting from forward contracts using PJM West Hub as the delivery point, EME has participated in purchasing fixed transmission rights in PJM, and may continue to do so in the future. A fixed transmission right is a financial instrument that entitles the holder thereof to receive actual spot prices at one point of delivery and pay prices at another point of delivery that are pegged to prices at the first point of delivery, plus or minus a fixed amount. Accordingly, EME's price risk management activities include using fixed transmission rights alone or in combination with forward contracts to manage the risks associated with changes in prices within the PJM market.

The following table sets forth the forward market prices for energy per megawatt-hour as quoted for sales into the PJM West Hub at March 31, 2004:

		24-Hour PJM West Forward Energy Prices*
2004
	April	$	39.31
	May		38.17
	June		41.96
	July		52.46
	August		52.09
	September		38.88
	October		37.24
	November		37.91
	December		38.80
2005 Calendar "strip"(1)		$	40.79

(1): Market price for energy purchases for the entire calendar year, as quoted for sales into the PJM West Hub.
*: Energy prices were determined by obtaining broker quotes and other public sources for the PJM West Hub delivery point. Forward prices at PJM West are generally higher than the prices at the Homer City busbar.

The ability of EME's subsidiary, EME Homer City, to make payments under the long-term lease entered into as part of the sale-leaseback transaction depends on revenues generated by the Homer City facilities, which depend in part on the market conditions for the sale of capacity and energy. These market conditions are beyond EME's control.

Europe

United Kingdom

The First Hydro plant sells electrical energy and ancillary services through bilateral contracts of varying terms in the England and Wales wholesale electricity market.

The electricity trading arrangements introduced in March 2001 provide, among other things, for the establishment of a range of voluntary short-term power exchanges and brokered markets operating from a year or more in advance to 1 hour prior to the delivery or receipt of power. In the final hour after the notification of all contracts, the system operator can accept bids and offers in the Balancing Mechanism to balance generation and demand and resolve any transmission constraints. There is a mandatory settlement process for recovering imbalances between contracted and metered volumes with strong incentives for being in balance, and a Balancing and Settlement Code Panel to oversee governance of the Balancing Mechanism. The system operator can also purchase system reserve and response services to maintain the quality of the electrical supply directly from generators (generally referred to as "ancillary services"). Ancillary services contracts typically run for up to a year and can consist of both fixed amounts and variable amounts represented by prices for services that are only paid for when actually called upon by the grid operator. A key feature of the trading arrangements is the requirement for firm physical delivery, which means that a generator must deliver, and a consumer must take delivery of, its net contracted positions or pay for any energy imbalance at the imbalance prices calculated by the system operator based on the prices of bids and offers accepted in the Balancing Mechanism. This provides an incentive for parties to contract in advance and for the development of forwards and futures markets. Under these arrangements, there has been an increased emphasis on credit quality, including the need for parent company guarantees or letters of credit for companies below investment grade.

The wholesale price of electricity has decreased significantly in recent years. The reduction has been driven principally by surplus generating capacity and increased competition. During 2003, prices were more volatile. There was further downward pressure on wholesale prices in the first part of the year followed by some recovery during the summer in prices and in the peak/off peak differentials for the 2003-2004 winter period. That recovery tailed off towards the end of the year with a considerable narrowing in the peak/off peak differentials which has continued during the first quarter of 2004. Compliance with First Hydro's bond financing documents is subject to market conditions for electric energy and ancillary services, which are beyond First Hydro's control.

Asia Pacific

Australia

The Loy Yang B plant and the Valley Power Peaker project sell 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 spot price each half-hour. To mitigate exposure to price volatility of the electricity traded into the pool, the Loy Yang B plant and the Valley Power Peaker project have entered into a number of financial hedges. The State Hedge agreement with the State Electricity Commission of Victoria is a long-term contractual arrangement based upon a fixed price commencing May 8, 1997 and terminating October 31, 2016. The State Government of Victoria, Australia guarantees the State Electricity Commission of Victoria's obligations under the State Hedge. From January 2003 to July 2014, approximately 77% of the Loy Yang B plant output sold is hedged under the State Hedge. From August 2014 to October 2016,

approximately 56% of the Loy Yang B plant output sold is hedged under the State Hedge. Additionally, the Loy Yang B plant and the Valley Power Peaker project have entered into a number of derivative contracts to mitigate further against price volatility inherent in the electricity pool. These contracts consist of fixed forward electricity contracts and/or cap contracts that expire on various dates through December 31, 2006.

New Zealand

Contact Energy generates about 30% of New Zealand's electricity and is the largest retailer of natural gas and electricity in New Zealand. A substantial portion of Contact Energy's generation output is matched with the demand of its retail electricity customers or sold through forward contracts with other wholesale electricity counterparties. The forward contracts and/or option contracts have varying terms that expire on various dates through June 30, 2010, although the majority of the forward contracts are short term (less than two years).

In May 2003, the New Zealand government announced that it would establish a new governance body to be known as the Electricity Commission along with a set of rules to govern the market. The Electricity Governance Regulations and Rules were finalized in 2003. The Regulations came into force on January 16, 2004, and the Rules came into force during February and March of 2004.

During the winter of 2003, wholesale electricity prices increased significantly in response to lower hydro inflows, higher demand and anticipated restrictions on the availability of thermal fuel. The New Zealand government responded by calling for nationwide energy savings in the order of 10%. Recent rains and anticipated snowmelt have largely improved the earlier conditions with wholesale electricity prices returning to more normal levels. The national energy savings program ended in July 2003.

However, there are ongoing concerns that new investment in generation has not been forthcoming and that there is a significant risk that similar events may arise in subsequent years. As a consequence the New Zealand government took the following steps:

•: the Electricity Commission has been given responsibility for managing dry year reserve, which it is undertaking through the procurement of reserve capacity; and
•: the Electricity Commission has been given additional reserve powers ranging from information disclosure to imposing hedge obligations on major users and generators.

The New Zealand government announced in July 2003 that it would purchase a new 155 MW power plant before winter 2004 to increase electricity security. The plant is to be situated at Whirinaki, Hawkes Bay. The Electricity Commission will include this plant in its portfolio of reserve energy. The Whirinaki plant, which is expected to be operational in May 2004, will be located on a site leased to the government from Contact Energy and will also be operated under contract by Contact Energy.

Credit Risk

In conducting EME's price risk management and trading activities, EME contracts with a number of utilities, energy companies and financial institutions, collectively referred to as counterparties. In the event a counterparty were to default on its trade obligation, EME would be exposed to the risk of possible loss associated with reselling the contracted product at a lower price if the non-performing counterparty were unable to pay the resulting liquidated damages owed to EME. Further, EME would be exposed to the risk of non-payment of accounts receivable accrued for products delivered prior to the time such counterparty defaulted.

To manage credit risk, EME looks at the risk of a potential default by counterparties. Credit risk is measured by the loss that would be incurred if counterparties failed to perform pursuant to the terms of their contractual obligations. EME measures, monitors and mitigates, to the extent possible, credit risk. To mitigate counterparty risk, master netting agreements are used whenever possible and counterparties may be required to pledge collateral when deemed necessary. EME also takes other appropriate steps to limit or lower credit exposure. Processes have also been established to determine and monitor the creditworthiness of counterparties. EME manages the credit risk on the portfolio based on credit ratings using published ratings of counterparties and other publicly disclosed information, such as financial statements, regulatory filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements including master netting agreements. A risk management committee regularly reviews the credit quality of EME's counterparties. Despite this, there can be no assurance that these efforts will be wholly successful in mitigating credit risk or that collateral pledged will be adequate.

EME measures credit risk exposure from counterparties of its merchant energy activities by the sum of: (i) 60 days of accounts receivable, (ii) current fair value of open positions, and (iii) a credit value at risk. EME's subsidiaries enter into master agreements and other arrangements in conducting price risk management and trading activities which typically provide for a right of setoff in the event of bankruptcy or default by the counterparty. Accordingly, EME's credit risk exposure from counterparties is based on net exposure under these agreements. At March 31, 2004, the credit ratings of EME's counterparties were as follows:

S&P Credit Rating	March 31, 2004
	(in millions)
A or higher	$	20
A-		13
BBB+		110
BBB		18
BBB-		3
Below investment grade		16

Total	$	180

Exelon Generation accounted for 14% and 19% of EME's consolidated operating revenues for the first quarters of 2004 and 2003, respectively. The percentage is less in the first quarter of 2004 because a smaller number of plants are subject to contracts with Exelon Generation. See "—Commodity Price Risk—Americas—Illinois Plants." Any failure of Exelon Generation to make payments under the power purchase agreements could adversely affect EME's results of operations and financial condition.

EME's contracted power plants and the plants owned by unconsolidated affiliates in which EME owns an interest sell power under long-term power purchase agreements. Generally, each plant sells its output to one counterparty. Accordingly, a default by a counterparty under a long-term power purchase agreement, including a default as a result of a bankruptcy, would likely have a material adverse affect on the operations of such power plant.

Interest Rate Risk

Interest rate changes affect the cost of capital needed to operate EME's projects. EME has mitigated the risk of interest rate fluctuations by arranging for fixed rate financing or variable rate financing with interest rate swaps, interest rate options or other hedging mechanisms for a number of its project financings. Interest expense included $15 million and $9 million of additional interest

expense for the three months ended March 31, 2004 and 2003, respectively, as a result of interest rate hedging mechanisms. EME has 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.

EME had short-term obligations of $36 million at March 31, 2004, consisting of promissory notes related to Contact Energy. The fair values of these obligations approximated their carrying values at March 31, 2004, and would not have been materially affected by changes in market interest rates. The fair market values of long-term fixed interest rate obligations are subject to interest rate risk. The fair market value of EME's total long-term obligations (including current portion) was $6.1 billion at March 31, 2004, compared to the carrying value of $6.0 billion.

Foreign Exchange Rate Risk

Fluctuations in foreign currency exchange rates can affect, on a U.S. dollar equivalent basis, the amount of EME's equity contributions to, and distributions from, its international projects. At times, EME has hedged a portion of its current exposure to fluctuations in foreign exchange rates through financial derivatives, offsetting obligations denominated in foreign currencies, and indexing underlying project agreements to U.S. dollars or other indices reasonably expected to correlate with foreign exchange movements. In addition, EME has used statistical forecasting techniques to help assess foreign exchange risk and the probabilities of various outcomes. EME cannot provide assurances, however, that fluctuations in exchange rates will be fully offset by hedges or that currency movements and the relationship between certain macroeconomic variables will behave in a manner that is consistent with historical or forecasted relationships.

The First Hydro plant in the U.K. and the plants in Australia have been financed in their local currencies, pounds sterling and Australian dollars, respectively, thus hedging the majority of their acquisition costs against foreign exchange fluctuations. Furthermore, EME has 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.

During the first three months of 2004, foreign currencies in the U.K., Australia and New Zealand increased in value compared to the U.S. dollar by 3%, 1% and 1%, respectively (determined by the change in the exchange rates from December 31, 2003 to March 31, 2004). The increase in value of these currencies was the primary reason for the foreign currency translation gain of $22 million during the first three months of 2004.

Contact Energy enters into foreign currency forward exchange contracts to hedge identifiable foreign currency commitments associated with transactions in the ordinary course of business. The contracts are primarily in Australian and U.S. dollars with varying maturities through February 2006. At March 31, 2004, the outstanding notional amount of the contracts totaled $18 million and the fair value of the contracts totaled $(2) thousand.

In addition, Contact Energy enters into cross currency interest rate swap contracts in the ordinary course of business. These cross currency swap contracts involve swapping fixed and floating-rate U.S. and Australian dollar loans into floating-rate New Zealand dollar loans with varying maturities through April 2018.

EME will continue to monitor its foreign exchange exposure and analyze the effectiveness and efficiency of hedging strategies in the future.

Fair Value of Financial Instruments

Non-Trading Derivative Financial Instruments

The following table summarizes the fair values for outstanding derivative financial instruments used for purposes other than trading by risk category and instrument type (in millions):

			March 31, 2004			December 31, 2003
Derivatives:
	Interest rate:
		Interest rate swap/cap agreements	$	(37	)	$	(29	)
		Interest rate options		(1	)		(1	)
	Commodity price:
		Electricity		(175	)		(126	)
	Foreign currency forward exchange agreements			(2	)		(2	)
	Cross currency interest rate swaps			(114	)		(91	)

In assessing the fair value of EME's non-trading derivative financial instruments, EME uses a variety of methods and assumptions based on the market conditions and associated risks existing at each balance sheet date. The fair value of commodity price contracts takes into account quoted market prices, time value of money, volatility of the underlying commodities and other factors. The following table summarizes the maturities, the valuation method and the related fair value of EME's commodity price risk management assets and liabilities as of March 31, 2004 (in millions):

	Total Fair Value			Maturity <1 year			Maturity 1 to 3 years		Maturity 4 to 5 years			Maturity >5 years
Prices actively quoted	$	(87	)	$	(87	)	$	—	$	—		$	—
Prices based on models and other valuation methods		(88	)		29			27		(13	)		(131	)

Total	$	(175	)	$	(58	)	$	27	$	(13	)	$	(131	)

The fair value of the electricity rate swap agreements (included under commodity price-electricity) entered into by the Loy Yang B plant and the First Hydro plant has been estimated by discounting the future net cash flows resulting from the difference between the average aggregate contract price per MW and a forecasted market price per MW multiplied by the number of MW remaining to be sold under the contract.

Energy Trading Derivative Financial Instruments

EME's risk management and trading operations are conducted by its subsidiary, Edison Mission Marketing & Trading. As a result of a number of industry and credit-related factors, Edison Mission Marketing & Trading has minimized its price risk management and trading activities not related to EME's power plants or investments in energy projects. To the extent Edison Mission Marketing & Trading engages in trading activities, Edison Mission Marketing & Trading seeks to manage price risk and to create stability of future income by selling electricity in the forward markets and, to a lesser degree, to generate profit from price volatility of electricity and fuels by buying and selling these commodities in wholesale markets. EME generally balances forward sales and purchase contracts and manages its exposure through a value at risk analysis as described under "—Commodity Price Risk."

The fair value of the commodity financial instruments related to energy trading activities as of March 31, 2004 and December 31, 2003, are set forth below (in millions):

	March 31, 2004				December 31, 2003
	Assets		Liabilities		Assets		Liabilities
Electricity	$	107	$	14	$	104	$	11
Other		—		1		—		1

Total	$	107	$	15	$	104	$	12

The change in the fair value of trading contracts for the quarter ended March 31, 2004, was as follows (in millions):

Fair value of trading contracts at January 1, 2004	$	92
Net gains from energy trading activities		1
Amount realized from energy trading activities		(1	)

Fair value of trading contracts at March 31, 2004	$	92

Quoted market prices are used to determine the fair value of the financial instruments related to energy trading activities, except for the power sales agreement with an unaffiliated electric utility that EME's subsidiary purchased and restructured and a long-term power supply agreement with another unaffiliated party. EME's subsidiary recorded these agreements at fair value based upon a discounting of future electricity prices derived from a proprietary model using a discount rate equal to the cost of borrowing the non-recourse debt incurred to finance the purchase of the power supply agreement. The following table summarizes the maturities, the valuation method and the related fair value of energy trading assets and liabilities (as of March 31, 2004) (in millions):

	Total Fair Value		Maturity <1 year			Maturity 1 to 3 years		Maturity 4 to 5 years		Maturity >5 years
Prices actively quoted	$	—	$	—		$	—	$	—	$	—
Prices based on models and other valuation methods		92		(3	)		6		5		84

Total	$	92	$	(3	)	$	6	$	5	$	84

Regulatory Matters

For a discussion of EME's regulatory matters, refer to "Regulatory Matters" on page 24 of EME's annual report on Form 10-K for the year ended December 31, 2003. There have been no significant developments with regard to regulatory matters that affect disclosures presented in the annual report, except as follows:

Commonwealth Edison's application to join PJM was finally approved by the Federal Energy Regulatory Commission, or the FERC, on April 27, 2004, with an effective date for integration set for May 1, 2004.

On March 19, 2004, in a separate but related matter, the FERC issued another order having the effect of postponing to December 1, 2004 the effective date for elimination of regional through and out rates in the region encompassed by PJM (as expanded by the addition of Commonwealth Edison and as to be further expanded by the addition of AEP) and the MISO. The effect of this order is that

so-called rate pancaking was not eliminated prior to Commonwealth Edison's integration into PJM, nor will it be eliminated prior to AEP's scheduled date for integration into PJM. Rate pancaking occurs when energy must move through multiple, separately priced transmission systems to travel from its point of production to its point of delivery, and each transmission owner along the line charges separately for the use of its system. Accordingly, Midwest Generation will continue to have to pay transmission charges for power sold for delivery outside of Commonwealth Edison's former control area, now known under PJM as PJM's Northern Illinois Control Area, or NICA. The FERC included in its order a strong statement that the existing through and out rates must be eliminated no later than December 1, 2004.

On March 24, 2004, the FERC, in another order, rejected a proposal by PJM for certain market mitigation procedures to be applied to the new NICA. On April 23, 2004, PJM filed a request for rehearing of one aspect of the March 24 order and an "Explanation" relating to another aspect of such order, and supplemented its filing on April 26, 2004. EME and Midwest Generation have filed a motion for a procedural schedule that will allow 30 days for EME and Midwest Generation to prepare and submit analyses responding to PJM's filings. It is not possible at this time to predict the outcome of this matter or the impact of the market monitor's proposed mitigation measures should they or some form of them be adopted.

Apart from the uncertainties regarding the market mitigation issues discussed previously, the direct impact on Midwest Generation of the above-described matters will for the most part be limited to the delay in the elimination of regional through and out rates. This is not expected to have a material effect on Midwest Generation's financial results with respect to the period between the May 1, 2004 integration of Commonwealth Edison and the mandated elimination of the through and out rates on December 1, 2004. The impact on power prices in the new NICA and in the surrounding bilateral markets by reason of the islanded integration of Commonwealth Edison is difficult to predict, but it is not currently anticipated that it will have a material effect upon Midwest Generation's financial results in the period prior to the integration of AEP into PJM, currently scheduled for October 1, 2004.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of market risk sensitive instruments, refer to "Market Risk Exposures" on page 106 of EME's annual report on Form 10-K for the year ended December 31, 2003. Refer to "Market Risk Exposures" in Item 2 for an update to that disclosure.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

EME's management, with the participation of the company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of EME's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, EME's disclosure controls and procedures are effective.

Internal Control Over Financial Reporting

There have not been any changes in EME's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, EME's internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit No.		Description
3.1		Certificate of Incorporation of Edison Mission Energy, dated August 14, 2001, incorporated by reference to Exhibit 3.1 to Edison Mission Energy's Form 8-K dated October 26, 2001.
3.1.1		Certificate of Amendment to the Certificate of Incorporation of Edison Mission Energy dated May 4, 2004.
3.2		By-laws of Edison Mission Energy amended May 4, 2004.
10.1		Edison Mission Energy BV Sale Incentive Plan, effective as of February 19, 2004.
10.2		Edison Mission Energy BV Sale Severance Plan, effective as of February 19, 2004.
10.3		Edison Mission Energy BV Sale Incentive Plan - Australia, effective as of February 19, 2004.
10.4		Edison Mission Energy BV Sale Retention Plan - Australia, effective as of February 19, 2004.
10.5		Edison Mission Energy BV Sale Severance Plan - Australia, effective as of February 19, 2004.
10.6		Edison Mission Energy BV Sale Incentive Plan - Singapore, effective as of February 19, 2004.
10.7		Edison Mission Energy BV Sale Retention Plan - Singapore, effective as of February 19, 2004.
10.8		Edison Mission Energy BV Sale Severance Plan - Singapore, effective as of February 19, 2004.
10.9		Edison Mission Energy BV Sale Incentive Plan - UK, effective as of February 19, 2004.
10.10		Edison Mission Energy BV Sale Retention Plan - UK, effective as of February 19, 2004.
10.11		Edison Mission Energy BV Sale Severance Plan - UK, effective as of February 19, 2004.
10.12		Terms and conditions for 2004 long-term compensation awards under the Equity Compensation Plan and the 2000 Equity Plan, incorporated by reference to Exhibit 10.1 to Edison International's Form 10-Q for the quarter ended March 31, 2004 (File No. 1-9936).
10.13		Credit Agreement, dated as of April 27, 2004, among Edison Mission Energy, the Lenders referred to therein, the Issuing Lenders referred to therein and Citicorp North America, Inc., as Administrative Agent for the Lenders and the Issuing Lenders party thereto.
10.14		Security Agreement, dated as of April 27, 2004, between Edison Mission Energy and Citicorp North America, Inc., as Administrative Agent.

10.15		Reimbursement Agreement, dated as of October 26, 2001, between Edison Mission Energy and Midwest Generation, LLC.
31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
32		Statement Pursuant to 18 U.S.C. Section 1350.
99.1		Homer City Facilities Funds Flow From Operations for the twelve months ended March 31, 2004.
99.2		Illinois Plants Funds Flow From Operations for the twelve months ended March 31, 2004.

(b) Reports on Form 8-K

Date of Report		Date Filed		Item(s) Reported
January 7, 2004		January 8, 2004		5
February 26, 2004		February 26, 2004		12	*

*: The February 26, 2004 Form 8-K reporting events under Item 12 are furnished under Item 12 and shall not be deemed to be "filed" for purposes of the Securities and Exchange Act of 1934, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EDISON MISSION ENERGY (REGISTRANT)
		By:		/s/ Kevin M. Smith Kevin M. Smith Senior Vice President, Chief Financial Officer and Treasurer
		Date:		May 7, 2004

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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, Unaudited)
EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands, Unaudited)
EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, Unaudited)
EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, Unaudited)
EDISON MISSION ENERGY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 (Dollars in millions, Unaudited)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES
EX-3.1.1 2 a2135451zex-3_11.htm EXHIBIT 3.1.1

Exhibit 3.1.1

CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
EDISON MISSION ENERGY

Pursuant to Section 242 of the General Corporation Law of the State of Delaware

Edison Mission Energy, a Delaware corporation (hereinafter called the "Corporation") does hereby certify as follows:

FIRST: Article SIXTH of the Corporation's Certificate of Incorporation is hereby amended to read in its entirety as set forth below:

SIXTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

(1) The business and affairs of the Corporation shall be managed by or under the direction of the board of directors of the Corporation (the "Board of Directors").

(2) The directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the Corporation.

(3) The number of directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws so provide.

(4) The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent permissible under Delaware law.

(5) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are herby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-Laws adopted by the stockholder; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had been adopted.

(6) Notwithstanding any other provision of this Certificate of Incorporation or applicable law, the Corporation shall not, without the approval of the shareholders of the Corporation, take any action or omit to take any action, either directly or indirectly, that under the Indenture, dated as of July 2, 2001, by and between Mission Energy Holding Company, a Delaware corporation and sole shareholder of the Corporation, and Wilmington Trust Company, as trustee, or under the Amended and Restated Credit Agreement, dated as of July 3, 2001, by and among Mission Energy Holding Company, as borrower, the lenders named therein, and Goldman Sachs Credit Partners L.P. (or any successor thereto), as the lead arranger, Mission Energy Holding Company has agreed the Corporation would not take or omit, or Mission Energy Holding Company has agreed it would not cause or permit the Corporation to take or to omit.

(7) Shares of the stock of this Corporation owned by its subsidiaries shall not be entitled to vote on any matter at any meeting of stockholders or any adjournment thereof.

SECOND: The foregoing amendment was duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware pursuant to an action without meeting of stockholders in accordance with Section 228 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, Edison Mission Energy has caused this Certificate to be duly executed in its corporate name this 4th day of May, 2004.

		EDISON MISSION ENERGY
		By:	/s/ RAYMOND W. VICKERS
		Name:	Raymond W. Vickers
		Title:	Senior Vice President and General Counsel

EX-3.2 3 a2135451zex-3_2.htm EXHIBIT 3.2
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Exhibit 3.2

BY-LAWS

EDISON MISSION ENERGY

MAY 4, 2004

EDISON MISSION ENERGY

INDEX

Article I—Offices
	Section 1.1	Principal Executive Office.	1
	Section 1.2	Other Offices.	1
Article II—Stockholders
	Section 2.1	Meeting Locations.	1
	Section 2.2	Annual Meetings.	1
	Section 2.3	Special Meetings.	1
	Section 2.4	Notice of Annual or Special Meeting.	2
	Section 2.5	Quorum; Adjournment.	2
	Section 2.6	Adjourned Meeting and Notice Thereof.	3
	Section 2.7	Voting.	3
	Section 2.8	Record Date.	4
	Section 2.9	Consent of Absentees; Waiver of Notice.	4
	Section 2.10	Action Without Meeting.	4
	Section 2.11	Proxies.	5
Article III—Directors
	Section 3.1	Powers.	5
	Section 3.2	Number of Directors.	5
	Section 3.3	Election and Term of Office.	5
	Section 3.4	Vacancies.	6
	Section 3.5	Place of Meeting.	6
	Section 3.6	Organization Meeting.	6
	Section 3.7	Special Meetings.	6
	Section 3.8	Quorum.	7
	Section 3.9	Participation in Meetings by Conference Telephone.	7
	Section 3.10	Waiver of Notice.	7
	Section 3.11	Adjournment.	7
	Section 3.12	Fees and Compensation.	7
	Section 3.13	Action Without Meeting.	7
Article IV—Officers
	Section 4.1	Officers.	8
	Section 4.2	Election.	8
	Section 4.3	Eligibility of Chairman of the Board, Vice Chairman of the Board or President.	8
	Section 4.4	Removal and Resignation.	8
	Section 4.5	Appointment of Other Officers.	8
	Section 4.6	Vacancies.	8
	Section 4.7	Salaries.	8
	Section 4.8	Chairman of the Board.	9
	Section 4.9	Vice Chairman of the Board.	9
	Section 4.10	President.	9
	Section 4.11	Vice President.	9
	Section 4.12	Chief Operating Officer.	9
	Section 4.13	General Manager.	9
	Section 4.14	Chief Financial Officer.	9
	Section 4.15	General Counsel.	10
	Section 4.16	Assistant General Counsel.	10
	Section 4.17	Controller.	10
	Section 4.18	Secretary.	10
	Section 4.19	Assistant Secretary.	10

	Section 4.20	Secretary Pro Tempore.	10
	Section 4.21	Treasurer.	10
	Section 4.22	Assistant Treasurer.	11
	Section 4.23	Performance of Duties.	11
Article V—Other Provisions
	Section 5.1	Inspection of By-laws.	11
	Section 5.2	Contracts and Other Instruments, Loans, Notes and Deposit of Funds.	11
	Section 5.3	Representation of Shares of Other corporations.	11
	Section 5.4	Fiscal Year and Subdivisions.	12
	Section 5.5	Record Owners.	12
	Section 5.6	Construction and Definitions.	12
Article VI—Indemnification
	Section 6.1	Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the corporation	12
	Section 6.2	Power to Indemnify in Actions, Suibts or Proceedings by or in the Right of the Corporation	12
	Section 6.3	Authorization of Indemnification	13
	Section 6.4	Good Faith Defined	13
	Section 6.5	Indemnification by a Court	13
	Section 6.6	Expenses Payable in Advance	13
	Section 6.7	Indemnification of Employees and Agents	14
	Section 6.8	Right of Directors and Officers to Bring Suit.	14
	Section 6.9	Successful Defense.	14
	Section 6.10	Nonexclusivity of Rights.	14
	Section 6.11	Survival of Indemnification and Advancement of Expenses	14
	Section 6.12	Limitation on Indemnification	15
	Section 6.13	Insurance.	15
	Section 6.14	Expenses as a Witness.	15
	Section 6.15	Indemnity Agreements.	15
	Section 6.16	Severability.	15
	Section 6.17	Certain Definitions	16
	Section 6.18	Effect of Repeal or Modification.	16
Article VII—Amendments
	Section 7.1	Amendments.	16

BY-LAWS

By-laws for the regulation, except
as otherwise provided by statute
or its Certificate of Incorporation

EDISON MISSION ENERGY

ADOPTED AS OF AUGUST 15, 2001

Article I—Offices

Section 1.1 Principal Executive Office.

The principal executive office of the corporation is hereby fixed and located at 18101 Von Karman Avenue, Suite 1700, in the City of Irvine, County of Orange, State of California. The Board of Directors ("the Board") is hereby granted full power and authority to change the principal executive office from one location to another.

Section 1.2 Other Offices.

Branches or subordinate offices may be established at any time by the Board of Directors or the President at any place within or without the State of California.

Article II—Stockholders

Section 2.1 Meeting Locations.

All meetings of stockholders shall be held at the principal executive office, or at such other office or places within or without the State of Delaware as may be designated by either the Board or by the person or persons giving notice of the meeting pursuant to Section 2.4.

Section 2.2 Annual Meetings.

The annual meeting of stockholders shall be held on the 1st Tuesday in the month of May of each year, at the hour of 2:00 p.m. on said day, or at such other time on such other day as shall be fixed by the Board, to elect directors to hold office for the year next ensuing and until their successors shall be elected, and to consider and act upon such other matters as may lawfully be presented to such meeting; provided, however, that should said day fall upon a legal holiday observed by this corporation, then any such annual meeting of stockholders shall be held at the same time and place on the next day thereafter ensuing which is a full business day.

Section 2.3 Special Meetings.

Special meetings of the stockholders may be called at any time by the Board, the Chairman of the Board, the Vice Chairman of the Board, the President, the Executive Vice President, the Senior Vice President, or the holders of shares entitled to cast not less than ten percent of the votes at such meeting. Upon written request to the Chairman of the Board, the Vice Chairman of the Board, the President, the Executive Vice President, the Senior Vice President, the Secretary or Assistant Secretary by any person entitled to call a special meeting of stockholders, the officer forthwith shall cause notice to be given to the stockholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty-five nor more than sixty days after the receipt of the request. If the notice is not given within twenty days after receipt of the request, the persons entitled to call the meeting may give the notice.

Section 2.4 Notice of Annual or Special Meeting.

Written notice of each annual or special meeting of stockholders shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote thereat. Such notice shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and (i) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (ii) in the case of the annual meeting, those matters which the Board, at the time of the mailing of the notice, intends to present for action by the stockholders, but subject to the provisions of applicable law, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the name of nominees intended at the time of the notice to be presented by the Board for election.

Notice of a stockholders' meeting or any report to the stockholders shall be given either personally to the recipient or to a person in the office of the recipient or by first-class United States mail, by private mail or messenger service, by telephone facsimile transmission, or by any other means of written communication, addressed to the stockholder at the address of such stockholder appearing on the books of the corporation or given by the stockholder to the corporation for the purpose of notice; or if no such address appears or is given, at the place where the principal executive office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. Such notice or report shall be deemed to have been given at the time when delivered personally, deposited in the United States mail or sent by private mail or messenger service, by telephone facsimile transmission or sent by any other means of written or electronic communication. Notice to stockholders may also be given by a form of electronic transmission if consented to by the stockholders to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed to be revoked (i) if the corporation is unable to deliver by electronic transmission two consecutive notices by the corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or Assistant Secretary of the corporation or other person responsible for the giving of notice; provided, however, that the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given by electronic transmission shall be deemed given (i) if by facsimile, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) by any other form of electronic transmission, when directed to the stockholder.

Section 2.5 Quorum; Adjournment.

(a) A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of the stockholders.

(b) Except as provided in subsection (c) below, the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by the certificate of incorporation of the corporation, as it may be amended or restated from time to time (the "Certificate of Incorporation").

(c) The stockholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough stockholders

to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

(d) In the absence of a quorum, any meeting of stockholders may be adjourned from time to time by the vote of a majority of the shares represented either in person or by proxy, but no other business may be transacted, except as provided in subsection (c) above.

Section 2.6 Adjourned Meeting and Notice Thereof.

Any stockholders' meeting, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy thereat, but in the absence of a quorum (except as permitted by applicable law in the case of withdrawals by stockholders to reduce the number remaining to less than a quorum) no other business may be transacted at such meeting.

Notice need not be given of any such adjourned meeting if the time and place, if any, thereof and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting in the manner provided by Section 2.4.

Section 2.7 Voting.

The stockholders entitled to notice of any meeting or to vote at any such meeting shall be only persons in whose name shares stand on the stock records of the corporation on the record date determined in accordance with Section 2.8.

Voting shall in all cases be subject to the provisions of the Delaware General corporation Law (the "DGCL") and the Certificate of Incorporation. Without limiting the generality of the foregoing sentence:

(a) Shares standing in the name of another corporation, domestic or foreign, may be voted by an officer, agent, or proxyholder as the By-laws of the other corporation may prescribe or, in the absence of such provision, as the Board of the other corporation may determine or, in the absence of that determination, by the chairman of the board, president or any vice president of the other corporation, or by any other person authorized to do so by the chairman of the board, president, or any vice president of the other corporation. Shares which are purported to be voted or any proxy purported to be executed in the name of a corporation (whether or not any title of the person signing is indicated) shall be presumed to be voted or the proxy executed in accordance with the provisions of the DGCL, unless the contrary is shown.

(b) Shares of this corporation owned by its subsidiary shall not be entitled to vote on any matter.

(c) Shares of this corporation held by this corporation in a fiduciary capacity, and shares of this corporation held in a fiduciary capacity by its subsidiary, shall not be entitled to vote on any matter, except as follows: (i) to the extent that the settlor or beneficial owner possesses and exercises a right to vote or to give this corporation binding instructions as to how to vote such shares; or (ii) where there are one or more co-trustees who are not affected by the prohibition of this subsection, in which case the shares may be voted by the co-trustees as if it or they are the sole trustees.

Section 2.8 Record Date.

The Board may fix, in advance, a record date for the determination of the stockholders entitled to notice of any meeting or to vote, entitled to consent to corporate action in writing or by electronic transmission without a meeting, or entitled to receive payment of any dividend or other distribution, or any allotment of any rights or entitled to exercise any rights, in respect of any other lawful action. The record date so fixed shall be not more than sixty days nor less than ten days prior to the date of the meeting nor more than sixty days prior to any other action. When a record date is so fixed, only stockholders of record at the close of business on that date are entitled to notice of and to vote at the meeting or to receive the dividend, distribution, or allotment of rights, or to exercise the rights, as the case may be, notwithstanding any transfer of shares on the books of the corporation after the record date, except as otherwise provided by law or these By-laws.

Section 2.9 Consent of Absentees; Waiver of Notice.

The transactions of any meeting of stockholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice (or provides a waiver thereof by electronic transmission) or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this division to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of stockholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the Certificate of Incorporation or these By-laws, except as provided in the DGCL.

Section 2.10 Action Without Meeting.

Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of stockholders of the corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing or by electronic transmission, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its principal place of business or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this Section 2.10 to the corporation, written consents signed by a sufficient number of holders to take action are delivered to the corporation by delivery to its principal place of business or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the corporation as provided above in this section.

Section 2.11 Proxies.

Every person entitled to vote shares has the right to do so either in person or by one or more persons authorized by a written proxy executed by such stockholder and filed with the Secretary. No proxy shall be valid after the expiration of three (3) years from the date thereof, unless otherwise provided in the proxy.

Article III—Directors

Section 3.1 Powers.

Subject to any limitations of the Certificate of Incorporation, of these By-laws and of the DGCL relating to action required to be approved by the stockholders, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board. The Board may delegate the management of the day-to-day operation of the business of the corporation provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Board shall have the following powers in addition to the other powers enumerated in these By-laws:

(a) To select and remove all the other officers, agents and employees of the corporation, prescribe the powers and duties for them as may not be inconsistent with law, with the Certificate of Incorporation or these By-laws, fix their compensation and require from them security for faithful service.

(b) To conduct, manage and control the affairs and business of the corporation and to make such rules and regulations therefor not inconsistent with law, or with the Certificate of Incorporation or these By-laws, as they may deem best.

(c) To adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time as in their judgment they deem best.

(d) To authorize the issuance of shares of stock of the corporation from time to time, upon such terms and for such consideration as may be lawful.

(e) To borrow money and incur indebtedness for the purposes of the corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidences of debt and securities therefor.

Section 3.2 Number of Directors.

The authorized number of directors shall not be less than three (3) nor more than six (6) until changed by amendment of the Certificate of Incorporation or by a By-law duly adopted by the stockholders. The exact number of directors shall be fixed, within the limits specified, by the Board or the stockholders in the same manner provided in these By-laws for the amendment thereof. The exact number of authorized directors shall be three (3) until changed as provided in these By-laws.

Section 3.3 Election and Term of Office.

The directors shall be elected at each annual meeting of the stockholders, but if any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of stockholders held for that purpose. Each director shall hold office until the next annual meeting and until a successor has been elected and qualified, or until such director's earlier death, resignation or removal.

Section 3.4 Vacancies.

Any director may resign effective upon giving written notice to the Chairman of the Board, the Vice Chairman of the Board, the President, the Secretary, or the Board, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

Unless otherwise required by law or the Certificate of Incorporation, vacancies in the Board may be filled by a majority of the remaining directors, whether or not less than a quorum, or by a sole remaining director, and each director so elected shall hold office until the next annual meeting and until such director's successor has been elected and qualified.

A vacancy or vacancies in the Board shall be deemed to exist in case of the death, resignation or removal of any director, or if the authorized number of directors be increased, or if the stockholders fail, at any annual or special meeting of stockholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at that meeting.

The stockholders may elect a director or directors at any time to fill any vacancy not filled by the directors. Any such election by written consent requires the consent of holders of a majority of the outstanding capital stock entitled to vote. If the Board accepts the resignation of a director tendered to take effect at a future time, the Board or the stockholders shall have power to elect a successor to take office when the resignation is to become effective.

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of the director's term of office.

Section 3.5 Place of Meeting.

Regular or special meetings of the Board shall be held at any place within or without the State of Delaware which has been designated from time to time by the Board or as provided in these By-laws. In the absence of such designation, regular meetings shall be held at the principal executive office of the corporation.

Section 3.6 Organization Meeting.

Promptly following each annual meeting of stockholders, the Board shall hold a regular meeting for the purpose of organization, election of officers and the transaction of other business.

Section 3.7 Special Meetings.

Special meetings other than organization meetings of the Board for any purpose or purposes may be called at any time by the Chairman of the Board, the Vice Chairman of the Board, the President, any Executive Vice President, any Senior Vice President, the Secretary, an Assistant Secretary or by any two directors.

Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone, telegram or other electronic means on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Any such notice shall be addressed or delivered to each director at such director's address as it is shown upon the records of the corporation or as may have been given to the corporation by the director for purposes of notice or, if such address is not shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. The notice need not specify the purpose of such meeting.

Notice by first-class mail shall be deemed to have been given at the time a written notice is deposited in the United States mail, postage prepaid or sent by private mail or messenger service. Any

other written notice shall be deemed to have been given at the time it is personally delivered to the recipient, to a person in the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient, delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means to the recipient. Oral notice shall be deemed to have been given at the time it is communicated, in person, by telephone to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient.

Section 3.8 Quorum.

At all meetings of the Board, one-third of the maximum number of authorized directors constitutes a quorum of the Board, except to adjourn as provided in Section 3.11 of this Article. As defined in Section 3.2 of this Article, the maximum number of authorized directors is six. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board, unless a greater number is required by law or by the Certificate of Incorporation; provided, however, that a meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

Section 3.9 Participation in Meetings by Conference Telephone.

Members of the Board may participate in a meeting of the Board through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Such participation constitutes presence in person at such meeting.

Section 3.10 Waiver of Notice.

The transactions of any meeting of the Board, however called and noticed or wherever held, are as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice (or provides a waiver thereof by electronic transmission), a consent to holding such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 3.11 Adjournment.

A majority of the directors present, whether or not a quorum is present, may adjourn any directors' meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place is fixed at the meeting adjourned. If the meeting is adjourned for more than twenty-four hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment.

Section 3.12 Fees and Compensation.

Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by the Board.

Section 3.13 Action Without Meeting.

Unless otherwise provided by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if all of the members of the Board consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmissions are filed with the minutes of proceedings of the Board. Such written consent or consents, in writing or by electronic transmission, shall have the same force and effect as a unanimous vote of the Board.

Article IV—Officers

Section 4.1 Officers.

The officers of the corporation shall be a Chairman of the Board, a Vice Chairman of the Board, a President, a Vice President, a Chief Financial Officer, a Controller, a Secretary and a Treasurer. The corporation may also have, at the discretion of the Board, one or more additional Vice Presidents, a Chief Operating Officer, a General Manager, a General Counsel, one or more Assistant General Counsels, one or more Assistant Controllers, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 4.5 of this Article.

Section 4.2 Election.

The officers of the corporation, except such officers as may be elected or appointed in accordance with the provisions of Section 4.5 or Section 4.6 of this Article, shall be chosen annually by, and shall serve at the pleasure of the Board, and shall hold their respective offices until their resignation, removal, or other disqualification from service, or until their respective successors shall be elected.

Section 4.3 Eligibility of Chairman of the Board, Vice Chairman of the Board or President.

No person shall be eligible for the office of Chairman of the Board, Vice Chairman of the Board or President unless such person is a member of the Board of the corporation; any other officer may or may not be a director.

Section 4.4 Removal and Resignation.

Any officer may be removed, either with or without cause, by the Board at any time or by any officer upon whom such power of removal may be conferred by the Board. Any such removal shall be without prejudice to the rights, if any, of the officer under any contract of employment of the officer.

Any officer may resign at any time by giving written notice to the corporation, but without prejudice to the rights, if any, of the corporation under any contract of employment to which the officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 4.5 Appointment of Other Officers.

The Board may appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in the By-laws or as the Board may from time to time determine. Notwithstanding the job title for such person, no employee or other representative of this corporation shall be an officer of this corporation unless elected by the Board.

Section 4.6 Vacancies.

A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these By-laws for regular election or appointment to such office.

Section 4.7 Salaries.

The salaries of the Chairman of the Board, Vice Chairman of the Board, President, General Manager, Vice Presidents, Controller, Treasurer and Secretary of the corporation shall be fixed by the Board. Salaries of all other officers shall be approved from time to time by the chief executive officer.

Section 4.8 Chairman of the Board.

The Chairman of the Board, if there shall be such an officer, shall preside at all meetings of the Board, and shall exercise such powers and perform such duties as from time to time may be conferred upon or assigned to him by the Board or the By-laws.

Section 4.9 Vice Chairman of the Board.

The Vice Chairman of the Board, if there shall be such an officer, shall perform such of the duties of the Chairman of the Board as the Chairman of the Board shall designate, and, in the absence of the Chairman of the Board, shall perform the duties of the Chairman of the Board.

Section 4.10 President.

Subject to such supervisory powers, if any, as may be given by the Board to the Chairman of the Board or Vice Chairman of the Board, the President shall be the chief executive officer of the corporation and has, subject to the control of the Board, general supervision, direction, and control of the business and affairs of the corporation. The President shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board or Vice Chairman of the Board, or if there be neither, at all meetings of the Board. The President has the general powers and duties of management usually vested in the office of president of a corporation and has such other powers and duties as may be prescribed by the Board or the By-laws. The President may designate from time to time the titles which the employees or other representatives of this corporation shall use, including the appointment of agent for service of process. Without limiting the foregoing, the President may designate one or more employees as regional vice-presidents.

Section 4.11 Vice President.

In the absence or disability of the President, the Vice Presidents in order of their rank shall perform all the duties of the President and when so acting shall have all the powers of, and be subject to all the restrictions upon the President. The Board of Directors may establish the order of rank of the Vice Presidents. In the absence of such ranking, the Vice Presidents shall be ranked as follows: Executive Vice President (if any), Senior Vice President (if any). Vice Presidents holding identical titles shall be ranked in order of election to that office by the Board.

Section 4.12 Chief Operating Officer.

The Chief Operating Officer, if there shall be such an officer, must be a vice president of the corporation and shall be subject to the exercise of the general powers of supervision, direction and control of the business and officers of the corporation by the President, and supervise the operations of the corporation.

Section 4.13 General Manager.

The General Manager, if there shall be such an officer, must be a vice president of the corporation and shall, subject to the exercise of the general powers of supervision, direction and control by the President, or the Chief Operating Officer, if any, shall manage the operations of the corporation. In the absence of the Chief Operating Officer, the General Manager shall perform all the duties of the Chief Operating Officer and when so acting shall have all the powers of, and be subject to, all the restrictions upon the Chief Operating Officer.

Section 4.14 Chief Financial Officer.

The Chief Financial Officer of the corporation shall be the chief consulting officer in all matters of financial import, and shall have control over all financial matters concerning the corporation. If the corporation does not have a currently elected and acting Controller, the Chief Financial Officer shall also be the chief accounting officer of the corporation.

Section 4.15 General Counsel.

The General Counsel shall be the chief consulting officer of the corporation in all legal matters and, subject to the President, shall have control over all matters of legal import concerning the corporation.

Section 4.16 Assistant General Counsel.

One or more Assistant General Counsels, if any, shall perform such of the duties of the General Counsel as the General Counsel may designate, and in the absence or disability of the General Counsel, any Assistant General Counsel, in order of election to that office by the Board, shall perform the duties of the General Counsel.

Section 4.17 Controller.

The Controller shall be the chief accounting officer of the corporation and shall have control over all accounting matters concerning the corporation and shall perform such other duties as the Board or the President shall designate.

Section 4.18 Secretary.

The Secretary shall keep or cause to be kept, at the principal executive office and such other place as the Board may order, a book of minutes of all meetings of the stockholders, the Board, and its committees, and a share register or a duplicate share register.

The Secretary shall give, or cause to be given, notice of all the meetings of the stockholders and of the Board and any committees thereof required by the By-laws or by law to be given, shall keep the seal of the corporation in safe custody, shall from time to time issue such corporate secretarial certificates as may be required for the business and affairs of the corporation, and shall have such other general powers and duties of management usually vested in the office of secretary of a corporation and as may be prescribed by the Board, the President or the By-laws.

Section 4.19 Assistant Secretary.

One or more Assistant Secretaries, if any, shall perform such of the duties of the Secretary as the Secretary shall designate, and in the absence or disability of the Secretary, any Assistant Secretary, in order of election to that office by the Board, shall perform the duties of the Secretary.

Section 4.20 Secretary Pro Tempore.

At any meeting of the Board or of the stockholders from which the Secretary and Assistant Secretary are absent, a Secretary pro tempore may be appointed by the Board or stockholders as appropriate and act.

Section 4.21 Treasurer.

The Treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation. The books of account shall at all times be open to inspection by any director.

The Treasurer shall deposit, or cause to be deposited, all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board pursuant to Section 5.2. The Treasurer shall disburse or cause to be disbursed, the funds of the corporation as may be ordered by the President or the Chief Financial Officer, shall render to the President, the Chief Financial Officer or the directors, whenever they request it, an account of all transactions as Treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board or the By-laws.

Section 4.22 Assistant Treasurer.

One or more Assistant Treasurers, if any, shall perform such of the duties of the Treasurer as the Treasurer shall designate, and in the absence or disability of the Treasurer, any Assistant Treasurer, in order of election to that office by the Board, shall perform the duties of the Treasurer.

Section 4.23 Performance of Duties.

Officers shall perform the duties of their respective offices as stated in these By-laws, and such additional duties as the Board shall designate.

Article V—Other Provisions

Section 5.1 Inspection of By-laws.

The corporation shall keep in its principal executive office the original or a copy of these By-laws, as amended to date, which shall be open to inspection by stockholders at all reasonable times during office hours.

Section 5.2 Contracts and Other Instruments, Loans, Notes and Deposit of Funds.

The Chairman of the Board, the Vice Chairman of the Board, the President and any Vice President of this corporation, either alone or with the Secretary or an Assistant Secretary, shall execute in the name of the corporation such written instruments as may be authorized by the Board and, without special direction of the Board, such instruments as transactions of the ordinary business of the corporation may require and, such officers without the special direction of the Board may authenticate, attest or countersign any such instruments when deemed appropriate. The Board may authorize any person, persons, entity, entities, attorney, attorneys, attorney-in-fact, attorneys-in-fact, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by resolution of the Board as it may direct. Such authority may be general or confined to specific instances.

All checks, drafts, or other similar orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as the Board, Chief Executive Officer, Chief Financial Officer or Treasurer may direct.

Unless authorized by the Board or these By-laws, no officer, agent, employee or any other person or persons shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or amount.

All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies, or other depositories as the Board may direct.

Section 5.3 Representation of Shares of Other corporations.

The President or any other officer or officers authorized by the Board or the President are each authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the corporation. The authority herein granted may be exercised either by any such officer in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officer.

Section 5.4 Fiscal Year and Subdivisions.

The calendar year shall be the corporate fiscal year of the corporation. For the purpose of paying dividends, for making reports and for the convenient transaction of the business of the corporation, the Board may divide the fiscal year into appropriate subdivisions.

Section 5.5 Record Owners.

The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law.

Section 5.6 Construction and Definitions.

Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the DGCL shall govern the construction of these By-laws.

Article VI—Indemnification

Section 6.1 Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation. Subject to Section 6.3 of this Article, the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person's conduct was unlawful.

Section 6.2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the corporation. Subject to Section 6.3 of this Article VI, the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or is or was a director or officer of the corporation serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged or found to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case,

such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Section 6.3 Authorization of Indemnification. Any indemnification under this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 6.1 or Section 6.2 of this Article, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the corporation. To the extent, however, that a present or former director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.

Section 6.4 Good Faith Defined. For purposes of any determination under Section 6.3 of this Article, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person's conduct was unlawful, if such person's action is based on the records or books of account of the corporation or another enterprise, or on information supplied to such person by the officers of the corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the corporation or another enterprise or on information or records given or reports made to the corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the corporation or another enterprise. The term "another enterprise" as used in this Section 6.4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the corporation as a director, officer, employee or agent. The provisions of this Section 6.4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 6.1 or 6.2 of this Article, as the case may be.

Section 6.5 Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 6.3 of this Article, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery in the State of Delaware for indemnification to the extent otherwise permissible under Sections 6.1 and 6.2 of this Article. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standards of conduct set forth in Section 6.1 or 6.2 of this Article, as the case may be. Neither a contrary determination in the specific case under Section 6.3 of this Article nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 6.5 shall be given to the corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

Section 6.6 Expenses Payable in Advance. Expenses incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by

or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this Article VI.

Section 6.7 Indemnification of Employees and Agents.

A person who was or is a party or is threatened to be made a party to or is involved in any proceeding by reason of the fact that he or she is or was an employee or agent of this corporation or is or was serving at the request of this corporation as an employee or agent of another enterprise, including service with respect to employee benefit plans, whether the basis of such action is an alleged action or inaction in an official capacity or in any other capacity while serving as an employee or agent, may, subject to the terms of any agreement between this corporation and such person, be indemnified and held harmless by this corporation to the fullest extent permitted by Delaware law and the Certificate of Incorporation, against all costs, charges, expenses, liabilities, and losses, (including attorneys' fees, judgments, fines, Employee Retirement Income Security Act excise taxes or penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith.

Section 6.8 Right of Directors and Officers to Bring Suit.

If a claim under Section 6.1 or Section 6.2 of this Article is not paid in full by this corporation within thirty (30) days after a written claim has been received by this corporation, the claimant may at any time thereafter bring suit against this corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim. Neither the failure of this corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is permissible in the circumstances because he or she has met the applicable standard of conduct, if any, nor an actual determination by this corporation (including its Board, independent legal counsel, or its stockholders) that the claimant has not met the applicable standard of conduct, shall be a defense to the action or create a presumption for the purpose of an action that the claimant has not met the applicable standard of conduct.

Section 6.9 Successful Defense.

Notwithstanding any other provisions of this Article, to the extent that a director or officer has been successful on the merits in defense of any proceeding referred to in Section 6.1 or in Section 6.2 or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred in connection therewith.

Section 6.10 Nonexclusively of Rights.

The indemnification and advancement of expenses provided by or granted pursuant to this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, it being the policy of the corporation that indemnification of the persons specified in Sections 6.1 and 6.2 of this Article shall be made to the fullest extent permitted by law. The provisions of this Article shall not be deemed to preclude the indemnification of any person who is not specified in Section 6.1 or 6.2 of this Article but whom the corporation has the power or obligation to indemnify under the provisions of the DGCL, or otherwise.

Section 6.11 Survival of Indemnification and Advancement of Expenses.

The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who

has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 6.12 Limitation on Indemnification.

Notwithstanding anything contained in this Article to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 6.5 hereof), the corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board (other than a suit permitted by Section 6.8 of this Article). Any indemnification under this Article (unless ordered by a court) to be made by the corporation is further subject to the following limitations: (A) the corporation shall indemnify any such person seeking indemnification in connection with settlement of a proceeding (or part thereof), other than a proceeding by or in the name of this corporation, to procure a judgment in its favor only if any settlement of such a proceeding is approved in writing by the corporation; and (B) that no such person shall be indemnified (i) except to the extent that the aggregate of losses to be indemnified exceeds the amount of such losses for which the director or officer is paid pursuant to any directors' and officers' liability insurance policy maintained by the corporation; (ii) on account of any suit in which judgment is rendered against such person for an accounting of profits made from the purchase or sale by such person of securities of the corporation pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any foreign federal, state, or local statutory law or regulation; (iii) if a court of competent jurisdiction finally determines that any indemnification hereunder is unlawful; and (iv) as to circumstances in which indemnity is expressly prohibited by any provision of the DGCL.

Section 6.13 Insurance.

This corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee, or agent of this corporation or another corporation, partnership, joint venture, trust, or other enterprise against any expense, liability, or loss, whether or not this corporation would have the power to indemnify such person against such expense, liability, or loss under the Law.

Section 6.14 Expenses as a Witness.

To the extent that any director, officer, employee, or agent of this corporation is, by reason of such position or a position with another entity at the request of this corporation, a witness in any action, suit, or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred by him or her on his or her behalf in connection therewith.

Section 6.15 Indemnity Agreements.

This corporation may enter into agreements with any director, officer, employee, or agent of this corporation providing for indemnification to the fullest extent permissible under the DGCL and the Certificate of Incorporation.

Section 6.16 Severability.

Each and every paragraph, sentence, term, and provision of this Article is separate and distinct so that if any paragraph, sentence, term, or provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of any other paragraph, sentence, term, or provision hereof. To the extent required, any paragraph, sentence, term, or provision of this Article may be modified by a court of competent jurisdiction to preserve its validity and to provide the claimant with, subject to the limitations set forth in this Article and any agreement between this corporation and claimant, the broadest possible indemnification permitted under applicable law.

Section 6.17 Certain Definitions.

For purposes of this Article, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article.

Section 6.18 Effect of Repeal or Modification.

Any repeal or modification of this Article shall not adversely affect any right of indemnification of a director or officer existing at the time of such repeal or modification with respect to any action or omission occurring prior to such repeal or modification.

Article VII—Amendments

Section 7.1 Amendments.

These By-laws may be amended or repealed, in whole or in part, or new By-laws may be adopted either by the holders of a majority of the outstanding capital stock entitled to vote thereon or by the approval of the Board; provided, however, that notice of such amendment, repeal or adoption of new By-laws be contained in the notice of such meeting of stockholders or Board, as the case may be; and provided, further, that a By-law specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable Board or vice versa may only be adopted by approval of the holders of a majority of the outstanding capital stock entitled to vote thereon. The exact number of directors within the maximum and minimum number specified in these By-laws may be amended by the Board alone.

[End of By-laws]

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EDISON MISSION ENERGY INDEX
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EX-10.1 4 a2135451zex-10_1.htm EXHIBIT 10.1
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Exhibit 10.1

EDISON MISSION ENERGY
BV SALE INCENTIVE PLAN

1. Establishment of the Plan. Edison Mission Energy, a Delaware corporation (the "Company"), hereby establishes this BV Sale Incentive Plan (the "Plan"), effective as of February 19, 2004 (the "Effective Date"), for the benefit of certain key employees of the Company and certain of its subsidiaries and affiliates.

2. Purpose. The Board of Directors (the "Board") of the Company has determined that it is in the best interest of the Company and its shareholder to pursue the possibility of accomplishing one or more transactions (together, as defined below, the "Covered Transaction") which would result in a sale or other disposition of all or substantially all of MEC International BV (the "BV"). In that connection, the Board believes that it is in the best interests of the Company and its shareholder that the Participants (as defined below), who are among the key employees of the Company and certain of its Subsidiaries and affiliates, remain in their Employer's employ during the period in which the Board is pursuing the Covered Transaction, be provided with additional incentives to develop the most desirable alternatives for the Company and its shareholder and be eligible to receive certain bonuses for their efforts in developing such transaction and putting the Company in a position where its shareholder may receive the benefits of a disposition of BV. Therefore, in order to accomplish these objectives, the Board has caused the Company to establish this Plan. For purposes of the Plan, the assets of the BV will be deemed to include the interest of Mission Energy Wales (U.S.) ("MEW U.S.") in the Mission Hydro Ltd. Partnership (UK) ("Mission Hydro").

3. Defined Terms. For purposes of the Plan, the following terms (in addition to the defined terms set forth above) shall have the meanings indicated:

(a) "ANSP" means the aggregate cash and non-cash consideration received by BV or the shareholders or subsidiaries of the BV, as the case may be, as seller(s) in the Covered Transaction, excluding for these purposes any obligations of the BV or its subsidiaries that are assumed by, on behalf of, or for the purchaser, and subject to the following:

(i) ANSP shall include the following, if and when paid to BV or its shareholders or subsidiaries, as the case may be, as sellers in the Covered Transaction: (A) any and all deferred installments of the sale price, (B) any portion of the sale price held in escrow subsequent to the Closing Date if and to the extent actually released from escrow, and (C) any consideration paid by the Purchaser after the Closing Date upon the occurrence of any specified contingencies or the satisfaction of any specified performance objectives;

(ii) ANSP shall be determined without giving effect to the payments under this Plan;

(iii) ANSP shall be net of, or otherwise reduced by, the following: (A) any severance and retention payments associated with the Covered Transaction; (B) any indebtedness or other liability of BV or one of its subsidiaries related to or arising in connection with the transferred assets or operations that is retained or discharged by the Company or its affiliates, including, without limitation, contributions made to project or related entities in connection with the sale transaction; (C) any U.S., foreign and local income, transfer and other taxes, assessments and governmental levies realized, incurred, attributed to or related in any manner to the sale of the BV and its subsidiaries, including taxes imposed on the distribution of proceeds to or by the BV and its subsidiaries and tax impacts related to the liquidation or restructuring of the interest of MEW US in the Mission Hydro in connection with the sale; and (D) transaction costs incurred and paid or payable by the Company or any of its Subsidiaries, parents or other affiliates including, without limitation (1) commitment, broker, advisory, investment banking, appraisal, fairness opinion,

financing and underwriting fees, commissions and discounts, (2) recording, insurance, filing, legal, travel, printing costs and other similar fees, costs and expenses, (3) claims arising or paid in connection with the sale, including costs of defense, (4) costs of consents, waivers or settlements to facilitate sale, and (5) any other direct expenses associated with the sale; and

(iv) ANSP shall include the proceeds of a sale of interests in or assets of BV only if such sale is specifically approved in advance of the Closing Date of the Covered Transaction by the Board. If substantially all (but not the entirety) of BV is sold, any sale of a remaining component that occurs more than six (6) months after the Closing Date of the Covered Transaction will not, unless otherwise provided by the Board at the time of the sale, be included in ANSP. ANSP shall be adjusted to give effect to any such sale within such six-month period.

(b) "Base Salary" means the Participant's base salary of record for benefit purposes paid to a Participant by the Company and/or one or more Employers (whether or not deferred), but excludes (i) incentive, retention, signing or other bonus compensation, (ii) severance, and (iii) any other form of compensation or benefit.

(c) "Base Salary Multiplier" means the factor by which a Participant's Base Salary shall be multiplied to determine the amount of the Participant's Sale Bonus, which factor may vary between particular Participants and may be determined based on the aggregate ANSP received in connection with the Covered Transaction.

(d) "Beneficiary" means the individual or entity determined under Section 11(e) of the Plan.

(e) "Board" means the Board of Directors of the Company.

(f) "Cause" means the occurrence of any one or more of the following:

(i) The Participant's conviction for, or pleading guilty or nolo contendere to, committing an act of fraud, embezzlement, theft, or other act constituting a felony;

(ii) A significant adverse change in the Participant's performance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties as well as any reasonable duties that may be assigned to him or her to help effect the Covered Transaction), including but not limited to a failure to comply with the Company's policies and instructions regarding the sale of BV and the confidentiality of certain information related thereto; or

(iii) The willful engaging by the Participant in misconduct that: (A) if the event giving rise to the termination of the Participant's employment occurs before the sale of the Participant's Employer or while the Participant is otherwise employed by an Employer, is in violation of the Company's and/or the Participant's Employer's policies and practices applicable to the Participant from time to time; or (B) if the event giving rise to the termination of the Participant's employment occurs after the sale of the Participant's Employer when the Participant is no longer employed by an Employer, would have resulted in the termination of the Participant's employment by the Company or the Participant's Employer under the Company's and/or the Participant's Employer's policies and practices applicable to the Participant in effect immediately prior to such sale. However, no act or failure to act, on the Participant's part, shall be considered "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company and his or her Employer.

(g) "Closing Date" means the date of the closing of a Covered Transaction or Covered Sale, as the case may be, as determined in accordance with the definitive agreements entered into to effect such transaction.

(h) "Covered Sale" means a sale of the Participant's Employer in a transaction that results in the Participant becoming employed by the Purchaser thereof or an affiliate of such Purchaser that is not an Employer.

(i) "Covered Transaction" means one or more transactions outside of the ordinary course that amount, in the aggregate, to a sale of all or substantially all of the assets or interests of BV, provided that a transaction included in the Covered Transaction must be specifically approved by the Board in advance of the consummation of the Covered Transaction. For purposes of this definition, "substantially all" shall mean stock or interests in and assets of BV (including stock and interests in Subsidiaries) (including EcoElectrica) representing or generating at least 90% of BV's 2003 revenue base as set forth in the attached Exhibit A; provided that the Board may, in its discretion, lower the 90% threshold in light of all circumstances existing at the time of the sale and the degree to which the Company has exited the international market.

(j) "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.

(l) "Participant" or "Participants" means any person who is a participant in this Plan as determined in accordance with Article 5.

(m) "Purchaser" means any person or entity or affiliate thereof that has purchased all or any part of the assets or interests of BV outside the ordinary course in a transaction that is included in the Covered Transaction.

(n) "Sale Bonus" means an unfunded right to receive a payment under this Plan.

(o) "Sale Bonus Payment Scheme" means the rules for the manner and timing of the payment of a Sale Bonus set forth in Section 8.

(p) "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

(q) "Term of the Plan" means the period of time beginning on the Effective Date and ending on the first to occur of: (A) July 1, 2005, unless a written agreement or written letter of intent is in place that, on July 1, 2005, has been approved by the Board and that relates to a transaction or series of transactions that would (if consummated) result in a Covered Transaction or (B) a determination by the Board that a Covered Transaction is not reasonably expected to occur on or before July 1, 2005; provided that the Board may, in its discretion, extend the term of the Plan beyond such date.

4. Administration.

(a) The Plan shall be interpreted, administered and operated by the Board. The Board shall have complete authority, in its sole discretion subject to the express provisions of the Plan, to determine who shall be a Participant, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for the administration of the Plan, including whether, for purposes of the Plan, a termination of a Participant's employment has been with or without Cause or for Good Reason. Notwithstanding the foregoing, the Board may delegate any of its duties hereunder to such person or persons from time to time as it may designate.

(b) All expenses and liabilities that members of the Board incur in connection with the administration of the Plan shall be borne by the Company. The Board may employ attorneys, consultants, accountants, appraisers, brokers, or other persons, and the Board, the Company and the Company's officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. No member of the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, and all members of the Board shall be fully protected by the Company in respect of any such action, determination or interpretation.

5. Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who will be Participants in the Plan, the Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable) applicable to each Participant and the Sale Bonus Payment Scheme applicable to each Participant. In order to participate in the Plan, each Participant must promptly sign and return to the Company a participation agreement in the form provided by the Company (a "Participation Agreement"), which shall set forth the Participant's Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable), designated Sale Bonus Payment Scheme and additional details about the Plan.

6. Sale Bonus Trigger; Effect of Termination of Employment.

(a) Subject to Section 11(c) below, a Participant shall be entitled to receive a Sale Bonus on the terms set forth in Sections 7 and 8 below if the Participant:

(i) is employed by an Employer on the Closing Date of the Covered Transaction,

(ii) prior to the Closing Date of the applicable Covered Sale, was terminated by his or her Employer without Cause (which does not include transfer to a Purchaser or another Employer) or terminated employment with his or her Employer for Good Reason, or

(iii) transferred employment to a Purchaser pursuant to the terms of the applicable Covered Sale and either (A) is still employed by the Purchaser on the Closing Date of the Covered Transaction or (B) such employment by the Purchaser was terminated by the Purchaser without Cause or terminated by the Participant for Good Reason).

A Participant shall not be entitled to a Sale Bonus if his or her employment by his or her Employer terminates for any other reason before the Closing Date of a Covered Transaction. After the Closing Date of a Covered Transaction, a Participant's subsequent termination of employment will have no affect on the Participant's entitlement to receive a Sale Bonus hereunder. The Board shall make the determination of whether a termination of a Participant's employment by a Purchaser qualifies as a termination for Cause, or whether a termination of employment with a Purchaser by the Participant qualifies as a termination for Good Reason, and in such context shall treat the Purchaser as the Employer for purposes of the definition of such term.

(b) Any termination of a Participant's employment by his or her Employer for Cause or by a Participant for Good Reason shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 11(k) of this Plan. Notwithstanding anything else contained herein to the contrary, a Participant shall not be deemed to have terminated employment if his or her employment by an Employer terminates but he or she continues as an employee of another Employer.

7. Amount of Sale Bonus. In the event that a Participant becomes entitled to receive a Sale Bonus, the amount of such Participant's Sale Bonus shall be determined by multiplying the Participant's highest annual rate of Base Salary in effect at any time during the 24-month period preceding the Closing Date of the last transaction resulting in a Covered Transaction by the Participant's applicable Base Salary Multiplier. Each Participant's Base Salary Multiplier (or the applicable formula for

determining the Base Salary Multiplier, as applicable) shall be set forth in the Participant's Participation Agreement. Following consummation of a Covered Transaction, determinations of ANSP (including, without limitation, the determination of value in U.S. dollars of any non-cash consideration and the value in U.S. dollars of any consideration not expressed in U.S. dollars) shall be made by the Board in good faith, whose good faith determination will be binding.

8. Payment of Sale Bonus. If a Participant becomes entitled to receive a Sale Bonus, the manner and timing of the payment of such Sale Bonus shall be determined in accordance with the following rules. The Company's management, in its sole discretion, shall determine which of the following Sale Bonus Payment Schemes, either Payment Scheme One set forth in subsection (a) or Payment Scheme Two set forth in subsection (b), shall apply to each Participant. The applicable Payment Scheme shall be set forth in the Participant's Participation Agreement.

(a) Payment Scheme One. Payment of a Sale Bonus to a Participant under Payment Scheme One shall be made in accordance with this Section 8(a). Within sixty (60) days after the Closing Date of the last transaction resulting in a Covered Transaction, the Board shall make a good faith estimate of ANSP resulting from the Covered Transaction. Subject to clause (ii) below, no later than sixty (60) days after the Closing Date, each Participant who is eligible to receive a Sale Bonus under this Section 8(a) shall be paid an amount equal to 80% of such Participant's estimated Sale Bonus, calculated based on such estimate. Within 24 months after the Closing Date of the Covered Transaction, the Board shall make an updated estimate of ANSP, at which time up to 100% of the remainder of each Participant's Sale Bonus, if any, shall be paid subject to the following provisions of this paragraph:

(i) The updated calculations shall take into account any further information regarding claims, charges, levies and expenses associated with the Covered Transaction and post-Closing Date activities as well as an updated calculation of the estimated tax consequences of the Covered Transaction. To the extent that deal-related claims, charges or levies that would have the effect, if successful, of reducing ANSP are made, but not actually resolved, during the 24-month period, adjustments shall be made to the calculations assuming the most unfavorable result to the Company and its affiliates and any subsequent true-ups shall be made within a reasonable period of time following the resolution of the matter. To the extent that any earn-out or similar conditional amount is scheduled to be paid more than 24 months after the Closing Date, or to the extent escrowed proceeds are scheduled to be released from escrow more than 24 months after the Closing Date, the Board will within a reasonable time after the occurrence of such events adjust Sale Bonus calculations when and if such amounts are actually received (to the extent such amounts were not previously taken into account). If final amounts still remain to be determined more than 24 months after Closing Date, whether because of pending claims, earn-outs or similar arrangements, or otherwise, the Board may at any time thereafter make a good faith estimate of what the final amount of ANSP will be and pay out the remaining Sale Bonus amounts (less amounts previously paid) based on such good faith estimate. In such case, the Board's good faith determination will be binding on all Participants whose Sale Bonus is so paid and there will be no adjustments to such bonuses for events occurring before or after such determination.

(ii) Notwithstanding the foregoing, if the Board determines that, based on the estimate of ANSP made within sixty (60) days of the Closing Date of the Covered Transaction, the remainder of a Participant's Sale Bonus amount, if any, would be United States Dollars 10,000 or less, the Board may elect to pay the Participant's entire Sale Bonus (without reduction for a withhold) based on the Board's initial estimate of ANSP. In such case, the Board's good faith initial estimate of ANSP will be binding on all Participants whose Sale Bonus is so paid and there will be no adjustments to such Sale Bonuses for events occurring before or after such determination.

(b) Payment Scheme Two. Payment of a Sale Bonus to a Participant under Payment Scheme Two shall be made in a cash lump sum no later than sixty (60) days following the Closing Date of the

Covered Transaction based on the Board's initial estimate of ANSP, which estimate will be final and binding for such purposes.

(c) Liability for Payment. The Company shall be liable for the payment of benefits under this Plan with respect to each Participant.

9. Taxes. The Company and/or the Participant's Employer, as applicable, has the right to withhold from any amount otherwise payable to a Participant under or pursuant to this Plan the amount of any taxes or other statutory deductions that the Company or such Employer, or any of their respective affiliates, may legally be required to withhold with respect to such payment (including, without limitation, any United States Federal taxes, and any other foreign, state, city, or local taxes). In the event that tax withholding is required with respect to amounts or benefits payable or deliverable by the Company or the Participant's Employer to a Participant and the Company or the Employer cannot satisfy its tax withholding obligations in the manner described in the preceding sentence, the Company or the Employer may require the Participant to pay or provide for the payment of such required tax withholding as a condition to the payment or delivery of such amounts or benefits. Each Participant, former Participant and Beneficiary shall be solely responsible for all income and employment taxes arising in connection with participation in this Plan or benefits hereunder.

10. Arbitration

(a) Arbitration of Claims. Unless superceded by express provision in the Participant's Participation Agreement, the Company, the Participant, and the Participant's Employer hereby consent to the resolution by mandatory and binding arbitration of all claims or controversies arising out of or in connection with this Plan that the Company or the Participant's Employer may have against the Participant, or that the Participant may have against the Company, his or her Employer, or against either of their officers, directors, employees or agents acting in their capacity as such. Each party's promise to resolve all such claims or controversies by arbitration in accordance with this Plan rather than through the courts is consideration for the other party's like promise. It is further agreed that the decision of an arbitrator on any issue, dispute, claim or controversy submitted for arbitration, shall be final and binding upon the Company, the Participant, and the Participant's Employer and that judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.

All expenses of such arbitration, the reasonable fees and expenses of the counsel for the Participant, shall be advanced and borne by the Company or the Participant's Employer; provided, however, that if it is finally determined that the Participant did not commence the arbitration in good faith and had no reasonable basis therefore or that the Participant failed to comply with Section 11(c) or breached the agreement contemplated thereby, the Participant shall repay all advanced fees and expenses and shall reimburse the Company and the Participant's Employer for their reasonable legal fees and expenses in connection therewith.

Except as otherwise provided in this procedure or by mutual agreement of the parties, any arbitration shall be administered by a sole arbitrator in accordance with the then-current arbitration and mediation rules of the Judicial Arbitration & Mediation Services, Inc. ("JAMS" or the "Tribunal"). The arbitration shall be held in Los Angeles, California, or at a mutually agreeable location. Pre-hearing and post-hearing procedures may be held by telephone or in person, as the arbitrator deems necessary.

The arbitrator shall be selected as follows: if the parties cannot agree on an arbitrator, the Tribunal shall then provide the names of nine available arbitrators experienced in business employment matters along with their resumes and fee schedules. Each party may strike all names on the list it deems unacceptable. If more than one common name remains on the list of all parties, the parties shall strike names alternately until only one remains. The party who did not initiate the claim shall strike first. If no common name remains on the lists of the parties, the Tribunal shall furnish an additional list or lists until an arbitrator is selected.

The arbitrator shall interpret this Plan, any applicable Company or Employer policy or rules and regulations, any applicable substantive law (and the law of remedies, if applicable), or applicable federal law. In reaching his or her decision, the arbitrator shall have no authority to change or modify any lawful Company or Employer policy, rule or regulation, or this Plan. The arbitrator, and not any federal, state or local court or agency, shall have exclusive and broad authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Plan, including but not limited to, any claim that all or any part of this Plan is voidable.

The arbitrator shall have authority to entertain a motion to dismiss and/or motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. Following the completion of the arbitration, the arbitrator shall issue a written decision disclosing his or her essential findings and conclusions upon which the award is based.

Neither the Company, the Participant or the Participant's Employer shall be entitled to join or consolidate claims in arbitration by or against other Participants or arbitrate any claim as a representative or member of a class or in a private attorney general capacity.

(b) Discovery. Each party shall have the right to take the deposition of one individual and any expert witness(es) designated by another party. Each party shall also have the opportunity to obtain documents from another party through one request for production of documents. Additional discovery may be had only when the arbitrator so orders upon a showing of substantial need. Any disputes regarding depositions, requests for production of documents or other discovery shall be submitted to the arbitrator for determination.

(c) Subpoenas. Each party shall have the right to subpoena witnesses and documents for the arbitration hearing by requesting a subpoena from the arbitrator. Any such request shall be served on all other parties, who shall advise the arbitrator in writing of any objections that the party may have to issuance of the subpoena within ten calendar days of receipt of the request.

(d) Designation of Witnesses. At least thirty calendar days before the arbitration, the parties must exchange lists of witnesses, including any expert(s), and copies of all exhibits intended to be used at the arbitration.

(e) Application of Federal Law. Notwithstanding any other choice of law provision in this Plan, this arbitration provision shall be governed by the procedural and substantive provisions of the Federal Arbitration Act, 9 U.S.C., Sec. 1 et. seq.

11. Miscellaneous

(a) Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or Subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company following the Covered Transaction) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

(b) Assignment by the Participant. None of the benefits, payments, proceeds or claims of any Participant shall be subject to any claim of any creditor and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any such Participant have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under this Plan. Notwithstanding the foregoing, benefits that are in pay status may be subject to a court order of garnishment or wage assignment, or similar order, or a tax levy. This Plan shall inure to the benefit of and be enforceable by each Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still

be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Participant's Beneficiary in accordance with the terms of this Plan.

(c) Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company's obligation to pay benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form (or forms, as applicable) attached to the Participant's Participation Agreement (or such other form (or forms) as the Board (or its delegate) may require) and such executed agreement is received by the Company no later than 60 days after the Closing Date and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

(d) Employment Status. Except as may be provided under any other written agreement between a Participant and his or her Employer, the employment of the Participant by his or her Employer is "at will," and may be terminated by either the Participant or the Employer at any time, subject to applicable law.

(e) Beneficiaries. Subject to the other provisions of this Section 11(e), the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Board (or its delegate) to receive the benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

No Beneficiary designation shall become effective until it is filed with the Board (or its delegate), and no Beneficiary designation of someone other than a Participant's spouse shall be effective unless such designation is consented to by the Participant's spouse on a form provided by and in accordance with procedures established by the Board or its delegate.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Board determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Board that they are legally entitled to receive the benefits specified hereunder.

Notwithstanding anything else herein to the contrary, in the event any amount is payable under this Plan to a minor, payment shall not be made to the minor, but instead be paid: (i) to that person's living parent(s) to act as custodian; (ii) if that person's parents are then divorced, and one parent is the sole custodial parent, to such custodial parent; or (iii) if no parent of that person is then living, to a custodian selected by the Board to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Board decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.

(f) Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Board, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Board may direct that such payment be made to any person found by the Board, in its sole judgment, to have assumed the

care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Board and all Employers.

(g) Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

(h) Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

(i) Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

(j) Modification. The Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment that adversely affects a Participant shall be effective without the consent of such Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorized member of the Board or its designee or legal representative.

(k) Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognized international courier (such as FedEx) postage and mailing fee prepaid and addressed: (i) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (ii) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

(l) Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Plan. Any statutory reference in this Plan shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision.

(m) No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its subsidiaries have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its subsidiaries to make or authorize (or to refrain from making or authorizing, as the case may be): (i) any adjustment, recapitalization, reorganization or other change in capital structure or business; (ii) any merger, amalgamation, consolidation or change in ownership; (iii) any dissolution or liquidation; (iv) any sale or transfer of assets or business; or (v) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan as of the date first set forth above.

		EDISON MISSION ENERGY
		By

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project	Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

			514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
PT Adro	Indonesia		—				—		—	8	%		—		—
CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

			19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

			233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

			755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

			—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project
Total		$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE INCENTIVE PLAN
EXHIBIT A
EX-10.2 5 a2135451zex-10_2.htm EXHIBIT 10.2
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Exhibit 10.2

EDISON MISSION ENERGY
BV SALE SEVERANCE PLAN

TABLE OF CONTENTS

ARTICLE 1		ESTABLISHMENT, TERM, AND PURPOSE	1
	1.1	Establishment of the Plan	1
	1.2	Purpose of the Plan	1
ARTICLE 2		DEFINITIONS	1
ARTICLE 3		PARTICIPATION	4
	3.1	Participation	4
	3.2	Termination of Employment	4
	3.3	Benefit Offset	4
	3.4	Re-Employment	4
	3.5	Notice of Termination	4
ARTICLE 4			5
	4.1	Right to Severance Benefits	5
	4.2	Severance Benefits.	5
	4.3	Minimum Benefit for Designated Participants.	6
	4.4	Timing and Manner of Payment of Severance Benefits	6
ARTICLE 5		TAXES	6
ARTICLE 6		EXCISE TAX GROSS-UP	7
	6.1	Gross-Up Payment	7
	6.2	Determination of Gross-Up	7
	6.3	Notification	7
	6.4	Underpayment and Overpayment	9
ARTICLE 7		PAYMENT OBLIGATIONS	10
	7.1	Liability for Payment	10
	7.2	Payment of Obligations Absolute	10
	7.3	Unsecured General Creditor	10
	7.4	Relationship to Other Plans	10
	7.5	Other Benefit Plans	10
ARTICLE 8		RESOLUTION OF DISPUTES	11
	8.1	Claim	11
	8.2	Claim Decision	11
	8.3	Request for Review	11
	8.4	Review of Decision	11
ARTICLE 9		RESOLUTION OF DISPUTES—ARBITRATION	11
	9.1	General	11
	9.2	Arbitration of Claims	11
	9.3	Discovery	12
	9.4	Subpoenas	12
	9.5	Designation of Witnesses	13
	9.6	Application of Federal Law	13
ARTICLE 10		SUCCESSORS AND ASSIGNMENT	13
	10.1	Successors to the Company	13
	10.2	Assignment by the Participant	13
ARTICLE 11		ADMINISTRATION OF THE PLAN	13
	11.1	Committee Action	13
	11.2	Powers and Duties of the Committee	13
	11.3	Construction and Interpretation	14
	11.4	Information	14
	11.5	Compensation, Expenses and Indemnity	14

ARTICLE 12		MISCELLANEOUS	14
	12.1	Release Agreement	14
	12.2	Term of the Plan	14
	12.3	Employment Status	15
	12.4	Beneficiaries	15
	12.5	Payments on Behalf of Persons Under Incapacity	16
	12.6	Gender and Number	16
	12.7	Severability	16
	12.8	Modification	16
	12.9	Notice	16
	12.10	Applicable Law	16
	12.11	WARN Act	16
	12.12	No Sale Obligation	16

EDISON MISSION ENERGY
BV SALE SEVERANCE PLAN

ARTICLE 1
ESTABLISHMENT, TERM, AND PURPOSE

1.1 Establishment of the Plan. Edison Mission Energy hereby establishes a severance plan to be known as the "Edison Mission Energy BV Sale Severance Plan" (the "Plan"). This Plan shall become effective February 19, 2004 (the "Effective Date"). This Plan is intended to be an "employee benefit plan" within the meaning of Section (3) of the Employee Retirement Income Security Act of 1974, as amended.

1.2 Purpose of the Plan. The purpose of this Plan is to provide key employees of the Employers with an incentive to remain in the employ of their respective Employers through the completion of a sale of MEC International, BV ("BV") and to provide for continuity in the management and operations of the Employers (as such term is defined below) during such time by offering certain employment protection and financial security in the event that their employment is terminated by their respective Employers without Cause (as such term is defined below) or by the key employees for Good Reason during the term of the Plan (as such term is defined below).

ARTICLE 2
DEFINITIONS

Whenever used in this Plan, the following terms shall have the meanings set forth below (such defined terms are in addition to the defined terms set forth above) unless the context clearly indicates to the contrary:

(a)

"Base Salary" means the Participant's base salary of record for benefit purposes paid to a Participant by the Company and/or one or more Employers (whether or not deferred), but excludes (1) incentive, retention, signing or other bonus compensation and (2) any other form of compensation or benefit.

(b)

"Beneficiary" means the persons or entities designated or deemed designated by a Participant pursuant to Section 12.4.

(c)

"Board" means the Board of Directors of the Company.

(d)

"BV Sale" means one or more transactions outside of the ordinary course that amount, in the aggregate, to a sale of all or substantially all of the assets or interests of BV, provided that a transaction included in the BV Sale must be specifically approved by the Board in advance of the consummation of the BV Sale. For purposes of this definition, "substantially all" shall mean stock or interests in and assets of BV (including stock and interests in Subsidiaries) (including EcoElectrica) representing or generating at least 90% of BV's 2003 revenue base as set forth in the attached Exhibit A; provided that the Board may, in its discretion, lower the 90% threshold in light of all circumstances existing at the time of the sale and the degree to which the Company has exited the international market; and provided further, that for purposes of this definition, the assets of the BV shall be deemed to include the interest of Mission Energy Wales (U.S.) in the Mission Hydro Ltd. Partnership (UK);

(e)

"Cause" means the occurrence of any one or more of the following:

(1): The Participant's conviction for, or pleading guilty or nolo contendere to, committing an act of fraud, embezzlement, theft, or other act constituting a felony;
(2): A significant adverse change in the Participant's performance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties as well as

any reasonable duties that may be assigned to him or her to help effect the BV Sale), including but not limited to a failure to comply with the Company's policies and instructions regarding the BV Sale and the confidentiality of certain information related thereto; or

(2): The willful engaging by the Participant in misconduct that: (i) if the event giving rise to the termination of the Participant's employment occurs before the sale of the Participant's Employer or while the Participant is otherwise employed by an Employer, is in violation of the Company's and/or the Participant's Employer's policies and practices applicable to the Participant from time to time; or (ii) if the event giving rise to the termination of the Participant's employment occurs after the sale of the Participant's Employer when the Participant is no longer employed by an Employer, would have resulted in the termination of the Participant's employment by the Company or the Participant's Employer under the Company's and/or the Participant's Employer's policies and practices applicable to the Participant in effect immediately prior to such sale. However, no act or failure to act, on the Participant's part, shall be considered "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company and his or her Employer.

(f): "COBRA" means the health care continuation coverage requirements set forth in Section 4980B of the Code.
(g): "Code" means the United States Internal Revenue Code of 1986, as amended.
(h): "Committee" means the Board or one or more committees appointed by the Board.
(i): "Company" means Edison Mission Energy, a Delaware corporation, or any successor thereto as provided in Section 10.1.
(j): "Deferred Stock Unit" means an award granted by Edison International, the Company or an Employer in the form of a bookkeeping entry which serves as a measurement relative to shares of Edison International common stock for purposes of determining the payment, in cash or stock at some time after vesting, of the award.
(k): "Disability" shall mean, for all purposes of this Plan, the Participant's eligibility for benefits under his or her Employer's long-term disability plan applicable to the Participant, as determined by the Employer.
(l): "Dividend Equivalent" means a dividend equivalent granted by Edison International, the Company or an Employer in connection with a Stock Option grant.
(m): "EDCP" means the Edison International Executive Deferred Compensation Plan, as amended from time to time. EDCP shall not include the Edison International Affiliate Option Deferred Compensation Plan, the OGDP, or any other nonqualified deferred compensation plan.
(n): "EIX Severance Plan" means the Edison International Executive Severance Plan.
(o): "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.
(p): "Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
(q): "Executive Incentive Award" means the annual incentive bonus, if any, paid to the Participant by his or her Employer(s) (or deferred by the Participant) under the Edison International Executive Incentive Compensation Plan or any similar successor plan. Executive Incentive Award does not include special retention bonus, signing bonus, one-time or special project bonus, or any other form of bonus, or any other form of compensation or benefit.

(r)

"Executive Retirement Plan" means the Southern California Edison Company Executive Retirement Plan, as amended from time to time, or any similar or successor plan sponsored by an Employer.

(s)

(t)

"Minimum Benefit Percentage" means, if benefits are triggered under this Plan, the minimum benefit to which certain designated Participants may become entitled pursuant to Section 4.3.

(u)

"OGDP" means the Edison International Option Gain Deferral Plan, as it may be amended from time to time.

(v)

"Participant" means any person who is a participant in this Plan as determined in accordance with Article 3.

(w)

"Performance Shares" means an award of units denominated as "performance shares," the value of which is based on the value of a related number of shares of Edison International stock and the earn-out of which is based on the passage of time or the attainment of one or more performance criteria. However, Stock Options, Dividend Equivalents, and Deferred Stock Units granted or credited under or in accordance with Edison International's Affiliate Option Exchange Offer, any other offer by Edison International, the Company or an affiliate to exchange outstanding awards, or any plan of deferred compensation maintained by the Company or an Employer shall not be deemed to be Performance Shares.

(x)

"Purchaser" means any person or entity or affiliate thereof that has purchased all or any part of the assets or interests of BV outside the ordinary course in a transaction that is included in the BV Sale.

(y)

"Qualifying Severance Event" means, as to a Participant, the occurrence of either of the following events during the term of the Plan:

(1): A termination of the Participant's employment by his or her Employer, without the Participant's consent, for reasons other than Cause (and other than due to the Participant's death or Disability); or
(2): A termination of employment by the Participant for Good Reason.

(z)

"Severance Benefit" means the severance benefit set forth in Article 4 of this Plan.

(aa)

"Severance Date" means, in the case of a Participant who becomes entitled to benefits under this Plan, the last day that the Participant is actually employed by an Employer in connection with the event that entitles the Participant to such benefits.

(bb)

"Similar Position" means employment with a Purchaser with a compensation package that would not, if offered to the Participant by his or her Employer while he or she was an employee of an Employer, have permitted the Participant to terminate his or her employment with the Employer for Good Reason. If a Participant accepts employment with a Purchaser, he or she shall be precluded from claiming that such employment fails to qualify as a Similar Position.

(cc)

"Stock Option" means an option granted by Edison International, the Company or an Employer to purchase shares of Edison International stock.

(dd): "Stock Option Retention Exchange" means the exchange on November 29, 2001, pursuant to a Participant's election, of Stock Options for Deferred Stock Units.
(ee): "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

ARTICLE 3
PARTICIPATION

3.1 Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who will be Participants in the Plan and the benefits to which each Participant may become eligible to receive under the Plan. In order to participate in the Plan, each Participant must promptly sign and return to the Company a participation agreement in the form provided by the Company (a "Participation Agreement"), which shall set forth whether the Participant may become eligible for a Severance Benefit under the Plan, the definitions of the components of the Severance Benefit to which the Participant may become entitled to receive, the Participant's Minimum Benefit Percentage, if applicable, and additional details about the Plan.

3.3 Benefit Offset. Notwithstanding anything else contained herein to the contrary, any benefits otherwise payable or deliverable under this Plan to a Participant shall be offset or reduced by the amount of severance benefits payable or deliverable to the Participant under any other redundancy, severance or other plan, program, or agreement (including, without limitation, any employment agreement) of or with the Company, the Participant's Employer, or their respective affiliates whether contractual, statutory or otherwise (to the extent the Participant remains entitled to any such benefits after giving effect to the Participant's agreement to waive his or her entitlement to such benefits pursuant to his or her Participation Agreement); provided, however, that any benefits payable to a Participant under this Plan shall not be offset or reduced by the amount of any benefits payable to such Participant under the Company's Sale Incentive Plan or the Company's BV Sale Retention Plan, except to the extent that any amounts payable to a Participant under the Sale Incentive Plan and/or BV Sale Retention Plan are included in the calculation of the Participant's minimum benefit (if applicable) pursuant to Section 4.3.

3.4 Re-Employment. Notwithstanding anything else contained herein to the contrary, a Participant shall have no right to benefits hereunder with respect to a termination of his or her employment if, in connection with such termination, he or she is otherwise entitled to benefits under this Plan but, prior to the payment or delivery (or commencement of payment or delivery, as the case may be) of such benefits, the Participant becomes re-employed by his or her Employer or by another Employer or by any other affiliate of the Company. Notwithstanding anything else contained herein to the contrary, a Participant's right to continuing or additional benefits under this Plan shall automatically terminate (but the Participant shall have no obligation to re-pay benefits previously paid) if the Participant becomes re-employed by his or her Employer or by another Employer or by any other affiliate of the Company. If a Participant is re-employed and his or her employment is subsequently terminated and the Participant again becomes entitled to benefits under the terms of this Plan in connection with such later termination of employment, the amount of payments otherwise payable to the Participant hereunder in connection with such later termination of employment shall be reduced by the amount of any payments paid under this Plan to the Participant in connection with any prior termination of his or her employment.

3.5 Notice of Termination. Any termination of a Participant's employment by his or her Employer for Cause or by a Participant for Good Reason shall be communicated by Notice of

Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 12.9 of this Plan.

ARTICLE 4
SEVERANCE BENEFITS

4.1 Right to Severance Benefits. Subject to Section 12.1, a Participant shall be entitled to receive from the Company, for and on behalf of the Participant's Employer, the applicable Severance Benefits described in this Article 4 if, during the term of the Plan, the Participant incurs a Qualifying Severance Event. If a Participant's employment by his or her Employer terminates for any reason other than a Qualifying Severance Event, then such Participant shall not be entitled to any Severance Benefits hereunder. If more than one Qualifying Severance Event occurs with respect to a Participant, such events shall constitute a single Qualifying Severance Event and the provisions of this Article 4 shall apply with respect to the Participant only once. A Participant's continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason for purposes of determining if a Qualifying Severance Event has occurred with respect to the Participant.

4.2 Severance Benefits.

4.2.1 If a Participant becomes entitled to receive Severance Benefits in accordance with Section 4.1 and such Participant is not offered a Similar Position at a Purchaser within 30 days after the Severance Date, then such Participant shall become entitled to the following benefits, each of which is defined in Exhibit C to such Participant's Participation Agreement: (a) a Cash Severance Benefit, (b) a Pro-Rata Bonus Payment, (c) an Outplacement Benefit and (d) Non-Cash Severance Benefits.

4.2.2 If a Participant becomes entitled to receive Severance Benefits in accordance with Section 4.1 and such Participant is offered a Similar Position at a Purchaser within 30 days after the Severance Date (whether or not he or she accepts such Similar Position), then such Participant shall become entitled to the following benefits, each of which is defined in Exhibit C to such Participant's Participation Agreement: (a) a Pro-Rata Bonus Payment and (b) Non-Cash Severance Benefits.

4.2.3 Notwithstanding the foregoing, if a Participant become entitled to Severance Benefits under Section 4.2.2 and not 4.2.1 and such Participant accepts such Similar Position, but within 12 months after he or she accepts such Similar Position, his or her employment with such Purchaser is either terminated by the Purchaser for any reason other than for Cause or by such Participant for Good Reason, then his or her Severance Benefit shall be adjusted in accordance with the next sentence. In addition to the benefits set forth in the first sentence Section 4.2.2, such Participant shall become entitled to the following benefits, each of which is defined in Exhibit C to such Participant's Participation Agreement: (i) a Cash Severance Benefit, calculated as though a Similar Position was not offered to such Participant and the benefit became payable upon his or her Severance Date and (ii) an Outplacement Benefit; provided that the amount of such benefits, if triggered, shall be reduced by the amount of severance benefits payable or deliverable to the Participant under any severance plan, policy, program or agreement of the Purchaser or any of its affiliates. The Board shall make the determination of whether a termination of a Participant's employment by a Purchaser qualifies as a termination for Cause, or whether a termination of employment with a Purchaser by the Participant qualifies as a termination for Good Reason, and in such context shall treat the Purchaser as the Employer for purposes of the definition of such term.

4.3 Minimum Benefit for Designated Participants.

4.3.1 The Company's management, in its sole discretion, shall determine if a Participant shall be entitled to receive a minimum Plan benefit pursuant to this Section 4.3 and, and with respect to each such Participant, his or her Minimum Benefit Percentage. Each Participant's Participation Agreement will indicate whether the Participant is subject to this Section 4.3 and will set forth the Participant's Minimum Benefit Percentage, if applicable, which may vary amongst Participants.

4.3.2 If a Participant who has been designated as eligible to receive a minimum Plan benefit under this Section 4.3 becomes entitled to a Cash Severance Benefit pursuant to Section 4.2, then the sum of the participant's Cash Severance Benefit, any Pro-Rata Bonus Payment, any amount payable to such Participant under the Company's Sale Incentive Plan, any other severance benefits payable to the Participant under local law or otherwise (including without limitation, any severance paid to the Participant by a Purchaser or any of its affiliates in the circumstances contemplated by Section 4.2.3), without duplicating any offset of benefits as provided for in Section 3.3, and any amount payable to such Participant under the Company's BV Sale Retention Plan, must be at least equal to the Participant's Minimum Benefit Percentage of the Participant's annualized rate of Base Salary in effect immediately prior to the Participant's Severance Date. If such minimum amount is not satisfied, the Company, for and on behalf of the Participant's Employer, shall increase such Participant's Cash Severance Amount by the amount of the shortfall as a supplemental benefit paid on the same terms as the Cash Severance Amount. To the extent that such an increase is made and the Participant later becomes entitled to benefits with respect to the Sale Incentive Plan, BV Sale Retention Plan or additional benefits with respect to this Plan (in either case, to the extent that such benefits were not included in the calculation of the initial shortfall amount), then the amount by which the Cash Severance Amount was increased for the shortfall will offset any such benefits otherwise due to the Participant.

4.4 Timing and Manner of Payment of Severance Benefits. Any Pro-Rata Bonus Payment shall be paid by the Company to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the Participant's Severance Date. Any Cash Severance Benefit shall be paid by the Company, for and on behalf of the participant's Employer, to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the Participant's Severance Date or in a series of substantially equal payments (without interest), no less frequently than monthly, over a period not to exceed 12 months, with the first payment to commence upon the first day of the month immediately following the Participant's Severance Date. The Company shall determine, in its sole discretion, whether such Cash Severance Benefit shall be paid in the form of a single lump sum or a series of installments. Subject to Section 7.1, any Outplacement Benefit and Non-Cash Severance Benefit, as applicable to the Participant, shall be paid in accordance with the terms set forth in Exhibit C to the Participant's Participation Agreement.

ARTICLE 5
TAXES

The Company and/or the Participant's Employer, as applicable, has the right to withhold from any amount otherwise payable to a Participant under or pursuant to this Plan the amount of any taxes or other statutory deductions that the Company or such Employer may legally be required to withhold with respect to such payment (including, without limitation, any United States Federal taxes, and any other foreign, state, city, or local taxes). In the event that tax withholding is required with respect to amounts or benefits payable or deliverable by the Company or the Participant's Employer to a Participant and the Company or the Employer cannot satisfy its tax withholding obligations in the manner described in the preceding sentence, the Company or the Employer may require the Participant to pay or provide for the payment of such required tax withholding as a condition to the payment or delivery of such amounts or benefits.

Each Participant, former Participant and Beneficiary shall be solely responsible for all income and employment taxes arising in connection with participation in this Plan or benefits hereunder.

ARTICLE 6
EXCISE TAX GROSS-UP

6.1 Gross-Up Payment. In the event it is determined (pursuant to Section 6.2) or finally determined (as defined in Section 6.3(c)) that any payment, distribution, transfer, or benefit by the Company, or a direct or indirect subsidiary or affiliate of the Company, to or for the benefit of the Participant or the Participant's dependents, heirs or beneficiaries (whether such payment, distribution, transfer, benefit or other event occurs pursuant to the terms of this Plan or otherwise, but determined without regard to any additional payments required under this Article 6) (each a "Payment" and collectively the "Payments") is subject to the excise tax imposed by Section 4999 of the Code, and any successor provision or any comparable provision of state or local income tax law (collectively, "Section 4999"), or any interest, penalty or addition to tax is incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest, penalty, and addition to tax, hereinafter collectively referred to as the "Excise Tax"), then, within 10 days after such determination or final determination, as the case may be, the Company shall pay to the Participant (or to the applicable taxing authority on the Participant's behalf) an additional cash payment (hereinafter referred to as the "Gross-Up Payment") equal to an amount such that after payment by the Participant of all taxes, interest, penalties, additions to tax and costs imposed or incurred with respect to the Gross-Up Payment (including, without limitation, any income and excise taxes imposed upon the Gross-Up Payment), the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such Payment or Payments. This provision is intended to put the Participant in the same position as the Participant would have been had no Excise Tax been imposed upon or incurred as a result of any Payment.

6.2 Determination of Gross-Up.

(a): Except as provided in Section 6.3, the determination that a Payment is subject to an Excise Tax shall be made in writing by the principal certified public accounting firm then retained by the Company to audit its annual financial statements (the "Accounting Firm"). Such determination shall include the amount of the Gross-Up Payment and detailed computations thereof, including any assumptions used in such computations. Any determination by the Accounting Firm will be binding on the Company, the Participant's Employer and the Participant.
(b): For purposes of determining the amount of the Gross-Up Payment, the Participant shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made. Such highest marginal rate shall take into account the loss of itemized deductions by the Participant and shall also include the Participant's share of the hospital insurance portion of FICA and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Participant's residence on the date of his or her Qualifying Severance Event, net of the maximum reduction in Federal income taxes that could be obtained from the deduction of such state and local taxes.

6.3 Notification.

(a): The Participant shall notify the Company and his or her Employer (if other than the Company) in writing of any claim by the Internal Revenue Service (or any successor thereof) or any state or local taxing authority (individually or collectively, the "Taxing Authority") that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 30 days after the Participant

receives written notice of such claim and shall apprise the Company and his or her Employer of the nature of such claim and the date on which such claim is requested to be paid; provided, however, that failure by the Participant to give such notice within such 30-day period shall not result in a waiver or forfeiture of any of the Participant's rights under this Article 6 except to the extent of actual damages suffered by the Company as a result of such failure. The Participant shall not pay such claim prior to the expiration of the 15-day period following the date on which the Participant gives such notice to the Company and his or her Employer (or such shorter period ending on the date that any payment of taxes, interest, penalties or additions to tax with respect to such claim is due). If the Company or the Participant's Employer notifies the Participant in writing prior to the expiration of such 15-day period (regardless of whether such claim was earlier paid as contemplated by the preceding parenthetical) that it desires to contest such claim, the Participant shall:

(1): give the Company and the Participant's Employer any information reasonably requested by the Company or the Participant's Employer relating to such claim;
(2): take such action in connection with contesting such claim as the Company or the Participant's Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company or the Participant's Employer;
(3): cooperate with the Company and the Participant's Employer in good faith in order effectively to contest such claim; and
(4): permit the Company and the Participant's Employer to participate in any proceedings relating to such claim;

: provided, however, that the Company shall bear and pay directly all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold the Participant harmless, on an after-tax basis, for all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed in relation to such claim and in relation to the payment of such costs and expenses or indemnification.
(b): Without limitation on the foregoing provisions of this Section 6.3, and to the extent its actions do not unreasonably interfere with or prejudice the Participant's disputes with the Taxing Authority as to other issues, the Company and the Participant's Employer shall control all proceedings taken in connection with such contest and, in its or their reasonable discretion, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the Taxing Authority in respect of such claim and may, at its or in their sole option, either direct the Participant to pay the tax, interest or penalties claimed and sue for a refund or contest the claim in any permissible manner, and the Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company or the Participant's Employer shall determine; provided, however, that if the Company directs the Participant to pay such claim and sue for a refund, the Company shall advance an amount equal to such payment to the Participant, on an interest-free basis, and shall indemnify and hold the Participant harmless, on an after-tax basis, from all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed with respect to such advance or with respect to any imputed income with respect to such advance, as any such amounts are incurred; and, further, provided, that any extension of the statute of limitations relating to payment of taxes, interest, penalties or additions to tax for the taxable year of the Participant with respect to which such contested amount is claimed to be due is limited solely to such contested amount; and, provided, further, that any settlement of any claim shall be reasonably

acceptable to the Participant, and the Company's and the Participant's Employer's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and the Participant shall be entitled to settle or contest, as the case may be, any other issue.

(c): If, after receipt by the Participant of an amount advanced by the Company pursuant to Section 6.3(a), the Participant receives any refund with respect to such claim, the Participant shall (subject to the Company's compliance with the requirements of this Article 6) promptly pay to the Company an amount equal to such refund (together with any interest paid or credited thereof after taxes applicable thereto), net of any taxes (including, without limitation, any income or excise taxes), interest, penalties or additions to tax and any other costs incurred by the Participant in connection with such advance, after giving effect to such repayment. If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 6.3(a), it is finally determined that the Participant is not entitled to any refund with respect to such claim, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be treated as a Gross-Up Payment and shall offset, to the extent thereof, the amount of any Gross-Up Payment otherwise required to be paid.
(d): For purposes of this Article 6, whether the Excise Tax is applicable to a Payment shall be deemed to be "finally determined" upon the earliest of: (1) the expiration of the 15-day period referred to in Section 6.3(a) if the Company or the Participant's Employer has not notified the Participant that it intends to contest the underlying claim, (2) the expiration of any period following which no right of appeal exists, (3) the date upon which a closing agreement or similar agreement with respect to the claim is executed by the Participant and the Taxing Authority (which agreement may be executed only in compliance with this section), or (4) the receipt by the Participant of notice from the Company or the Participant's Employer that it no longer seeks to pursue a contest (which shall be deemed received if the Company or the Participant's Employer does not, within 15 days following receipt of a written inquiry from the Participant, affirmatively indicate in writing to the Participant that the Company or the Participant's Employer intends to continue to pursue such contest).

6.4 Underpayment and Overpayment. It is possible that no Gross-Up Payment will initially be made but that a Gross-Up Payment should have been made, or that a Gross-Up Payment will initially be made in an amount that is less than what should have been made (either of such events is referred to as an "Underpayment"). It is also possible that a Gross-Up Payment will initially be made in an amount that is greater than what should have been made (an "Overpayment"). The determination of any Underpayment or Overpayment shall be made by the Accounting Firm in accordance with Section 6.2. In the event of an Underpayment, the amount of any such Underpayment shall be paid to the Participant as an additional Gross-Up Payment. In the event of an Overpayment, any such Overpayment shall be treated for all purposes as a loan to the Participant with interest at the applicable Federal rate provided for in Section 1274(d) of the Code. In such case, the amount of the loan shall be subject to reduction to the extent necessary to put the Participant in the same after-tax position as if such Overpayment were never made. The amount of any such reduction to the loan shall be determined by the Accounting Firm in accordance with the principles set forth in Section 6.2. The Participant shall repay the amount of the loan (after reduction, if any) to the Company as soon as administratively practicable after the Company or the Participant's Employer notifies the Participant of (a) the Accounting Firm's determination that an Overpayment was made and (b) the amount to be repaid.

ARTICLE 7
PAYMENT OBLIGATIONS

7.1 Liability for Payment. Except for the benefits related to Performance Shares, Deferred Stock Units, Stock Options and/or Dividend Equivalents which shall be paid by the appropriate entity as determined under the provisions of the incentive plan under which the award was granted, and in the case of benefits payable under Article 4 hereof, the Company, for and on behalf of the Participant's Employer, shall be liable for the payment of benefits under this Plan with respect to each Participant.

7.2 Payment of Obligations Absolute. Subject to the Participant's compliance with Section 12.1 and the agreement contemplated thereby and subject to Section 3.4 and Article 5, the Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Participant or anyone else except as provided in Section 3.3 and/or Section 3.4. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Participant or from whomsoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Section 3.4, Article 6, or Article 9 and subject to the Participant's compliance with Section 12.1 and the agreement contemplated thereby.

Participants shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Plan, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Plan.

7.3 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. It is the intention of the Company that this Plan be unfunded for purposes of the Code and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

7.4 Relationship to Other Plans. By accepting participation in this Plan, each Participant (a) consents to the payment terms set forth in this Plan, (b) agrees that this Plan amends the otherwise inconsistent terms of any Company or Employer compensation, incentive, benefit or perquisite plan or program, and (c) agrees that such sections of this Plan will control to the extent that any inconsistency may exist between those sections and the terms of any Company or Employer compensation, incentive, benefit or perquisite plan, policy or program.

7.5 Other Benefit Plans. All payments, benefits and amounts provided under this Plan shall be in addition to and not in substitution for any pension rights under the Company's or other Employer's tax-qualified pension plan in which the Participant participates, and any disability, workers' compensation or other Company or other Employer benefit plan distribution that a Participant is entitled to, under the terms of any such plan, at the time his or her employment by his or her Employer terminates. Notwithstanding the foregoing, this Plan shall not create an inference that any duplicate payments shall be required. Payments received by a person under this Plan shall not be deemed a part of the person's compensation for purposes of determining the person's benefits under any employee welfare, pension or other benefit plan or arrangement, if any, provided by an Employer, except where explicitly provided under the terms of such plan or arrangement.

ARTICLE 8
RESOLUTION OF DISPUTES

8.1 Claim. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as "Claimant") may file a written request for such benefit with the Committee, setting forth his or her claim. The request must be addressed to the Committee at the Company's principal place of business.

8.2 Claim Decision. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for special circumstances.

If the claim is denied in whole or in part, the Committee shall inform the Claimant in writing, using language calculated to be understood by the Claimant, setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Plan on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under Section 8.3.

8.3 Request for Review. Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination. Such request must be addressed to the Committee, at the Company's principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee.

8.4 Review of Decision. Within 60 days after the Committee's receipt of a request for review, after considering all materials presented by the Claimant, the Committee will inform the Claimant in writing, in a manner calculated to be understood by the Claimant, of its decision setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the 60 day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review.

ARTICLE 9
RESOLUTION OF DISPUTES—ARBITRATION

9.1 General. A Participant or Beneficiary must complete the claims procedure described in Article 8 before submitting any claim or controversy arising out of or in connection with this Plan to arbitration as described below in this Article 9.

9.2 Arbitration of Claims. The Company, the Participant, and the Participant's Employer hereby consent to the resolution by mandatory and binding arbitration of all claims or controversies arising out of or in connection with this Plan and/or the Exhibits hereto that the Company or the Participant's Employer may have against the Participant, or that the Participant may have against the Company, his or her Employer, or against either of their officers, directors, employees or agents acting in their capacity as such. Each party's promise to resolve all such claims or controversies by arbitration in accordance with this Plan rather than through the courts is consideration for the other party's like promise. It is further agreed that the decision of an arbitrator on any issue, dispute, claim or controversy submitted for arbitration, shall be final and binding upon the Company, the Participant, and the Participant's Employer and that judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.

All expenses of such arbitration, the reasonable fees and expenses of the counsel for the Participant, shall be advanced and borne by the Company or the Participant's Employer; provided,

however, that if it is finally determined that the Participant did not commence the arbitration in good faith and had no reasonable basis therefore or that the Participant failed to comply with Section 12.1 or breached the agreement contemplated thereby, the Participant shall repay all advanced fees and expenses and shall reimburse the Company and the Participant's Employer for their reasonable legal fees and expenses in connection therewith.

The arbitrator shall interpret this Plan, any applicable Company or Employer policy or rules and regulations, any applicable substantive law (and the law of remedies, if applicable), or applicable federal law; provided, however, if arbitration is brought after the claim or controversy has been submitted for review by the Committee in accordance with Article 8, the arbitrator shall defer to the Committee's interpretations of the Plan and such policies, rules, and regulations so long as the Committee has not abused its discretion hereunder. In reaching his or her decision, the arbitrator shall have no authority to change or modify any lawful Company or Employer policy, rule or regulation, or this Plan. The arbitrator, and not any federal, state or local court or agency, shall have exclusive and broad authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Plan, including but not limited to, any claim that all or any part of this Plan is voidable.

9.3 Discovery. Each party shall have the right to take the deposition of one individual and any expert witness(es) designated by another party. Each party shall also have the opportunity to obtain documents from another party through one request for production of documents. Additional discovery may be had only when the arbitrator so orders upon a showing of substantial need. Any disputes regarding depositions, requests for production of documents or other discovery shall be submitted to the arbitrator for determination.

9.4 Subpoenas. Each party shall have the right to subpoena witnesses and documents for the arbitration hearing by requesting a subpoena from the arbitrator. Any such request shall be served on all other parties, who shall advise the arbitrator in writing of any objections that the party may have to issuance of the subpoena within ten calendar days of receipt of the request.

9.5 Designation of Witnesses. At least thirty calendar days before the arbitration, the parties must exchange lists of witnesses, including any expert(s), and copies of all exhibits intended to be used at the arbitration.

9.6 Application of Federal Law. Notwithstanding any other choice of law provision in this Plan, this arbitration provision shall be governed by the procedural and substantive provisions of the Federal Arbitration Act, 9 U.S.C., Sec. 1 et. seq.

ARTICLE 10
SUCCESSORS AND ASSIGNMENT

10.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company after the BV Sale) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

10.2 Assignment by the Participant. None of the benefits, payments, proceeds or claims of any Participant shall be subject to any claim of any creditor and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any such Participant have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under this Plan. Notwithstanding the foregoing, benefits that are in pay status may be subject to a court order of garnishment or wage assignment, or similar order, or a tax levy. This Plan shall inure to the benefit of and be enforceable by each Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Participant's Beneficiary in accordance with the terms of this Plan.

ARTICLE 11
ADMINISTRATION OF THE PLAN

11.1 Committee Action. The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee.

11.2 Powers and Duties of the Committee. The Committee shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the power and authority to do the following:

(a): To determine eligibility for and participation in this Plan;
(b): To construe and interpret the terms and provisions of this Plan;
(c): To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries, and to determine the amount of withholding taxes to be deducted pursuant to Article 5;

(d): To maintain all records that may be necessary for the administration of this Plan;
(e): To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;
(f): To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof; and
(g): To appoint a plan administrator or any other agent (which may include, without limitation, one or more employees of the Company), and to delegate to them such powers and duties in connection with the administration of this Plan as the Committee may from time to time prescribe.

11.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, including whether, for purposes of the Plan, a termination of a Participant's employment has been with or without Cause or for Good Reason, which interpretation or construction shall be final and binding on all parties, including but not limited to each Employer and any Participant or Beneficiary. The Committee shall administer such terms and provisions in full accordance with any and all laws applicable to this Plan.

11.4 Information. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require.

11.5 Compensation, Expenses and Indemnity. The members of the Committee shall serve without additional compensation for their services hereunder beyond that which they are entitled as authorized by the Board. The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. The Company shall pay expenses and fees in connection with the administration of this Plan. To the extent permitted by applicable law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and each member thereof, and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to this Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

ARTICLE 12
MISCELLANEOUS

12.1 Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company's obligation to pay benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form (or forms, if applicable) attached to the Participant's Participation Agreement (or such other form (or forms) as the Committee may require) and such executed agreement is received by the Company no later than 60 days after the Participant's Severance Date and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

12.2 Term of the Plan. This Plan will commence on the Effective Date and shall continue in effect through the first to occur of (1) July 1, 2005 or (2) a determination by the Board that a BV Sale is not reasonably expected to occur on or before July 1, 2005; provided that the Board may, in its discretion, extend the term of the Plan beyond such date. Notwithstanding the preceding sentence, the Plan shall continue beyond such date with respect to a Participant to the extent that a contract is in

place on July 1, 2005 to complete the sale of the Employer at which such Participant is then employed, in which case the Plan shall continue with respect to such Participant until the earlier to occur of: (1) the completion of the sale of such Employer or (2) the expiration or any other termination of such contract without the sale being completed. Termination of the Plan shall not modify the 12-month severance protection provided in Section 4.2.3, and such protection shall continue pursuant to its terms until the applicable 12-month period has expired. In addition, the termination of this Plan shall have no effect on any other severance protections provided pursuant to other severance programs maintained by an Employer or any affiliate.

12.3 Employment Status. Except as may be provided under any other written agreement between a Participant and his or her Employer, the employment of the Participant by his or her Employer is "at will," and may be terminated by either the Participant or the Employer at any time, subject to applicable law. Payments made under this Plan shall not give any person the right to any benefits provided to persons retained in an Employer's employ (such as, without limitation, health and dental benefits). Except as may otherwise be required by law or set forth specifically in such plans or as otherwise expressly provided in this Plan, such benefits shall terminate as of the date the Participant's employment by an Employer terminates.

12.4 Beneficiaries. Subject to the other provisions of this Section 12.4, the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

No Beneficiary designation shall become effective until it is filed with the Committee, and no Beneficiary designation of someone other than a Participant's spouse shall be effective unless such designation is consented to by the Participant's spouse on a form provided by and in accordance with procedures established by the Committee or its delegate.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.

Notwithstanding anything else herein to the contrary, in the event any amount is payable under this Plan to a minor, payment shall not be made to the minor, but instead be paid: (a) to that person's living parent(s) to act as custodian; (b) if that person's parents are then divorced, and one parent is the sole custodial parent, to such custodial parent; or (c) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.

12.5 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and all Employers.

12.6 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

12.7 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

12.8 Modification. The Committee or the Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment shall be effective without the consent of each affected Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorized member of the Committee (or the Board) or its designee or legal representative.

12.9 Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognized international courier (such as FedEx) postage and mailing fee prepaid and addressed: (a) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (b) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

12.10 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Plan. Any statutory reference in this Plan shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision.

12.11 WARN Act. Benefits payable under this Plan are intended to satisfy, where applicable, any Company or other Employer's obligations under the Federal Worker Adjustment and Retraining Notification Act and any similar obligations that the Company or any other Employer may have under any successor or other severance pay statute.

12.12 No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its subsidiaries have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its subsidiaries to make or authorize (or to refrain from making or authorizing, as the case may be): (a) any adjustment, recapitalization, reorganization or other change in capital structure or business; (b) any merger, amalgamation, consolidation or change in ownership; (c) any dissolution or liquidation; (d) any sale or transfer of assets or business; or (e) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan as of the date first set forth above.

		EDISON MISSION ENERGY

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project	Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

			514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
PT Adro	Indonesia		—				—		—	8	%		—		—
CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

			19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

			233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

			755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

			—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total		$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE SEVERANCE PLAN
TABLE OF CONTENTS
EDISON MISSION ENERGY BV SALE SEVERANCE PLAN
ARTICLE 1 ESTABLISHMENT, TERM, AND PURPOSE
ARTICLE 2 DEFINITIONS
ARTICLE 3 PARTICIPATION
ARTICLE 4 SEVERANCE BENEFITS
ARTICLE 5 TAXES
ARTICLE 6 EXCISE TAX GROSS-UP
ARTICLE 7 PAYMENT OBLIGATIONS
ARTICLE 8 RESOLUTION OF DISPUTES
ARTICLE 9 RESOLUTION OF DISPUTES—ARBITRATION
ARTICLE 10 SUCCESSORS AND ASSIGNMENT
ARTICLE 11 ADMINISTRATION OF THE PLAN
ARTICLE 12 MISCELLANEOUS
EXHIBIT A
EX-10.3 6 a2135451zex-10_3.htm EXHIBIT 10.3
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Exhibit 10.3

EDISON MISSION ENERGY
BV SALE INCENTIVE PLAN—AUSTRALIA

1. Establishment of the Plan. Edison Mission Energy, a Delaware corporation (the "Company"), hereby establishes this BV Sale Incentive Plan—Australia (the "Plan"), effective as of February 19, 2004 (the "Effective Date"), for the benefit of certain key employees of the Company and certain of its Subsidiaries (as defined below) and affiliates.

2. Purpose. The Board of Directors (the "Board") of the Company has determined that it is in the best interest of the Company and its shareholder to pursue the possibility of accomplishing one or more transactions (together, as defined below, the "Covered Transaction") which would result in a sale or other disposition of all or substantially all of MEC International BV (the "BV"). In that connection, the Board believes that it is in the best interests of the Company and its shareholder that the Participants (as defined below), who are among the key employees of the Company and certain of its Subsidiaries and affiliates, remain in their Employer's employ during the period in which the Board is pursuing the Covered Transaction, be provided with additional incentives to develop the most desirable alternatives for the Company and its shareholder and be eligible to receive certain bonuses for their efforts in developing such transaction and putting the Company in a position where its shareholder may receive the benefits of a disposition of BV. Therefore, in order to accomplish these objectives, the Board has caused the Company to establish this Plan. For purposes of the Plan, the assets of the BV will be deemed to include the interest of Mission Energy Wales (U.S.) ("MEW U.S.") in the Mission Hydro Ltd. Partnership (UK) ("Mission Hydro").

3. Defined Terms. For purposes of the Plan, the following terms (in addition to the defined terms set out above) shall have the meanings indicated:

(a) "ANSP" means the aggregate cash and non-cash consideration received by BV or the shareholders or Subsidiaries and affiliates of the BV, as the case may be, as seller(s) in the Covered Transaction, excluding for these purposes any obligations of the BV or its subsidiaries that are assumed by, on behalf of, or for the Purchaser, and subject to the following:

(ii) ANSP shall be determined without giving effect to the payments under this Plan;

(iii) ANSP shall be net of, or otherwise reduced by, the following: (A) any severance and retention payments associated with the Covered Transaction; (B) any indebtedness or other liability of BV or one of its subsidiaries related to or arising in connection with the transferred assets or operations that is retained or discharged by the Company or its affiliates, including, without limitation, contributions made to project or related entities in connection with the sale transaction; (C) any U.S., foreign and local income, transfer and other taxes, assessments and governmental levies realised, incurred, attributed to or related in any manner to the sale of the BV and its subsidiaries, including taxes imposed on the distribution of proceeds to or by the BV and its subsidiaries and tax impacts related to the liquidation or restructuring of the interest of MEW US in the Mission Hydro in connection with the sale; and (D) transaction costs incurred and paid or payable by the Company or any of its Subsidiaries, parents or other affiliates including, without limitation (1) commitment, broker, advisory, investment banking, appraisal, fairness opinion, financing and underwriting fees, commissions and discounts, (2) recording, insurance, filing, legal, travel, printing costs and other similar fees, costs and expenses, (3) claims arising or paid in connection with the sale, including costs of defense,

(4) costs of consents, waivers or settlements to facilitate sale, and (5) any other direct expenses associated with the sale; and

(b) "Base Salary" means the Participant's annual base salary of record for benefit purposes paid to a Participant by the Company and/or one or more Employers (whether or not deferred), but excludes (i) incentive, retention, signing or other bonus compensation, (ii) severance, and (iii) any other form of compensation or benefit.

(d) "Beneficiary" means the individual person or entity determined designated or deemed designated under Section 11(d) of the Plan.

(e) "Board" means the Board of Directors of the Company.

(f) "Cause" means the occurrence of any one or more of the following:

(i) The Participant's conviction for, or pleading guilty to, committing an act of fraud, embezzlement, theft, or other criminal act punishable by a term of imprisonment of 6 months or more;

(h) "Covered Sale" means a sale of the Participant's Employer in a transaction that results in the Participant (by consent) becoming employed by the Purchaser thereof or an affiliate of such Purchaser that is not an Employer.

(i) "Covered Transaction" means one or more transactions outside of the ordinary course that amount, in the aggregate, to a sale of all or substantially all of the assets or interests of BV, provided that a transaction included in the Covered Transaction must be specifically approved by the Board in advance of the consummation of the Covered Transaction. For purposes of this definition, "substantially all" shall mean stock or interests in and assets of BV (including stock and interests in Subsidiaries) (including EcoElectrica) representing or generating at least 90% of BV's 2003 revenue base as set out in the attached Exhibit A; provided that the Board may, in its discretion, lower the 90% threshold in light of all circumstances existing at the time of the sale and the degree to which the Company has exited the international market.

(j) "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.

(k) "Good Reason" means, without the Participant's express consent:

(i) a material reduction by the Participant's Employer of the aggregate value of the compensation (including current compensation and long-term incentive opportunities) and benefits paid and provided, as the case may be to the Participant; or

(ii) a significant reduction by the Participant's employer in the Participant's duties or responsibilities; or

(iii) a significant change in location of the workplace which is a question of fact and degree.

For the purpose of sub-clause (i), in no event will the BV Sale, in and of itself, constitute a reduction of compensation or long-term incentive award opportunities.

(l) "Initial Estimate" means the estimate described in Section 8.

(m) "Participant" means any person who is a participant in this Plan as determined in accordance with Section 5.

(n) "Participation Agreement" means an agreement between the Company, for and on behalf of the Employer, and the Participant as described in Section 5.

(o) "PAYG Withholding" has the same meaning as in Schedule 1 to the Taxation Administration Act 1953 (Cth).

(p) "Purchaser" means any person or entity or affiliate thereof that has purchased all or any part of the assets or interests of BV outside the ordinary course in a transaction that is included in the Covered Transaction.

(q) "Sale Bonus" means an unfunded right to receive a payment under this Plan.

(r) "Sale Bonus Payment Scheme" means the scheme nominated in a Participant's Participation Agreement, which establishes the manner and timing of the payment of a Sale Bonus in accordance with in Section 8.

(s) "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

(t) "Term of the Plan" means the period of time beginning on the Effective Date and ending on the first to occur of: (A) July 1, 2005, unless a written agreement or written letter of intent is in place that, on July 1, 2005, has been approved by the Board and that relates to a transaction or

series of transactions that would (if consummated) result in a Covered Transaction or (B) a determination by the Board that a Covered Transaction is not reasonably expected to occur on or before July 1, 2005; provided that the Board may, in its discretion, extend the term of the Plan beyond such date.

(u) "USD" means United States dollars.

4. Administration.

5. Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who are eligible to be Participants in the Plan, the Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable) applicable to each Participant and the Sale Bonus Payment Scheme applicable to each Participant. In order to participate in the Plan, each employee who is eligible to be a Participant must promptly sign and return to the Company a participation agreement in the form provided by the Company (a "Participation Agreement"), which shall set out the Participant's Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable), designated Sale Bonus Payment Scheme and additional details about the Plan.

6. Sale Bonus Trigger; Effect of Termination of Employment.

(a) Subject to Section 11(b) below, a Participant shall be entitled to receive a Sale Bonus on the terms set out in Sections 7 and 8 below if the Participant:

(i) is employed by an Employer on the Closing Date of the Covered Transaction,

(ii) prior to the Closing Date of the applicable Covered Sale, was terminated by his or her Employer without Cause (which does not include circumstances where the Participant accepts employment with a Purchaser or another entity that falls within the definition of Employer) or terminated employment with his or her Employer for Good Reason, or

(iii) commences employment with a Purchaser pursuant to the terms of the applicable Covered Sale and either (A) is still employed by the Purchaser on the Closing Date of the Covered Transaction or (B) such employment by the Purchaser was terminated by the Purchaser without Cause or terminated by the Participant for Good Reason).

will have no affect on the Participant's entitlement to receive a Sale Bonus under the Plan. The Board shall make the determination of whether a termination of a Participant's employment by a Purchaser qualifies as a termination for Cause, or whether a termination of employment with a Purchaser by the Participant qualifies as a termination for Good Reason, and in such context shall treat the Purchaser as the Employer for purposes of the definition of such term.

(b) Any termination of a Participant's employment by his or her Employer for Cause or by a Participant for Good Reason shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 11(j) of this Plan. Notwithstanding anything else contained herein to the contrary, a Participant shall not be deemed to have terminated employment, for purposes of this Plan, if his or her employment by an Employer terminates but he or she continues as an employee of another entity that falls within the definition of Employer, unless local laws otherwise require.

7. Amount of Sale Bonus. In the event that a Participant becomes entitled to receive a Sale Bonus, the amount of such Participant's Sale Bonus shall be determined by multiplying the Participant's highest annualised rate of Base Salary in effect at any time during the 24-month period preceding the Closing Date of the last transaction resulting in a Covered Transaction by the Participant's applicable Base Salary Multiplier. Each Participant's Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable) shall be set out in the Participant's Participation Agreement. Following consummation of a Covered Transaction, determinations of ANSP (including, without limitation, the determination of value in U.S. dollars of any non-cash consideration and the value in U.S. dollars of any consideration not expressed in U.S. dollars) shall be made by the Board in good faith, whose good faith determination will be binding.

8. Payment of Sale Bonus. If a Participant becomes entitled to receive a Sale Bonus, the manner and timing of the payment of such Sale Bonus shall be determined in accordance with the following rules. The Company's management, in its sole discretion, shall determine which of the following Sale Bonus Payment Schemes, either Payment Scheme One set out in subsection (a) or Payment Scheme Two set out in subsection (b), shall apply to each Participant. The applicable Payment Scheme shall be set out in the Participant's Participation Agreement.

(a) Payment Scheme One. Payment of a Sale Bonus to a Participant under Payment Scheme One shall be made in accordance with this Section 8(a). Within sixty (60) days after the Closing Date of the last transaction resulting in a Covered Transaction, the Board shall make a good faith estimate of ANSP resulting from the Covered Transaction (the "Initial Estimate"). Subject to clause (ii) below, no later than sixty (60) days after the Closing Date, each Participant who is eligible to receive a Sale Bonus under this Section 8(a) shall be paid an amount equal to 80% of such Participant's estimated Sale Bonus, calculated based on such estimate. Within 24 months after the Closing Date of the Covered Transaction, the Board shall make an updated estimate of ANSP, at which time up to 100% of the remainder of each Participant's Sale Bonus, if any, shall be paid subject to the following provisions of this paragraph:

that any earn-out or similar conditional amount is scheduled to be paid more than 24 months after the Closing Date, or to the extent escrowed proceeds are scheduled to be released from escrow more than 24 months after the Closing Date, the Board will within a reasonable time after the occurrence of such events adjust Sale Bonus calculations when and if such amounts are actually received (to the extent such amounts were not previously taken into account). If final amounts still remain to be determined more than 24 months after Closing Date, whether because of pending claims, earn-outs or similar arrangements, or otherwise, the Board may at any time thereafter make a good faith estimate of what the final amount of ANSP will be and pay out the remaining Sale Bonus amounts (less amounts previously paid) based on such good faith estimate. In such case, the Board's good faith determination will be binding on all Participants whose Sale Bonus is so paid and there will be no adjustments to such bonuses for events occurring before or after such determination.

(ii) Notwithstanding the foregoing, if the Board determines that, based on the estimate of ANSP made within sixty (60) days of the Closing Date of the Covered Transaction, the remainder of a Participant's Sale Bonus amount, if any, would be USD10,000 or less, the Board may elect to pay the Participant's entire Sale Bonus (without reduction for a withhold) based on the Board's Initial Estimate of ANSP. In such case, the Board's good faith Initial Estimate of ANSP will be binding on all Participants whose Sale Bonus is so paid and there will be no adjustments to such Sale Bonuses for events occurring before or after such determination.

(b) Payment Scheme Two. Payment of a Sale Bonus to a Participant under Payment Scheme Two shall be made in a cash lump sum no later than sixty (60) days following the Closing Date of the Covered Transaction based on the Board's Initial Estimate of ANSP, which estimate will be final and binding for such purposes.

(c) Liability for Payment. The Company shall be liable for the payment of benefits under this Plan with respect to each Participant.

10. Arbitration

(a) Arbitration of Claims. Unless superseded by express provision in the Participant's Participation Agreement, the Company, the Participant, and the Participant's Employer hereby consent to the resolution by mandatory and binding arbitration of all disputes or differences arising out of or in connection with this Plan that the Company or the Participant's Employer may have against the Participant, or that the Participant may have against the Company, his or her Employer, or against either of their officers, directors, employees or agents acting in their capacity as such. It is further agreed that the award made by the arbitrator on any dispute or difference which is referred to for arbitration in accordance with this Section 10, shall be final and binding upon the Company, the Participant, and the Participant's Employer and that judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.

commence the arbitration in good faith and had no reasonable basis therefor or that the Participant failed to comply with Section 11(b) or breached the agreement contemplated thereby, the Participant shall repay all advanced fees and expenses and shall reimburse the Company and the Participant's Employer for their reasonable legal fees and expenses in connection therewith.

Except as otherwise provided in this procedure or by mutual agreement of the parties, any arbitration shall be administered by a single arbitrator and, subject to the provisions of this Section 10, the Commercial Arbitration Act 1984 (Vic) (the "Act") shall apply to the reference to arbitration. The arbitration shall be held in Melbourne in the State of Victoria, Australia or at such other location as all the parties may mutually agree. Pre-hearing and post-hearing procedures may be held by telephone or in person as the arbitrator directs to be appropriate or convenient.

Any party wishing to refer a dispute or difference to arbitration must give to each of the other parties at least 30 days prior to the reference a notice in writing:

(i) stating that it requires the dispute or difference to be referred to arbitration;

(ii) specifying in summary form the matter or matters the subject of the dispute or difference; and

(iii) proposing the name of the person to be appointed as arbitrator.

At the expiration of the 30 day notice period any party may refer the dispute to arbitration in accordance with this Section 10. If within the 30 day notice period the parties cannot agree on an arbitrator, then any party may request the chairman for the time being of the Victorian Bar Council, whose current address is care of Level 2, Douglas Menzies Chambers, 180 William Street, Melbourne, Victoria, 3000, Australia to nominate an arbitrator. The nominee must be a practising barrister or solicitor who has attained the rank of Queen's Counsel or Senior Counsel and who has a general commercial law practice.

In making any determination for the purposes of the arbitration the arbitrator shall interpret this Plan, any applicable Company or Employer policy or rules and regulations according to applicable law. In reaching his or her decision, the arbitrator shall have no authority to change or modify any lawful Company or Employer policy, rule or regulation, or this Plan. The arbitrator shall have exclusive jurisdiction to resolve any dispute or difference relating to the interpretation, applicability, enforceability or formation of this Plan, including but not limited to, any claim that all or any part of this Plan is voidable.

The arbitrator shall have the power to entertain an application by any party to dismiss or strike out any claim made in the arbitration or an application for summary judgment. In entertaining such application and making a determination in respect of it the arbitrator is required to have regard to the Supreme Court (General Civil Procedure) Rules 1996 (Vic). Following the completion of the arbitration, the arbitrator shall issue a written decision disclosing his or her essential findings and conclusions upon which the award is based.

(b) Discovery. Each party shall have the right and opportunity to obtain documents from another party through one request for production of documents. Additional discovery may be had only when the arbitrator so orders upon a showing of substantial need. Any disputes regarding requests for production of documents or other discovery shall be submitted to the arbitrator for directions.

(c) Subpoenas. Any party shall have the right to obtain from the court an order requiring a person to attend for examination before the arbitrator or requiring a person to so attend and to produce to the arbitrator the document or documents specified in the court's order.

(d) Designation of Witnesses. Unless otherwise directed or ordered by the arbitrator at least thirty calendar days before the arbitration, the parties must exchange lists of witnesses, including any expert(s), and copies of all witness statements and exhibits intended to be used at the arbitration.

(e) Unless otherwise agreed in writing by all the parties:

(i) the parties are entitled to be represented in the arbitration by a legal practitioner or a legally qualified person;

(ii) the arbitrator may not extend the ambit of the dispute or difference referred to arbitration to include other disputes;

(iii) the arbitrator may not order or direct the consolidation of arbitration proceedings as contemplated by section 26 of the Act;

(iv) the arbitrator must determine the difference or dispute by arbitration and has no power to settle, compromise or mediate a resolution of the dispute or difference;

(v) the arbitrator is required to deliver an award, together with the reasons therefor, within thirty days after the conclusion of the arbitration hearing, unless all the parties agree to a request by the arbitrator to extend the time;

(vi) the arbitrator must deliver a final award and is not entitled to make an interim award; and

(vii) none of the parties, nor the arbitrator, is entitled to have a preliminary question of law determined by the court nor to apply to the court for an order in relation to the costs of the arbitration where a final award is not made by the arbitrator or where the award made is wholly set aside by the court.

11. Miscellaneous

(a) Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary of affiliate thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company following the Covered Transaction) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

(b) Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company and any of its Subsidiaries or affiliates' obligation to pay a Sale Bonus to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form attached to the Participant's Participation Agreement (or such other form as the Board (or its delegate) may require) and such executed agreement is received by the Company no later than 60 days after the Closing Date and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

(c) Notice of Termination. In signing the Participation Agreement, the Participant agrees that the Participant's employment with the Employer is terminable by either party providing 4 weeks' notice of termination where the employee is under 45 years of age or 5 weeks' notice of termination where the employee is 45 years of age or over and has at least two years' continuous service with the Employer.

(d) Beneficiaries. Subject to the other provisions of this Section 11(d), the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Board (or its delegate) to receive the

benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

Notwithstanding anything else herein to the contrary, in the event any amount is payable under this Plan to a minor, payment shall not be made to the minor, but instead be paid: (i) to that person's living parent(s) to act as custodian; (ii) if that person's parents are then divorced, and one parent is the sole custodial parent, to such custodial parent; or (iii) if no parent of that person is then living, payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.

(e) Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Board, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Board may direct that such payment be made to any person found by the Board, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Board and the Employers.

(f) Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company or its Subsidiaries or affiliates. No assets of the Company or its Subsidiaries or affiliates shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company or its Subsidiaries or affiliates under this Plan. Any and all of the Company, its Subsidiaries and affiliates' assets shall be, and remain, the general unpledged, unrestricted assets of the Company, its Subsidiaries and affiliates. Any obligation under this Plan shall be merely that of an unfunded and unsecured promise to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

(g) Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

(h) Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

(i) Modification. The Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment that adversely affects a Participant shall be effective without the consent of such Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorised member of the Board or its designee or legal representative.

(j) Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and, subject to applicable law, shall be deemed to have been duly given when delivered or on the date stamped as received by a recognised international courier (such as FedEx) postage and mailing fee prepaid and addressed: (i) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (ii) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

(k) Applicable Law. This document is governed by and is to be construed in accordance with the laws in force in the State of Victoria, Australia and the parties agree to submit to the non-exclusive jurisdiction of the Court of that State.

(l) No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its Subsidiaries and affiliates have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its Subsidiaries or affiliates to make or authorise (or to refrain from making or authorising, as the case may be): (i) any adjustment, recapitalisation, reorganisation or other change in capital structure or business; (ii) any merger, amalgamation, consolidation or change in ownership; (iii) any dissolution or liquidation; (iv) any sale or transfer of assets or business; or (v) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorised officer to execute this Plan as of the date first set out above.

		EDISON MISSION ENERGY
		By

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project		Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
	First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
	Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
	ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
	Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
	Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
	Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

				514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
	Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
	PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
	PT Adro	Indonesia		—				—		—	8	%		—		—
	CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
	TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

				19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
	Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
	Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
	Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

				233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
	Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

				755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
	Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

				—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total			$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE INCENTIVE PLAN—AUSTRALIA
EXHIBIT A
EX-10.4 7 a2135451zex-10_4.htm EXHIBIT 10.4
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Exhibit 10.4

EDISON MISSION ENERGY
BV SALE RETENTION PLAN—AUSTRALIA

TABLE OF CONTENTS

			Page
ARTICLE 1		ESTABLISHMENT, TERM, AND PURPOSE	1
	1.1	Establishment of the Plan.	1
	1.2	Purpose of the Plan.	1
ARTICLE 2		DEFINITIONS	2
ARTICLE 3		PARTICIPATION	2
	3.1	Participation	2
	3.2	Termination of Employment	3
	3.3	Re-Employment	3
	3.4	Notice of Termination	3
	4.1	Right to Payment of Retention Benefit	3
	4.3	Timing and Manner of Payment	3
ARTICLE 5		TAXES	4
ARTICLE 6		PAYMENT OBLIGATIONS	4
	6.1	Liability for Payment	4
	6.2	Payment of Obligations Absolute	4
	6.3	Unsecured General Creditor	4
	6.4	Other Benefit Plans	4
ARTICLE 7		RESOLUTION OF DISPUTES	5
	7.1	Claim	5
	7.2	Claim Decision	5
	7.3	Request for Review	5
	7.4	Review of Decision	5
ARTICLE 8		RESOLUTION OF DISPUTES—ARBITRATION	5
	8.1	General	5
	8.2	Arbitration of Claims	5
	8.3	Discovery	6
	8.4	Subpoenas	6
	8.5	Designation of Witnesses	6
ARTICLE 9		SUCCESSORS AND ASSIGNMENT	7
	9.1	Successors to the Company	7
ARTICLE 10		ADMINISTRATION OF THE PLAN	7
	10.1	Committee Action	7
	10.2	Powers and Duties of the Committee	7
	10.3	Construction and Interpretation	8
	10.4	Information	8
	10.5	Compensation, Expenses and Indemnity	8
ARTICLE 11		MISCELLANEOUS	8
	11.1	Release Agreement	8
	11.2	Term of the Plan	9
	11.3	Notice of Termination	9
	11.4	Beneficiaries	9
	11.5	Payments on Behalf of Persons Under Incapacity	9
	11.6	Gender and Number	10
	11.7	Severability	10
	11.8	Modification	10
	11.9	Notice	10
	11.10	Applicable Law	10
	11.11	No Sale Obligation	10

EDISON MISSION ENERGY
BV SALE RETENTION PLAN—AUSTRALIA

ARTICLE 1
ESTABLISHMENT, TERM, AND PURPOSE

1.1 Establishment of the Plan. Edison Mission Energy hereby establishes a retention plan to be known as the "Edison Mission Energy BV Sale Retention Plan—Australia" (the "Plan"). This Plan will become effective on and from February 19, 2004 (the "Effective Date").

1.2 Purpose of the Plan. The purpose of this Plan is to provide certain key employees of the Employers (as defined below) with an incentive to remain in the employ of their respective Employers through the completion of a sale of MEC International, BV ("BV") and to provide for continuity in the management and operations of the Employers during such time by offering certain employment protection and financial security in the event that their employment is terminated by their respective Employers without Cause (as defined below).

ARTICLE 2
DEFINITIONS

In addition to the terms defined above, whenever used in this Plan, the following terms shall have the meanings set out below unless the context clearly indicates to the contrary:

(a)

"Base Salary" means the Participant's annual base salary of record for benefit purposes paid to a Participant by the Company and/or one or more Employers (whether or not deferred), but excludes (i) incentive, retention, signing or other bonus compensation, (ii) severance, and (iii) any other form of compensation or benefit.

(b)

"Beneficiary" means the person or entity designated or deemed designated under Section 11.4 of the Plan.

(c)

"Board" means the Board of Directors of the Company.

(d)

"BV Sale" means one or more transactions outside of the ordinary course that amount, in the aggregate, to a sale of all or substantially all of the assets or interests of BV, provided that a transaction included in the BV Sale must be specifically approved by the Board in advance of the consummation of the BV Sale. For purposes of this definition, "substantially all" shall mean stock or interests in and assets of BV (including stock and interests in Subsidiaries) (including EcoElectrica) representing or generating at least 90% of BV's 2003 revenue base as set out in the attached Exhibit A; provided that the Board may, in its discretion, lower the 90% threshold in light of all circumstances existing at the time of the sale and the degree to which the Company has exited the international market; and provided further, that for purposes of this definition, the assets of the BV shall be deemed to include the interest of Mission Energy Wales (U.S.) in the Mission Hydro Ltd. Partnership (UK);

(e)

"Cause" means the occurrence of any one or more of the following:

(1): The Participant's conviction for, or pleading guilty to, committing an act of fraud, embezzlement, theft, or other criminal act punishable by a term of imprisonment of 6 months or more;
(2): A significant adverse change in the Participant's performance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties as well as any reasonable duties that may be assigned to him or her to help effect the BV Sale), including but not limited to a failure to comply with the Company's policies and

instructions regarding the BV Sale and the confidentiality of certain information related thereto; or

(2): Wilful misconduct by the Participant that: (i) if the event giving rise to the termination of the Participant's employment occurs before the sale of the Participant's Employer or while the Participant is otherwise employed by an Employer, is in violation of the Company's and/or the Participant's Employer's policies and practices applicable to the Participant from time to time; or (ii) if the event giving rise to the termination of the Participant's employment occurs after the sale of the Participant's Employer when the Participant is no longer employed by an Employer, would have resulted in the termination of the Participant's employment by the Company or the Participant's Employer under the Company's and/or the Participant's Employer's policies and practices applicable to the Participant in effect immediately prior to such sale. However, an act or an omission of a Participant will only be considered "wilful" where it is committed in bad faith and without reasonable belief that the act or omission was in the best interest of the Company and the Employer.

(f): "Code" means the United States Internal Revenue Code of 1986, as amended.
(g): "Committee" means the Board or one or more committees appointed by the Board.
(h): "Company" means Edison Mission Energy, a Delaware corporation, or any successor thereto as provided in Section 9.1.
(i): "Disability" shall mean, for all purposes of this Plan, the Participant's eligibility for benefits under his or her Employer's long-term disability plan applicable to the Participant, as determined by the Employer.
(j): "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.
(k): "Participant" means any person who is a participant in this Plan as determined in accordance with Article 3.
(l): "PAYG Withholding" has the same meaning as in Schedule 1 to the Taxation Administration Act 1953 (Cth).
(m): "Purchaser" means any person or entity or affiliate thereof that has purchased all or any part of the assets or interests of BV outside the ordinary course in a transaction that is included in the BV Sale.
(n): "Retention Benefit" means the retention benefit set out in Article 4 of this Plan.
(o): "STI" means the short term incentive program, if any, maintained by the Company or by an Employer in which a Participant participates.
(p): "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
(q): "USD" means United States dollars.

ARTICLE 3
PARTICIPATION

3.1 Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who are eligible to be Participants in the Plan and the Retention Benefit which each Participant may become eligible to receive under the Plan. An employee who is eligible to become a Participant will only become a Participant once he or she has signed and returned to the

Company a participation agreement in the form provided by the Company (a "Participation Agreement") in accordance with the requirements set out in the Participation Agreement. The Participation Agreement shall set out whether the Participant may become eligible for a Retention Benefit under the Plan and additional details about the Plan.

3.2 Termination of Employment. Notwithstanding anything else contained in the Plan to the contrary, a Participant shall not be deemed to have terminated employment for the purposes of this Plan if his or her employment by a previous Employer terminates but he or she commences employment as an employee of another entity that falls within the definition of Employer, unless local laws otherwise require.

3.3 Re-Employment. Notwithstanding anything else contained in the Plan to the contrary, a Participant shall have no right to a Retention Benefit under this Plan where, prior to the payment or delivery (or commencement of payment or delivery, as the case may be) of a Retention Benefit, the Participant becomes re-employed by his or her previous Employer or employed by another Employer. Notwithstanding anything else contained in this Plan to the contrary, a Participant's right to continuing or additional benefits under this Plan shall automatically terminate (but the Participant shall have no obligation to re-pay benefits previously paid) if the Participant becomes re-employed by his or her previous Employer or employed by another Employer. If a Participant is so employed and that employment is subsequently terminated and the Participant again becomes entitled to a Retention Benefit under this Plan in connection with such later termination of employment, any payments otherwise payable to the Participant hereunder in connection with such later termination of employment shall be reduced by the amount of any payments paid under this Plan to the Participant in connection with any prior termination of his or her employment.

3.4 Notice of Termination. Any termination of a Participant's employment by his or her Employer for Cause shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 11.9 of this Plan.

ARTICLE 4
RETENTION BENEFIT

4.1 Right to Payment of Retention Benefit. A Participant who has been designated as eligible to receive a Retention Benefit pursuant to this Article 4 shall be entitled to receive from the Company a Retention Benefit if he or she remains employed by his or her Employer until the first to occur of: (1) a termination of the Participant's employment by his or her Employer without Cause (and other than due to the Participant's death or Disability), (2) a sale by the Company of the Participant's Employer, (3) the BV Sale, (4) a public announcement by the Company that the BV Sale has been terminated, or (5) July 1, 2005. If a Participant's employment by his or her Employer terminates prior to July 1, 2005 for any reason other than by his or her Employer without Cause (and other than due to the Participant's death or Disability), then such Participant shall not be entitled to a Retention Benefit.

4.2 Retention Benefits. If a Participant becomes entitled to a Retention Benefit pursuant to Section 4.1, the amount of such benefit shall be set out in the Participant's Participation Agreement.

4.3 Timing and Manner of Payment. Any Retention Benefit shall be paid by the Company to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the date such benefit becomes payable pursuant to Section 4.1.

ARTICLE 5
TAXES

The Company and/or the Participant's Employer, as applicable, has the right to withhold from any amount otherwise payable to a Participant under or pursuant to this Plan the amount of any taxes or other statutory deductions that the Company or such Employer, or any of their respective subsidiaries or affiliates, may legally be required to withhold with respect to such payment (including, without limitation, any amounts required to be withheld under PAYG Withholding and any United States Federal taxes, and any other foreign, state, city, or local taxes). Each Participant and Beneficiary shall be solely responsible for all income taxes arising in connection with participation in this Plan or benefits hereunder.

ARTICLE 6
PAYMENT OBLIGATIONS

6.1 Liability for Payment. The Company shall be liable for the payment of a Retention Benefit under this Plan with respect to each Participant.

6.2 Payment of Obligations Absolute. Subject to Sections 11.1 and 3.3 and Article 5, the Company and any of its Subsidiaries' or affiliates' obligations to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company and any of its Subsidiaries or affiliates may have against the Participant or anyone else. All amounts payable by the Company and any of its Subsidiaries or affiliates under the Plan shall be paid without notice or demand. Each and every payment made under the Plan by the Company and any of its Subsidiaries or affiliates shall be final, and neither the Company nor its Subsidiaries or affiliates shall seek to recover all or any part of such payment from the Participant or from whomsoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Section 3.3 or Article 8 and subject to the Participant's compliance with Section 11.1 and the agreement contemplated thereby.

6.3 Unsecured General Creditor. No assets of the Company or its Subsidiaries or affiliates shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company or its Subsidiaries or affiliates under this Plan. Any and all of the Company or its Subsidiaries or affiliates' assets shall be, and remain, the general unpledged, unrestricted assets of the Company and its Subsidiaries and affiliates. Any obligation under this Plan shall be merely that of an unfunded and unsecured promise to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

6.4 Other Benefit Plans. Unless otherwise required by law, all payments, benefits and amounts provided under this Plan shall be in addition to and not in substitution for any superannuation or pension rights under the Company's or other Employer's superannuation or tax-qualified pension plan in which the Participant participates, and any disability or other Company or other Employer benefit plan distribution that a Participant is entitled to, under the terms of any such plan, at the time his or her employment by his or her Employer terminates. Notwithstanding the foregoing, this Plan shall not create an inference that any duplicate payments shall be required. Payments received by a person under this Plan shall not be deemed a part of the person's compensation for purposes of determining the person's benefits under any employee welfare, pension or other benefit plan or arrangement, if any, provided by an Employer, except where explicitly provided under the terms of such plan or arrangement.

ARTICLE 7
RESOLUTION OF DISPUTES

7.1 Claim. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as "Claimant") may file a written request for such benefit with the Committee, setting out his or her claim. The request must be addressed to the Committee at the Company's principal place of business.

7.2 Claim Decision. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for special circumstances.

If the claim is denied in whole or in part, the Committee shall inform the Claimant in writing, using language calculated to be understood by the Claimant, setting out: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Plan on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under Section 7.3.

7.3 Request for Review. Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination. Such request must be addressed to the Committee, at the Company's principal place of business. The Claimant or his or her duly authorised representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee.

7.4 Review of Decision. Within 60 days after the Committee's receipt of a request for review, after considering all materials presented by the Claimant, the Committee will inform the Claimant in writing, in a manner calculated to be understood by the Claimant, of its decision setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the 60 day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred and twenty days after receipt of the request for review.

ARTICLE 8
RESOLUTION OF DISPUTES—ARBITRATION

8.1 General. A Participant or Beneficiary must complete the claims procedure described in Article 7 before submitting any dispute or difference arising out of or in connection with this Plan to arbitration as described below in this Article 8.

8.2 Arbitration of Claims. Unless superseded by express provision in the Participant's Participation Agreement, the Company, the Participant, and the Participant's Employer hereby consent to the resolution by mandatory and binding arbitration of all disputes or differences arising out of or in connection with this Plan that the Company or the Participant's Employer may have against the Participant, or that the Participant may have against the Company, his or her Employer, or against either of their officers, directors, employees or agents acting in their capacity as such. It is further agreed that the award made by the arbitrator on any dispute or difference which is referred to for arbitration in accordance with this Article 8, shall be final and binding upon the Company, the Participant, and the Participant's Employer and that judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.

the arbitration in good faith and had no reasonable basis therefor or that the Participant failed to comply with Section 11.1 or breached the agreement contemplated thereby, the Participant shall repay all advanced fees and expenses and shall reimburse the Company and the Participant's Employer for their reasonable legal fees and expenses in connection therewith.

Except as otherwise provided in this procedure or by mutual agreement of the parties, any arbitration shall be administered by a single arbitrator and, subject to the provisions of this Article 8, the Commercial Arbitration Act 1984 (Vic) (the "Act") shall apply to the reference to arbitration. The arbitration shall be held in Melbourne in the State of Victoria, Australia or at such other location as all the parties may mutually agree. Pre-hearing and post-hearing procedures may be held by telephone or in person as the arbitrator directs to be appropriate or convenient.

Any party wishing to refer a dispute or difference to arbitration must give to each of the other parties at least 30 days prior to the reference a notice in writing:

(i): stating that it requires the dispute or difference to be referred to arbitration;
(ii): specifying in summary form the matter or matters the subject of the dispute or difference; and
(iii): proposing the name of the person to be appointed as arbitrator.

At the expiration of the 30 day notice period any party may refer the dispute to arbitration in accordance with this Article 8.

If within the 30 day notice period the parties cannot agree on an arbitrator, then any party may request the chairman for the time being of the Victorian Bar Council, whose current address is care of Level 2, Douglas Menzies Chambers, 180 William Street, Melbourne, Victoria, 3000, Australia to nominate an arbitrator. The nominee must be a practising barrister or solicitor who has attained the rank of Queen's Counsel or Senior Counsel and who has a general commercial law practice.

8.3 Discovery. Each party shall have the right and opportunity to obtain documents from another party through one request for production of documents. Additional discovery may be had only when the arbitrator so orders upon a showing of substantial need. Any disputes regarding requests for production of documents or other discovery shall be submitted to the arbitrator for directions.

8.4 Subpoenas. Any party shall have the right to obtain from the court an order requiring a person to attend for examination before the arbitrator or requiring a person to so attend and to produce to the arbitrator the document or documents specified in the court's order.

8.5 Designation of Witnesses. Unless otherwise directed or ordered by the arbitrator at least thirty calendar days before the arbitration, the parties must exchange lists of witnesses, including any expert(s), and copies of all witness statements and exhibits intended to be used at the arbitration.

Unless otherwise agreed in writing by all the parties:

(i): the parties are entitled to be represented in the arbitration by a legal practitioner or a legally qualified person;
(ii): the arbitrator may not extend the ambit of the dispute or difference referred to arbitration to include other disputes;
(iii): the arbitrator may not order or direct the consolidation of arbitration proceedings as contemplated by section 26 of the Act;
(iv): the arbitrator must determine the difference or dispute by arbitration and has no power to settle, compromise or mediate a resolution of the dispute or difference;
(v): the arbitrator is required to deliver an award, together with the reasons therefor, within thirty days after the conclusion of the arbitration hearing, unless all the parties agree to a request by the arbitrator to extend the time;
(vi): the arbitrator must deliver a final award and is not entitled to make an interim award; and
(vii): none of the parties, nor the arbitrator, is entitled to have a preliminary question of law determined by the court nor to apply to the court for an order in relation to the costs of the arbitration where a final award is not made by the arbitrator or where the award made is wholly set aside by the court.

ARTICLE 9
SUCCESSORS AND ASSIGNMENT

9.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary or affiliate thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company after the BV Sale) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

ARTICLE 10
ADMINISTRATION OF THE PLAN

10.1 Committee Action. The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee.

10.2 Powers and Duties of the Committee. The Committee shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the power and authority to do the following:

(a): To determine eligibility for and participation in this Plan;
(b): To construe and interpret the terms and provisions of this Plan;

(c): To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries, and to determine the amount of withholding taxes to be deducted pursuant to Article 5;
(d): To maintain all records that may be necessary for the administration of this Plan;
(e): To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;
(f): To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof; and
(g): To appoint a plan administrator or any other agent (which may include, without limitation, one or more employees of the Company), and to delegate to them such powers and duties in connection with the administration of this Plan as the Committee may from time to time prescribe.

10.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, including whether, for purposes of the Plan, a termination of a Participant's employment has been with or without Cause, which interpretation or construction shall be final and binding on all parties, including but not limited to each Employer and any Participant or Beneficiary. The Committee shall administer such terms and provisions in full accordance with any and all laws applicable to this Plan.

10.4 Information. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require.

10.5 Compensation, Expenses and Indemnity. The members of the Committee shall serve without additional compensation for their services hereunder beyond that which they are entitled as authorised by the Board. The Committee is authorised at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. The Company shall pay expenses and fees in connection with the administration of this Plan. To the extent permitted by applicable law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and each member thereof, and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to this Plan, other than expenses and liabilities arising out of wilful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

ARTICLE 11
MISCELLANEOUS

11.1 Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company and any of its Subsidiaries or affiliates' obligation to pay a Retention Benefit to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form attached to the Participant's Participation Agreement (or such other form as the Committee may require) and such executed agreement is received by the Company no later than 60 days after the date the Participant becomes entitled to a Retention Benefit pursuant to Section 4.1 and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

11.2 Term of the Plan. This Plan will commence on the Effective Date and shall continue in effect through the date that benefits are triggered pursuant to Section 4.1.

11.3 Notice of Termination. In signing the Participation Agreement, the Participant agrees that the Participant's employment with the Employer is terminable by either party providing 4 weeks' notice of termination where the employee is under 45 years of age or 5 weeks' notice of termination where the employee is 45 years of age or over and has at least 2 years' continuous service with the Employer. Payments made under this Plan shall not give any person the right to any benefits provided to persons retained in an Employer's employ (such as, without limitation, health and dental benefits). Except as may otherwise be required by law or set out specifically in such plans or as otherwise expressly provided in this Plan, such benefits shall terminate as of the date the Participant's employment by an Employer terminates.

11.4 Beneficiaries. Subject to the other provisions of this Section 11.4, the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.

Notwithstanding anything else herein to the contrary, in the event any amount is payable under this Plan to a minor, payment shall not be made to the minor, but instead be paid: (a) to that person's living parent(s) to act as custodian; (b) if that person's parents are then divorced, and one parent is the sole custodial parent, to such custodial parent; or (c) if no parent of that person is then living, payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.

11.5 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Employers.

11.6 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

11.7 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

11.8 Modification. The Committee or the Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment shall be effective without the consent of each affected Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorised member of the Committee (or the Board) or its designee or legal representative.

11.9 Notice. For purposes of this Plan, and unless otherwise required by law, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognised international courier (such as FedEx) postage and mailing fee prepaid and addressed: (a) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (b) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

11.10 Applicable Law. This document is governed by and is to be construed in accordance with the law in force in the State of Victoria, Australia and the parties agree to submit to the non-exclusive jurisdiction of the Courts of the State of Victoria, Australia.

11.11 No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its Subsidiaries and affiliates have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its Subsidiaries or affiliates to make or authorise (or to refrain from making or authorising, as the case may be): (a) any adjustment, recapitalisation, reorganisation or other change in capital structure or business; (b) any merger, amalgamation, consolidation or change in ownership; (c) any dissolution or liquidation; (d) any sale or transfer of assets or business; or (e) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorised officer to execute this Plan as of the date first set forth above.

EDISON MISSION ENERGY

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project	Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

			514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
PT Adro	Indonesia		—				—		—	8	%		—		—
CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

			19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

			233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

			755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

			—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total		$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE RETENTION PLAN—AUSTRALIA
TABLE OF CONTENTS
EDISON MISSION ENERGY BV SALE RETENTION PLAN—AUSTRALIA
EXHIBIT A
EX-10.5 8 a2135451zex-10_5.htm EXHIBIT 10.5
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Exhibit 10.5

EDISON MISSION ENERGY
BV SALE SEVERANCE PLAN—AUSTRALIA

TABLE OF CONTENTS

			Page
ARTICLE 1		ESTABLISHMENT, TERM, AND PURPOSE	1
	1.1	Establishment of the Plan	1
	1.2	Purpose of the Plan	1
ARTICLE 2		DEFINITIONS	1
ARTICLE 3		PARTICIPATION	4
	3.1	Participation	4
	3.2	Termination of Employment	4
	3.3	Benefit Offset	4
	3.4	Re-Employment	4
	3.5	Notice of Termination	5
ARTICLE 4			5
	4.1	Right to Severance Benefits	5
	4.2	Severance Benefits	5
	4.3	Minimum Benefit for Designated Participants	6
	4.4	Timing and Manner of Payment of Severance Benefits	6
ARTICLE 5		TAXES	6
ARTICLE 6		PAYMENT OBLIGATIONS	7
	6.1	Liability for Payment	7
	6.2	Payment of Obligations Absolute	7
	6.3	Unsecured General Creditor	7
	6.4	Relationship to Other Plans	7
	6.5	Other Benefit Plans	7
ARTICLE 7		RESOLUTION OF DISPUTES	8
	7.1	Claim	8
	7.2	Claim Decision	8
	7.3	Request for Review	8
	7.4	Review of Decision	8
ARTICLE 8		RESOLUTION OF DISPUTES—ARBITRATION	8
	8.1	General	8
	8.2	Arbitration of Claims	8
	8.3	Discovery	9
	8.4	Subpoenas	10
	8.5	Designation of Witnesses	10
ARTICLE 9		SUCCESSORS AND ASSIGNMENT	10
	9.1	Successors to the Company	10
ARTICLE 10		ADMINISTRATION OF THE PLAN	10
	10.1	Committee Action	10
	10.2	Powers and Duties of the Committee	10
	10.3	Construction and Interpretation	11
	10.4	Information	11
	10.5	Compensation, Expenses and Indemnity	11

ARTICLE 11		MISCELLANEOUS	11
	11.1	Release Agreement	11
	11.2	Term of the Plan	12
	11.3	Notice of Termination	12
	11.4	Beneficiaries	12
	11.5	Payments on Behalf of Persons Under Incapacity	13
	11.6	Gender and Number	13
	11.7	Severability	13
	11.8	Modification	13
	11.9	Notice	13
	11.10	Applicable Law	13
	11.11	No Sale Obligation	13

EDISON MISSION ENERGY
BV SALE SEVERANCE PLAN—AUSTRALIA

ARTICLE 1
ESTABLISHMENT, TERM, AND PURPOSE

1.1 Establishment of the Plan. Edison Mission Energy hereby establishes a severance plan to be known as the "Edison Mission Energy BV Sale Severance Plan—Australia" (the "Plan"). This Plan will become effective on and from February 19, 2004 (the "Effective Date").

1.2 Purpose of the Plan. The purpose of this Plan is to provide key employees of the Employers (as defined below) with an incentive to remain in the employ of their respective Employers through the completion of a sale of MEC International, BV ("BV") and to provide for continuity in the management and operations of the Employers during such time by offering certain employment protection and financial security in the event that their employment is terminated by their respective Employers without Cause (as defined below) or by the key employees for Good Reason (as defined below) during the term of the Plan.

ARTICLE 2
DEFINITIONS

In addition to the defined terms above, whenever used in this Plan, the following terms shall have the meanings set out below unless the context clearly indicates to the contrary:

(a)

"Base Salary" means the Participant's annual base salary of record for benefit purposes paid to a Participant by the Company and/or one or more Employers (whether or not deferred), but excludes (i) incentive, retention, signing or other bonus compensation (ii) severance, and (iii) any other form of compensation or benefit.

(b)

"Beneficiary" means the person or entity designated or deemed designated under Section 11.4 of the Plan.

(c)

"Board" means the Board of Directors of the Company.

(d)

"BV Sale" means one or more transactions outside of the ordinary course that amount, in the aggregate, to a sale of all or substantially all of the assets or interests of BV, provided that a transaction included in the BV Sale must be specifically approved by the Board in advance of the consummation of the BV Sale. For purposes of this definition, "substantially all" shall mean stock or interests in and assets of BV (including stock and interests in Subsidiaries) (including EcoElectrica) representing or generating at least 90% of BV's 2003 revenue base as set out in the attached Exhibit A; provided that the Board may, in its discretion, lower the 90% threshold in light of all circumstances existing at the time of the sale and the degree to which the Company has exited the international market; and provided further, that for purposes of this definition, the assets of the BV shall be deemed to include the interest of Mission Energy Wales (U.S.) in the Mission Hydro Ltd. Partnership (UK);

(e)

"Cause" means the occurrence of any one or more of the following:

(1): The Participant's conviction for, or pleading guilty to, committing an act of fraud, embezzlement, theft, or other criminal act punishable by a term of imprisonment of 6 months or more;
(2): A significant adverse change in the Participant's performance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties as well as any reasonable duties that may be assigned to him or her to help effect the BV Sale),

including but not limited to a failure to comply with the Company's policies and instructions regarding the BV Sale and the confidentiality of certain information related thereto; or

(3): Wilful misconduct by the Participant that: (i) if the event giving rise to the termination of the Participant's employment occurs before the sale of the Participant's Employer or while the Participant is otherwise employed by an Employer, is in violation of the Company's and/or the Participant's Employer's policies and practices applicable to the Participant from time to time; or (ii) if the event giving rise to the termination of the Participant's employment occurs after the sale of the Participant's Employer when the Participant is no longer employed by an Employer, would have resulted in the termination of the Participant's employment by the Company or the Participant's Employer under the Company's and/or the Participant's Employer's policies and practices applicable to the Participant in effect immediately prior to such sale. However, an act or omission of a Participant will only be considered "wilful" where it is committed in bad faith and without reasonable belief that the act or omission was in the best interest of the Company and the Employer.

(f): "Code" means the United States Internal Revenue Code of 1986, as amended.
(g): "Committee" means the Board or one or more committees appointed by the Board.
(h): "Company" means Edison Mission Energy, a Delaware corporation, or any successor thereto as provided in Section 9.1.
(i): "Deferred Stock Unit" means an award granted by Edison International, the Company or an Employer in the form of a bookkeeping entry which serves as a measurement relative to shares of Edison International common stock for purposes of determining the payment, in cash or stock at some time after vesting, of the award.
(j): "Disability" means, for all purposes of this Plan, the Participant's eligibility for benefits under his or her Employer's long-term disability plan applicable to the Participant, as determined by the Employer.
(k): "Dividend Equivalent" means a dividend equivalent granted by Edison International, the Company or an Employer in connection with a Stock Option grant.
(l): "EDCP" means the Edison International Executive Deferred Compensation Plan, as amended from time to time. EDCP shall not include the Edison International Affiliate Option Deferred Compensation Plan, the OGDP, or any other nonqualified deferred compensation plan.
(m): "EIX Severance Plan" means the Edison International Executive Severance Plan.
(n): "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.
(o): "Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
(p): "Executive Incentive Award" means the annual incentive bonus, if any, paid to the Participant by his or her Employer(s) (or deferred by the Participant) under the Edison International Executive Incentive Compensation Plan or any similar successor plan. Executive Incentive Award does not include special retention bonus, signing bonus, one-time or special project bonus, or any other form of bonus, or any other form of compensation or benefit.
(q): "Executive Retirement Plan" means the Southern California Edison Company Executive Retirement Plan, as amended from time to time, or any similar or successor plan sponsored by an Employer.

(r)

"Good Reason" means, without the Participant's express consent:

(i): a material reduction by the Participant's employer of the aggregate value of the compensation (including current compensation and long-term incentive award opportunities) and benefits paid and provided, as the case may be, to the Participant; or
(ii): a significant reduction by the Participant's employer of the Participant's duties or responsibilities; or
(iii): a significant change in location of the workplace which is a question of fact and degree.

For the purpose of sub-clause (i), in no event will the BV Sale, in and of itself, constitute a reduction of compensation or long-term incentive award opportunities.

(s)

"Minimum Benefit Percentage" means, if benefits are triggered under this Plan, the minimum benefit to which certain designated Participants may become entitled pursuant to Section 4.3.

(t)

"OGDP" means the Edison International Option Gain Deferral Plan, as it may be amended from time to time.

(u)

"Participant" means any person who is a participant in this Plan as determined in accordance with Article 3.

(v)

"PAYG Withholding" has the same meaning as in Schedule 1 to the Taxation Administration Act 1953 (Cth).

(w)

(x)

(y)

"Qualifying Severance Event" means, as to a Participant, the occurrence of either of the following events during the term of the Plan:

(i): A termination of the Participant's employment by his or her Employer, without the Participant's consent, for reasons other than Cause (and other than due to the Participant's death or Disability); or
(ii): A termination of employment by the Participant for Good Reason.

(z)

"Severance Benefits" means the severance benefits set out in Article 4 of this Plan.

(aa)

(bb)

"Similar Position" means employment with a Purchaser with a compensation package, level of responsibility or duties and work location that would not, if offered to the Participant by his or her Employer while he or she was an employee of an Employer, have permitted the Participant to terminate his or her employment with the Employer for Good Reason.

(cc): "Stock Option" means an option granted by Edison International, the Company or an Employer to purchase shares of Edison International stock.
(dd): "Stock Option Retention Exchange" means the exchange on November 29, 2001, pursuant to a Participant's election, of Stock Options for Deferred Stock Units.
(ee): "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
(ff): "USD" means United States dollars.

ARTICLE 3
PARTICIPATION

3.1 Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who are eligible to be Participants in the Plan and the Severance Benefits which each Participant may become eligible to receive under the Plan. An employee who is eligible to become a Participant will only become a Participant once he or she has promptly signed and returned to the Company a participation agreement in the form provided by the Company (a "Participation Agreement") in accordance with the requirements set out in the Participation Agreement. The Participation Agreement shall set forth when the Participant will become eligible for Severance Benefits under the Plan, the definitions of the components of the Severance Benefits to which the Participant may become entitled, the Participant's Minimum Benefit Percentage, if applicable, and additional details about the Plan.

3.2 Termination of Employment. Notwithstanding anything else contained in the Plan to the contrary, a Participant shall be deemed not to have terminated employment for the purposes of this Plan if he or she accepts employment with and commences employment as an employee of another entity that falls within the definition of Employer, unless local laws otherwise provide.

3.3 Benefit Offset. Notwithstanding anything else contained in the Plan to the contrary, any benefits otherwise payable or deliverable under this Plan to a Participant shall be offset or reduced by the amount of severance benefits payable or deliverable to the Participant under any local law, other redundancy, severance or other plan, program, or agreement (including, without limitation, any employment agreement) of or with the Company, the Participant's Employer, or their respective affiliates whether contractual, statutory or otherwise (to the extent the Participant remains entitled to any such benefits after giving effect to the Participant's agreement to waive his or her entitlement to such benefits pursuant to his or her Participation Agreement); provided, however, that any benefits payable to a Participant under this Plan shall not be offset or reduced by the amount of any benefits payable to such Participant under the Company's Sale Incentive Plan or the Company's BV Sale Retention Plan, except to the extent that any amounts payable to a Participant under the Sale Incentive Plan and/or BV Sale Retention Plan are included in the calculation of the Participant's minimum benefit (if applicable) pursuant to Section 4.3.

3.4 Re-Employment. Notwithstanding anything else contained in the Plan to the contrary, to the extent permitted by law a Participant shall have no right to Severance Benefits under the Plan where, prior to the payment or delivery (or commencement of payment or delivery, as the case may be) of Severance Benefits, the Participant becomes re-employed by his or her previous Employer or employed by another Employer. Notwithstanding anything else contained in the Plan to the contrary, a Participant's right to continuing or additional Severance Benefits under this Plan shall automatically terminate (but the Participant shall have no obligation to re-pay benefits previously paid) if the Participant becomes re-employed by his or her previous Employer or employed by another Employer. If a Participant is so employed and that employment is subsequently terminated and the Participant again becomes entitled to Severance Benefits under this Plan in connection with such later termination of

employment, any payments otherwise payable to the Participant hereunder in connection with such later termination of employment shall be reduced by the amount of any payments paid under this Plan to the Participant in connection with any prior termination of his or her employment.

3.5 Notice of Termination. Any termination of a Participant's employment by his or her Employer for Cause or by a Participant for Good Reason shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 11.9 of this Plan.

ARTICLE 4
SEVERANCE BENEFITS

4.1 Right to Severance Benefits. Subject to Section 11.1, a Participant shall be entitled to receive from the Company, for and on behalf of the Participant's Employer, the applicable Severance Benefits described in this Article 4 if, during the term of the Plan, the Participant incurs a Qualifying Severance Event. If a Participant's employment by his or her Employer terminates for any reason other than a Qualifying Severance Event, then the Participant shall not be entitled to any Severance Benefits hereunder. If more than one Qualifying Severance Event occurs with respect to a Participant, such events shall constitute a single Qualifying Severance Event and the provisions of this Article 4 shall apply with respect to the Participant only once. A Participant's continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason for purposes of determining if a Qualifying Severance Event has occurred with respect to the Participant.

4.2 Severance Benefits.

4.2.1 If a Participant becomes entitled to receive Severance Benefits in accordance with Section 4.1 and the Participant is not offered a Similar Position at a Purchaser within 30 days after the Severance Date, then such Participant shall become entitled to the following benefits, each of which is defined in Exhibit C to such Participant's Participation Agreement: (a) a Cash Severance Benefit, (b) a Pro-Rata Bonus Payment, (c) an Outplacement Benefit and (d) Non-Cash Severance Benefits.

4.2.2 If a Participant becomes entitled to receive Severance Benefits in accordance with Section 4.1 and the Participant is offered a Similar Position at a Purchaser within 30 days after the Severance Date (whether or not he or she accepts such Similar Position), then the Participant shall become entitled to the following benefits, each of which is defined in Exhibit C to the Participant's Participation Agreement: (a) a Pro-Rata Bonus Payment and (b) Non-Cash Severance Benefits. A Participant's Non Cash Severance Benefits may amount to no more than an employee's usual entitlements on termination of employment.

4.2.3 Notwithstanding the foregoing, if a Participant becomes entitled to Severance Benefits under Section 4.2.2 and not 4.2.1 and the Participant accepts such Similar Position, but within 12 months after he or she accepts such Similar Position, his or her employment with the Purchaser is either terminated by the Purchaser for any reason other than for Cause or by the Participant for Good Reason, then his or her Severance Benefit shall be adjusted in accordance with the next sentence. In addition to the benefits set out in Section 4.2.2, the Participant shall become entitled to the following benefits, each of which is defined in Exhibit C to such Participant's Participation Agreement: (i) a Cash Severance Benefit, calculated as though a Similar Position was not offered to such Participant and the benefit became payable upon his or her Severance Date and (ii) an Outplacement Benefit; provided that the amount of such benefits, if triggered, shall be reduced by the amount of severance benefits payable or deliverable to the Participant under any severance plan, policy, program or agreement of the Purchaser or any of its affiliates as a result of

redundancy. The Board shall make the determination of whether a termination of a Participant's employment by a Purchaser qualifies as a termination for Cause, or whether a termination of employment with a Purchaser by the Participant qualifies as a termination for Good Reason, and in this context shall treat the Purchaser as the Employer for purposes of the definition of such term.

4.3 Minimum Benefit for Designated Participants.

4.3.1 The Company's management, in its sole discretion, shall determine if a Participant will be entitled to receive a minimum Plan benefit pursuant to this Section 4.3 and, with respect to each such Participant, his or her Minimum Benefit Percentage. Each Participant's Participation Agreement will indicate whether the Participant is subject to this Section 4.3 and will set out the Participant's Minimum Benefit Percentage, if applicable, which may vary amongst Participants.

4.3.2 If a Participant who has been designated as eligible to receive a minimum Plan benefit under this Section 4.3 becomes entitled to a Cash Severance Benefit pursuant to Section 4.2, then the sum of the Participant's Cash Severance Benefit, any Pro-Rata Bonus Payment, any amount payable to such Participant under the Company's Sale Incentive Plan, any other severance benefits payable to the Participant, as a result of redundancy, under local law or otherwise (including without limitation, any severance paid to the Participant by a Purchaser or any of its affiliates in the circumstances contemplated by Section 4.2.3), without duplicating any offset of benefits as provided for in Section 3.3, and any amount payable to the Participant under the Company's BV Sale Retention Plan, must be at least equal to the Participant's Minimum Benefit Percentage of the Participant's annualised rate of Base Salary in effect immediately prior to the Participant's Severance Date. If this minimum amount is not satisfied, the Company, for and on behalf of the Participant's Employer, shall increase the Participant's Cash Severance Benefit by the amount of the shortfall as a supplemental severance benefit paid on the same terms as the Cash Severance Benefit. To the extent that such an increase is made and the Participant later becomes entitled to benefits under the Sale Incentive Plan, BV Sale Retention Plan or additional benefits under this Plan (in either case, to the extent that such benefits were not included in the calculation of the initial shortfall amount), then the amount by which the Cash Severance Benefit was increased for the shortfall will offset any such benefits otherwise due to the Participant.

4.4 Timing and Manner of Payment of Severance Benefits. Any Pro-Rata Bonus Payment shall be paid by the Company to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the Participant's Severance Date. Any Cash Severance Benefit shall be paid by the Company, for and on behalf of the Participant's Employer, to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the Participant's Severance Date or in a series of substantially equal payments (without interest), no less frequently than monthly, over a period not to exceed 12 months, with the first payment to commence upon the first day of the month immediately following the Participant's Severance Date. The Company shall determine, in its sole discretion, whether such Cash Severance Benefit shall be paid in the form of a single lump sum or a series of installments. Subject to Section 6.1, any Outplacement Benefits and Non-Cash Severance Benefit, as applicable to the Participant, shall be paid in accordance with the terms set out in Exhibit C to the Participant's Participation Agreement.

ARTICLE 5
TAXES

Federal taxes, and any other foreign, state, city, or local taxes). Each Participant and Beneficiary shall be solely responsible for all income taxes arising in connection with participation in this Plan or benefits hereunder.

ARTICLE 6
PAYMENT OBLIGATIONS

6.1 Liability for Payment. Except for the benefits related to Performance Shares, Deferred Stock Units, Stock Options and/or Dividend Equivalents which shall be paid by the appropriate entity as determined under the provisions of the incentive plan under which the award was granted, and in the case of Severance Benefits payable under Article 4 hereof, the Company, for and on behalf of the Participant's Employer, shall be liable for the payment of Severance Benefits under this Plan with respect to each Participant.

6.2 Payment of Obligations Absolute. Subject to Sections 11.1, 3.3 and 3.4 and Article 5, the Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Participant or anyone else. All amounts payable by the Company under the Plan shall be paid without notice or demand. Each and every payment made under the Plan by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Participant or from whomsoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Sections 3.3 and 3.4 and Article 8 and subject to the Participant's compliance with Section 11.1 and the agreement contemplated thereby.

6.3 Unsecured General Creditor. No assets of the Company or any of its Subsidiaries or affiliates shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company or any of its Subsidiaries or affiliates under this Plan. Any and all of the Company, its Subsidiaries and affiliates' assets shall be, and remain, the general unpledged, unrestricted assets of that entity. The Company and any of its Subsidiaries or affiliates' obligations under this Plan shall be merely that of an unfunded and unsecured promise of the Company, its Subsidiaries or affiliates to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

6.4 Relationship to Other Plans. By accepting participation in this Plan, each Participant (a) consents to the payment terms set forth in this Plan, (b) agrees that this Plan amends the otherwise inconsistent terms of any Company or Employer compensation, incentive, benefit or perquisite plan, policy or program, and (c) agrees that such sections of this Plan will control to the extent that any inconsistency may exist between those sections and the terms of any Company or Employer compensation, incentive, benefit or perquisite plan, policy or program.

6.5 Other Benefit Plans. Unless otherwise required by law, all payments, benefits and amounts provided under this Plan shall be in addition to and not in substitution for any superannuation or pension rights under the Company's or other Employer's superannuation or tax-qualified pension plan in which the Participant participates, and any disability or other Company or other Employer benefit plan distribution that a Participant is entitled to, under the terms of any such plan, at the time his or her employment by his or her Employer terminates. Notwithstanding the foregoing, this Plan shall not create an inference that any duplicate payments shall be required. Payments received by a person under this Plan shall not be deemed a part of the person's compensation for purposes of determining the

person's benefits under any employee welfare, pension or other benefit plan or arrangement, if any, provided by an Employer, except where explicitly provided under the terms of such plan or arrangement.

ARTICLE 7
RESOLUTION OF DISPUTES

7.1 Claim. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as "Claimant") may file a written request for such benefit with the Committee, setting forth his or her claim. The request must be addressed to the Committee at the Company's principal place of business.

7.2 Claim Decision. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for special circumstances.

7.3 Request for Review. Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination. Such request must be addressed to the Committee, at the Company's principal place of business. The Claimant or his or her duly authorised representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee.

7.4 Review of Decision. Within 60 days after the Committee's receipt of a request for review, after considering all materials presented by the Claimant, the Committee will inform the Claimant in writing, in a manner calculated to be understood by the Claimant, of its decision setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the 60 day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review.

ARTICLE 8
RESOLUTION OF DISPUTES—ARBITRATION

8.1 General. A Participant or Beneficiary must complete the claims procedure described in Article 7 before submitting any dispute or difference arising out of or in connection with this Plan to arbitration as described below in this Article 8.

8.2 Arbitration of Claims. Unless superseded by express provision in the Participant's Participation Agreement, the Company, the Participant, and the Participant's Employer hereby consent to the resolution by mandatory and binding arbitration of all disputes or differences arising out of or in connection with this Plan that the Company or the Participant's Employer may have against the Participant, or that the Participant may have against the Company, his or her Employer, or against either of their officers, directors, employees or agents acting in their capacity as such. It is further agreed that the award made by the arbitrator on any dispute or difference which is referred to for arbitration in accordance with this Article 8, shall be final and binding upon the Company, the

Participant, and the Participant's Employer and that judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.

All expenses of such arbitration, including the reasonable fees and expenses of the legal representative for the Participant, shall be paid and borne by the Company or the Participant's Employer; provided, however, that if the arbitrator determines that the Participant did not commence the arbitration in good faith and had no reasonable basis therefor or that the Participant failed to comply with Section 11.1 or breached the agreement contemplated thereby, the Participant shall repay all advanced fees and expenses and shall reimburse the Company and the Participant's Employer for their reasonable legal fees and expenses in connection therewith.

Except as otherwise provided in this procedure or by mutual agreement of the parties, any arbitration shall be administered by a single arbitrator and, subject to the provisions of this Article 8, the Commercial Arbitration Act 1984 (Vic) (the "Act") shall apply to the reference to arbitration. The arbitration shall be held in Melbourne in the State of Victoria, Australia or at such other location as all the parties may mutually agree. Pre-hearing and post-hearing procedures may be held by telephone or in person as the arbitrator directs to be appropriate or convenient.

Any party wishing to refer a dispute or difference to arbitration must give to each of the other parties at least 30 days prior to the reference a notice in writing:

(i): stating that it requires the dispute or difference to be referred to arbitration;
(ii): specifying in summary form the matter or matters the subject of the dispute or difference; and
(iii): proposing the name of the person to be appointed as arbitrator.

At the expiration of the 30 day notice period any party may refer the dispute to arbitration in accordance with this Article 8.

8.3 Discovery. Each party shall have the right and opportunity to obtain documents from another party through one request for production of documents. Additional discovery may be had only when the arbitrator so orders upon a showing of substantial need. Any disputes regarding requests for production of documents or other discovery shall be submitted to the arbitrator for directions.

8.4 Subpoenas. Any party shall have the right to obtain from the court an order requiring a person to attend for examination before the arbitrator or requiring a person to so attend and to produce to the arbitrator the document or documents specified in the court's order.

8.5 Designation of Witnesses. Unless otherwise directed or ordered by the arbitrator at least thirty calendar days before the arbitration, the parties must exchange lists of witnesses, including any expert(s), and copies of all witness statements and exhibits intended to be used at the arbitration.

Unless otherwise agreed in writing by all the parties:

(i): the parties are entitled to be represented in the arbitration by a legal practitioner or a legally qualified person;
(ii): the arbitrator may not extend the ambit of the dispute or difference referred to arbitration to include other disputes;
(iii): the arbitrator may not order or direct the consolidation of arbitration proceedings as contemplated by section 26 of the Act;
(iv): the arbitrator must determine the difference or dispute by arbitration and has no power to settle, compromise or mediate a resolution of the dispute or difference;
(v): the arbitrator is required to deliver an award, together with the reasons therefor, within thirty days after the conclusion of the arbitration hearing, unless all the parties agree to a request by the arbitrator to extend the time;
(vi): the arbitrator must deliver a final award and is not entitled to make an interim award; and
(vii): none of the parties, nor the arbitrator, is entitled to have a preliminary question of law determined by the court nor to apply to the court for an order in relation to the costs of the arbitration where a final award is not made by the arbitrator or where the award made is wholly set aside by the court.

ARTICLE 9
SUCCESSORS AND ASSIGNMENT

9.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary or affiliate thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company after the BV Sale) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

ARTICLE 10
ADMINISTRATION OF THE PLAN

10.1 Committee Action. The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee.

necessary to accomplish its purposes, including, but not by way of limitation, the power and authority to do the following:

(a): To determine eligibility for and participation in this Plan;
(b): To construe and interpret the terms and provisions of this Plan;
(c): To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries, and to determine the amount of withholding taxes to be deducted pursuant to Article 5;
(d): To maintain all records that may be necessary for the administration of this Plan;
(e): To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;
(f): To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof; and
(g): To appoint a plan administrator or any other agent (which may include, without limitation, one or more employees of the Company), and to delegate to them such powers and duties in connection with the administration of this Plan as the Committee may from time to time prescribe.

10.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, including whether, for purposes of the Plan, a termination of a Participant's employment has been with or without Cause or for Good Reason, which interpretation or construction shall be final and binding on all parties, including but not limited to each Employer and any Participant or Beneficiary. The Committee shall administer such terms and provisions in full accordance with any and all laws applicable to this Plan.

10.4 Information. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require.

10.5 Compensation, Expenses and Indemnity. The members of the Committee shall serve without additional compensation for their services hereunder beyond that which they are entitled as authorised by the Board. The Committee is authorised at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. The Company shall pay expenses and fees in connection with the administration of this Plan. To the extent permitted by applicable law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and each member thereof, and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to this Plan, other than expenses and liabilities arising out of wilful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

ARTICLE 11
MISCELLANEOUS

11.1 Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company, its Subsidiaries or affiliates' obligation to pay Severance Benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the

form attached to the Participant's Participation Agreement (or such other form as the Committee may require) and such executed agreement is received by the Company no later than 60 days after the Participant's Severance Date and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

11.2 Term of the Plan. This Plan will commence on the Effective Date and shall continue in effect through the first to occur of (1) July 1, 2005 or (2) a determination by the Board that a BV Sale is not reasonably expected to occur on or before July 1, 2005; provided that the Board may, in its discretion, extend the term of the Plan beyond such date. Notwithstanding the preceding sentence, the Plan shall continue beyond such date with respect to a Participant to the extent that a contract is in place on July 1, 2005 to complete the sale of the Employer at which such Participant is then employed, in which case the Plan shall continue with respect to such Participant until the earlier to occur of: (1) the completion of the sale of such Employer or (2) the expiration or any other termination of such contract without the sale being completed. Termination of the Plan shall not modify the 12-month severance protection provided in Section 4.2.3, and such protection shall continue pursuant to its terms until the applicable 12-month period has expired. In addition, the termination of this Plan shall have no effect on any other severance protections provided pursuant to other severance programs maintained by an Employer or the Company or any of its Subsidiaries or affiliates.

11.3 Notice of Termination. In signing the Participation Agreement, the Participant agrees that the Participant's employment with the Employer is terminable by either party providing 4 weeks' notice of termination where the employee is under 45 years of age or 5 weeks' notice of termination where the employee is 45 years of age or over and has at least 2 years' continuous service with the Employer. Payments made under this Plan shall not give any person the right to any benefits provided to persons retained in an Employer's employ (such as, without limitation, health and dental benefits). Except as may otherwise be required by law or set forth specifically in such plans or as otherwise expressly provided in this Plan, such benefits shall terminate as of the date the Participant's employment by an Employer terminates.

11.4 Beneficiaries. Subject to the other provisions of this Section 11.4, the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.

Notwithstanding anything else herein to the contrary, in the event any amount is payable under this Plan to a minor, payment shall not be made to the minor, but instead be paid: (a) to that person's

living parent(s) to act as custodian; (b) if that person's parents are then divorced, and one parent is the sole custodial parent, to such custodial parent; or (c) if no parent of that person is then living, payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.

11.5 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt for the payment the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Employers.

11.6 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

11.7 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

11.8 Modification. The Committee or the Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment shall be effective without the consent of each affected Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorised member of the Committee (or the Board) or its designee or legal representative.

11.9 Notice. For purposes of this Plan, and unless otherwise required by law, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognised international courier (such as FedEx) postage and mailing fee prepaid and addressed: (a) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (b) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

11.10 Applicable Law. This document is governed by and is to be construed in accordance with the law in force in the State of Victoria, Australia and the parties agree to submit to the non-exclusive jurisdiction of the Courts in the State of Victoria, Australia.

11.11 No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its Subsidiaries and affiliates have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its Subsidiaries or affiliates to make or authorise (or to refrain from making or authorising, as the case may be): (a) any adjustment, recapitalisation, reorganisation or other change in capital structure or business; (b) any merger,

amalgamation, consolidation or change in ownership; (c) any dissolution or liquidation; (d) any sale or transfer of assets or business; or (e) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorised officer to execute this Plan as of the date first set forth above.

	EDISON MISSION ENERGY

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project	Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

			514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
PT Adro	Indonesia		—				—		—	8	%		—		—
CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

			19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

			233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

			755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

			—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total		$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE SEVERANCE PLAN—AUSTRALIA
TABLE OF CONTENTS
EDISON MISSION ENERGY BV SALE SEVERANCE PLAN—AUSTRALIA ARTICLE 1 ESTABLISHMENT, TERM, AND PURPOSE
ARTICLE 2 DEFINITIONS
ARTICLE 3 PARTICIPATION
ARTICLE 4 SEVERANCE BENEFITS
ARTICLE 5 TAXES
ARTICLE 6 PAYMENT OBLIGATIONS
ARTICLE 7 RESOLUTION OF DISPUTES
ARTICLE 8 RESOLUTION OF DISPUTES—ARBITRATION
ARTICLE 9 SUCCESSORS AND ASSIGNMENT
ARTICLE 10 ADMINISTRATION OF THE PLAN
ARTICLE 11 MISCELLANEOUS
EXHIBIT A
EX-10.6 9 a2135451zex-10_6.htm EXHIBIT 10.6
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Exhibit 10.6

EDISON MISSION ENERGY
BV SALE INCENTIVE PLAN—SINGAPORE

1. Establishment of the Plan. Edison Mission Energy, a Delaware corporation (the "Company"), hereby establishes this BV Sale Incentive Plan—Singapore (the "Plan"), effective as of February 19, 2004 (the "Effective Date"), for the benefit of certain key employees of the Company and certain of its subsidiaries and affiliates.

3. Defined Terms. For purposes of the Plan (and/or the Participation Agreement), the following terms (in addition to the defined terms set forth above) shall have the meanings indicated:

(ii) ANSP shall be determined without giving effect to the payments under this Plan;

connection with the sale, including costs of defense, (4) costs of consents, waivers or settlements to facilitate sale, and (5) any other direct expenses associated with the sale; and

(b) "Base Salary" means the Participant's base salary of record for benefit purposes paid to a Participant by the Company and/or one or more Employers (whether or not deferred), but excludes (i) incentive, retention, signing or other bonus compensation, (ii) severance, and (iii) any other form of compensation or benefit.

(d) "Beneficiary" means the individual or entity determined under Section 11(e) of the Plan.

(e) "Board" means the Board of Directors of the Company.

(f) "Cause" means the occurrence of any one or more of the following:

(i) The Participant's conviction for, or pleading guilty or nolo contendere to, committing an act of fraud, embezzlement, theft, or other crime for which the Participation is imprisoned;

(g) "Closing Date" means the date of the closing of a Covered Transaction or Covered Sale, as the case may be, as determined in accordance with the definitive agreements entered into to effect such transaction.

(h) "Covered Sale" means a sale of the Participant's Employer in a transaction that results in the Participant becoming employed by the Purchaser thereof or an affiliate of such Purchaser that is not an Employer.

(i) "Covered Transaction" means one or more transactions outside of the ordinary course that amount, in the aggregate, to a sale of all or substantially all of the assets or interests of BV, provided that a transaction included in the Covered Transaction must be specifically approved by the Board in advance of the consummation of the Covered Transaction. For purposes of this definition, "substantially all" shall mean stock or interests in and assets of BV (including stock and interests in Subsidiaries) (including EcoElectrica) representing or generating at least 90% of BV's 2003 revenue base as set forth in the attached Exhibit A; provided that the Board may, in its discretion, lower the 90% threshold in light of all circumstances existing at the time of the sale and the degree to which the Company has exited the international market.

(j) "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.

(k) "Good Reason" means, without the Participant's express written consent, a material reduction by the Participant's Employer of the aggregate value of the compensation (including current compensation and long-term incentive opportunities) and benefits paid and provided, as the case may be to the Participant; provided, however, that in no event shall the occurrence of a Covered Sale or Covered Transaction, in and of itself, constitute a reduction of compensation or long-term incentive award opportunities.

(l) "Participant" or "Participants" means any person who is a participant in this Plan as determined in accordance with Section 5.

(n) "Sale Bonus" means an unfunded right to receive a payment under this Plan.

(o) "Sale Bonus Payment Scheme" means the rules for the manner and timing of the payment of a Sale Bonus set forth in Section 8.

(p) "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

4. Administration.

interpretation made in good faith with respect to the Plan, and all members of the Board shall be fully protected by the Company in respect of any such action, determination or interpretation.

6. Sale Bonus Trigger; Effect of Termination of Employment.

(a) Subject to Section 11(c) below, a Participant shall be entitled to receive a Sale Bonus on the terms set forth in Sections 7 and 8 below if the Participant:

(i) is employed by an Employer on the Closing Date of the Covered Transaction,

7. Amount of Sale Bonus. In the event that a Participant becomes entitled to receive a Sale Bonus, the amount of such Participant's Sale Bonus shall be determined by multiplying the Participant's highest annual rate of Base Salary in effect at any time during the 24-month period preceding the Closing Date of the last transaction resulting in a Covered Transaction by the Participant's applicable Base Salary Multiplier. Each Participant's Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable) shall be set forth in the Participant's Participation Agreement. Following consummation of a Covered Transaction, determinations of ANSP (including, without limitation, the determination of value in U.S. dollars of any non-cash consideration and the value in U.S. dollars of any consideration not expressed in U.S. dollars) shall be made by the Board in good faith, whose good faith determination will be binding.

(a) Payment Scheme One. Payment of a Sale Bonus to a Participant under Payment Scheme One shall be made in accordance with this Section 8(a). Within sixty (60) days after the Closing Date of the last transaction resulting in a Covered Transaction, the Board shall make a good faith estimate of ANSP resulting from the Covered Transaction. Subject to clause (ii) below, no later than sixty (60) days after the Closing Date, each Participant who is eligible to receive a Sale Bonus under this Section 8(a) shall be paid an amount equal to 80% of such Participant's estimated Sale Bonus, calculated based on such estimate. Within 24 months after the Closing Date of the Covered Transaction, the Board shall make an updated estimate of ANSP, at which time up to 100% of the remainder of each Participant's Sale Bonus, if any, shall be paid subject to the following provisions of this paragraph:

(b) Payment Scheme Two. Payment of a Sale Bonus to a Participant under Payment Scheme Two shall be made in a cash lump sum no later than sixty (60) days following the Closing Date of the Covered Transaction based on the Board's initial estimate of ANSP, which estimate will be final and binding for such purposes.

(c) Liability for Payment. The Company shall be liable for the payment of benefits under this Plan with respect to each Participant.

10. Arbitration

All expenses of such arbitration, including the reasonable fees and expenses of the counsel for the Participant, shall be advanced and borne by the Company or the Participant's Employer; provided, however, that if it is finally determined that the Participant did not commence the arbitration in good faith and had no reasonable basis therefore or that the Participant failed to comply with Section 11(c) or breached the agreement contemplated thereby, the Participant shall repay all advanced fees and expenses and shall reimburse the Company and the Participant's Employer for their reasonable legal fees and expenses in connection therewith.

Except as otherwise provided in this procedure or by mutual agreement of the parties, any arbitration shall be administered by a sole arbitrator at the Singapore International Arbitration Centre ("SIAC") under then-existing SIAC arbitration rules (the "Tribunal"). Pre-hearing and post-hearing procedures may be held by telephone or in person, as the arbitrator deems necessary.

The arbitrator shall interpret this Plan, any applicable Company or Employer policy or rules and regulations, any applicable substantive law (and the law of remedies, if applicable), or applicable federal law. In reaching his or her decision, the arbitrator shall have no authority to change or modify any lawful Company or Employer policy, rule or regulation, or this Plan. The arbitrator, and not any federal, state or local court or agency, shall have exclusive and broad authority to resolve any dispute

relating to the interpretation, applicability, enforceability or formation of this Plan, including but not limited to, any claim that all or any part of this Plan is voidable.

The arbitrator shall have authority to entertain a motion to dismiss and/or motion for summary judgment by any party. Following the completion of the arbitration, the arbitrator shall issue a written decision disclosing his or her essential findings and conclusions upon which the award is based.

(b) Discovery. Each party shall have the right to take the deposition of one individual and any expert witness(es) designated by another party. Each party shall also have the opportunity to obtain documents from another party through one request for production of documents. Additional discovery may be had only when the arbitrator so orders upon a showing of substantial need. Any disputes regarding depositions, requests for production of documents or other discovery shall be submitted to the arbitrator for determination.

(c) Subpoenas. Each party shall have the right to subpoena witnesses and documents for the arbitration hearing by requesting a subpoena from the arbitrator. Any such request shall be served on all other parties, who shall advise the arbitrator in writing of any objections that the party may have to issuance of the subpoena within ten calendar days of receipt of the request.

(d) Designation of Witnesses. At least thirty calendar days before the arbitration, the parties must exchange lists of witnesses, including any expert(s), and copies of all exhibits intended to be used at the arbitration.

11. Miscellaneous

(a) Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or Subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company following the Covered Transaction) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

(b) Assignment by the Participant. None of the benefits, payments, proceeds or claims of any Participant shall be subject to any claim of any creditor and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any such Participant have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under this Plan. Notwithstanding the foregoing, benefits that are in pay status may be subject to a court order of garnishment or wage assignment, or similar order, or a tax levy. This Plan shall inure to the benefit of and be enforceable by each Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Participant's Beneficiary in accordance with the terms of this Plan.

(c) Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company's obligation to pay benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form attached to the Participant's Participation Agreement (or such other form as the Board (or its delegate) may require) and such executed agreement is received by the Company no later than 60 days after the Closing Date and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

(d) Employment Status. Except as may be provided under any other written agreement between a Participant and his or her Employer, the employment of the Participant by his or her Employer is "at will," and may be terminated by either the Participant or the Employer at any time, subject to applicable law.

(e) Beneficiaries. Subject to the other provisions of this Section 11(e), the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Board (or its delegate) to receive the benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

(f) Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Board, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Board may direct that such payment be made to any person found by the Board, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Board and all Employers.

(g) Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

(h) Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

(i) Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

(j) Modification. The Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment that adversely affects a Participant shall be effective without the consent of such Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorized member of the Board or its designee or legal representative.

(k) Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognized international courier (such as FedEx) postage and mailing fee prepaid and addressed: (i) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (ii) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

(l) Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Plan. Any statutory reference in this Plan shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision. The provisions of the Singapore Contracts (Rights of Third Parties) Act (Cap. 53B) shall not apply to this Plan.

(m) No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its subsidiaries have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its subsidiaries to make or authorize (or to refrain from making or authorizing, as the case may be): (i) any adjustment, recapitalization, reorganization or other change in capital structure or business; (ii) any merger, amalgamation, consolidation or change in ownership; (iii) any dissolution or liquidation; (iv) any sale or transfer of assets or business; or (v) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan as of the date first set forth above.

		EDISON MISSION ENERGY
		By

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project		Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
	First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
	Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
	ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
	Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
	Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
	Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

				514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
	Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
	PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
	PT Adro	Indonesia		—				—		—	8	%		—		—
	CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
	TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

				19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
	Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
	Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
	Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

				233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
	Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

				755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
	Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

				—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total			$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE INCENTIVE PLAN—SINGAPORE
EX-10.7 10 a2135451zex-10_7.htm EXHIBIT 10.7
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Exhibit 10.7

EDISON MISSION ENERGY
BV SALE RETENTION PLAN—SINGAPORE

TABLE OF CONTENTS

		Page
ARTICLE 1 ESTABLISHMENT, TERM, AND PURPOSE		1
	1.1 Establishment of the Plan	1
	1.2 Purpose of the Plan	1
ARTICLE 2 DEFINITIONS		1
ARTICLE 3 PARTICIPATION		2
	3.1 Participation	2
	3.2 Termination of Employment	3
	3.3 Re-Employment	3
	3.4 Notice of Termination	3
	4.1 Right to Retention Benefit	3
	4.3 Timing and Manner of Payment	3
ARTICLE 5 TAXES		3
ARTICLE 6 PAYMENT OBLIGATIONS		4
	6.1 Liability for Payment	4
	6.2 Payment of Obligations Absolute	4
	6.3 Unsecured General Creditor	4
	6.4 Other Benefit Plans	4
ARTICLE 7 RESOLUTION OF DISPUTES		4
	7.1 Claim	4
	7.2 Claim Decision	5
	7.3 Request for Review	5
	7.4 Review of Decision	5
ARTICLE 8 RESOLUTION OF DISPUTES—ARBITRATION		5
	8.1 General	5
	8.2 Arbitration of Claims	5
	8.3 Discovery	6
	8.4 Subpoenas	6
	8.5 Designation of Witnesses	6
ARTICLE 9 SUCCESSORS AND ASSIGNMENT		6
	9.1 Successors to the Company	6
	9.2 Assignment by the Participant	7
ARTICLE 10 ADMINISTRATION OF THE PLAN		7
	10.1 Committee Action	7
	10.2 Powers and Duties of the Committee	7
	10.3 Construction and Interpretation	7
	10.4 Information	8
	10.5 Compensation, Expenses and Indemnity	8
ARTICLE 11 MISCELLANEOUS		8
	11.1 Release Agreement	8
	11.2 Term of the Plan	8
	11.3 Employment Status	8
	11.4 Beneficiaries	8
	11.5 Payments on Behalf of Persons Under Incapacity	9
	11.6 Gender and Number	9
	11.7 Severability	9
	11.8 Modification	9
	11.9 Notice	9
	11.10 Applicable Law	10
	11.11 No Sale Obligation	10

EDISON MISSION ENERGY
BV SALE RETENTION PLAN—SINGAPORE

ARTICLE 1
ESTABLISHMENT, TERM, AND PURPOSE

1.1 Establishment of the Plan. Edison Mission Energy hereby establishes a retention plan to be known as the "Edison Mission Energy BV Sale Retention Plan—Singapore" (the "Plan"). This Plan shall become effective February 19, 2004 (the "Effective Date").

1.2 Purpose of the Plan. The purpose of this Plan is to provide key employees of the Employers with an incentive to remain in the employ of their respective Employers through the completion of a sale of MEC International, BV ("BV") and to provide for continuity in the management and operations of the Employers (as such term is defined below) during such time by offering certain employment protection and financial security in the event that their employment is terminated by their respective Employers without Cause (as such term is defined below).

ARTICLE 2
DEFINITIONS

Whenever used in this Plan (and/or the Participation Agreement), the following terms shall have the meanings set forth below (such defined terms are in addition to the defined terms set forth above) unless the context clearly indicates to the contrary:

(a)

(b)

"Beneficiary" means the persons or entities designated or deemed designated by a Participant pursuant to Section 11.4.

(c)

"Board" means the Board of Directors of the Company.

(d)

(e)

"Cause" means the occurrence of any one or more of the following:

(1): The Participant's conviction for, or pleading guilty or nolo contendere to, committing an act of fraud, embezzlement, theft, or other crime for which the Participant is imprisoned;
(2): A significant adverse change in the Participant's performance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties as well as any reasonable duties that may be assigned to him or her to help effect the BV Sale), including but not limited to a failure to comply with the Company's policies and

instructions regarding the BV Sale and the confidentiality of certain information related thereto; or

(2): The willful engaging by the Participant in misconduct that: (i) if the event giving rise to the termination of the Participant's employment occurs before the sale of the Participant's Employer or while the Participant is otherwise employed by an Employer, is in violation of the Company's and/or the Participant's Employer's policies and practices applicable to the Participant from time to time; or (ii) if the event giving rise to the termination of the Participant's employment occurs after the sale of the Participant's Employer when the Participant is no longer employed by an Employer, would have resulted in the termination of the Participant's employment by the Company or the Participant's Employer under the Company's and/or the Participant's Employer's policies and practices applicable to the Participant in effect immediately prior to such sale. However, no act or failure to act, on the Participant's part, shall be considered "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company and his or her Employer.

(f): "Code" means the United States Internal Revenue Code of 1986, as amended.
(g): "Committee" means the Board or one or more committees appointed by the Board.
(h): "Company" means Edison Mission Energy, a Delaware corporation, or any successor thereto as provided in Section 9.1.
(i): "Disability" shall mean, for all purposes of this Plan, the Participant's eligibility for benefits under his or her Employer's long-term disability plan applicable to the Participant, as determined by the Employer.
(j): "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.
(k): "Participant" means any person who is a participant in this Plan as determined in accordance with Article 3.
(l): "Purchaser" means any person or entity or affiliate thereof that has purchased all or any part of the assets or interests of BV outside the ordinary course in a transaction that is included in the BV Sale.
(m): "Retention Benefit" means the retention benefit set forth in Article 4 of this Plan.
(n): "STI" means the short term incentive program, if any, maintained by the Company or by an Employer in which a Participant participates.
(o): "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

ARTICLE 3
PARTICIPATION

3.1 Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who will be Participants in the Plan and the benefits to which each Participant may become eligible to receive under the Plan. In order to participate in the Plan, each Participant must promptly sign and return to the Company a participation agreement in the form provided by the Company (a "Participation Agreement"), which shall set forth whether the Participant may become eligible for a Retention Benefit under the Plan and additional details about the Plan.

3.2 Termination of Employment. Notwithstanding anything else contained herein to the contrary, a Participant shall not be deemed to have terminated employment if his or her employment by an Employer terminates but he or she continues as an employee of another Employer.

3.3 Re-Employment. Notwithstanding anything else contained herein to the contrary, a Participant shall have no right to benefits hereunder with respect to a termination of his or her employment if, in connection with such termination, he or she is otherwise entitled to benefits under this Plan but, prior to the payment or delivery (or commencement of payment or delivery, as the case may be) of such benefits, the Participant becomes re-employed by his or her Employer or by another Employer or by any other affiliate of the Company. Notwithstanding anything else contained herein to the contrary, a Participant's right to continuing or additional benefits under this Plan shall automatically terminate (but the Participant shall have no obligation to re-pay benefits previously paid) if the Participant becomes re-employed by his or her Employer or by another Employer or by any other affiliate of the Company. If a Participant is re-employed and his or her employment is subsequently terminated and the Participant again becomes entitled to benefits under the terms of this Plan in connection with such later termination of employment, the amount of payments otherwise payable to the Participant hereunder in connection with such later termination of employment shall be reduced by the amount of any payments paid under this Plan to the Participant in connection with any prior termination of his or her employment.

3.4 Notice of Termination. Any termination of a Participant's employment by his or her Employer for Cause shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 11.9 of this Plan.

ARTICLE 4
RETENTION BENEFIT

4.1 Right to Retention Benefit. The Company's management, in its sole discretion, shall determine if a Participant shall be eligible to receive a Retention Benefit pursuant to this Article 4. A Participant who has been designated as eligible to receive a Retention Benefit pursuant to this Article 4 shall be entitled to receive from the Company a Retention Benefit if he or she remains employed by his or her Employer until the first to occur of: (1) a termination of the Participant's employment by his or her Employer without Cause (and other than due to the Participant's death or Disability), (2) a sale by the Company of the Participant's Employer, (3) the BV Sale, (4) a public announcement by the Company that the BV Sale has been terminated, or (5) July 1, 2005. If a Participant's employment by his or her Employer terminates prior to July 1, 2005 for any reason other than by his or her Employer without Cause (and other than due to the Participant's death or Disability), then such Participant shall not be entitled to a Retention Benefit.

4.2 Retention Benefits. If a Participant becomes entitled to a Retention Benefit pursuant to Section 4.1, the amount of such benefit shall be set forth in the Participant's Participation Agreement.

4.3 Timing and Manner of Payment. Any Retention Benefit shall be paid by the Company to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the date such benefit becomes payable pursuant to Section 4.1.

ARTICLE 5
TAXES

with respect to such payment (including, without limitation, any United States Federal taxes, and any other foreign, state, city, or local taxes). In the event that tax withholding is required with respect to amounts or benefits payable or deliverable by the Company or the Participant's Employer to a Participant and the Company or the Employer cannot satisfy its tax withholding obligations in the manner described in the preceding sentence, the Company or the Employer may require the Participant to pay or provide for the payment of such required tax withholding as a condition to the payment or delivery of such amounts or benefits.

Each Participant, former Participant and Beneficiary shall be solely responsible for all income and employment taxes arising in connection with participation in this Plan or benefits hereunder.

ARTICLE 6
PAYMENT OBLIGATIONS

6.1 Liability for Payment. The Company shall be liable for the payment of benefits under this Plan with respect to each Participant.

6.2 Payment of Obligations Absolute. Subject to the Participant's compliance with Section 11.1 and the agreement contemplated thereby and subject to Section 3.4 and Article 5, the Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Participant or anyone else except as provided in Section 3.3 and/or Section 3.4. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Participant or from whomsoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Section 3.4 or Article 8 and subject to the Participant's compliance with Section 11.1 and the agreement contemplated thereby.

6.3 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

6.4 Other Benefit Plans. All payments, benefits and amounts provided under this Plan shall be in addition to and not in substitution for any pension rights under the Company's or other Employer's tax-qualified pension plan in which the Participant participates, and any disability, workers' compensation or other Company or other Employer benefit plan distribution that a Participant is entitled to, under the terms of any such plan, at the time his or her employment by his or her Employer terminates. Notwithstanding the foregoing, this Plan shall not create an inference that any duplicate payments shall be required. Payments received by a person under this Plan shall not be deemed a part of the person's compensation for purposes of determining the person's benefits under any employee welfare, pension or other benefit plan or arrangement, if any, provided by an Employer, except where explicitly provided under the terms of such plan or arrangement.

ARTICLE 7
RESOLUTION OF DISPUTES

7.1 Claim. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as "Claimant") may file a written request for such

benefit with the Committee, setting forth his or her claim. The request must be addressed to the Committee at the Company's principal place of business.

7.2 Claim Decision. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for special circumstances.

7.3 Request for Review. Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination. Such request must be addressed to the Committee, at the Company's principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee.

7.4 Review of Decision. Within 60 days after the Committee's receipt of a request for review, after considering all materials presented by the Claimant, the Committee will inform the Claimant in writing, in a manner calculated to be understood by the Claimant, of its decision setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the 60 day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review.

ARTICLE 8
RESOLUTION OF DISPUTES—ARBITRATION

8.1 General. A Participant or Beneficiary must complete the claims procedure described in Article 7 before submitting any claim or controversy arising out of or in connection with this Plan to arbitration as described below in this Article 8.

8.2 Arbitration of Claims. The Company, the Participant, and the Participant's Employer hereby consent to the resolution by mandatory and binding arbitration of all claims or controversies arising out of or in connection with this Plan and/or the Exhibits hereto that the Company or the Participant's Employer may have against the Participant, or that the Participant may have against the Company, his or her Employer, or against either of their officers, directors, employees or agents acting in their capacity as such. Each party's promise to resolve all such claims or controversies by arbitration in accordance with this Plan rather than through the courts is consideration for the other party's like promise. It is further agreed that the decision of an arbitrator on any issue, dispute, claim or controversy submitted for arbitration, shall be final and binding upon the Company, the Participant, and the Participant's Employer and that judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.

All expenses of such arbitration, including the reasonable fees and expenses of the counsel for the Participant, shall be advanced and borne by the Company or the Participant's Employer; provided, however, that if it is finally determined that the Participant did not commence the arbitration in good faith and had no reasonable basis therefore or that the Participant failed to comply with Section 11.1 or breached the agreement contemplated thereby, the Participant shall repay all advanced fees and

expenses and shall reimburse the Company and the Participant's Employer for their reasonable legal fees and expenses in connection therewith.

Except as otherwise provided in this procedure or by mutual agreement of the parties, any arbitration shall be administered by a sole arbitrator at the Singapore International Arbitration Centre ("SIAC") under then-existing SIAC arbitration (the "Tribunal"). Pre-hearing and post-hearing procedures may be held by telephone or in person, as the arbitrator deems necessary.

The arbitrator shall interpret this Plan, any applicable Company or Employer policy or rules and regulations, any applicable substantive law (and the law of remedies, if applicable), or applicable federal law; provided, however, if arbitration is brought after the claim or controversy has been submitted for review by the Committee in accordance with Article 7, the arbitrator shall defer to the Committee's interpretations of the Plan and such policies, rules, and regulations so long as the Committee has not abused its discretion hereunder. In reaching his or her decision, the arbitrator shall have no authority to change or modify any lawful Company or Employer policy, rule or regulation, or this Plan. The arbitrator, and not any federal, state or local court or agency, shall have exclusive and broad authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Plan, including but not limited to, any claim that all or any part of this Plan is voidable.

8.3 Discovery. Each party shall have the right to take the deposition of one individual and any expert witness(es) designated by another party. Each party shall also have the opportunity to obtain documents from another party through one request for production of documents. Additional discovery may be had only when the arbitrator so orders upon a showing of substantial need. Any disputes regarding depositions, requests for production of documents or other discovery shall be submitted to the arbitrator for determination.

8.4 Subpoenas. Each party shall have the right to subpoena witnesses and documents for the arbitration hearing by requesting a subpoena from the arbitrator. Any such request shall be served on all other parties, who shall advise the arbitrator in writing of any objections that the party may have to issuance of the subpoena within ten calendar days of receipt of the request.

8.5 Designation of Witnesses. At least thirty calendar days before the arbitration, the parties must exchange lists of witnesses, including any expert(s), and copies of all exhibits intended to be used at the arbitration.

ARTICLE 9
SUCCESSORS AND ASSIGNMENT

9.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company after

the BV Sale) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

9.2 Assignment by the Participant. None of the benefits, payments, proceeds or claims of any Participant shall be subject to any claim of any creditor and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any such Participant have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under this Plan. Notwithstanding the foregoing, benefits that are in pay status may be subject to a court order of garnishment or wage assignment, or similar order, or a tax levy. This Plan shall inure to the benefit of and be enforceable by each Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Participant's Beneficiary in accordance with the terms of this Plan.

ARTICLE 10
ADMINISTRATION OF THE PLAN

10.2 Powers and Duties of the Committee. The Committee shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the power and authority to do the following:

(a): To determine eligibility for and participation in this Plan;
(b): To construe and interpret the terms and provisions of this Plan;
(c): To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries, and to determine the amount of withholding taxes to be deducted pursuant to Article 5;
(d): To maintain all records that may be necessary for the administration of this Plan;
(e): To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;
(f): To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof; and
(g): To appoint a plan administrator or any other agent (which may include, without limitation, one or more employees of the Company), and to delegate to them such powers and duties in connection with the administration of this Plan as the Committee may from time to time prescribe.

10.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, including whether, for purposes of the Plan, a termination of a Participant's employment has been with or without Cause, which interpretation or

construction shall be final and binding on all parties, including but not limited to each Employer and any Participant or Beneficiary. The Committee shall administer such terms and provisions in full accordance with any and all laws applicable to this Plan.

10.4 Information. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require.

10.5 Compensation, Expenses and Indemnity. The members of the Committee shall serve without additional compensation for their services hereunder beyond that which they are entitled as authorized by the Board. The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. The Company shall pay expenses and fees in connection with the administration of this Plan. To the extent permitted by applicable law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and each member thereof, and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to this Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

ARTICLE 11
MISCELLANEOUS

11.1 Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company's obligation to pay benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form attached to the Participant's Participation Agreement (or such other form as the Committee may require) and such executed agreement is received by the Company no later than 60 days after the date the Participant becomes entitled to a Retention Benefit pursuant to Section 4.1 and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

11.2 Term of the Plan. This Plan will commence on the Effective Date and shall continue in effect through the date that benefits are triggered pursuant to Section 4.1.

11.3 Employment Status. Except as may be provided under any other written agreement between a Participant and his or her Employer, the employment of the Participant by his or her Employer is "at will," and may be terminated by either the Participant or the Employer at any time, subject to applicable law. Payments made under this Plan shall not give any person the right to any benefits provided to persons retained in an Employer's employ (such as, without limitation, health and dental benefits). Except as may otherwise be required by law or set forth specifically in such plans or as otherwise expressly provided in this Plan, such benefits shall terminate as of the date the Participant's employment by an Employer terminates.

11.4 Beneficiaries. Subject to the other provisions of this Section 11.4, the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

No Beneficiary designation shall become effective until it is filed with the Committee, and no Beneficiary designation of someone other than a Participant's spouse shall be effective unless such

designation is consented to by the Participant's spouse on a form provided by and in accordance with procedures established by the Committee or its delegate.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.

11.5 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and all Employers.

11.6 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

11.7 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

11.8 Modification. The Committee or the Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment shall be effective without the consent of each affected Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorized member of the Committee (or the Board) or its designee or legal representative.

11.9 Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognized international courier (such as FedEx) postage and mailing fee prepaid and addressed: (a) if to the Participant, to his or her latest

address as reflected on the records of the Company or his or her Employer, and (b) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

11.10 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Plan. Any statutory reference in this Plan shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision. The provisions of the Singapore Contracts (Rights of Third Parties) Act (Cap. 53B) shall not apply to this Plan.

11.11 No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its subsidiaries have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its subsidiaries to make or authorize (or to refrain from making or authorizing, as the case may be): (a) any adjustment, recapitalization, reorganization or other change in capital structure or business; (b) any merger, amalgamation, consolidation or change in ownership; (c) any dissolution or liquidation; (d) any sale or transfer of assets or business; or (e) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan as of the date first set forth above.

		EDISON MISSION ENERGY

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project		Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
	First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
	Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
	ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
	Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
	Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
	Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

				514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
	Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
	PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
	PT Adro	Indonesia		—				—		—	8	%		—		—
	CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
	TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

				19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
	Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
	Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
	Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

				233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
	Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

				755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
	Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

				—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total			$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE RETENTION PLAN—SINGAPORE
TABLE OF CONTENTS
EDISON MISSION ENERGY BV SALE RETENTION PLAN—SINGAPORE ARTICLE 1 ESTABLISHMENT, TERM, AND PURPOSE
ARTICLE 2 DEFINITIONS
ARTICLE 3 PARTICIPATION
ARTICLE 4 RETENTION BENEFIT
ARTICLE 5 TAXES
ARTICLE 6 PAYMENT OBLIGATIONS
ARTICLE 7 RESOLUTION OF DISPUTES
ARTICLE 8 RESOLUTION OF DISPUTES—ARBITRATION
ARTICLE 9 SUCCESSORS AND ASSIGNMENT
ARTICLE 10 ADMINISTRATION OF THE PLAN
ARTICLE 11 MISCELLANEOUS
EXHIBIT A
EX-10.8 11 a2135451zex-10_8.htm EXHIBIT 10.8
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Exhibit 10.8

EDISON MISSION ENERGY
BV SALE SEVERANCE PLAN—SINGAPORE

TABLE OF CONTENTS

			Page
ARTICLE 1		ESTABLISHMENT, TERM, AND PURPOSE	1
	1.1	Establishment of the Plan.	1
	1.2	Purpose of the Plan.	1
ARTICLE 2		DEFINITIONS	1
ARTICLE 3		PARTICIPATION	4
	3.1	Participation.	4
	3.2	Termination of Employment.	4
	3.3	Benefit Offset.	4
	3.4	Re-Employment	4
	3.5	Notice of Termination.	5
ARTICLE 4			5
	4.1	Right to Severance Benefits.	5
	4.2	Severance Benefits.	5
	4.3	Minimum Benefit for Designated Participants.	6
	4.4	Timing and Manner of Payment of Severance Benefits	6
ARTICLE 5		TAXES	6
ARTICLE 6		EXCISE TAX GROSS-UP	7
	6.1	Gross-Up Payment.	7
	6.2	Determination of Gross-Up.	7
	6.3	Notification.	8
	6.4	Underpayment and Overpayment.	9
ARTICLE 7		PAYMENT OBLIGATIONS	10
	7.1	Liability for Payment.	10
	7.2	Payment of Obligations Absolute.	10
	7.3	Unsecured General Creditor.	10
	7.4	Relationship to Other Plans.	10
	7.5	Other Benefit Plans.	10
ARTICLE 8		RESOLUTION OF DISPUTES	11
	8.1	Claim.	11
	8.2	Claim Decision.	11
	8.3	Request for Review.	11
	8.4	Review of Decision.	11
ARTICLE 9		RESOLUTION OF DISPUTES—ARBITRATION	11
	9.1	General.	11
	9.2	Arbitration of Claims.	11
	9.3	Discovery.	12
	9.4	Subpoenas.	12
	9.5	Designation of Witnesses.	13
ARTICLE 10		SUCCESSORS AND ASSIGNMENT	13
	10.1	Successors to the Company.	13
	10.2	Assignment by the Participant.	13
ARTICLE 11		ADMINISTRATION OF THE PLAN	13
	11.1	Committee Action.	13
	11.2	Powers and Duties of the Committee.	13
	11.3	Construction and Interpretation.	14
	11.4	Information.	14
	11.5	Compensation, Expenses and Indemnity.	14

ARTICLE 12		MISCELLANEOUS	14
	12.1	Release Agreement.	14
	12.2	Term of the Plan.	14
	12.3	Employment Status.	15
	12.4	Beneficiaries.	15
	12.5	Payments on Behalf of Persons Under Incapacity.	15
	12.6	Gender and Number.	16
	12.7	Severability.	16
	12.8	Modification.	16
	12.9	Notice.	16
	12.10	Applicable Law.	16
	12.11	WARN Act.	16
	12.12	No Sale Obligation.	16

EDISON MISSION ENERGY
BV SALE SEVERANCE PLAN—SINGAPORE

ARTICLE 1
ESTABLISHMENT, TERM, AND PURPOSE

1.1 Establishment of the Plan. Edison Mission Energy hereby establishes a severance plan to be known as the "Edison Mission Energy BV Sale Severance Plan—Singapore" (the "Plan"). This Plan shall become effective February 19, 2004 (the "Effective Date"). This Plan is intended to be an "employee benefit plan" within the meaning of Section (3) of the Employee Retirement Income Security Act of 1974, as amended.

ARTICLE 2
DEFINITIONS

(a)

(b)

"Beneficiary" means the persons or entities designated or deemed designated by a Participant pursuant to Section 12.4.

(c)

"Board" means the Board of Directors of the Company.

(d)

(e)

"Cause" means the occurrence of any one or more of the following:

(1): The Participant's conviction for, or pleading guilty or nolo contendere to, committing an act of fraud, embezzlement, theft, or other crime for which the Participant is imprisioned;
(2): A significant adverse change in the Participant's performance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties as well as

(2): The willful engaging by the Participant in misconduct that: (i) if the event giving rise to the termination of the Participant's employment occurs before the sale of the Participant's Employer or while the Participant is otherwise employed by an Employer, is in violation of the Company's and/or the Participant's Employer's policies and practices applicable to the Participant from time to time; or (ii) if the event giving rise to the termination of the Participant's employment occurs after the sale of the Participant's Employer when the Participant is no longer employed by an Employer, would have resulted in the termination of the Participant's employment by the Company or the Participant's Employer under the Company's and/or the Participant's Employer's policies and practices applicable to the Participant in effect immediately prior to such sale. However, no act or failure to act, on the Participant's part, shall be considered "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company and his or her Employer.

(f): "COBRA" means the health care continuation coverage requirements set forth in Section 4980B of the Code.
(g): "Code" means the United States Internal Revenue Code of 1986, as amended.
(h): "Committee" means the Board or one or more committees appointed by the Board.
(i): "Company" means Edison Mission Energy, a Delaware corporation, or any successor thereto as provided in Section 10.1.
(j): "Deferred Stock Unit" means an award granted by Edison International, the Company or an Employer in the form of a bookkeeping entry which serves as a measurement relative to shares of Edison International common stock for purposes of determining the payment, in cash or stock at some time after vesting, of the award.
(k): "Disability" shall mean, for all purposes of this Plan, the Participant's eligibility for benefits under his or her Employer's long-term disability plan applicable to the Participant, as determined by the Employer.
(l): "Dividend Equivalent" means a dividend equivalent granted by Edison International, the Company or an Employer in connection with a Stock Option grant.
(m): "EDCP" means the Edison International Executive Deferred Compensation Plan, as amended from time to time. EDCP shall not include the Edison International Affiliate Option Deferred Compensation Plan, the OGDP, or any other nonqualified deferred compensation plan.
(n): "EIX Severance Plan" means the Edison International Executive Severance Plan.
(o): "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.
(p): "Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
(q): "Executive Incentive Award" means the annual incentive bonus, if any, paid to the Participant by his or her Employer(s) (or deferred by the Participant) under the Edison International Executive Incentive Compensation Plan or any similar successor plan. Executive Incentive Award does not include special retention bonus, signing bonus, one-time or special project bonus, or any other form of bonus, or any other form of compensation or benefit.

(r)

"Executive Retirement Plan" means the Southern California Edison Company Executive Retirement Plan, as amended from time to time, or any similar or successor plan sponsored by an Employer.

(s)

(t)

"Minimum Benefit Percentage" means, if benefits are triggered under this Plan, the minimum benefit to which certain designated Participants may become entitled pursuant to Section 4.3.

(u)

"OGDP" means the Edison International Option Gain Deferral Plan, as it may be amended from time to time.

(v)

"Participant" means any person who is a participant in this Plan as determined in accordance with Article 3.

(w)

(x)

(y)

"Qualifying Severance Event" means, as to a Participant, the occurrence of either of the following events during the term of the Plan:

(1): A termination of the Participant's employment by his or her Employer, without the Participant's consent, for reasons other than Cause (and other than due to the Participant's death or Disability); or
(2): A termination of employment by the Participant for Good Reason.

(z)

"Severance Benefit" means the severance benefit set forth in Article 4 of this Plan.

(aa)

(bb)

(cc)

"Stock Option" means an option granted by Edison International, the Company or an Employer to purchase shares of Edison International stock.

(dd): "Stock Option Retention Exchange" means the exchange on November 29, 2001, pursuant to a Participant's election, of Stock Options for Deferred Stock Units.
(ee): "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

ARTICLE 3
PARTICIPATION

3.1 Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who will be Participants in the Plan and the benefits to which each Participant may become eligible to receive under the Plan. In order to participate in the Plan, each Participant must promptly sign and return to the Company a participation agreement in the form provided by the Company (a "Participation Agreement"), which shall set forth whether the Participant may become eligible for a Severance Benefit under the Plan, the definitions of the components of the Severance Benefit to which the Participant may become entitled to receive, the Participant's Minimum Benefit Percentage, if applicable, and additional details about the Plan.

3.3 Benefit Offset. Notwithstanding anything else contained herein to the contrary, any benefits otherwise payable or deliverable under this Plan to a Participant shall be offset or reduced by the amount of severance benefits payable or deliverable to the Participant under any other redundancy, severance or other plan, program, or agreement (including, without limitation, any employment agreement or payment of salary in lieu of notice) of or with the Company, the Participant's Employer, or their respective affiliates whether contractual, statutory or otherwise (to the extent the Participant remains entitled to any such benefits after giving effect to the Participant's agreement to waive his or her entitlement to such benefits pursuant to his or her Participation Agreement); provided, however, that any benefits payable to a Participant under this Plan shall not be offset or reduced by the amount of any benefits payable to such Participant under the Company's Sale Incentive Plan or the Company's BV Sale Retention Plan, except to the extent that any amounts payable to a Participant under the Sale Incentive Plan and/or BV Sale Retention Plan are included in the calculation of the Participant's minimum benefit (if applicable) pursuant to Section 4.3.

3.4 Re-Employment. Notwithstanding anything else contained herein to the contrary, a Participant shall have no right to benefits hereunder with respect to a termination of his or her employment if, in connection with such termination, he or she is otherwise entitled to benefits under this Plan but, prior to the payment or delivery (or commencement of payment or delivery, as the case may be) of such benefits, the Participant becomes re-employed by his or her Employer or by another Employer or by any other affiliate of the Company. Notwithstanding anything else contained herein to the contrary, a Participant's right to continuing or additional benefits under this Plan shall automatically terminate (but the Participant shall have no obligation to re-pay benefits previously paid) if the Participant becomes re-employed by his or her Employer or by another Employer or by any other affiliate of the Company. If a Participant is re-employed and his or her employment is subsequently terminated and the Participant again becomes entitled to benefits under the terms of this Plan in connection with such later termination of employment, the amount of payments otherwise payable to the Participant hereunder in connection with such later termination of employment shall be reduced by the amount of any payments paid under this Plan to the Participant in connection with any prior termination of his or her employment.

3.5 Notice of Termination. Any termination of a Participant's employment by his or her Employer for Cause or by a Participant for Good Reason shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 12.9 of this Plan.

ARTICLE 4
SEVERANCE BENEFITS

4.1 Right to Severance Benefits. Subject to Section 12.1, a Participant shall be entitled to receive from the Company, for and on behalf of the Participant's Employer, the applicable Severance Benefits described in this Article 4 if, during the term of the Plan, the Participant incurs a Qualifying Severance Event. If a Participant's employment by his or her Employer terminates for any reason other than a Qualifying Severance Event, then such Participant shall not be entitled to any Severance Benefits hereunder. If more than one Qualifying Severance Event occurs with respect to a Participant, such events shall constitute a single Qualifying Severance Event and the provisions of this Article 4 shall apply with respect to the Participant only once. A Participant's continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason for purposes of determining if a Qualifying Severance Event has occurred with respect to the Participant.

4.2 Severance Benefits.

in such context shall treat the Purchaser as the Employer for purposes of the definition of such term.

4.3 Minimum Benefit for Designated Participants.

4.4 Timing and Manner of Payment of Severance Benefits. Any Pro-Rata Bonus Payment shall be paid by the Company to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the Participant's Severance Date. Any Cash Severance Benefit shall be paid by the Company, for and on behalf of the Participant's Employer, to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the Participant's Severance Date or in a series of substantially equal payments (without interest), no less frequently than monthly, over a period not to exceed 12 months, with the first payment to commence upon the first day of the month immediately following the Participant's Severance Date. The Company shall determine, in its sole discretion, whether such Cash Severance Benefit shall be paid in the form of a single lump sum or a series of installments. Subject to Section 7.1, any Outplacement Benefit and Non-Cash Severance Benefit, as applicable to the Participant, shall be paid in accordance with the terms set forth in Exhibit C to the Participant's Participation Agreement.

ARTICLE 5
TAXES

manner described in the preceding sentence, the Company or the Employer may require the Participant to pay or provide for the payment of such required tax withholding as a condition to the payment or delivery of such amounts or benefits.

Each Participant, former Participant and Beneficiary shall be solely responsible for all income and employment taxes arising in connection with participation in this Plan or benefits hereunder.

ARTICLE 6
EXCISE TAX GROSS-UP

6.1 Gross-Up Payment. In the event it is determined (pursuant to Section 6.2) or finally determined (as defined in Section 6.3(c)) that any payment, distribution, transfer, or benefit by the Company, or a direct or indirect subsidiary or affiliate of the Company, to or for the benefit of the Participant or the Participant's dependents, heirs or beneficiaries (whether such payment, distribution, transfer, benefit or other event occurs pursuant to the terms of this Plan or otherwise, but determined without regard to any additional payments required under this Article 6) (each a "Payment" and collectively the "Payments") is subject to the excise tax imposed by Section 4999 of the Code, and any successor provision or any comparable provision of state or local income tax law (collectively, "Section 4999"), or any interest, penalty or addition to tax is incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest, penalty, and addition to tax, hereinafter collectively referred to as the "Excise Tax"), then, within 10 days after such determination or final determination, as the case may be, the Company shall pay to the Participant (or to the applicable taxing authority on the Participant's behalf) an additional cash payment (hereinafter referred to as the "Gross-Up Payment") equal to an amount such that after payment by the Participant of all taxes, interest, penalties, additions to tax and costs imposed or incurred with respect to the Gross-Up Payment (including, without limitation, any income and excise taxes imposed upon the Gross-Up Payment), the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such Payment or Payments. This provision is intended to put the Participant in the same position as the Participant would have been had no Excise Tax been imposed upon or incurred as a result of any Payment.

6.2 Determination of Gross-Up.

(a): Except as provided in Section 6.3, the determination that a Payment is subject to an Excise Tax shall be made in writing by the principal certified public accounting firm then retained by the Company to audit its annual financial statements (the "Accounting Firm"). Such determination shall include the amount of the Gross-Up Payment and detailed computations thereof, including any assumptions used in such computations. Any determination by the Accounting Firm will be binding on the Company, the Participant's Employer and the Participant.
(b): For purposes of determining the amount of the Gross-Up Payment, the Participant shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made. Such highest marginal rate shall take into account the loss of itemized deductions by the Participant and shall also include the Participant's share of the hospital insurance portion of FICA and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Participant's residence on the date of his or her Qualifying Severance Event, net of the maximum reduction in Federal income taxes that could be obtained from the deduction of such state and local taxes.

6.3 Notification.

(a)

The Participant shall notify the Company and his or her Employer (if other than the Company) in writing of any claim by the Internal Revenue Service (or any successor thereof) or any state or local taxing authority (individually or collectively, the "Taxing Authority") that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 30 days after the Participant receives written notice of such claim and shall apprise the Company and his or her Employer of the nature of such claim and the date on which such claim is requested to be paid; provided, however, that failure by the Participant to give such notice within such 30-day period shall not result in a waiver or forfeiture of any of the Participant's rights under this Article 6 except to the extent of actual damages suffered by the Company as a result of such failure. The Participant shall not pay such claim prior to the expiration of the 15-day period following the date on which the Participant gives such notice to the Company and his or her Employer (or such shorter period ending on the date that any payment of taxes, interest, penalties or additions to tax with respect to such claim is due). If the Company or the Participant's Employer notifies the Participant in writing prior to the expiration of such 15-day period (regardless of whether such claim was earlier paid as contemplated by the preceding parenthetical) that it desires to contest such claim, the Participant shall:

(1): give the Company and the Participant's Employer any information reasonably requested by the Company or the Participant's Employer relating to such claim;
(2): take such action in connection with contesting such claim as the Company or the Participant's Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company or the Participant's Employer;
(3): cooperate with the Company and the Participant's Employer in good faith in order effectively to contest such claim; and
(4): permit the Company and the Participant's Employer to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold the Participant harmless, on an after-tax basis, for all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed in relation to such claim and in relation to the payment of such costs and expenses or indemnification.

(b)

Without limitation on the foregoing provisions of this Section 6.3, and to the extent its actions do not unreasonably interfere with or prejudice the Participant's disputes with the Taxing Authority as to other issues, the Company and the Participant's Employer shall control all proceedings taken in connection with such contest and, in its or their reasonable discretion, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the Taxing Authority in respect of such claim and may, at its or in their sole option, either direct the Participant to pay the tax, interest or penalties claimed and sue for a refund or contest the claim in any permissible manner, and the Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company or the Participant's Employer shall determine; provided, however, that if the Company directs the Participant to pay such claim and sue for a refund, the Company shall advance an amount equal to such payment to the Participant, on an interest-free basis, and shall indemnify and hold the

Participant harmless, on an after-tax basis, from all taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax imposed with respect to such advance or with respect to any imputed income with respect to such advance, as any such amounts are incurred; and, further, provided, that any extension of the statute of limitations relating to payment of taxes, interest, penalties or additions to tax for the taxable year of the Participant with respect to which such contested amount is claimed to be due is limited solely to such contested amount; and, provided, further, that any settlement of any claim shall be reasonably acceptable to the Participant, and the Company's and the Participant's Employer's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and the Participant shall be entitled to settle or contest, as the case may be, any other issue.

(c): If, after receipt by the Participant of an amount advanced by the Company pursuant to Section 6.3(a), the Participant receives any refund with respect to such claim, the Participant shall (subject to the Company's compliance with the requirements of this Article 6) promptly pay to the Company an amount equal to such refund (together with any interest paid or credited thereof after taxes applicable thereto), net of any taxes (including, without limitation, any income or excise taxes), interest, penalties or additions to tax and any other costs incurred by the Participant in connection with such advance, after giving effect to such repayment. If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 6.3(a), it is finally determined that the Participant is not entitled to any refund with respect to such claim, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall be treated as a Gross-Up Payment and shall offset, to the extent thereof, the amount of any Gross-Up Payment otherwise required to be paid.
(d): For purposes of this Article 6, whether the Excise Tax is applicable to a Payment shall be deemed to be "finally determined" upon the earliest of: (1) the expiration of the 15-day period referred to in Section 6.3(a) if the Company or the Participant's Employer has not notified the Participant that it intends to contest the underlying claim, (2) the expiration of any period following which no right of appeal exists, (3) the date upon which a closing agreement or similar agreement with respect to the claim is executed by the Participant and the Taxing Authority (which agreement may be executed only in compliance with this section), or (4) the receipt by the Participant of notice from the Company or the Participant's Employer that it no longer seeks to pursue a contest (which shall be deemed received if the Company or the Participant's Employer does not, within 15 days following receipt of a written inquiry from the Participant, affirmatively indicate in writing to the Participant that the Company or the Participant's Employer intends to continue to pursue such contest).

6.4 Underpayment and Overpayment. It is possible that no Gross-Up Payment will initially be made but that a Gross-Up Payment should have been made, or that a Gross-Up Payment will initially be made in an amount that is less than what should have been made (either of such events is referred to as an "Underpayment"). It is also possible that a Gross-Up Payment will initially be made in an amount that is greater than what should have been made (an "Overpayment"). The determination of any Underpayment or Overpayment shall be made by the Accounting Firm in accordance with Section 6.2. In the event of an Underpayment, the amount of any such Underpayment shall be paid to the Participant as an additional Gross-Up Payment. In the event of an Overpayment, any such Overpayment shall be treated for all purposes as a loan to the Participant with interest at the applicable Federal rate provided for in Section 1274(d) of the Code. In such case, the amount of the loan shall be subject to reduction to the extent necessary to put the Participant in the same after-tax position as if such Overpayment were never made. The amount of any such reduction to the loan shall be determined by the Accounting Firm in accordance with the principles set forth in Section 6.2. The

Participant shall repay the amount of the loan (after reduction, if any) to the Company as soon as administratively practicable after the Company or the Participant's Employer notifies the Participant of (a) the Accounting Firm's determination that an Overpayment was made and (b) the amount to be repaid.

ARTICLE 7
PAYMENT OBLIGATIONS

7.1 Liability for Payment. Except for the benefits related to Performance Shares, Deferred Stock Units, Stock Options and/or Dividend Equivalents which shall be paid by the appropriate entity as determined under the provisions of the incentive plan under which the award was granted, and in the case of benefits payable under Article 4 hereof, the Company, for and on behalf of the Participant's Employer, shall be liable for the payment of benefits under this Plan with respect to each Participant.

7.2 Payment of Obligations Absolute. Subject to the Participant's compliance with Section 12.1 and the agreement contemplated thereby and subject to Section 3.4 and Article 5, the Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Participant or anyone else except as provided in Section 3.3 and/or Section 3.4. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Participant or from whomsoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Section 3.4, Article 6, or Article 9 and subject to the Participant's compliance with Section 12.1 and the agreement contemplated thereby.

7.3 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. It is the intention of the Company that this Plan be unfunded for purposes of the Code and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

7.4 Relationship to Other Plans. By accepting participation in this Plan, each Participant (a) consents to the payment terms set forth in this Plan, (b) agrees that this Plan amends the otherwise inconsistent terms of any Company or Employer compensation, incentive, benefit or perquisite plan or program, and (c) agrees that such sections of this Plan will control to the extent that any inconsistency may exist between those sections and the terms of any Company or Employer compensation, incentive, benefit or perquisite plan or program.

7.5 Other Benefit Plans. All payments, benefits and amounts provided under this Plan shall be in addition to and not in substitution for any pension rights under the Company's or other Employer's tax-qualified pension plan in which the Participant participates, and any disability, workers' compensation or other Company or other Employer benefit plan distribution that a Participant is entitled to, under the terms of any such plan, at the time his or her employment by his or her

Employer terminates. Notwithstanding the foregoing, this Plan shall not create an inference that any duplicate payments shall be required. Payments received by a person under this Plan shall not be deemed a part of the person's compensation for purposes of determining the person's benefits under any employee welfare, pension or other benefit plan or arrangement, if any, provided by an Employer, except where explicitly provided under the terms of such plan or arrangement.

ARTICLE 8
RESOLUTION OF DISPUTES

8.1 Claim. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as "Claimant") may file a written request for such benefit with the Committee, setting forth his or her claim. The request must be addressed to the Committee at the Company's principal place of business.

8.2 Claim Decision. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for special circumstances.

8.3 Request for Review. Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination. Such request must be addressed to the Committee, at the Company's principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee.

8.4 Review of Decision. Within 60 days after the Committee's receipt of a request for review, after considering all materials presented by the Claimant, the Committee will inform the Claimant in writing, in a manner calculated to be understood by the Claimant, of its decision setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the 60 day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review.

ARTICLE 9
RESOLUTION OF DISPUTES—ARBITRATION

9.1 General. A Participant or Beneficiary must complete the claims procedure described in Article 8 before submitting any claim or controversy arising out of or in connection with this Plan to arbitration as described below in this Article 9.

9.2 Arbitration of Claims. The Company, the Participant, and the Participant's Employer hereby consent to the resolution by mandatory and binding arbitration of all claims or controversies arising out of or in connection with this Plan and/or the Exhibits hereto that the Company or the Participant's Employer may have against the Participant, or that the Participant may have against the Company, his or her Employer, or against either of their officers, directors, employees or agents acting in their capacity as such. Each party's promise to resolve all such claims or controversies by arbitration in accordance with this Plan rather than through the courts is consideration for the other party's like

promise. It is further agreed that the decision of an arbitrator on any issue, dispute, claim or controversy submitted for arbitration, shall be final and binding upon the Company, the Participant, and the Participant's Employer and that judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.

All expenses of such arbitration, including the reasonable fees and expenses of the counsel for the Participant, shall be advanced and borne by the Company or the Participant's Employer; provided, however, that if it is finally determined that the Participant did not commence the arbitration in good faith and had no reasonable basis therefore or that the Participant failed to comply with Section 12.1 or breached the agreement contemplated thereby, the Participant shall repay all advanced fees and expenses and shall reimburse the Company and the Participant's Employer for their reasonable legal fees and expenses in connection therewith.

Except as otherwise provided in this procedure or by mutual agreement of the parties, any arbitration shall be administered by a sole arbitrator at the Singapore International Arbitration Centre ("SIAC") under the then-existing SIAC arbitration rules (the "Tribunal"). Pre-hearing and post-hearing procedures may be held by telephone or in person, as the arbitrator deems necessary.

The arbitrator shall interpret this Plan, any applicable Company or Employer policy or rules and regulations, any applicable substantive law (and the law of remedies, if applicable), or applicable federal law; provided, however, if arbitration is brought after the claim or controversy has been submitted for review by the Committee in accordance with Article 8, the arbitrator shall defer to the Committee's interpretations of the Plan and such policies, rules, and regulations so long as the Committee has not abused its discretion hereunder. In reaching his or her decision, the arbitrator shall have no authority to change or modify any lawful Company or Employer policy, rule or regulation, or this Plan. The arbitrator, and not any federal, state or local court or agency, shall have exclusive and broad authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Plan, including but not limited to, any claim that all or any part of this Plan is voidable.

9.3 Discovery. Each party shall have the right to take the deposition of one individual and any expert witness(es) designated by another party. Each party shall also have the opportunity to obtain documents from another party through one request for production of documents. Additional discovery may be had only when the arbitrator so orders upon a showing of substantial need. Any disputes regarding depositions, requests for production of documents or other discovery shall be submitted to the arbitrator for determination.

9.4 Subpoenas. Each party shall have the right to subpoena witnesses and documents for the arbitration hearing by requesting a subpoena from the arbitrator. Any such request shall be served on all other parties, who shall advise the arbitrator in writing of any objections that the party may have to issuance of the subpoena within ten calendar days of receipt of the request.

9.5 Designation of Witnesses. At least thirty calendar days before the arbitration, the parties must exchange lists of witnesses, including any expert(s), and copies of all exhibits intended to be used at the arbitration.

ARTICLE 10
SUCCESSORS AND ASSIGNMENT

10.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company after the BV Sale) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

10.2 Assignment by the Participant. None of the benefits, payments, proceeds or claims of any Participant shall be subject to any claim of any creditor and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any such Participant have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under this Plan. Notwithstanding the foregoing, benefits that are in pay status may be subject to a court order of garnishment or wage assignment, or similar order, or a tax levy. This Plan shall inure to the benefit of and be enforceable by each Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Participant's Beneficiary in accordance with the terms of this Plan.

ARTICLE 11
ADMINISTRATION OF THE PLAN

11.1 Committee Action. The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee.

11.2 Powers and Duties of the Committee. The Committee shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the power and authority to do the following:

(a): To determine eligibility for and participation in this Plan;
(b): To construe and interpret the terms and provisions of this Plan;
(c): To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries, and to determine the amount of withholding taxes to be deducted pursuant to Article 5;
(d): To maintain all records that may be necessary for the administration of this Plan;
(e): To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;

(f): To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof; and
(g): To appoint a plan administrator or any other agent (which may include, without limitation, one or more employees of the Company), and to delegate to them such powers and duties in connection with the administration of this Plan as the Committee may from time to time prescribe.

11.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, including whether, for purposes of the Plan, a termination of a Participant's employment has been with or without Cause or for Good Reason, which interpretation or construction shall be final and binding on all parties, including but not limited to each Employer and any Participant or Beneficiary. The Committee shall administer such terms and provisions in full accordance with any and all laws applicable to this Plan.

11.4 Information. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require.

11.5 Compensation, Expenses and Indemnity. The members of the Committee shall serve without additional compensation for their services hereunder beyond that which they are entitled as authorized by the Board. The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. The Company shall pay expenses and fees in connection with the administration of this Plan. To the extent permitted by applicable law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and each member thereof, and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to this Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

ARTICLE 12
MISCELLANEOUS

12.1 Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company's obligation to pay benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form attached to the Participant's Participation Agreement (or such other form as the Committee may require) and such executed agreement is received by the Company no later than 60 days after the Participant's Severance Date and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

12.2 Term of the Plan. This Plan will commence on the Effective Date and shall continue in effect through the first to occur of (1) July 1, 2005 or (2) a determination by the Board that a BV Sale is not reasonably expected to occur on or before July 1, 2005; provided that the Board may, in its discretion, extend the term of the Plan beyond such date. Notwithstanding the preceding sentence, the Plan shall continue beyond such date with respect to a Participant to the extent that a contract is in place on July 1, 2005 to complete the sale of the Employer at which such Participant is then employed, in which case the Plan shall continue with respect to such Participant until the earlier to occur of: (1) the completion of the sale of such Employer or (2) the expiration or any other termination of such contract without the sale being completed. Termination of the Plan shall not modify the 12-month severance protection provided in Section 4.2.3, and such protection shall continue pursuant to its terms

until the applicable 12-month period has expired. In addition, the termination of this Plan shall have no effect on any other severance protections provided pursuant to other severance programs maintained by an Employer or any affiliate.

12.3 Employment Status. Except as may be provided under any other written agreement between a Participant and his or her Employer, the employment of the Participant by his or her Employer is "at will," and may be terminated by either the Participant or the Employer at any time, subject to applicable law. Payments made under this Plan shall not give any person the right to any benefits provided to persons retained in an Employer's employ (such as, without limitation, health and dental benefits). Except as may otherwise be required by law or set forth specifically in such plans or as otherwise expressly provided in this Plan, such benefits shall terminate as of the date the Participant's employment by an Employer terminates.

12.4 Beneficiaries. Subject to the other provisions of this Section 12.4, the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.

12.5 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and all Employers.

12.6 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

12.7 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

12.8 Modification. The Committee or the Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment shall be effective without the consent of each affected Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorized member of the Committee (or the Board) or its designee or legal representative.

12.9 Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognized international courier (such as Federal Express) postage and mailing fee prepaid and addressed: (a) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (b) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

12.10 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Plan. Any statutory reference in this Plan shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision. The provisions of the Singapore Contracts (Rights of Third Parties) Act (Cap. 53B) shall not apply to this Plan.

12.11 WARN Act. Benefits payable under this Plan are intended to satisfy, where applicable, any Company or other Employer's obligations under the Federal Worker Adjustment and Retraining Notification Act and any similar obligations that the Company or any other Employer may have under any successor or other severance pay statute.

12.12 No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its subsidiaries have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its subsidiaries to make or authorize (or to refrain from making or authorizing, as the case may be): (a) any adjustment, recapitalization, reorganization or other change in capital structure or business; (b) any merger, amalgamation, consolidation or change in ownership; (c) any dissolution or liquidation; (d) any sale or transfer of assets or business; or (e) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan as of the date first set forth above.

		EDISON MISSION ENERGY

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project	Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

			514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
PT Adro	Indonesia		—				—		—	8	%		—		—
CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

			19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

			233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

			755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

			—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total		$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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TABLE OF CONTENTS
EDISON MISSION ENERGY BV SALE SEVERANCE PLAN—SINGAPORE
ARTICLE 2 DEFINITIONS
ARTICLE 3 PARTICIPATION
ARTICLE 4 SEVERANCE BENEFITS
ARTICLE 5 TAXES
ARTICLE 6 EXCISE TAX GROSS-UP
ARTICLE 7 PAYMENT OBLIGATIONS
ARTICLE 8 RESOLUTION OF DISPUTES
ARTICLE 9 RESOLUTION OF DISPUTES—ARBITRATION
ARTICLE 10 SUCCESSORS AND ASSIGNMENT
ARTICLE 11 ADMINISTRATION OF THE PLAN
ARTICLE 12 MISCELLANEOUS
EX-10.9 12 a2135451zex-10_9.htm EXHIBIT 10.9
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Exhibit 10.9

EDISON MISSION ENERGY
BV SALE INCENTIVE PLAN—UK

1. Establishment of the Plan. Edison Mission Energy, a Delaware corporation (the "Company"), hereby establishes this BV Sale Incentive Plan—UK (the "Plan"), effective as of February 19, 2004 (the "Effective Date"), for the benefit of certain key employees of the Company and certain of its subsidiaries and affiliates.

3. Defined Terms. For purposes of the Plan, the following terms (in addition to the defined terms set forth above) shall have the meanings indicated:

(ii) ANSP shall be determined without giving effect to the payments under this Plan;

(4) costs of consents, waivers or settlements to facilitate sale, and (5) any other direct expenses associated with the sale; and

(d) "Beneficiary" means the individual or entity determined under Section 11(d) of the Plan.

(e) "Board" means the Board of Directors of the Company.

(f) "Cause" means the occurrence of any one or more of the following:

(i) The Participant's conviction for, or pleading guilty to, committing an act of fraud, embezzlement, theft, or other act constituting a criminal act for which a custodial sentence may be imposed;

(ii) A significant adverse change in the Participant's performance of or any material breach or non-observance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties or express or implied obligations arising from his or her employment as well as any reasonable duties that may be assigned to him or her to help effect the BV Sale), including but not limited to a failure to comply with the Company's policies and instructions regarding the BV Sale and the confidentiality of certain information related thereto and including any refusal to comply with any reasonable and lawful instructions given by the Employer; or

(j) "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.

(k) "Good Reason" means, without the Participant's express written consent, a material reduction by the Participant's Employer of the aggregate value of the compensation (including current compensation and long-term incentive opportunities) and benefits paid and provided, as the case may be to the Participant; provided, however, that in no event shall the occurrence of a Covered Sale or Covered Transaction, in and of itself, constitute a reduction of compensation or long-term incentive award opportunities and further provided that the Participant's Employer shall not have remedied the issue giving rise to the Good Reason within 30 days of it being brought to the Employer's attention by the Participant. For the avoidance of doubt, where the Purchaser provides a benefit package which is no less favourable in aggregate the fact that long term incentive opportunities and benefits previously provided by the Employer have ceased to be provided shall not constitute a Good Reason.

(l) "Participant" or "Participants" means any person who is a participant in this Plan as determined in accordance with Article 5.

(n) "Sale Bonus" means an unfunded right to receive a payment under this Plan.

(o) "Sale Bonus Payment Scheme" means the rules for the manner and timing of the payment of a Sale Bonus set forth in Section 8.

(p) "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

4. Administration.

5. Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who will be Participants in the Plan, the Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable) applicable to each Participant and the Sale Bonus Payment Scheme applicable to each Participant. In order to participate in the Plan, each Participant must promptly sign and return to the Company a participation agreement in the form provided by the Company (a "Participation Agreement"), which shall set forth the Participant's Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable), designated Sale Bonus Payment Scheme and additional details about the Plan.

6. Sale Bonus Trigger; Effect of Termination of Employment.

(a) Subject to Section 11(c) below, a Participant shall be entitled to receive a Sale Bonus on the terms set forth in Sections 7 and 8 below if the Participant:

(i) is employed by an Employer on the Closing Date of the Covered Transaction,

(b) Any termination of a Participant's employment by his or her Employer for Cause or by a Participant for Good Reason shall be communicated by Notice of Termination. For purposes of

this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 11(j) of this Plan. Notwithstanding anything else contained herein to the contrary, a Participant shall not be deemed to have terminated employment if his or her employment by an Employer terminates but he or she continues as an employee of another Employer.

7. Amount of Sale Bonus. In the event that a Participant becomes entitled to receive a Sale Bonus, the amount of such Participant's Sale Bonus shall be determined by multiplying the Participant's highest annual rate of Base Salary in effect at any time during the 24-month period preceding the Closing Date of the last transaction resulting in a Covered Transaction by the Participant's applicable Base Salary Multiplier. Each Participant's Base Salary Multiplier (or the applicable formula for determining the Base Salary Multiplier, as applicable) shall be set forth in the Participant's Participation Agreement. Following consummation of a Covered Transaction, determinations of ANSP (including, without limitation, the determination of value in U.S. dollars of any non-cash consideration and the value in U.S. dollars of any consideration not expressed in U.S. dollars) shall be made by the Board in good faith, whose good faith determination will be binding.

8. Payment of Sale Bonus. If a Participant becomes entitled to receive a Sale Bonus, the manner and timing of the payment of such Sale Bonus shall be determined in accordance with the following rules. The Company's management, in its sole discretion, shall determine which of the following Sale Bonus Payment Schemes, either Payment Scheme One set forth in subsection (a) or Payment Scheme Two set forth in subsection (b), shall apply to each Participant. The applicable Payment Scheme shall be set forth in the Participant's Participation Agreement.

faith estimate. In such case, the Board's good faith determination will be binding on all Participants whose Sale Bonus is so paid and there will be no adjustments to such bonuses for events occurring before or after such determination.

(c) Liability for Payment. The Company shall be liable for the payment of benefits under this Plan with respect to each Participant.

9. Taxes. The Company and/or the Participant's Employer, as applicable, has the right to withhold from any amount otherwise payable to a Participant under or pursuant to this Plan the amount of any taxes or other statutory deductions that the Company or such Employer, or any of their respective affiliates, may legally be required to withhold with respect to such payment (including, without limitation, income tax, National Insurance contributions and (if applicable) any United States Federal taxes, and any other foreign, state, city, or local taxes). In the event that tax withholding is required with respect to amounts or benefits payable or deliverable by the Company or the Participant's Employer to a Participant and the Company or the Employer cannot satisfy its tax withholding obligations in the manner described in the preceding sentence, the Company or the Employer may require the Participant to pay or provide for the payment of such required tax withholding as a condition to the payment or delivery of such amounts or benefits. Each Participant, former Participant and Beneficiary shall be solely responsible for all income and employment taxes arising in connection with participation in this Plan or benefits hereunder.

10. Arbitration

(a) Except in so far as precluded by s.203 of the Employment Rights Act 1996, any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the London Court of International Arbitration Rules, which Rules are deemed to be incorporated by reference into this clause.

(b) The number of arbitrators shall be one.

(d) The language to be used in the arbitral proceedings shall be English.

(e) The governing law of the contract shall be the substantive law of the State of California, United States of America.

11. Miscellaneous

following the Covered Transaction) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

(c) Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company's obligation to pay benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form attached to the Participant's Participation Agreement (or such other form as the Committee may require) and such executed agreement is received by the Company no later than 60 days after the Closing Date and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.

for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.

(e) Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and all Employers.

(f) Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

(i) Modification. The Committee or the Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment that adversely affects a Participant shall be effective without the consent of such Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorized member of the Committee (or the Board) or its designee or legal representative.

(j) Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognized international courier (such as FedEx) postage and mailing fee prepaid and addressed: (i) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (ii) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

(k) Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Plan. Any statutory reference in this Plan shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision.

(l) No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its subsidiaries have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its subsidiaries to make or authorize (or to refrain from making or authorizing, as the case may be): (i) any adjustment, recapitalization, reorganization or other change in capital structure or business; (ii) any merger, amalgamation, consolidation or change in ownership; (iii) any dissolution or liquidation; (iv) any sale or transfer of assets or business; or (v) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan as of the date first set forth above.

		EDISON MISSION ENERGY
		By

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project	Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

			514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
PT Adro	Indonesia		—				—		—	8	%		—		—
CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

			19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

			233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

			755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

			—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total		$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE INCENTIVE PLAN—UK
EXHIBIT A
EX-10.10 13 a2135451zex-10_10.htm EXHIBIT 10.10
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Exhibit 10.10

EDISON MISSION ENERGY
BV SALE RETENTION PLAN—UK

TABLE OF CONTENTS

			Page
ARTICLE 1		ESTABLISHMENT, TERM, AND PURPOSE	1
	1.1	Establishment of the Plan	1
	1.2	Purpose of the Plan	1
ARTICLE 2		DEFINITIONS	1
ARTICLE 3		PARTICIPATION	2
	3.1	Participation	2
	3.2	Termination of Employment	3
	3.3	Re-Employment	3
	3.4	Notice of Termination	3
	4.1	Right to Retention Benefit	3
	4.3	Timing and Manner of Payment	3
ARTICLE 5		TAXES	4
ARTICLE 6		PAYMENT OBLIGATIONS	4
	6.1	Liability for Payment	4
	6.2	Payment of Obligations Absolute	4
	6.3	Unsecured General Creditor	4
	6.4	Other Benefit Plans	4
ARTICLE 7		RESOLUTION OF DISPUTES	5
	7.1	Claim	5
	7.2	Claim Decision	5
	7.3	Request for Review	5
	7.4	Review of Decision	5
ARTICLE 8		RESOLUTION OF DISPUTES—ARBITRATION	5
ARTICLE 9		SUCCESSORS AND ASSIGNMENT	6
	9.1	Successors to the Company	6
	9.2	Assignment by the Participant	6
ARTICLE 10		ADMINISTRATION OF THE PLAN	6
	10.1	Committee Action	6
	10.2	Powers and Duties of the Committee	6
	10.3	Construction and Interpretation	7
	10.4	Information	7
	10.5	Compensation, Expenses and Indemnity	7
ARTICLE 11		MISCELLANEOUS	7
	11.1	Release Agreement	7
	11.2	Term of the Plan	7
	11.3	Employment Status	7
	11.4	Beneficiaries	8
	11.5	Payments on Behalf of Persons Under Incapacity	8
	11.6	Gender and Number	8
	11.7	Severability	8
	11.8	Modification	8

11.9	Notice	9
11.10	Applicable Law	9
11.11	No Sale Obligation	9

EDISON MISSION ENERGY
BV SALE RETENTION PLAN—UK

ARTICLE 1
ESTABLISHMENT, TERM, AND PURPOSE

1.1 Establishment of the Plan. Edison Mission Energy hereby establishes a retention plan to be known as the "Edison Mission Energy BV Sale Retention Plan—UK" (the "Plan"). This Plan shall become effective February 19, 2004 (the "Effective Date").

1.2 Purpose of the Plan. The purpose of this Plan is to provide key employees of the Employers with an incentive to remain in the employ of their respective Employers through the completion of a sale of MEC International, BV ("BV") and to provide for continuity in the management and operations of the Employers (as such term is defined below) during such time by offering compensation for loss of office in the event that their employment is terminated by their respective Employers for redundancy or otherwise without Cause (as such term is defined below).

ARTICLE 2
DEFINITIONS

(a)

(b)

"Beneficiary" means the persons or entities designated or deemed designated by a Participant pursuant to Section 11.4.

(c)

"Board" means the Board of Directors of the Company.

(d)

(e)

"Cause" means the occurrence of any one or more of the following:

(1): The Participant's conviction for, or pleading guilty to, committing an act of fraud, embezzlement, theft, or other act constituting a criminal offence for which a custodial sentence can be imposed;
(2): A significant adverse change in the Participant's performance of or any material breach or non-observance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties or express or implied obligations arising from his or her

employment as well as any reasonable duties that may be assigned to him or her to help effect the BV Sale), including but not limited to a failure to comply with the Company's policies and instructions regarding the BV Sale and the confidentiality of certain information related thereto and including any refusal to comply with any reasonable and lawful instructions given by the Employer; or

(2): The willful engaging by the Participant in misconduct that: (i) if the event giving rise to the termination of the Participant's employment occurs before the sale of the Participant's Employer or while the Participant is otherwise employed by an Employer, is in violation of the Company's and/or the Participant's Employer's policies and practices applicable to the Participant from time to time; or (ii) if the event giving rise to the termination of the Participant's employment occurs after the sale of the Participant's Employer when the Participant is no longer employed by an Employer, would have resulted in the termination of the Participant's employment by the Company or the Participant's Employer under the Company's and/or the Participant's Employer's policies and practices applicable to the Participant in effect immediately prior to such sale. However, no act or failure to act, on the Participant's part, shall be considered "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company and his or her Employer.

(f): "Code" means the United States Internal Revenue Code of 1986, as amended.
(g): "Committee" means the Board or one or more committees appointed by the Board.
(h): "Company" means Edison Mission Energy, a Delaware corporation, or any successor thereto as provided in Section 9.1.
(i): "Disability" shall mean, for all purposes of this Plan, the Participant's eligibility for benefits under his or her Employer's long-term disability plan applicable to the Participant, as determined by the Employer.
(j): "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.
(k): "Participant" means any person who is a participant in this Plan as determined in accordance with Article 3.
(l): "Purchaser" means any person or entity or affiliate thereof that has purchased all or any part of the assets or interests of BV outside the ordinary course in a transaction that is included in the BV Sale.
(m): "Retention Benefit" means the retention benefit set forth in Article 4 of this Plan.
(n): "STI" means the short term incentive program, if any, maintained by the Company or by an Employer in which a Participant participates.
(o): "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

ARTICLE 3
PARTICIPATION

3.1 Participation. The Company's management, in its sole discretion, shall determine those employees of an Employer who will be Participants in the Plan and the benefits to which each Participant may become eligible to receive under the Plan. In order to participate in the Plan, each Participant must promptly sign and return to the Company a participation agreement in the form

provided by the Company (a "Participation Agreement"), which shall set forth whether the Participant may become eligible for a Retention Benefit under the Plan and additional details about the Plan.

3.2 Termination of Employment. Notwithstanding anything else contained herein to the contrary, a Participant shall not be deemed to have terminated employment if his or her employment by an Employer terminates but he or she continues as an employee of another Employer or his or her employment by an Employer transfers to a Purchaser by operation of law.

3.3 Re-Employment. Notwithstanding anything else contained herein to the contrary, a Participant shall have no right to benefits hereunder with respect to a termination of his or her employment if, in connection with such termination, he or she is otherwise entitled to benefits under this Plan but, prior to the payment or delivery (or commencement of payment or delivery, as the case may be) of such benefits, the Participant becomes re-employed by his or her Employer or by another Employer or by any other affiliate of the Company. Notwithstanding anything else contained herein to the contrary, a Participant's right to continuing or additional benefits under this Plan shall automatically terminate (but the Participant shall have no obligation to re-pay benefits previously paid) if the Participant becomes re-employed by his or her Employer or by another Employer or by any other affiliate of the Company. If a Participant is re-employed and his or her employment is subsequently terminated and the Participant again becomes entitled to benefits under the terms of this Plan in connection with such later termination of employment, the amount of payments otherwise payable to the Participant hereunder in connection with such later termination of employment shall be reduced by the amount of any payments paid under this Plan to the Participant in connection with any prior termination of his or her employment.

3.4 Notice of Termination. Any termination of a Participant's employment by his or her Employer for Cause shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 11.9 of this Plan.

ARTICLE 4
RETENTION BENEFIT

4.1 Right to Retention Benefit. The Company's management, in its sole discretion, shall determine if a Participant shall be eligible to receive a Retention Benefit pursuant to this Article 4. A Participant who has been designated as eligible to receive a Retention Benefit pursuant to this Article 4 shall be entitled to receive from the Company a Retention Benefit if he or she remains employed by his or her Employer until the first to occur of: (1) a termination of the Participant's employment by his or her Employer without Cause (and other than due to the Participant's death or Disability), (2) a sale by the Company of the Participant's Employer, (3) the BV Sale, (4) a public announcement by the Company that the BV Sale has been terminated, or (5) July 1, 2005. If a Participant's employment by his or her Employer terminates prior to July 1, 2005 other than in the circumstances described above for any reason other than by his or her Employer without Cause (and other than due to the Participant's death or Disability), then such Participant shall not be entitled to a Retention Benefit.

4.2 Retention Benefits. If a Participant becomes entitled to a Retention Benefit pursuant to Section 4.1, the amount of such benefit shall be set forth in the Participant's Participation Agreement.

4.3 Timing and Manner of Payment. Any Retention Benefit shall be paid by the Company to the Participant (or his or her Beneficiary) in the form of a single lump sum cash payment within 60 days after the date such benefit becomes payable pursuant to Section 4.1.

ARTICLE 5
TAXES

The Company and/or the Participant's Employer, as applicable, has the right to withhold from any amount otherwise payable to a Participant under or pursuant to this Plan the amount of any taxes or other statutory deductions that the Company or such Employer may legally be required to withhold with respect to such payment (including, without limitation, income tax and National Insurance contributions, and any other foreign, state, city, or local taxes). In the event that tax withholding is required with respect to amounts or benefits payable or deliverable by the Company or the Participant's Employer to a Participant and the Company or the Employer cannot satisfy its tax withholding obligations in the manner described in the preceding sentence, the Company or the Employer may require the Participant to pay or provide for the payment of such required tax withholding as a condition to the payment or delivery of such amounts or benefits.

Each Participant, former Participant and Beneficiary shall be solely responsible for all income and employment taxes arising in connection with participation in this Plan or benefits hereunder.

ARTICLE 6
PAYMENT OBLIGATIONS

6.1 Liability for Payment. The Company shall be liable for the payment of benefits under this Plan with respect to each Participant.

6.2 Payment of Obligations Absolute. Subject to the Participant's compliance with Section 11.1 and the agreement contemplated thereby and subject to Section 3.4 and Article 5, the Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Participant or anyone else except as provided in Section 3.3 and/or Section 3.4. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Participant or from whomsoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Section 3.4 or Article 8 and subject to the Participant's compliance with Section 11.1 and the agreement contemplated thereby.

6.3 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors.

6.4 Other Benefit Plans. All payments, benefits and amounts provided under this Plan shall be in addition to and not in substitution for any pension rights under the Company's or other Employer's tax-qualified pension plan in which the Participant participates, and any disability, permanent health insurance or other Company or other Employer benefit plan distribution that a Participant is entitled to, under the terms of any such plan, at the time his or her employment by his or her Employer terminates. Notwithstanding the foregoing, this Plan shall not create an inference that any duplicate payments shall be required. Payments received by a person under this Plan shall not be deemed a part of the person's compensation for purposes of determining the person's benefits under any employee welfare, pension or other benefit plan or arrangement, if any, provided by an Employer, except where explicitly provided under the terms of such plan or arrangement.

ARTICLE 7
RESOLUTION OF DISPUTES

7.3 Request for Review. Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination. Such request must be addressed to the Committee, at the Company's principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee.

ARTICLE 8
RESOLUTION OF DISPUTES—ARBITRATION

8.1 A Participant or Beneficiary must complete the claims procedure described in Article 7 before submitting any claim or controversy arising out of or in connection with this Plan to arbitration as described below in this Article 8.

8.2 Except in so far as precluded by s.203 of the Employment Rights Act 1996, any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the London Court of International Arbitration Rules, which Rules are deemed to be incorporated by reference into this clause.

8.3 The number of arbitrators shall be one.

8.4 The seat, or legal place, of arbitration shall be London, England.

8.5 The language to be used in the arbitral proceedings shall be English.

8.6 The governing law of the contract shall be the substantive law of the State of California, United States of America.

ARTICLE 9
SUCCESSORS AND ASSIGNMENT

9.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company after the BV Sale) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

9.2 Assignment by the Participant. None of the benefits, payments, proceeds or claims of any Participant shall be subject to any claim of any creditor and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any such Participant have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under this Plan. Notwithstanding the foregoing, benefits that are in pay status may be subject to a court order of garnishment or wage assignment, or similar order, or a tax levy. This Plan shall inure to the benefit of and be enforceable by each Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Participant's Beneficiary in accordance with the terms of this Plan.

ARTICLE 10
ADMINISTRATION OF THE PLAN

10.2 Powers and Duties of the Committee. The Committee shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the power and authority to do the following:

(a): To determine eligibility for and participation in this Plan;
(b): To construe and interpret the terms and provisions of this Plan;
(c): To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries, and to determine the amount of withholding taxes to be deducted pursuant to Article 5;
(d): To maintain all records that may be necessary for the administration of this Plan;
(e): To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;
(f): To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof; and

(g): To appoint a plan administrator or any other agent (which may include, without limitation, one or more employees of the Company), and to delegate to them such powers and duties in connection with the administration of this Plan as the Committee may from time to time prescribe.

10.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, including whether, for purposes of the Plan, a termination of a Participant's employment has been with or without Cause, which interpretation or construction shall be final and binding on all parties, including but not limited to each Employer and any Participant or Beneficiary. The Committee shall administer such terms and provisions in full accordance with any and all laws applicable to this Plan.

10.5 Compensation, Expenses and Indemnity. The members of the Committee shall serve without additional compensation for their services hereunder beyond that which they are entitled as authorized by the Board. The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. The Company shall pay expenses and fees in connection with the administration of this Plan. To the extent permitted by applicable law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and each member thereof, and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to this Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

ARTICLE 11
MISCELLANEOUS

11.1 Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company's obligation to pay benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form attached to the Participant's Participation Agreement (or such other form as the Committee may require) and such executed agreement is received by the Company no later than 60 days after the date the Participant becomes entitled to a Retention Benefit pursuant to Section 4.1 and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

11.2 Term of the Plan. This Plan will commence on the Effective Date and shall continue in effect through the date that benefits are triggered pursuant to Section 4.1.

11.3 Employment Status. Except as may be provided under any other written agreement between a Participant and his or her Employer, the employment of the Participant by his or her Employer may be terminated by either the Participant or the Employer at any time, subject to applicable law. Payments made under this Plan shall not give any person the right to any benefits provided to persons retained in an Employer's employ (such as, without limitation, health and dental benefits). Except as may otherwise be required by law or set forth specifically in such plans or as otherwise expressly provided in this Plan, such benefits shall terminate as of the date the Participant's employment by an Employer terminates.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.

11.5 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and all Employers.

of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorized member of the Committee (or the Board) or its designee or legal representative.

11.9 Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognized international courier (such as Federal Express) postage and mailing fee prepaid and addressed: (a) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (b) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

11.10 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Plan. Any statutory reference in this Plan shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision.

11.11 No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its subsidiaries have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its subsidiaries to make or authorize (or to refrain from making or authorizing, as the case may be): (a) any adjustment, recapitalization, reorganization or other change in capital structure or business; (b) any merger, amalgamation, consolidation or change in ownership; (c) any dissolution or liquidation; (d) any sale or transfer of assets or business; or (e) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan as of the date first set forth above.

	EDISON MISSION ENERGY

EXHIBIT A

Edison Mission Energy
International Revenue Base

Project		Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base			Percentage of International Revenue Base
Europe
	First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000		20	%
	Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280		2	%
	ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650		13	%
	Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000		2	%
	Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800		5	%
	Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000		1	%

				514,328,000				488,503,800		670,235,000				312,236,930		800,740,730		44	%

Asia
	Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200		11	%
	PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000		1	%
	PT Adro	Indonesia		—				—		—	8	%		—		—
	CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500		2	%
	TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750		3	%

				19,418,000				19,418,000		764,762,000				280,349,450		299,767,450		16	%

Australia
	Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000		10	%
	Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000		1	%
	Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800		1	%

				233,695,000				218,835,800		—				—		218,835,800		12	%

New Zealand
	Contact Energy	New Zealand		755,524,000	51	%		385,317,240			—			385,317,240		21	%

				755,524,000				385,317,240		—				—		385,317,240		21	%

Americas
	Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000		6	%

				—				—		234,896,000				117,448,000		117,448,000		6	%

Non Project

Total			$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220		100	%

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EDISON MISSION ENERGY BV SALE RETENTION PLAN—UK
TABLE OF CONTENTS
EDISON MISSION ENERGY BV SALE RETENTION PLAN—UK ARTICLE 1 ESTABLISHMENT, TERM, AND PURPOSE
ARTICLE 2 DEFINITIONS
ARTICLE 3 PARTICIPATION
ARTICLE 4 RETENTION BENEFIT
ARTICLE 5 TAXES
ARTICLE 6 PAYMENT OBLIGATIONS
ARTICLE 7 RESOLUTION OF DISPUTES
ARTICLE 8 RESOLUTION OF DISPUTES—ARBITRATION
ARTICLE 9 SUCCESSORS AND ASSIGNMENT
ARTICLE 10 ADMINISTRATION OF THE PLAN
ARTICLE 11 MISCELLANEOUS
EXHIBIT A
EX-10.11 14 a2135451zex-10_11.htm EXHIBIT 10.11
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Exhibit 10.11

EDISON MISSION ENERGY
BV SALE SEVERANCE PLAN—UK

TABLE OF CONTENTS

ARTICLE 1		ESTABLISHMENT, TERM, AND PURPOSE	1
	1.1	Establishment of the Plan.	1
	1.2	Purpose of the Plan.	1
ARTICLE 2		DEFINITIONS	1
ARTICLE 3		PARTICIPATION	4
	3.1	Participation.	4
	3.2	Termination of Employment.	4
	3.3	Benefit Offset.	4
	3.4	Re-Employment	4
	3.5	Notice of Termination.	5
ARTICLE 4		SEVERANCE BENEFITS	5
	4.1	Right to Severance Benefits.	5
	4.2	Severance Benefits.	5
	4.3	Minimum Benefit for Designated Participants.	6
	4.4	Timing and Manner of Payment of Severance Benefits	6
ARTICLE 5		TAXES	6
ARTICLE 6		PAYMENT OBLIGATIONS	7
	6.1	Liability for Payment.	7
	6.2	Payment of Obligations Absolute.	7
	6.3	Unsecured General Creditor.	7
	6.4	Relationship to Other Plans.	7
	6.5	Other Benefit Plans.	7
ARTICLE 7		RESOLUTION OF DISPUTES	8
	7.1	Claim.	8
	7.2	Claim Decision.	8
	7.3	Request for Review.	8
	7.4	Review of Decision.	8
ARTICLE 8		RESOLUTION OF DISPUTES—ARBITRATION	8
ARTICLE 9		SUCCESSORS AND ASSIGNMENT	9
	9.1	Successors to the Company.	9
	9.2	Assignment by the Participant.	9
ARTICLE 10		ADMINISTRATION OF THE PLAN	9
	10.1	Committee Action.	9
	10.2	Powers and Duties of the Committee.	9
	10.3	Construction and Interpretation.	10
	10.4	Information.	10
	10.5	Compensation, Expenses and Indemnity.	10

ARTICLE 11		MISCELLANEOUS	10
	11.1	Release Agreement.	10
	11.2	Term of the Plan.	10
	11.3	Employment Status.	11
	11.4	Beneficiaries.	11
	11.5	Payments on Behalf of Persons Under Incapacity.	11
	11.6	Gender and Number.	12
	11.7	Severability.	12
	11.8	Modification.	12
	11.9	Notice.	12
	11.10	Applicable Law.	12
	11.11	Compliance with Statutory Obligations.	12
	11.12	No Sale Obligation.	12

EDISON MISSION ENERGY
BV SALE SEVERANCE PLAN—UK

ARTICLE 1
ESTABLISHMENT, TERM, AND PURPOSE

1.1 Establishment of the Plan. Edison Mission Energy hereby establishes a severance plan to be known as the "Edison Mission Energy BV Sale Severance Plan—UK" (the "Plan"). This Plan shall become effective February 19, 2004 (the "Effective Date"). This Plan is intended to be an "employee benefit plan" within the meaning of Section (3) of the Employee Retirement Income Security Act of 1974, as amended.

1.2 Purpose of the Plan. The purpose of this Plan is to provide key employees of the Employers with an incentive to remain in the employ of their respective Employers through the completion of a sale of MEC International, BV ("BV") and to provide for continuity in the management and operations of the Employers (as such term is defined below) during such time by offering compensation for loss of office in the event that their employment is terminated by their respective Employers for redundancy, or otherwise without Cause (as such term is defined below) or by the key employees for Good Reason during the term of the Plan (as such term is defined below).

ARTICLE 2
DEFINITIONS

(a)

(b)

"Beneficiary" means the persons or entities designated or deemed designated by a Participant pursuant to Section 11.4.

(c)

"Board" means the Board of Directors of the Company.

(d)

(e)

"Cause" means the occurrence of any one or more of the following:

(1): The Participant's conviction for, or pleading guilty to, committing an act of fraud, embezzlement, theft, or other act constituting a criminal offence for which a custodial sentence may be imposed;

(2): A significant adverse change in the Participant's performance of or any material breach or non-observance of his or her duties (which duties shall include, but not be limited to, the Participant's customary duties or express or implied obligations arising from his or her employment as well as any reasonable duties that may be assigned to him or her to help effect the BV Sale), including but not limited to a failure to comply with the Company's policies and instructions regarding the BV Sale and the confidentiality of certain information related thereto and including any refusal to comply with any reasonable and lawful instructions given by the Employer; or
(2): The willful engaging by the Participant in misconduct that: (i) if the event giving rise to the termination of the Participant's employment occurs before the sale of the Participant's Employer or while the Participant is otherwise employed by an Employer, is in violation of the Company's and/or the Participant's Employer's policies and practices applicable to the Participant from time to time; or (ii) if the event giving rise to the termination of the Participant's employment occurs after the sale of the Participant's Employer when the Participant is no longer employed by an Employer, would have resulted in the termination of the Participant's employment by the Company or the Participant's Employer under the Company's and/or the Participant's Employer's policies and practices applicable to the Participant in effect immediately prior to such sale. However, no act or failure to act, on the Participant's part, shall be considered "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company and his or her Employer.

(f): "Code" means the United States Internal Revenue Code of 1986, as amended.
(g): "Committee" means the Board or one or more committees appointed by the Board.
(h): "Company" means Edison Mission Energy, a Delaware corporation, or any successor thereto as provided in Section 10.1.
(i): "Deferred Stock Unit" means an award granted by Edison International, the Company or an Employer in the form of a bookkeeping entry which serves as a measurement relative to shares of Edison International common stock for purposes of determining the payment, in cash or stock at some time after vesting, of the award.
(j): "Disability" shall mean, for all purposes of this Plan, the Participant's eligibility for benefits under his or her Employer's long-term disability plan applicable to the Participant, as determined by the Employer.
(k): "Dividend Equivalent" means a dividend equivalent granted by Edison International, the Company or an Employer in connection with a Stock Option grant.
(l): "EDCP" means the Edison International Executive Deferred Compensation Plan, as amended from time to time. EDCP shall not include the Edison International Affiliate Option Deferred Compensation Plan, the OGDP, or any other nonqualified deferred compensation plan.
(m): "EIX Severance Plan" means the Edison International Executive Severance Plan.
(n): "Employer" means the Company or any Subsidiary or affiliated business of the Company that employs the Participant.
(o): "Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
(p): "Executive Incentive Award" means the annual incentive bonus, if any, paid to the Participant by his or her Employer(s) (or deferred by the Participant) under the Edison International Executive Incentive Compensation Plan or any similar successor plan. Executive Incentive

Award does not include special retention bonus, signing bonus, one-time or special project bonus, or any other form of bonus, or any other form of compensation or benefit.

(q)

"Executive Retirement Plan" means the Southern California Edison Company Executive Retirement Plan, as amended from time to time, or any similar or successor plan sponsored by an Employer.

(r)

"Good Reason" means, without the Participant's express written consent, a material reduction by the Participant's Employer of the aggregate value of the compensation (including current compensation and long-term incentive opportunities) and benefits paid and provided, as the case may be to the Participant; provided, however, that in no event shall the BV Sale or a sale of the Participant's Employer, in and of itself, constitute a reduction of compensation or long-term incentive award opportunities and further provided that the Participant's Employer shall not have remedied the issue giving rise to the Good Reason within 30 days of it being brought to the Employer's attention by the Participant. For the avoidance of doubt, where the Purchaser provides a benefit package which is no less favourable in aggregate the fact that long term incentive opportunities and benefits previously provided by the Employer have ceased to be provided shall not constitute a Good Reason.

(s)

"Minimum Benefit Percentage" means, if benefits are triggered under this Plan, the minimum benefit to which certain designated Participants may become entitled pursuant to Section 4.3.

(t)

"OGDP" means the Edison International Option Gain Deferral Plan, as it may be amended from time to time.

(u)

"Participant" means any person who is a participant in this Plan as determined in accordance with Article 3.

(v)

(w)

(x)

"Qualifying Severance Event" means, as to a Participant, the occurrence of either of the following events during the term of the Plan:

(1): A termination of the Participant's employment by his or her Employer, without the Participant's consent, for reasons other than Cause (and other than due to the Participant's death or Disability); or
(2): A termination of employment by the Participant for Good Reason.

(y)

"Severance Benefit" means the severance benefit set forth in Article 4 of this Plan.

(z)

(aa): "Stock Option" means an option granted by Edison International, the Company or an Employer to purchase shares of Edison International stock.
(bb): "Stock Option Retention Exchange" means the exchange on November 29, 2001, pursuant to a Participant's election, of Stock Options for Deferred Stock Units.
(cc): "Subsidiary" means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

ARTICLE 3
PARTICIPATION

the amount of any payments paid under this Plan to the Participant in connection with any prior termination of his or her employment.

3.5 Notice of Termination. Any termination of a Participant's employment by his or her Employer for Cause or by a Participant for Good Reason shall be communicated by Notice of Termination. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision or provisions in this Plan relied upon. The Notice of Termination shall be effective on the date specified in Section 11.9 of this Plan.

ARTICLE 4
SEVERANCE BENEFITS

4.1 Right to Severance Benefits. Subject to Section 11.1, a Participant shall be entitled to receive from the Company, for and on behalf of the Participant's Employer, the applicable Severance Benefits described in this Article 4 if, during the term of the Plan, the Participant incurs a Qualifying Severance Event. If a Participant's employment by his or her Employer terminates for any reason other than a Qualifying Severance Event, then such Participant shall not be entitled to any Severance Benefits hereunder. If more than one Qualifying Severance Event occurs with respect to a Participant, such events shall constitute a single Qualifying Severance Event and the provisions of this Article 4 shall apply with respect to the Participant only once. A Participant's continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason for purposes of determining if a Qualifying Severance Event has occurred with respect to the Participant provided the Participant serves his or her Notice of Termination within the term of the Plan.

4.2 Severance Benefits.

4.2.1 If a Participant becomes entitled to receive Severance Benefits in accordance with Section 4.1, then such Participant shall become entitled to the following benefits, each of which is defined in Exhibit C to such Participant's Participation Agreement: (a) a Cash Severance Benefit, (b) a Pro-Rata Bonus Payment, (c) an Outplacement Benefit and (d) Non-Cash Severance Benefits.

4.2.2 If a Participant's employment by an Employer transfers by operation of law to a Purchaser, or following a BV Sale, the Company ceases to control the voting power of the Employer then such Participant shall become immediately entitled to the following benefits, each of which is defined in Exhibit C to such Participant's Participation Agreement: (a) a Pro-Rata Bonus Payment and (b) Non-Cash Severance Benefits.

4.2.3 Notwithstanding the foregoing, if a Participant's employment by an Employer transfers by operation of law to a Purchaser, or following a BV Sale, the Company ceases to control the voting power of the Employer and within 12 months of the sale or transfer the Participant's employment with such Purchaser is either terminated by the Purchaser for any reason other than for Cause or by such Participant for Good Reason, then such Participant shall become entitled to the following benefits, each of which is defined in Exhibit C to such Participant's Participation Agreement: (i) a Cash Severance Benefit, calculated as though the benefit became payable upon the date the Company ceased to own or control the business employing the Participant and (ii) an Outplacement Benefit; provided that the amount of such benefits, if triggered, shall be reduced by the amount of severance benefits payable or deliverable to the Participant under any severance plan, policy, program or agreement of the Purchaser or any of its affiliates. The Board shall make the determination of whether a termination of a Participant's employment by a Purchaser qualifies as a termination for Cause, or whether a termination of employment with a Purchaser by the Participant qualifies as a termination for Good Reason, and in such context shall treat the Purchaser as the Employer for purposes of the definition of such term.

4.3 Minimum Benefit for Designated Participants.

ARTICLE 5
TAXES

The Company and/or the Participant's Employer, as applicable, has the right to withhold from any amount otherwise payable to a Participant under or pursuant to this Plan the amount of any taxes or other statutory deductions that the Company or such Employer may legally be required to withhold with respect to such payment (including, without limitation, income tax, National Insurance contributions and (if applicable) any United States Federal taxes, and any other foreign, state, city, or local taxes). In the event that tax withholding is required with respect to amounts or benefits payable or deliverable by the Company or the Participant's Employer to a Participant and the Company or the Employer cannot satisfy its tax withholding obligations in the manner described in the preceding sentence, the Company or the Employer may require the Participant to pay or provide for the payment of such required tax withholding as a condition to the payment or delivery of such amounts or benefits.

Each Participant, former Participant and Beneficiary shall be solely responsible for all income and employment taxes arising in connection with participation in this Plan or benefits hereunder.

ARTICLE 6
PAYMENT OBLIGATIONS

6.1 Liability for Payment. Except for the benefits related to Performance Shares, Deferred Stock Units, Stock Options and/or Dividend Equivalents which shall be paid by the appropriate entity as determined under the provisions of the incentive plan under which the award was granted, and in the case of benefits payable under Article 4 hereof, the Company, for and on behalf of the Participant's Employer, shall be liable for the payment of benefits under this Plan with respect to each Participant.

6.2 Payment of Obligations Absolute. Subject to the Participant's compliance with Section 11.1 and the agreement contemplated thereby and subject to Section 3.4 and Article 5, the Company's obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Participant or anyone else except as provided in Section 3.3 and/or Section 3.4. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Participant or from whomsoever may be entitled thereto, for any reasons whatsoever, except as otherwise provided in Section 3.4 or Article 8 and subject to the Participant's compliance with Section 11.1 and the agreement contemplated thereby.

6.3 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. It is the intention of the Company that this Plan be unfunded for purposes of the Code and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

6.4 Relationship to Other Plans. By accepting participation in this Plan, each Participant (a) consents to the payment terms set forth in this Plan, (b) agrees that this Plan amends the otherwise inconsistent terms of any Company or Employer compensation, incentive, benefit or perquisite plan or program, and (c) agrees that such sections of this Plan will control to the extent that any inconsistency may exist between those sections and the terms of any Company or Employer compensation, incentive, benefit or perquisite plan, policy or program.

6.5 Other Benefit Plans. All payments, benefits and amounts provided under this Plan shall be in addition to and not in substitution for any pension rights under the Company's or other Employer's tax-qualified pension plan in which the Participant participates, and any disability, permanent health insurance or other Company or other Employer benefit plan distribution that a Participant is entitled to, under the terms of any such plan, at the time his or her employment by his or her Employer terminates. Notwithstanding the foregoing, this Plan shall not create an inference that any duplicate payments shall be required. Payments received by a person under this Plan shall not be deemed a part

of the person's compensation for purposes of determining the person's benefits under any employee welfare, pension or other benefit plan or arrangement, if any, provided by an Employer, except where explicitly provided under the terms of such plan or arrangement.

ARTICLE 7
RESOLUTION OF DISPUTES

7.1 Claim. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as "Claimant") may file a written request for such benefit with the Committee, setting forth his or her claim. The request must be addressed to the Committee at the Company's principal place of business.

7.2 Claim Decision. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for special circumstances.

7.3 Request for Review. Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination. Such request must be addressed to the Committee, at the Company's principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee.

7.4 Review of Decision. Within 60 days after the Committee's receipt of a request for review, after considering all materials presented by the Claimant, the Committee will inform the Claimant in writing, in a manner calculated to be understood by the Claimant, of its decision setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the 60 day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review.

ARTICLE 8
RESOLUTION OF DISPUTES—ARBITRATION

8.1 A Participant or Beneficiary must complete the claims procedure described in Article 97 before submitting any claim or controversy arising out of or in connection with this Plan to arbitration as described below in this Article 8.

8.3 The number of arbitrators shall be one.

8.4 The seat, or legal place, of arbitration shall be London, England.

8.5 The language to be used in the arbitral proceedings shall be English.

8.6 The governing law of the contract shall be the substantive law of the State of California, United States of America.

ARTICLE 9
SUCCESSORS AND ASSIGNMENT

9.1 Successors to the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof (the business and/or assets of which constitute at least fifty percent (50%) of the total business and/or assets of the Company after the BV Sale) to expressly assume and agree to perform the Company's obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if such succession had not taken place.

9.2 Assignment by the Participant. None of the benefits, payments, proceeds or claims of any Participant shall be subject to any claim of any creditor and, in particular, the same shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any such Participant have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under this Plan. Notwithstanding the foregoing, benefits that are in pay status may be subject to a court order of garnishment or wage assignment, or similar order, or a tax levy. This Plan shall inure to the benefit of and be enforceable by each Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If a Participant dies while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to the Participant's Beneficiary in accordance with the terms of this Plan.

ARTICLE 10
ADMINISTRATION OF THE PLAN

10.2 Powers and Duties of the Committee. The Committee shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the power and authority to do the following:

(a): To determine eligibility for and participation in this Plan;
(b): To construe and interpret the terms and provisions of this Plan;
(c): To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries, and to determine the amount of withholding taxes to be deducted pursuant to Article 5;
(d): To maintain all records that may be necessary for the administration of this Plan;
(e): To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;

(f): To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof; and
(g): To appoint a plan administrator or any other agent (which may include, without limitation, one or more employees of the Company), and to delegate to them such powers and duties in connection with the administration of this Plan as the Committee may from time to time prescribe.

10.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, including whether, for purposes of the Plan, a termination of a Participant's employment has been with or without Cause or for Good Reason, which interpretation or construction shall be final and binding on all parties, including but not limited to each Employer and any Participant or Beneficiary. The Committee shall administer such terms and provisions in full accordance with any and all laws applicable to this Plan.

10.4 Information. To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require.

10.5 Compensation, Expenses and Indemnity. The members of the Committee shall serve without additional compensation for their services hereunder beyond that which they are entitled as authorized by the Board. The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. The Company shall pay expenses and fees in connection with the administration of this Plan. To the extent permitted by applicable law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and each member thereof, and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to this Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

ARTICLE 11
MISCELLANEOUS

11.1 Release Agreement. Notwithstanding anything else contained herein to the contrary, the Company's obligation to pay benefits to a Participant is subject to the condition precedent that the Participant execute a valid and effective Release Agreement in the form attached to the Participant's Participation Agreement (or such other form as the Committee may require) and such executed agreement is received by the Company no later than 60 days after the Participant's Severance Date and is not revoked by the Participant or otherwise rendered unenforceable by the Participant.

11.2 Term of the Plan. This Plan will commence on the Effective Date and shall continue in effect through the first to occur of (1) July 1, 2005 or (2) a determination by the Board that a BV Sale is not reasonably expected to occur on or before July 1, 2005; provided that the Board may, in its discretion, extend the term of the Plan beyond such date. Notwithstanding the preceding sentence, the Plan shall continue beyond such date with respect to a Participant to the extent that a contract is in place on July 1, 2005 to complete the sale of the Employer at which such Participant is then employed, in which case the Plan shall continue with respect to such Participant until the earlier to occur of: (1) the completion of the sale of such Employer or (2) the expiration or any other termination of such contract without the sale being completed. Termination of the Plan shall not modify the 12-month severance protection provided in Section 4.2.3, and such protection shall continue pursuant to its terms

11.3 Employment Status. Except as may be provided under any other written agreement between a Participant and his or her Employer, the employment of the Participant by his or her Employer may be terminated by either the Participant or the Employer at any time, subject to applicable law. Payments made under this Plan shall not give any person the right to any benefits provided to persons retained in an Employer's employ (such as, without limitation, health and dental benefits). Except as may otherwise be required by law or set forth specifically in such plans or as otherwise expressly provided in this Plan, such benefits shall terminate as of the date the Participant's employment by an Employer terminates.

11.4 Beneficiaries. Subject to the other provisions of this Section 11.4, the person or persons (including a trustee, personal representative or other fiduciary) last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death shall be the Participant's Beneficiary or Beneficiaries.

If there is no Beneficiary designation in effect with respect to a Participant, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder.

11.5 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under this Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and all Employers.

11.6 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

11.7 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Plan are not part of the provisions hereof and shall have no force and effect.

11.8 Modification. The Committee or the Board may from time to time amend this Plan in any way it determines to be advisable; provided, however, that no such amendment shall be effective without the consent of each affected Participant (or the Participant's legal representative). No provision of this Plan may be waived unless as to a Participant such waiver is agreed to in writing and signed by the Participant (or the Participant's legal representative) and by an authorized member of the Committee (or the Board) or its designee or legal representative.

11.9 Notice. For purposes of this Plan, notices, including Notice of Termination, and all other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered or on the date stamped as received by a recognized international courier (such as FedEx) postage and mailing fee prepaid and addressed: (a) if to the Participant, to his or her latest address as reflected on the records of the Company or his or her Employer, and (b) if to an Employer, to the attention of the Company's Corporate Secretary at the address of the Company's principal executive offices; or to such other address as either party may furnish to the other in writing for the delivery of notices to that party, with specific reference to this Plan and the importance of the notice, except that a notice of change of address shall be effective only upon receipt by the other party.

11.10 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this Plan. Any statutory reference in this Plan shall also be deemed to refer to all applicable final rules and final regulations promulgated under or with respect to the referenced statutory provision.

11.11 Compliance with Statutory Obligations. Benefits payable under this Plan are intended to satisfy, where applicable, any Company or other Employer's obligations under the Employment Rights Act 1996, the Federal Worker Adjustment and Retraining Notification Act and any similar obligations that the Company or any other Employer may have under any successor or other severance pay statute.

11.12 No Sale Obligation. Notwithstanding anything else contained herein or in any Participation Agreement or other agreement related to the Plan to the contrary, the Company and its subsidiaries have no obligation to close, negotiate or otherwise pursue any sale or other disposition of all or substantially all of BV or any component thereof. The existence of the Plan, the Participation Agreements, and the conditional rights of Participants under the Plan shall not limit, affect or restrict in any way the right or power of the Company or any of its subsidiaries to make or authorize (or to refrain from making or authorizing, as the case may be): (a) any adjustment, recapitalization, reorganization or other change in capital structure or business; (b) any merger, amalgamation, consolidation or change in ownership; (c) any dissolution or liquidation; (d) any sale or transfer of assets or business; or (e) any other corporate act or proceeding by the entity.

IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan as of the date first set forth above.

		EDISON MISSION ENERGY

EXHIBIT A

Edison Mission Energy International Revenue Base

Project	Country	2003 Revenues from Consolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenues of Unconsolidated Subsidiaries		EME Ownership Interest		EME Share of Revenues		2003 Revenue Base		Percentage of International Revenue Base
Europe
First Hydro	United Kingdom	$	367,633,000	100	%	$	367,633,000	$	—			$	—	$	367,633,000	20	%
Derwent	United Kingdom		—				—		106,316,000	33	%		35,084,280		35,084,280	2	%
ISAB	Italy		—				—		480,685,000	49	%		235,535,650		235,535,650	13	%
Italian Wind	Italy		—				—		83,234,000	50	%		41,617,000		41,617,000	2	%
Doga	Turkey		123,956,000	80	%		99,164,800						—		99,164,800	5	%
Spanish Hydro	Spain		22,739,000	95	%		21,706,000						—		21,706,000	1	%

			514,328,000				488,503,800		670,235,000				312,236,930		800,740,730	44	%

Asia
Paiton	Indonesia		—						485,018,000	40	%		194,007,200		194,007,200	11	%
PT Momi	Indonesia		17,994,000	100	%		17,994,000						—		17,994,000	1	%
PT Adro	Indonesia		—				—		—	8	%		—		—
CBK	Philippines		1,424,000	100	%		1,424,000		65,625,000	50	%		32,812,500		34,236,500	2	%
TECO	Thailand		—				—		214,119,000	25	%		53,529,750		53,529,750	3	%

			19,418,000				19,418,000		764,762,000				280,349,450		299,767,450	16	%

Australia
Loy Yang B	Australia		178,531,000	100	%		178,531,000						—		178,531,000	10	%
Valley Power	Australia		16,250,000	80	%		13,065,000						—		13,065,000	1	%
Kwinana	Australia		38,914,000	70	%		27,239,800						—		27,239,800	1	%

			233,695,000				218,835,800		—				—		218,835,800	12	%

New Zealand
Contact Energy	New Zealand		755,524,000	51	%		385,317,240						—		385,317,240	21	%

			755,524,000				385,317,240		—				—		385,317,240	21	%

Americas
Eco Electrica	Puerto Rico		—				—		234,896,000	50	%		117,448,000		117,448,000	6	%

			—				—		234,896,000				117,448,000		117,448,000	6	%

Non Project

Total		$	1,522,965,000			$	1,112,074,840	$	1,669,893,000			$	710,034,380	$	1,822,109,220	100	%

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EDISON MISSION ENERGY BV SALE SEVERANCE PLAN—UK
TABLE OF CONTENTS
EDISON MISSION ENERGY BV SALE SEVERANCE PLAN—UK
ARTICLE 1 ESTABLISHMENT, TERM, AND PURPOSE
ARTICLE 2 DEFINITIONS
ARTICLE 3 PARTICIPATION
ARTICLE 4 SEVERANCE BENEFITS
ARTICLE 5 TAXES
ARTICLE 6 PAYMENT OBLIGATIONS
ARTICLE 7 RESOLUTION OF DISPUTES
ARTICLE 8 RESOLUTION OF DISPUTES—ARBITRATION
ARTICLE 9 SUCCESSORS AND ASSIGNMENT
ARTICLE 10 ADMINISTRATION OF THE PLAN
ARTICLE 11 MISCELLANEOUS
EXHIBIT A
EX-10.13 15 a2135451zex-10_13.htm EXHIBIT 10.13
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Exhibit 10.13

EXECUTION COUNTERPART

CREDIT AGREEMENT

dated as of April 27, 2004

among

EDISON MISSION ENERGY

and

THE LENDERS REFERRED TO HEREIN

and

THE ISSUING LENDERS REFERRED TO HEREIN

and

CITICORP NORTH AMERICA, INC.,
as Administrative Agent for the Lenders

CITIGROUP GLOBAL MARKETS INC.,
CREDIT SUISSE FIRST BOSTON,
as Lead Arrangers

CITIGROUP GLOBAL MARKETS INC.,
CREDIT SUISSE FIRST BOSTON,
J.P. MORGAN SECURITIES INC. and
LEHMAN BROTHERS INC.,
as Joint Bookrunners

CREDIT SUISSE FIRST BOSTON,
J.P. MORGAN SECURITIES INC. and
LEHMAN BROTHERS INC.,
as Syndication Agents

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS			1
	SECTION 1.1 Defined Terms		1
	SECTION 1.2 Use of Defined Terms		20
	SECTION 1.3 Cross-References		20
	SECTION 1.4 Accounting and Financial Determinations		20
ARTICLE II COMMITMENTS AND BORROWING PROCEDURES			21
	SECTION 2.1 Commitments		21
	SECTION 2.2 Loans.		21
		SECTION 2.2.1 Obligations of Lenders	21
		SECTION 2.2.2 Type of Loans	21
		SECTION 2.2.3 Minimum Amounts; Limitation on Number of Loans	21
		SECTION 2.2.4 Limitations on Interest Periods	21
		SECTION 2.2.5 Reduction of Total Commitment Amount	21
	SECTION 2.3 Borrowing Procedure		21
	SECTION 2.4 Continuation and Conversion Elections		22
	SECTION 2.5 Funding		22
	SECTION 2.6 Letters of Credit.		23
		SECTION 2.6.1 General	23
		SECTION 2.6.2 Notice of Issuance, Amendment, Renewal or Extension	23
		SECTION 2.6.3 Limitations on Amounts	23
		SECTION 2.6.4 Expiration Date	24
		SECTION 2.6.5 Participations	24
		SECTION 2.6.6 Reimbursement	24
		SECTION 2.6.7 Obligations Absolute	24
		SECTION 2.6.8 Disbursement Procedures	26
		SECTION 2.6.9 Interim Interest	26
		SECTION 2.6.10 LC Disbursement Denomination	26
		SECTION 2.6.11 Addition and Replacement of Issuing Lenders	26
		SECTION 2.6.12 Offshore Currencies and Agreed Alternate Currencies	26
		SECTION 2.6.13 Cash Collateralization	27
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES			28
	SECTION 3.1 Repayments and Prepayments		28
		SECTION 3.1.1 Optional Prepayments and Commitment Reductions	28
		SECTION 3.1.2 Mandatory Prepayments	28
		SECTION 3.1.3 Acceleration; Penalty	29
	SECTION 3.2 Interest Provisions		29
		SECTION 3.2.1 Rates	29
		SECTION 3.2.2 Default Rates	30
		SECTION 3.2.3 Payment Dates	30
		SECTION 3.2.4 Interest Rate Determination	30
	SECTION 3.3 Fees		30
		SECTION 3.3.1 Commitment Fee	30
		SECTION 3.3.2 Letter of Credit Fees	30
		SECTION 3.3.3 Other Fees	31
		SECTION 3.3.4 Payment of Fees	31

ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS			31
	SECTION 4.1 LIBO Rate Lending Unlawful		31
	SECTION 4.2 Inability to Determine Rates		32
	SECTION 4.3 Increased LIBO Rate Loan Costs		32
	SECTION 4.4 Obligation to Mitigate		32
	SECTION 4.5 Funding Losses		33
	SECTION 4.6 Increased Capital Costs		33
	SECTION 4.7 Taxes		33
	SECTION 4.8 Payments, Computations		34
	SECTION 4.9 Sharing of Payments		35
	SECTION 4.10 Setoff		35
	SECTION 4.11 Replacement of Lender		35
ARTICLE V CONDITIONS TO LOANS			36
	SECTION 5.1 Conditions to Effectiveness		36
		SECTION 5.1.1 Delivery of Loan Documents	36
		SECTION 5.1.2 Officer's Certificates	36
		SECTION 5.1.3 Resolutions	36
		SECTION 5.1.4 Opinions of Counsel	37
		SECTION 5.1.5 Closing Fees, Expenses	37
		SECTION 5.1.6 Financial Statements	37
		SECTION 5.1.7 Solvency	37
		SECTION 5.1.8 Repayment of Existing Indebtedness	37
		SECTION 5.1.9 Lien Search; Recordings and Filings	37
		SECTION 5.1.10 Conditions to Other Financings	37
	SECTION 5.2 All Credit Extensions		38
		SECTION 5.2.1 Initial Credit Extension	38
		SECTION 5.2.2 Representations and Warranties; No Default	38
		SECTION 5.2.3 Borrowing Request	38
		SECTION 5.2.4 Satisfactory Legal Form	38
ARTICLE VI REPRESENTATIONS AND WARRANTIES			38
	SECTION 6.1 Organization; Power; Compliance with Law and Contractual Obligations		38
	SECTION 6.2 Due Authorization; Non-Contravention		39
	SECTION 6.3 Governmental Approval; Regulation		39
	SECTION 6.4 Validity		39
	SECTION 6.5 Financial Information		39
	SECTION 6.6 No Material Adverse Change		39
	SECTION 6.7 Litigation		39
	SECTION 6.8 Ownership of Properties		39
	SECTION 6.9 Taxes		40
	SECTION 6.10 Pension and Welfare Plans		40
	SECTION 6.11 Environmental Warranties		40
	SECTION 6.12 Regulations T, U and X		41
	SECTION 6.13 Accuracy of Information		41

ARTICLE VII COVENANTS			41
	SECTION 7.1 Affirmative Covenants		41
		SECTION 7.1.1 Financial Information, Reports, Notices	41
		SECTION 7.1.2 Compliance with Laws	43
		SECTION 7.1.3 Maintenance of Properties	43
		SECTION 7.1.4 Insurance	43
		SECTION 7.1.5 Books and Records	43
		SECTION 7.1.6 Environmental Covenant	44
		SECTION 7.1.7 Conduct of Business and Maintenance of Existence	44
		SECTION 7.1.8 Use of Proceeds	44
	SECTION 7.2 Negative Covenants		44
		SECTION 7.2.1 Restrictions on Indebtedness	44
		SECTION 7.2.2 Liens	45
		SECTION 7.2.3 Investments	46
		SECTION 7.2.4 Consolidation, Merger	46
		SECTION 7.2.5 Asset Dispositions	47
		SECTION 7.2.6 Transactions with Affiliates	47
		SECTION 7.2.7 Restricted Payments	47
		SECTION 7.2.8 Restrictive Agreements	47
		SECTION 7.2.9 Interest Coverage	48
		SECTION 7.2.10 Recourse Debt to Recourse Capital Ratio	48
		SECTION 7.2.11 ERISA	48
ARTICLE VIII EVENTS OF DEFAULT			48
	SECTION 8.1 Listing of Events of Default		48
		SECTION 8.1.1 Non-Payment of Obligations	48
		SECTION 8.1.2 Breach of Warranty	48
		SECTION 8.1.3 Non-Performance of Certain Covenants and Obligations	49
		SECTION 8.1.4 Non-Performance of Other Covenants and Obligations	49
		SECTION 8.1.5 Default on Other Indebtedness	49
		SECTION 8.1.6 Judgments	49
		SECTION 8.1.7 Pension Plans	49
		SECTION 8.1.8 Bankruptcy, Insolvency	49
		SECTION 8.1.9 Substantive Consolidation	50
		SECTION 8.1.10 Unenforceability of Documents	50
	SECTION 8.2 Action if Bankruptcy		50
	SECTION 8.3 Action if Other Event of Default		51
	SECTION 8.4 Rescission of Declaration		51
ARTICLE IX THE ADMINISTRATIVE AGENT			51
	SECTION 9.1 Actions		51
	SECTION 9.2 Funding Reliance		52
	SECTION 9.3 Exculpation		52
	SECTION 9.4 Successor		52
	SECTION 9.5 Loans by CNAI		53
	SECTION 9.6 Reliance by Administrative Agent		53
	SECTION 9.7 Notice of Default		53
	SECTION 9.8 Credit Decisions		53
	SECTION 9.9 Copies		54
	SECTION 9.10 Collateral		54

iii

ARTICLE X MISCELLANEOUS PROVISIONS			54
	SECTION 10.1 Waivers, Amendments		54
	SECTION 10.2 Notices		55
	SECTION 10.3 Payment of Costs and Expenses		55
	SECTION 10.4 Indemnification		56
	SECTION 10.5 Survival		57
	SECTION 10.6 Severability		57
	SECTION 10.7 Headings		57
	SECTION 10.8 Execution in Counterparts		57
	SECTION 10.9 Governing Law; Entire Agreement		57
	SECTION 10.10 Successors and Assigns		58
	SECTION 10.11 Sale and Transfer of Loans; Participations in Loans		58
		SECTION 10.11.1 Assignments	58
		SECTION 10.11.2 Participations	59
	SECTION 10.12 USA Patriot Act		60
	SECTION 10.13 Other Transactions		60
	SECTION 10.14 Submission To Jurisdiction; Waivers		61
	SECTION 10.15 WAIVERS OF JURY TRIAL		61
	SECTION 10.16 Non-Recourse Persons		61
	SECTION 10.17 Acknowledgments		61
	SECTION 10.18 Confidentiality		62

SCHEDULES

1.1(a)	—	Commitments
1.1(b)	—	Addresses for Notices and Lending Offices
1.1(c)	—	Collins Leases
2.6.12	—	Agreed Alternate Currency Letters of Credit
7.2.1	—	Liens
EXHIBITS
A	—	Form of Borrowing Request
B	—	Form of Continuation/Conversion Notice
C	—	Form of Assignment Agreement
D	—	Form of Borrower Security Agreement
E	—	Form of Opinions of Counsel
F	—	Form of Communications Agreement

CREDIT AGREEMENT dated as of April 27, 2004 among EDISON MISSION ENERGY, a corporation duly organized and validly existing under the laws of Delaware (the "Borrower"), the various financial institutions as are or may become parties hereto (collectively, the "Lenders"), the Issuing Lenders and CITICORP NORTH AMERICA, INC. ("CNAI"), as administrative agent for the Lenders and the Issuing Lenders party hereto.

RECITALS

A. The Borrower has requested that the Lenders establish a credit facility to make revolving loans and to issue letters of credit from time to time for general corporate purposes of the Borrower, as further described herein, and to pay certain fees and expenses associated with this Agreement and the Loans as further described herein; and

B. The Lenders are willing to make such credit facility available upon and subject to the terms and conditions hereinafter set forth.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.1 Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):

"Administrative Agent" means CNAI in its capacity as administrative agent for the Lenders hereunder, and includes each other Person as may have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4.

"Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Pension Plan or Welfare Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

"Affiliate Bankruptcy Event" means, with respect to Edison International or any of its Subsidiaries (other than the Borrower), such Person shall:

(a) apply for, consent to, or acquiesce in, or suffer to exist, the appointment of a trustee, receiver, sequestrator or other custodian for such Person or a substantial portion of its property, or make a general assignment for the benefit of creditors; or

(b) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of such Person.

"Agent-Related Persons" means CNAI and each other Person as may have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of CNAI, each such other Person and such Affiliates.

"Agreed Alternate Currency" shall mean the currencies listed on Schedule 2.6.12, pursuant to the procedures specified in Section 2.6.12(b).

"Agreed Alternate Percentage" shall mean the percentages listed opposite the Agreed Alternate Currencies on Schedule 2.6.12, pursuant to the procedures specified in Section 2.6.12(b).

"Agreement" means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date.

"Alternate Base Rate" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the highest of:

(a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's "base rate"; and

(b) 1/2 of 1% per annum above the Federal Funds Effective Rate.

Each change in any interest rate provided for herein based upon the Alternate Base Rate resulting from a change in the Alternate Base Rate shall take effect at the time of such change in the Alternate Base Rate.

"Anticipated Repatriation Costs" means, on any date of determination for any period, an amount equal to the product of (a) 35% times (b) the excess (if any) of (i) the amount of any Distributions or Net Intercompany Loan Proceeds received and retained by the Permitted International Subsidiary during such period (the "retained portion") over (ii) the sum of (A) the outstanding principal amount of intercompany loans from the Borrower or a Permitted Domestic Affiliate to the Permitted International Subsidiary on such date of determination plus (B) payments of principal of and interest on Indebtedness of the Borrower to creditors of the Permitted International Subsidiary or Subsidiaries of the Permitted International Subsidiary made by the Permitted International Subsidiary or Subsidiaries of the Permitted International Subsidiary during such period plus (C) the Freely Distributable Amount on such date of determination.

"Applicable Margin" means, for any day with respect to any LIBO Rate Loans, the LIBOR Applicable Margin and for any day with respect to Base Rate Loans, the Base Rate Applicable Margin.

"Approved Funds" means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

"Assignee" has the meaning set forth in Section 10.11.1.

"Assignment Agreement" means an Assignment Agreement substantially in the form of Exhibit C.

"Assignor" has the meaning set forth in Section 10.11.1.

"Authorized Representative" means, relative to any Person, those of its officers and employees whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to Section 5.1.3.

"Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.

"Base Rate Applicable Margin" is 2.50% per annum.

"Base Rate Loan" means a Loan bearing interest at a fluctuating rate of interest per annum determined by reference to the Alternate Base Rate plus the Base Rate Applicable Margin from time to time in effect.

"Board of Directors" means (a) with respect to a corporation, the board of directors of the corporation; (b) with respect to a partnership, the general partners or the management committee of the partnership; or (c) with respect to any other Person, the board or committee of such Person serving a similar function.

"Borrower" has the meaning set forth in the preamble.

"Borrower Security Agreement" means the Security Agreement dated as of April 27, 2004 between the Borrower and the Administrative Agent, substantially in the form of Exhibit D, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

"Borrowing" means Loans of the same type and, in the case of LIBO Rate Loans having the same Interest Period, made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.3.

"Borrowing Request" means a loan request and certificate duly executed by an Authorized Representative of the Borrower, substantially in the form of Exhibit A.

"Business Day" means:

(a) any day which is neither a Saturday or Sunday nor a legal holiday on which the Lenders are authorized or required to be closed in New York, New York; and

(b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market.

"BV Holdings" means Mission Energy Holdings International Inc., a Delaware corporation.

"Capital Stock" means

(a) in the case of a corporation, corporate stock;

(b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(c) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

(d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person,

but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

"Capitalized Lease Liabilities" of any Person means all monetary obligations of such Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of each Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

"Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent in accordance with Section 2.6.13, for the ratable benefit of the Administrative Agent, the Issuing Lenders and the Lenders, as collateral for the LC Exposures, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the Issuing Lenders.

"Cash Disbursements" means, in respect of any period, an amount equal to the aggregate amount of all Obligations due and payable with respect to Recourse Debt during such period.

"Cash Equivalent Investment" means, at any time:

(a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States government or an agency thereof; or

(b) other investments in securities or bank instruments rated at least "A" by S&P and "A2" by Moody's or "A-1" by S&P and "P-1" by Moody's and with maturities of less than 180 days.

"CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List.

"Citibank" means Citibank, N.A., a national banking association.

"CNAI" has the meaning set forth in the preamble.

"Code" means the Internal Revenue Code of 1986, as amended.

"Collateral" has the meaning set forth in the Borrower Security Agreement.

"Collateral Account" has the meaning set forth in the Borrower Security Agreement.

"Collateral Parties" means, collectively, Anacapa Energy Company, a California corporation, Silverado Energy Company, a California corporation, Viejo Energy Company, a California corporation, Del Mar Energy Company, a California corporation, Mission del Cielo, Inc., a Delaware corporation, Edison Mission Holdings Co., a California corporation, Midwest Generation EME, LLC, a Delaware limited liability company, Camino Energy Company, a California corporation, Southern Sierra Energy Company, a California corporation, San Joaquin Energy Company, a California corporation and Western Sierra Energy Company, a California corporation.

"Collins Leases" means each of the Facility Leases identified on Schedule 1.1(c).

"Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.2.5 or Section 3.1 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.11.1. The initial amount of each Lender's Commitment is set forth on Schedule 1.1(b) , or in the Assignment Agreement pursuant to which such Lender shall have assumed its Commitment, as applicable.

"Commitment Amount" means $98,000,000, as the same may be reduced in accordance with Section 2.2.5 or Section 3.1.

"Communications Agreement" means the Communications Agreement dated as of April 27, 2004 between the Borrower and the Administrative Agent, substantially in the form of Exhibit F, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

"Computation Date" has the meaning specified in Section 2.6.12.

"Consolidated Net Worth" means, at any date, the consolidated stockholders' equity of the Borrower and its Consolidated Subsidiaries determined as of such date without giving effect to (a) any non-cash charges relating to the termination of the Collins Leases and impairment of related assets and (b) any accumulated other comprehensive gain or loss after December 31, 2003 plus, to the extent not otherwise included therein, (i) the liquidation preference at such date of non-redeemable preferred stock of the Borrower and (ii) to the extent not included therein, Equity Preferred Securities.

"Consolidated Subsidiary" means, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if its consolidated financial statements were prepared as of such date.

"Contingent Liability" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed for purposes of this Agreement to be the outstanding principal

amount of the debt, obligation or other liability guaranteed thereby; provided, however, that if the maximum amount of the debt, obligation or other liability guaranteed thereby has not been established, the amount of such Contingent Liability shall be the maximum reasonably anticipated amount of the debt, obligation or other liability; provided, further, however, that any agreement to limit the maximum amount of such Person's obligation under such Contingent Liability shall not, of and by itself, be deemed to establish the maximum reasonably anticipated amount of such debt, obligation or other liability.

"Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Representative of the Borrower, substantially in the form of Exhibit B.

"Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

"Contractual Restrictions" mean Contractual Obligations of the Borrower or any of its Subsidiaries limiting or restricting any of the following activities of the Borrower or any of its Subsidiaries: (a) Restricted Payments, (b) the repayment or prepayment of intercompany notes or other intercompany obligations or reimbursements of management and other intercompany charges, expenses or accruals or other returns on investment, (c) disposition of assets, (d) incurrence of Indebtedness, (e) issuance of equity or (f) activities related to the foregoing.

"Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.

"Correlative Financing Provisions" means (a) with respect to each Financed Enterprise with respect to any provision in Section 7.2, the most restrictive correlative provision or provisions in the Effective Date Financing Documentation or in the documentation governing any Permitted Refinancing Indebtedness refinancing or replacing such Effective Date Financing Documentation and (b) with respect to each Financed Enterprise with respect to any other provision (other than any provision in Section 7.2) in this Agreement, the most restrictive correlative provision or provisions in the Effective Date Financing Documentation or in the documentation governing any Permitted Refinancing Indebtedness refinancing or replacing such Effective Date Financing Documentation, as the same may from time to time be amended, supplemented, amended and restated or otherwise modified and in effect on such date.

"Credit Exposure" means, with respect to a Lender at any time, the sum of the outstanding principal amount of such Lender's Loans and LC Exposure at such time.

"Credit Extension" means and includes (a) any Borrowing and (b) any Issuance of, or participation in, any Letters of Credit.

"CSFB" means Credit Suisse First Boston, acting through its Cayman Islands branch.

"Current Disposition" shall have the meaning set forth in Section 3.1.2(a).

"Debt Rating" means, with respect to any Person, a rating of such Person's long-term debt which is not secured or supported by a guarantee, letter of credit or other form of credit enhancement. If Moody's or S&P shall have changed its system of classifications after the date hereof, a Debt Rating shall be considered to be at or above a specified level if it is at or above the new rating which most closely corresponds to the specified level under the old rating system.

"Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.

"Derivatives Obligations" of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. For purposes of determining the Recourse Debt to Recourse Capital Ratio on any date, the Derivatives Obligations of the Borrower shall be determined on a "mark to market" basis on such date.

"Disposition" means any sale, assignment, transfer or other disposition of all or any substantial part of its property (whether now owned or hereafter acquired) by the Borrower or any Collateral Party (or any Subsidiary of a Collateral Party) to any other Person. The verb "Dispose" shall have a correlative meaning. Notwithstanding the foregoing, the following items shall not be deemed to be Dispositions:

(a) any assignment of property for security purposes to the extent not prohibited by this Agreement;

(b) any sale, assignment, transfer or other disposition of any property sold or disposed of in the ordinary course of business and on ordinary business terms;

(c) any single transaction or series of related transactions that involve assets having a fair market value of less than $15,000,000;

(d) the sale or other disposition of cash or Cash Equivalent Investments;

(e) the incurrence of Liens permitted pursuant to Section 7.2.2 and the disposition of assets related thereto by the secured party pursuant to a foreclosure;

(f) an Investment that is permitted pursuant to Section 7.2.3;

(g) any sale or lease of obsolete equipment or other assets that are no longer being used by the Borrower or any of its Subsidiaries; and

(h) a disposition resulting from the exercise by a governmental authority of its claimed or actual power of eminent domain, in each case without compensation.

"Distributions" means, with respect to any period (computed without duplication) each of the following to the extent received or available to be received by the Borrower or the Permitted International Subsidiary: (a) any cash interest on intercompany loans to Subsidiaries, (b) cash principal payments on intercompany loans to Subsidiaries extended in prior periods, (c) distributions or dividends constituting a return on capital, (d) distributions, dividends or other payments constituting a return of capital to the extent the same relates to costs and expenses directly or indirectly incurred by the Borrower in the development or construction of electric generation facilities or oil and gas properties that are subsequently financed by Indebtedness secured by such facilities or properties and (e) management fees paid in cash.

"Dollar" and the sign "$" mean lawful money of the United States.

"Dollar Equivalent" means, at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time and (b) as to any amount denominated in any Offshore Currency or Agreed Alternate Currency, the equivalent amount in Dollars as determined at such time on the basis of the Spot Rate for the purchase of Dollars with such Offshore Currency or Agreed Alternate Currency on the most recent Computation Date.

"Domestic Office" means, relative to any Lender, the office of such Lender designated on Schedule 1.1(b) or designated in the Assignment Agreement pursuant to which such Lender became a Lender hereunder or such other office of a Lender (or any successor or assign of such Lender) within

the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. A Lender may have separate Domestic Offices for purposes of making, maintaining or continuing, as the case may be, Base Rate Loans.

"Edison International" means Edison International, a California corporation.

"Edison Mission Group" means Edison Mission Group, a California corporation.

"Effective Date" means the date this Agreement becomes effective pursuant to Section 5.1.

"Effective Date Financing Documentation" means, with respect to each Financed Enterprise, documentation governing each Financing of such Financed Enterprise as in effect on the Effective Date.

"Environmental Laws" means all applicable Federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to Hazardous Materials and/or to public health and protection of the environment, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the Resource Conservation and Recovery Act, as amended.

"Equity Issuance" means (a) any issuance or sale by the Borrower or any of its Subsidiaries after the Effective Date of (i) any of its Capital Stock, (ii) any warrants or options exercisable in respect of its Capital Stock (other than any warrants or options issued to directors, officers or employees of the Borrower or any of its Subsidiaries pursuant to employee benefit plans established in the ordinary course of business and any Capital Stock of the Borrower issued upon the exercise of such warrants or options) or (iii) any other security or instrument representing an equity interest (or the right to obtain any equity interest) in the Borrower or any of its Subsidiaries or (b) the receipt by any of the Borrower's Subsidiaries after the Effective Date of any capital contribution (whether or not evidenced by any equity security issued by the recipient of such contribution); provided that Equity Issuance shall not include (x) any such issuance or sale described in clause (a) above by any Subsidiary of the Borrower to the Borrower or any direct or indirect Subsidiary of the Borrower or (y) any capital contribution by the Borrower or any direct or indirect Subsidiary of the Borrower to any Subsidiary of the Borrower.

"Equity Preferred Securities" means securities issued by the Borrower (a) that are not subject to mandatory redemption or the underlying securities, if any, of which are not subject to mandatory redemption, (b) that are perpetual or mature no less than 30 years from the date of issuance, (c) the indebtedness issued in connection with which, including any guaranty, is subordinate in right of payment to the unsecured and unsubordinated indebtedness of the issuer of such indebtedness or guaranty, and (d) the terms of which permit the deferral of payment of interest or distributions thereon to the date occurring after the Maturity Date.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.

"Event of Default" has the meaning set forth in Section 8.1.

"Excluded Taxes" means, with respect to the Administrative Agent, the Issuing Lenders or any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise Taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which it is located (other than a jurisdiction in which it is treated as being located solely by reason of its participation in transactions contemplated by the Loan

Documents), (c) in the case of a Non-U.S. Lender, any Tax that is imposed on amounts payable to such Non-U.S. Lender at the time such Non-U.S. Lender becomes a party to this Agreement, except to the extent that such Non-U.S. Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Tax pursuant to Section 4.7(a) and (d) in the case of a Non-U.S. Lender, any Tax that is attributable to such Non-U.S. Lender's failure or inability to comply with Section 4.7(e).

"Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three (3) Federal funds brokers of recognized standing selected by it.

"Fee Letters" means (a) the Fee Letter dated as of April 2, 2004 between the Borrower, CNAI, CSFB, JPMS and Lehman, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time and (b) each Fee Letter between the Borrower and any Issuing Lender, as each such Issuing Lender Fee Letter may be amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

"Financed Enterprise" means, individually, each Financed Subsidiary and each Joint Enterprise.

"Financed Subsidiary" means as of the Effective Date, each Collateral Party and each Subsidiary of a Collateral Party with a Financing.

"Financing" means, with respect to any Person, either Indebtedness of such Person or Lease Obligations of such Person, or a combination of both.

"Fiscal Quarter" means any quarter of a Fiscal Year.

"Fiscal Year" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "2003 Fiscal Year") refers to the Fiscal Year ending on December 31 occurring during such calendar year.

"Freely Distributable Amount" means, on any date of determination for any period, an amount (computed on the basis of the amounts reported or reflected on the most recently filed consolidated U.S. Federal income tax return and all subsequent filings for the Borrower and its Subsidiaries) equal to the sum of (a) amounts which if distributed by the Permitted International Subsidiary during such period would be excluded from U.S. taxation, as previously taxed, under section 959 of the Code, or any successor provision plus (b) amounts which if distributed by the Permitted International Subsidiary during such period would constitute a nontaxable return of capital under section 301(c)(2) of the Code, or any successor provision plus (c) amounts accrued and payable representing any arms length royalty payment, administrative service fee, technical services fee, contractual payment obligation or any arms length contractual fee owed by the Permitted International Subsidiary to a Permitted Domestic Affiliate.

"F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto.

"Funds Flow from Operations" means, for any period, the sum of the following (computed without duplication) (a) Distributions received or available to be received by the Borrower and the Permitted International Subsidiary during such period plus (b) positive Net Intercompany Loan Proceeds for such period (or less negative Net Intercompany Loan Proceeds for such period) less (c) Anticipated Repatriation Costs plus (d) Distributions made by the Permitted International Subsidiary plus (e) cash received (if any) by the Borrower during such period pursuant to Tax Sharing Agreements less (f) cash

paid (if any) by the Borrower during such period pursuant to Tax Sharing Agreements plus (g) cash received (if any) as tax refunds on foreign, federal or state income taxes less (h) cash paid (if any) on foreign, federal or state income tax obligations plus (i) interest income received or available to be received by the Borrower and Permitted International Subsidiary during such period less (j) Operating Expenses and Permitted International Subsidiary Expenses during such period.

"GAAP" has the meaning set forth in Section 1.4.

"Governmental Approval" means any authorization, consent, approval, license, permit, exemption, filing or registration with any Governmental Authority.

"Governmental Authority" means any nation or governmental, any state, provincial or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

"Granting Lender" has the meaning set forth in Section 10.11.1(e).

"Hazardous Material" means:

(a) any "hazardous substance", as defined by any Environmental Law;

(b) any "hazardous waste", as defined by any Environmental Law;

(d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, force or substance (including polychlorinated biphenyls, urea-formaldehyde insulation, asbestos or radioactivity) that is regulated pursuant to or could give rise to liability under any Environmental Law.

"herein", "hereof", "hereto", "hereunder" and similar terms contained in any Loan Document refer to such Loan Document as a whole and not to any particular Section, paragraph or provision of such Loan Document.

"including" means including without limiting the generality of any description preceding such term, and, for purposes of each Loan Document, the parties thereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned.

"Indebtedness" of any Person means, without duplication:

(a) all indebtedness for borrowed money;

(b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services which purchase price is due more than six months from the date of incurrence of the obligation in respect thereof or is evidenced by a note or other instrument, except trade accounts arising in the ordinary course of business;

(c) all reimbursement obligations with respect to surety bonds, letters of credit (to the extent not collateralized with cash or Cash Equivalent Investments), bankers' acceptances and similar instruments (in each case, whether or not matured);

(d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses;

(e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person

(even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property);

(f) all Capitalized Lease Liabilities;

(g) all net obligations with respect to interest cap arrangements, interest rate swaps agreements, sales of foreign exchange options and other hedging agreements or arrangements;

(h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and

(i) all Contingent Liabilities.

For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer.

"Indemnified Liabilities" has the meaning set forth in Section 10.4(a).

"Indemnified Parties" has the meaning set forth in Section 10.4(a).

"Indemnified Taxes" means Taxes other than Excluded Taxes.

"Initial Issuing Lenders" means CNAI in its capacity as an issuer of Letters of Credit.

"Interest Coverage Ratio" means, for any period, the ratio of (a) Funds Flow from Operations during such period to (b) Interest Expense for such period, provided that, upon the occurrence and continuation of a Significant Collateral Party Event subsequent to the commencement of the period for which the Interest Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Interest Coverage Ratio is made, then the Consolidated Interest Coverage Ratio will be calculated giving Pro Forma effect to the assumption that no Distributions were made or available to be made to the Borrower by each Collateral Party or any Subsidiary of a Collateral Party that gives rise to a Significant Collateral Party Event, as if the same had occurred at the beginning of the such period.

"Interest Expense" means the accrued interest expense of all the Borrower's senior recourse indebtedness, but shall exclude any intercompany obligation on which interest or the equivalent is received by the Borrower.

"Interest Period" means, relative to any LIBO Rate Loan, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date one, two, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in either case as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however, that (a) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless, if such Interest Period applies to LIBO Rate Loans, such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day) and (b) no Interest Period may end later than the "Maturity Date".

"Investment" means, relative to any Person:

(a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business);

(b) any Contingent Liability of such Person; and

The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property.

"ISP" means the International Standby Practices as set forth in the International Chamber of Commerce Publication No. 590, or such later revision thereof in effect at the time of an Issuance of a Letter of Credit.

"Issuance Date" means the date on which a Letter of Credit is Issued pursuant to Section 2.6.

"Issue" means, with respect to any Letter of Credit, to issue or to extend the expiry of, to amend or to renew or to increase the amount of, such Letter of Credit; and the terms "Issued", "Issuing" and "Issuance" have corresponding meanings.

"Issuing Lenders" means the Initial Issuing Lender and each other Person as may have subsequently been appointed as a successor or an additional Issuing Lender pursuant to Section 2.6.11.

"Joint Enterprise" means a general partnership, limited partnership, joint venture or similar entity in which a Collateral Party or a Subsidiary of a Collateral Party is a partner, joint venturer or equity participant. The term "Joint Enterprise" shall exclude, to the extent included, partnerships or other business entities included in the definition of "Subsidiary".

"JPMS" means J.P. Morgan Securities Inc.

"LC Collateral Account" means an account established in the name of the Borrower but under the exclusive dominion and control of the Administrative Agent, which shall be a "securities account" (as defined in Section 8-501(a) of the UCC) and, to the extent that credit balances not constituting "financial assets" (as defined in Section 8-102(a)(9) of the UCC) are credited thereto, a "deposit account" (as defined in Section 102(a)(29) of the UCC).

"LC Disbursement" means a payment made by any Issuing Lender pursuant to a Letter of Credit.

"LC Exposure" means, at any time, the Required Commitment Amount at such time minus any Cash Collateralized amounts. The LC Exposure of any Lender at any time shall be its Percentage of the total LC Exposure at such time.

"Lease Obligations" means rent, supplemental rent, termination value, or a similar monetary obligation under, or pursuant to, a lease or related documents in connection with a leveraged lease transaction (including Contingent Liabilities related thereto).

"Lehman" means Lehman Brothers Inc.

"Lenders" has the meaning set forth in the preamble.

"Letter of Credit" means any letter of credit issued pursuant to this Agreement.

"Letter of Credit Application" has the meaning set forth in Section 2.6.2.

"Letter of Credit Documents" means, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

"Leveraged Lease Basic Documents" means the Basic Documents as defined in the Leveraged Lease Participation Agreement.

"Leveraged Lease Participation Agreement" means, collectively (a) the Participation Agreement dated as of August 17, 2000 by and among Midwest, the Borrower, Powerton Trust I, Powerton Generation I, LLC, Wilmington Trust Company, United States Trust Company of New York, as Lease Indenture Trustee and United States Trust Company of New York, as Pass Through Trustee; (b) the Participation Agreement dated as of August 17, 2000 by and among Midwest, the Borrower, Powerton Trust II, Powerton Generation II, LLC, Wilmington Trust Company, United States Trust Company of New York, as Lease Indenture Trustee and United States Trust Company of New York, as Pass Through Trustee; (c) the Participation Agreement dated as of August 17, 2000 by and among Midwest, the Borrower, Joliet Trust I, Joliet Generation I, LLC, Wilmington Trust Company, United States Trust Company of New York, as Lease Indenture Trustee and United States Trust Company of New York, as Pass Through Trustee; and (d) the Participation Agreement dated as of August 17, 2000 by and among Midwest, the Borrower, Joliet Trust II, Joliet Generation II, LLC, Wilmington Trust Company, United States Trust Company of New York, as Lease Indenture Trustee and United States Trust Company of New York, as Pass Through Trustee, in each case, as amended, supplemented, amended and restated or otherwise in effect from time to time.

"Leveraged Lease Transaction" means the transaction consummated pursuant to the Leveraged Lease Participation Agreement and the Leveraged Lease Basic Documents."

"LIBO Rate" means, for each day during each Interest Period for each LIBO Rate Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Telerate Service Page 3750 as of 11:00 a.m., London time, two (2) Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Telerate Service Page 3750, the "LIBO Rate" shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 a.m., New York City time, two (2) Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. Notwithstanding any other provision hereof, at such time as there shall exist for any Lender a LIBOR Reserve Percentage which is greater than zero, the LIBO Rate used in the determination of LIBO Rate Loans made by such Lender shall be the LIBO Rate (Reserve Adjusted).

"LIBO Rate Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan at a fixed rate of interest per annum determined by reference to the LIBO Rate plus the LIBOR Applicable Margin from time to time in effect.

"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards,

if necessary, to the nearest whole multiple of l/100 of 1%) determined pursuant to the following formula:

	LIBO Rate (Reserve Adjusted)		=		LIBO Rate
					1.00—LIBOR Reserve Percentage

The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Administrative Agent, two (2) Business Days before the first day of such Interest Period.

"LIBOR Applicable Margin" is 3.50% per annum.

"LIBOR Office" means, relative to any Lender, the office of such Lender designated as such on Schedule 1.1(b) or designated in the Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent pursuant to Section 4.4, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder.

"LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period.

"Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, in each case of any kind, to secure payment of a debt or performance of an obligation.

"Loan" has the meaning set forth in Section 2.1.

"Loan Documents" means (a) this Agreement, (b) the Borrower Security Agreement, (c) the Communications Agreement, (d) the Fee Letters, (e) the Letter of Credit Documents and (f) the other agreements, documents and instruments delivered in connection with this Agreement, including each Borrowing Request and each Continuation/Conversion Notice.

"Material Adverse Effect" means any event, development or circumstance that has had or would reasonably be expected to have a material adverse effect on (a) the business, assets, property, condition (financial or otherwise) or operations of the Borrower and its Subsidiaries, taken as a whole since the Effective Date, (b) the ability of the Borrower to perform its obligations under any of the Loan Documents or (c) the aggregate value of the Collateral or the validity, enforceability or priority of the security interests granted in favor of the Lenders pursuant to the Borrower Security Agreement granting a security interest in the Collateral.

"Maturity Date" means April 27, 2007.

"MEHC" means Mission Energy Holding Company, a Delaware corporation.

"Midwest" means Midwest Generation, LLC, a Delaware limited liability company.

"Midwest Credit Agreement" means the Credit Agreement dated as of April 27, 2004 between Midwest, the Administrative Agent, the Lenders party thereto and the Issuing Lenders party thereto, as it may be amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

"Midwest Notes" mean the 8.75% Second Priority Senior Secured Notes in an aggregate principal amount of $1,000,000,000 issued on the date of and pursuant to an indenture dated as of the date hereof among Midwest and The Bank of New York, as trustee.

"Moody's" means Moody's Investors Service, a division of Dun & Bradstreet Corporation, and its successors and assigns.

"Net Cash Proceeds" means, in connection with any Disposition of a Collateral Party or of the assets or property of a Collateral Party (or a Subsidiary of a Collateral Party), the cash proceeds (or proceeds consisting of Cash Equivalent Investments) received by such Person from such Disposition, reduced by (a) the amount of any legal, title, and recording tax expenses, commissions and other fees, costs and expenses directly or indirectly incurred by such Person as a result of such Disposition, (b) the amount of any Taxes, incurred by such Person by reason of such Disposition and, in the case of any Subsidiary of the Borrower, after reduction by the amount of any Taxes incurred by such Subsidiary by reason of the transfer of such proceeds directly or indirectly to the Borrower or the receipt of such proceeds, and (c) repayments of Indebtedness to the extent that the transferee of (or holder of a Lien on) the property subject to such Disposition requires that such Indebtedness be repaid as a condition to the Disposition of such property.

"Net Intercompany Loan Proceeds" means, for any period, (a) cash proceeds of intercompany loans received by the Permitted International Subsidiary during such period minus (b) the amount of principal payments on intercompany loans paid or due and payable by the Permitted International Subsidiary during such period as a result of demand for payment by the payee or the maturity of intercompany loan (upon the occurrence of the stated maturity, acceleration of the maturity or otherwise).

"Net Tangible Assets" means, as of the date of any determination thereof, the total amount of all assets of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP), less the sum of (a) the consolidated current liabilities of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) and (b) assets properly classified as "intangible assets" in accordance with GAAP.

"Non-Recourse Debt" means Indebtedness which the Borrower is not directly or indirectly obligated to repay.

"Non-Recourse Persons" means the Affiliates of the Borrower, including Edison Mission Group, Edison International, MEHC and Southern California Edison Company, and the officers, directors, employees, shareholders, agents, Authorized Representatives and other controlling persons of the Borrower or any of its Affiliates, provided that in no event shall the Borrower be deemed to be a Non-Recourse Person.

"Non-U.S. Lender" has the meaning set forth in Section 4.7(e).

"Obligations" means with respect to any Indebtedness of any Person (collectively, without duplication): (i) all debt, financial liabilities and obligations of such Person of whatsoever nature and howsoever evidenced (including, but not limited to, principal, interest, fees, reimbursement obligations, cash cover obligations, penalties, indemnities and legal and other expenses, whether due after acceleration or otherwise) to the providers or holders of such Indebtedness or to any agent, trustee or other representative of such providers or holders of such Indebtedness under or pursuant to each agreement, document or instrument evidencing, securing, guaranteeing or relating to such Indebtedness, financial liabilities or obligations relating to such Indebtedness (including, without limitation, Loan Documents applicable to such Indebtedness (if any)), in each case, direct or indirect, primary or secondary, fixed or contingent, now or hereafter arising out of or relating to any such agreement, document or instrument; (ii) any and all sums advanced by the Administrative Agent or any other Person in order to preserve the Collateral or any other collateral securing such Indebtedness or

to preserve the Liens and security interests in the Collateral or any other collateral, securing such Indebtedness; and (iii) the costs and expenses of collection and enforcement of the obligations referred to in clauses (i) and (ii) (including, without limitation, (A) the costs and expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on any Collateral or any other collateral, (B) the costs and expenses of any exercise by the Administrative Agent or any other Person of its rights under the Borrower Security Agreement or any other security documents and (C) reasonable attorneys' fees and court costs).

"Offshore Currency" means at any time Australian dollars, English pounds sterling, Euros and New Zealand dollars.

"Operating Expenses" means, for any period, all amounts accrued or available to be accrued by the Borrower in the conduct of its business during such period, including utilities, general and administrative expenses, employee salaries, wages and other employment-related costs, fees for letters of credit, surety bonds and performance bonds. Operating Expenses do not include federal and state Taxes, depreciation or amortization, and other non-cash charges.

"Organic Document" means, with respect to any Person that is a corporation, its certificate of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock; with respect to any Person that is a limited liability company, its certificate of formation and its limited liability agreement, and, with respect to a private limited liability company, its deed of incorporation, its articles of association, all shareholders agreements, if any, and the shareholders register in each case, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect from time to time.

"Other Taxes" means any and all present or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

"Participant" has the meaning set forth in Section 10.11.2.

"Partnership" means a general partnership, limited partnership, joint venture or similar entity in which the Borrower or a Subsidiary is a partner, joint venturer or equity participant. The term "Partnership" shall exclude, to the extent included, partnerships or other business entities included in the definition of "Subsidiary".

"PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

"Pension Plan" means a "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, has any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

"Percentage" means, at the time of determination, the sum of the amount of such Lender's Loans, LC Exposure and unused Commitments divided by the sum of the total amount of Loans, LC Exposure and unused Commitments.

"Permitted Domestic Affiliate" means (a) Edison Mission Project Co. ("EMP"), (b) BV Holdings, (c) EME UK International LLC ("EME UK"), (d) EME Southwest Power Corporation ("EME Southwest") and (e) any other Person that becomes a direct wholly-owned Subsidiary of EMP, BV Holdings, EME UK or EME Southwest (each a "Subject Subsidiary" and, together with EMP, BV Holdings, EME UK and EME Southwest, the "Domestic Affiliates") so long as on any date of

determination: (a) (i) in the case of EMP and BV Holdings, such Person is a direct wholly-owned Subsidiary of the Borrower; (ii) in the case of EME UK and EME Southwest, such Person is either (A) a direct wholly-owned Subsidiary of BV Holdings or (B) a direct wholly-owned Subsidiary of a Subject Subsidiary of BV Holdings; and (iii) in the case of each Subject Subsidiary, such Subject Subsidiary is a direct wholly-owned Subsidiary of EMP, BV Holdings, EME UK or EME Southwest; (b) such Domestic Affiliate owns directly or through another Domestic Affiliate an equity interest in the Permitted International Subsidiary; (c) such Domestic Affiliate does not have any outstanding Indebtedness (other than (i) Indebtedness incurred in the ordinary course of business of the nature described in clauses (b), (e) and (f) of the definition of "Indebtedness" or (ii) intercompany loans payable to another Domestic Affiliate or the Borrower); (d) such Domestic Affiliate does not have any Liens against its property or assets (other than Liens of the nature described in clauses (b), (c) and (d) of Section 7.2.2); (e) such Domestic Affiliate is not and cannot be restricted directly or indirectly from making payments or distributions to the Borrower (or to the Domestic Affiliate that is the parent of such Domestic Affiliate) pursuant to restrictive agreements or arrangements; and (f) such Domestic Affiliate is not restricted directly or indirectly from making payments or distributions to the Borrower (or to the Domestic Affiliate that is the parent of such Domestic Affiliate) as a matter of law (whether by virtue of the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, any dissolution, winding up or liquidation proceeding, any appointment of a trustee, receiver, sequestrator or other custodian or otherwise).

"Permitted International Subsidiary" means MEC International B.V. ("MECI") so long as on any date of determination: (a) MECI is an indirect wholly-owned Subsidiary of the Borrower owned by the Borrower through the Permitted Domestic Affiliates; (b) MECI does not have any outstanding Indebtedness (other than (i) Indebtedness incurred in the ordinary course of business of the nature described in clauses (b), (e) and (f) of the definition of "Indebtedness", (ii) intercompany loans payable to its Subsidiaries or the Borrower or (iii) Indebtedness described in clause (c)(ii) below); (c) MECI does not have any Liens against its property or assets (other than (i) Liens of the nature described in clauses (b), (c) and (d) of Section 7.2.2 or (ii) Liens on equity interests in its Subsidiaries for the benefit of financial institutions or noteholders (or an agent or trustee on their behalf) providing financing directly or indirectly to such Subsidiaries) and such financial institutions or noteholders (or such agent or trustee) have not commenced remedial action with respect to such Lien); (d) MECI is not and cannot be restricted directly or indirectly from making payments or distributions to the Borrower pursuant to restrictive agreements or arrangements; and (e) MECI is not restricted directly or indirectly from making payments or distributions to the Borrower as a matter of law (whether by virtue of the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, any dissolution, winding up or liquidation proceeding, any appointment of a trustee, receiver, sequestrator or other custodian or otherwise).

"Permitted International Subsidiary Expenses" means, for any period, all amounts accrued by the Permitted International Subsidiary in the conduct of its business during such period, including utilities, general and administrative expenses, employee salaries, wages and other employment-related costs, fees for letters of credit, surety bonds and performance bonds.

"Permitted Refinancing Indebtedness" means, with respect to any Person, any refinancing of a Financing of such Person issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, "refinance") other Financings of such Person; provided, that (a) the aggregate principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the aggregate principal amount (or accreted value, if applicable) of the Financing being refinanced (plus all accrued interest thereon and the amount of all expenses and premiums in connection therewith), (b) the maturity date of the Permitted Refinancing Indebtedness is no earlier than the maturity date of the Financing being refinanced and such Permitted Refinancing Indebtedness has a weighted average life to maturity equal to or greater than the weighted

average life to maturity of the Financing being refinanced, (c) subject to clause (d) below, any Contractual Restrictions incurred in connection with such Permitted Refinancing Indebtedness are (as determined in good faith by the Borrower's Board of Directors, the determination of which shall be evidenced by a resolution of such Board of Directors) no more restrictive on such Person or its Subsidiaries or Affiliates than the Financing being refinanced taken as a whole and (d) with respect to any refinancings within 12 months of the maturity date of such Financing, such Permitted Refinancing Indebtedness may contain Contractual Restrictions that are in the written opinion of the Borrower's chief executive officer or chief financial officer required by the lenders in order to obtain such refinancings, are customary for such refinancings and apply only to the assets of or revenues of the Person which is the subject of the refinancing.

"Person" means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity.

"Powerton/Joliet Guarantees" means, collectively, (a) the Guaranty Agreement dated as of August 17, 2000 made by the Borrower in favor of Powerton Trust I that, among other things, guarantees the payment by Midwest of certain liabilities payable to Powerton Trust I, (b) the Guaranty Agreement dated as of August 17, 2000 made by the Borrower in favor of Powerton Trust II that, among other things, guarantees the payment by Midwest of certain liabilities payable to Powerton Trust II, (c) the Guaranty Agreement dated as of August 17, 2000 made by the Borrower in favor of Joliet Trust I that, among other things, guarantees the payment by Midwest of certain liabilities payable to Joliet Trust I and (d) the Guaranty Agreement dated as of August 17, 2000 made by the Borrower in favor of Joliet Trust II that, among other things, guarantees the payment by Midwest of certain liabilities payable to Joliet Trust II.

"Powerton/Joliet Intercompany Notes" means the promissory notes of the Borrower dated as of August 24, 2000 having a stated aggregate principal amount equal to $1,367,000,000, as such amount may be reduced from time to time pursuant to the terms thereof, evidencing in each case a loan from Midwest to the Borrower.

"Pro Forma" means, with respect to a calculation, that such calculation is made in accordance with Regulation S-X under the Securities Act and gives effect to all relevant modifications to contractual arrangements that have been made prior to, or are being made on, the calculation date; provided, that in the case of a calculation for any period occurring prior to the Effective Date, all contractual arrangements in effect on the Effective Date shall be deemed to have been in effect for the entirety of such period.

"Quarterly Payment Date" means the last day of each March, June, September, and December or, if any such day is not a Business Day, the next succeeding Business Day.

"Recourse Debt" means, on any date, the sum (without duplication) of the following indebtedness of the Borrower: (a) all indebtedness for borrowed money other than Subordinated Debt; (b) all guarantees for (i) indebtedness of the Subsidiaries and (ii) rental expenses of the Subsidiaries; (c) all reimbursement obligations with respect to surety bonds, letters of credit (to the extent not collateralized with cash or Cash Equivalent Investments), bankers' acceptances and similar instruments (in each case, whether or not matured); (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; and (e) Derivative Obligations. For purposes of the foregoing, (i) indebtedness of the Borrower shall exclude, to the extent included, (A) indebtedness of the Borrower evidenced by the Powerton/Joliet Intercompany Notes for so long as amounts payable thereunder are subject to setoff against amounts paid under the Powerton/Joliet Guarantees in accordance with the terms of the Powerton/Joliet Intercompany Notes; and (B) indebtedness of the Borrower under guarantees of rental expenses to the extent attributable to lease indebtedness provided

by Subsidiaries under leasing transactions; and (ii) the amount of indebtedness of the Borrower under guarantees of rental expenses of the Subsidiaries on any date of determination shall be the termination value under the related lease on such date of determination (adjusted so as to give effect to adjustments contemplated by clause (i)(B) above, if applicable) plus reasonably anticipated indemnity or other similar payments as of such date of determination; provided that the amount of indebtedness of the Borrower under each Powerton/Joliet Guarantee on any date of determination shall be the Termination Value (or, if applicable, Special Termination Value) as defined in such Powerton/Joliet Guarantee on such date of determination plus reasonably anticipated indemnity or other similar payments as of such date of determination.

"Recourse Debt to Recourse Capital Ratio" means, on any date, the ratio of: (a) Recourse Debt on such date to (b) the sum on such date of (i) Consolidated Net Worth on such date plus (ii) Recourse Debt.

"Register" has the meaning set forth in Section 10.11.1(b).

"Required Commitment Amount" means, at any time, (a) 100% of the aggregate undrawn amount of all outstanding Dollar denominated Letters of Credit, (b) 110% of the Dollar Equivalent of the aggregate undrawn amount of all outstanding Offshore Currency denominated Letters of Credit, (c) the sum of the Dollar Equivalent of the undrawn amount of each Agreed Alternate Currency denominated Letters of Credit each multiplied by its respective Agreed Alternate Percentage, (d) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time and (e) all other amounts payable to an Issuing Lender under the Letter of Credit Documents.

"Required Lenders" means, at any time, Lenders having Credit Exposures and unused Commitments representing at least 50.01% of the sum of the total Credit Exposures and unused Commitments at such time.

"Requirement of Law" means, as to any Person, the Organic Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other authority, in each case, applicable to or binding upon such Person or any of its Property or to which such Person or any of its property is subject.

"Restricted Payment" means any dividend (other than a dividend of the Borrower payable solely in common stock of the Borrower) on, or any payment on account of, or setting apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of capital stock of or other ownership interest or any warrants or options to purchase any such stock or ownership interest, whether now or hereafter outstanding, or making of any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Person making such dividend or payment.

"Restrictive Financing Documents" has the meaning set forth in Section 7.2.8.

"S&P" means Standard & Poor's Ratings Services and its successors and assigns.

"Significant Collateral Party Event" means the occurrence of a default in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness of a Collateral Party or a Subsidiary of a Collateral Party or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity, in either case, such Indebtedness having a principal amount, individually or in the aggregate, in excess of $20,000,000; provided that a cure by such Financed Enterprise or a waiver of

such default (which such waiver shall not impose more restrictive conditions than the Correlative Financing Provisions (on such Financed Enterprise) by the holders of such Indebtedness shall constitute a waiver or a cure of such default for the purposes of this Agreement.

"Solvent" means, with respect to any Person, on any date of determination: (a) the fair market value of its assets is in excess of the total amount of its liabilities (including net contingent liabilities); (b) it is then able and expects to be able to pay its debts as they mature; and (c) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. For purposes of the foregoing the amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, can reasonably be expected to become an actual or matured liability.

"Southern California Edison Company" means Southern California Edison Company, a California corporation.

"SPC" has the meaning set forth in Section 10.11.1(e).

"Spot Rate" for a currency means (a) for determining the Dollar Equivalent pursuant to Section 2.6.10, the rate quoted by an Issuing Lender as the spot rate for the purchase by such Issuing Lender of such currency with another currency through its foreign exchange trading desk at approximately 11:00 a.m., New York City time, on the date as of which the foreign exchange computation is made and (b) for all other calculations, the rate quoted by Citibank as the spot rate for the purchase by Citibank of such currency with another currency through its FX Dealing Desk at approximately 11:00 a.m., New York City time, on the date as of which the foreign exchange computation is made.

"Subordinated Debt" means all unsecured Indebtedness of the Borrower for money borrowed which is subordinated, upon terms (including the terms applicable to the payment, prepayment, redemption, purchase or defeasance thereof) satisfactory to the Required Lenders, in right of payment to the payment in full in cash of all Obligations.

"Subsidiary" means, with respect to any Person: (a) any corporation, association or other business entity of which more than 50% of the outstanding Capital Stock having ordinary voting power to elect a majority of the directors, managers or trustees of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person; and (b) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof).

"Subsidiary Payments" has the meaning set forth in Section 7.2.8.

"Tax" or "Taxes" means, with respect to any Person, any present or future taxes (including income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value-added, ad valorem, alternative or add-on minimum, estimated, or other tax of any kind whatsoever), levies, imposts, duties, fees or charges imposed by any government or any governmental agency or instrumentality or any international or multinational agency or commission, including any interest, penalty, or addition thereto, whether disputed or not for which such Person may be liable (including any such Tax related to any other Person for which such Person is liable, by contract, as transferee or successor, by law or otherwise).

"type" means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan.

"UCP" means the Uniform Customs and Practice for Documentary Credits, 1993 Revision, as set forth in the International Chamber of Commerce Publication No. 500, or such later revision thereof in effect at the time of an Issuance of a Letter of Credit.

"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York.

"United States" or "U.S." means the United States of America, its fifty States and the District of Columbia.

"United States Person" has the meaning given to such term in Section 7701(a)(30) of the Code.

"Welfare Plan" means a "welfare plan", as such term is defined in Section 3(1) of ERISA.

"Westside Entities" means Anacapa Energy Company, Silverado Energy Company, Viejo Energy Company, Del Mar Energy Company and each Subsidiary of the foregoing.

SECTION 1.2 Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in each Borrowing Request, Continuation/Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with any Loan Document.

SECTION 1.3 Cross-References. Unless otherwise specified, references in this Agreement to any Article, Section, Annex, Exhibit or Schedule are references to such Article, Section, Annex, Exhibit or Schedule of or to this Agreement, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.

SECTION 1.4 Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used in any Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles in effect from time to time in the United States ("GAAP") applied in the preparation of the financial statements referred to in Section 6.5, except that quarterly financial statements are not required to contain footnotes.

ARTICLE II

COMMITMENTS AND BORROWING PROCEDURES

SECTION 2.1 Commitments. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make revolving loans (each, a "Loan") to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount at any one time outstanding not to exceed at any one time the amount of such Lender's Commitment; provided that in no event shall any Loan be made by any Lender if, after giving effect thereto, such Lender's Credit Exposure would exceed the amount of its Commitment or the total Credit Exposures would exceed the total Commitments. Loans may from time to time be LIBO Rate Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.3 and 2.4. The Borrower may from time to time borrow, repay, in whole or in part, and reborrow Loans. Commitments shall terminate automatically on the Maturity Date.

SECTION 2.2 Loans.

SECTION 2.2.1 Obligations of Lenders. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required.

SECTION 2.2.2 Type of Loans. Subject to Section 4.2, each Loan shall be constituted entirely of Base Rate Loans or of LIBO Rate Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any LIBO Rate Loans by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

SECTION 2.2.3 Minimum Amounts; Limitation on Number of Loans. Each Loan shall be in an aggregate amount of $5,000,000 or a larger multiple of $1,000,000; provided that a Base Rate Loan may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or, in the case of a Loan that is required to finance, in an amount not less than $5,000,000, the amount of the reimbursement of an LC Disbursement as contemplated by Section 2.6.6. Loans of more than one type may be outstanding at the same time; provided that there shall not at any time be more than a total of ten (10) LIBO Rate Loans outstanding.

SECTION 2.2.4 Limitations on Interest Periods. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request (or to elect to convert to or continue as a LIBO Rate Loan) any Loan if the Interest Period requested therefor would end after the Maturity Date.

SECTION 2.2.5 Reduction of Total Commitment Amount. The Borrower may, from time to time on any Business Day occurring after the Effective Date, voluntarily reduce the Commitment Amount without premium or penalty (subject, however, to Section 4.5); provided, however, that all such reductions shall require at least three (3) Business Days' prior notice to the Administrative Agent and shall be permanent, and any partial reduction of the Commitment Amount shall be in a minimum amount of $5,000,000 and in an integral multiple of $1,000,000 in excess thereof; and, provided, further, that the Commitment Amount may not be reduced to an amount less than the total Credit Exposures of all Lenders.

SECTION 2.3 Borrowing Procedure.

(a) Each Borrowing of Loans shall be made on notice, given not later than (i) 12:00 Noon, New York City time, on the third Business Day prior to the date of the proposed Borrowing (in the case of a Borrowing of Loans to consist of LIBO Rate Loans) and (ii) 12:00 Noon, New York

City time, on the Business Day of the proposed Borrowing (in the case of a Borrowing of Loans to consist of Base Rate Loans), by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by facsimile transmission. Each such notice of a Borrowing of Loans shall be made in writing, in substantially the form of a Borrowing Request, specifying therein (i) the requested date of such Borrowing (which shall be a Business Day), (ii) whether such Borrowing is to be a LIBO Rate Loan or a Base Rate Loan, (iii) the requested aggregate amount of such Borrowing, (iv) in the case of a LIBO Rate Loan, the initial Interest Period therefor and (v) the location and number of the Borrower's account to which funds are to be disbursed.

(b) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 2:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower and designated by the Borrower in the applicable Borrowing Request; provided that Borrowings made to finance the reimbursement of an LC Disbursement as provided in Section 2.6.6 shall be remitted by the Administrative Agent to the Issuing Lender specified in Section 2.6.6.

(c) If no election as to the type of a Loan is specified, then the requested Loan shall be a Base Rate Loan. If no Interest Period is specified with respect to any requested LIBO Rate Loan, then the requested Loan shall be made instead as a Base Rate Loan.

SECTION 2.4 Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice to the Administrative Agent on or before 12:00 Noon, New York City time, on a Business Day, the Borrower may from time to time irrevocably elect that all, or any portion in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000 in excess thereof, of any Loans be (a) on not less than three (3) Business Days' notice, converted into, or continued as, LIBO Rate Loans, or (b) on the same Business Day, be converted into, Base Rate Loans. In the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan, such LIBO Rate Loan shall automatically be continued as a LIBO Rate Loan with an Interest Period of the same duration as the then expiring Interest Period; provided, however, that (i) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders, (ii) a LIBO Rate Loan may not be converted at any time other than the last day of the Interest Period applicable thereto and (iii) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default or Event of Default has occurred and is continuing. Each delivery of a Continuation/Conversion Notice shall constitute a certification and warranty by the Borrower that on the date of delivery of such notice no Default has occurred and is continuing. If prior to the time of such continuation or conversion any matter certified to by the Borrower by reason of the immediately preceding sentence will not be true and correct at such time if then made, the Borrower will immediately so notify the Administrative Agent. Except to the extent, if any, that prior to the time of such continuation or conversion the Administrative Agent shall have received written notice to the contrary from the Borrower, such certification and warranty shall be deemed to be made at the date of such continuation or conversion as if then made. Upon the occurrence and during the continuance of any Event of Default under Section 8.1.1, each LIBO Rate Loan shall convert automatically to a Base Rate Loan at the end of the Interest Period then in effect for such LIBO Rate Loan.

SECTION 2.5 Funding. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower hereby consents and agrees that, for purposes of any

determination to be made for purposes of Section 4.1, 4.2, 4.3, 4.4, or 4.5, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing deposits in its LIBOR Office's interbank eurodollar markets. Notwithstanding the foregoing, such foreign branch or Affiliate shall satisfy the requirements of Section 4.7(e).

SECTION 2.6 Letters of Credit.

SECTION 2.6.1 General. Subject to the terms and conditions set forth herein, in addition to the Loans provided for in Section 2.1, the Borrower may request an Issuing Lender to Issue, at any time and from time to time, on any Business Day during the Availability Period until the date which is ten Business Days prior to the Maturity Date, Letters of Credit for its own account in such form as is acceptable to such Issuing Lender in its reasonable determination. Letters of Credit Issued hereunder shall constitute utilization of the Commitments; provided that the Borrower's ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, within the Availability Period, obtain Letters of Credit to replace Letters of Credit which have expired or which have been drawn and subsequently reimbursed. The Borrower agrees that an Issuing Lender shall Issue all Letters of Credit subject to either the UCP or the ISP. The UCP or the ISP, as applicable, shall serve as evidence of general banking usage with respect to the subject matter thereof. The Borrower agrees that, for matters not addressed by the UCP or the ISP, each Letter of Credit shall be subject to and governed by the laws of the state of New York and applicable U.S. Federal laws or, if, at the Borrower's request and with an Issuing Lender's consent, a Letter of Credit expressly chooses a state or country law other than New York, or applicable U.S. Federal laws, such other law; provided further that such Issuing Lender shall not be liable for any payment, cost, expense or loss resulting from any action or inaction taken by such Issuing Lender if such action or inaction is justified under UCP, ISP, New York law or the law governing the Letter of Credit and the Borrower shall promptly reimburse such Issuing Lender for any such payment, cost, expense or loss in accordance with Section 10.4(a).

SECTION 2.6.2 Notice of Issuance, Amendment, Renewal or Extension. To request the Issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by such Issuing Lender) to an Issuing Lender and the Administrative Agent at least three (3) Business Days (or such shorter time as such Issuing Lender may agree in a particular instance in its sole discretion) prior to the requested Issuance Date a notice (a "Letter of Credit Application") requesting the Issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the Issuing Lender for such Letter of Credit, the Issuance Date (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with Section 2.6.4), the amount of such Letter of Credit, the denomination of a Letter of Credit in Dollars, Offshore Currency or Agreed Alternate Currency, the name and address of the beneficiary thereof, all other terms and conditions regarding such Letter of Credit and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by an Issuing Lender, the Borrower also shall submit a Letter of Credit Application on such Issuing Lender's standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of Letter of Credit Application or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

SECTION 2.6.3 Limitations on Amounts. A Letter of Credit shall be Issued, amended, renewed or extended only if (and upon Issuance of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such Issuance the total Credit Exposure shall not exceed the Commitment Amount.

SECTION 2.6.4 Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (a) the date set forth in the Letter of Credit Application and (b) the date that is five (5) Business Days prior to the Maturity Date.

SECTION 2.6.5 Participations. By the Issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) by an Issuing Lender, and without any further action on the part of such Issuing Lender or the Lenders, such Issuing Lender hereby grants to each Lender, and each Lender hereby acquires from such Issuing Lender, a participation in such Letter of Credit equal to such Lender's Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or Event of Default or reduction or termination of the Commitments.

In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of an Issuing Lender, such Lender's Percentage of each LC Disbursement made by such Issuing Lender promptly upon the request of such Issuing Lender at any time from the time of such LC Disbursement until such LC Disbursement is reimbursed by the Borrower or at any time after any reimbursement payment is required to be refunded to the Borrower for any reason. Such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each such payment shall be made in the same manner as provided in Section 2.3(b) with respect to Loans made by such Lender (and Section 2.3(b) shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the relevant Issuing Lender the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to Section 2.6.6, the Administrative Agent shall distribute such payment to the relevant Issuing Lender or, to the extent that the Lenders have made payments pursuant to this paragraph to reimburse such Issuing Lender, then to such Lenders and such Issuing Lender as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse an Issuing Lender for any LC Disbursement shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

SECTION 2.6.6 Reimbursement. If an Issuing Lender shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such Issuing Lender in respect of such LC Disbursement by paying to the Administrative Agent in Dollars an amount equal to the Dollar Equivalent (determined in accordance with Section 2.6.10) of such LC Disbursement and any interest accrued pursuant to Section 2.6.9 not later than 2:00 p.m., New York City time, four Business Days after the Business Day on which the Borrower receives notice of such LC Disbursement, provided that, if such LC Disbursement is less than the minimum borrowing specified in Section 2.2.3, the Borrower may, subject to the conditions to borrowing set forth herein, request, subject to Section 2.2.3, in accordance with Section 2.3 that such LC Disbursement be financed with a portion of a Borrowing of Loans and, to the extent so financed, the Borrower's obligation to reimburse such LC Disbursement shall be discharged and replaced by the resulting Loan.

If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender's Percentage thereof.

SECTION 2.6.7 Obligations Absolute.

(a) The Borrower's obligation to reimburse LC Disbursements as provided in Section 2.6.6 shall be absolute, unconditional and irrevocable, and shall be performed strictly

in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by an Issuing Lender under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit, and (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.6, constitute a legal or equitable discharge of the Borrower's obligations hereunder.

(b) Neither the Administrative Agent, the Lenders nor the Issuing Lenders, nor any of their respective directors, officers, employees, agents or advisors, shall have any liability or responsibility by reason of or in connection with the Issuance or transfer of any Letter of Credit by an Issuing Lender or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of an Issuing Lender; provided that the foregoing shall not be construed to excuse any Issuing Lender from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Lender's gross negligence or willful misconduct when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that:

(i) each Issuing Lender may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit;

(ii) each Issuing Lender shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit; and

(iii) this sentence shall establish the standard of care to be exercised by each Issuing Lender when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing).

(c) Each Issuing Lender shall act on behalf of the Lenders with respect to any Letters of Credit Issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for such Issuing Lender with respect thereto; provided, however, that each Issuing Lender shall have all of the benefits and immunities (i) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by each Issuing Lender in connection with Letters of Credit Issued by it or proposed to be Issued by it and the Letter of Credit Documents mutatis mutandis as if set forth in full therein as if the term "Administrative Agent", as used in Article IX, included each Issuing Lender with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to each Issuing Lender.

SECTION 2.6.8 Disbursement Procedures. Each Issuing Lender shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Each Issuing Lender shall promptly after such examination notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Lender and the Lenders with respect to any such LC Disbursement.

SECTION 2.6.9 Interim Interest. If an Issuing Lender shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the Dollar Equivalent (determined in accordance with Section 2.6.10) of the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement pursuant to Section 2.6.6, at a rate equal to the Alternate Base Rate, in effect from time to time, plus the Base Rate Applicable Margin; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to Section 2.6.6, then the Dollar Equivalent of such overdue amount shall bear additional interest (after as well as before judgment) at a rate equal to 2% per annum. Interest accrued pursuant to this paragraph shall be for account of the Issuing Lender, except that interest accrued on and after the date of payment by any Lender pursuant to Section 2.6.6 to reimburse such Issuing Lender shall be for account of such Lender to the extent of such payment.

SECTION 2.6.10 LC Disbursement Denomination. The obligations of the Borrower to reimburse LC Disbursements shall be in Dollars and, to the extent an LC Disbursement is made in an Offshore Currency or Agreed Alternate Currency, the Issuing Lender making such LC disbursement shall determine the Dollar Equivalent of such LC Disbursement on the date such Issuing Lender makes such LC Disbursement.

SECTION 2.6.11 Addition and Replacement of Issuing Lenders. Any Lender may become an Issuing Lender at any time by written agreement between the Borrower, the Administrative Agent, and such Lender. Any Issuing Lender may be replaced by a Lender at any time by written agreement between the Borrower, the Administrative Agent, the replaced Issuing Lender and such Lender. The Administrative Agent shall notify the Lenders of any such change of an Issuing Lender. At the time any such change shall become effective, the Borrower shall pay all unpaid fees accrued for account of the replaced Issuing Lender pursuant to Section 3.3.2. From and after the effective date of any such change, (a) the Lender becoming an Issuing Lender shall have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit to be Issued thereafter and (b) references herein to the term "Issuing Lender" shall be deemed to refer to such new or to any previous Issuing Lender, or to such new and all previous Issuing Lenders, as the context shall require. After the replacement of an Issuing Lender hereunder, the replaced Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit Issued by it prior to such replacement, but shall not be required to Issue additional Letters of Credit.

SECTION 2.6.12 Offshore Currencies and Agreed Alternate Currencies.

(a) Each Issuing Lender shall be under no obligation to Issue any Letter of Credit denominated in an Offshore Currency if such Issuing Lender cannot Issue in such requested Offshore Currency, in which event such Issuing Lender will give prompt notice to the Borrower no later than two (2) Business Days after the submission of a Letter of Credit Application that the Issuance of a Letter of Credit in the requested Offshore Currency is not

then available. If such Issuing Lender shall have so notified the Borrower, such Letter of Credit Application shall be deemed withdrawn.

(b) The Borrower shall be entitled to request that Letters of Credit hereunder also be permitted to be Issued in any other lawful foreign currency, that, in the opinion of all Lenders and an Issuing Lender, is at such time, freely traded in the offshore interbank foreign exchange markets and is freely transferable and freely convertible into Dollars (an "Agreed Alternate Currency"). The Borrower shall deliver to the Administrative Agent any request for the Issuance of a Letter of Credit in an Agreed Alternate Currency by not later than 11:00 a.m., New York City time, at least seven Business Days in advance of the date of any Letter of Credit proposed to be Issued in such Agreed Alternate Currency. Upon receipt of any such request the Administrative Agent will promptly notify the Lenders and such Issuing Lender thereof, and each Lender and such Issuing Lender will use its best efforts to respond to such request within two (2) Business Days of receipt thereof. Each Lender and such Issuing Lender may reject or accept such request in its sole discretion and, if any Lender or Issuing Lender shall reject such request, the request shall be deemed rejected by all Lenders and Issuing Lenders. The Administrative Agent will promptly notify the Borrower of the acceptance or rejection of any such request, and the Lender's determination of the percentage of the Dollar Equivalent face amount of such Agreed Alternate Currency denominated Letter of Credit (the "Agreed Alternate Percentage") of available Commitments required to cover such Alternate Currency denominated Letter of Credit. If the Borrower agrees with the Agreed Alternate Percentage, the Administrative Agent will circulate to each party to this Agreement a revised Schedule 2.6.12, setting forth the Agreed Alternate Currency denominated Letter of Credit to be Issued and the Agreed Alternate Percentage applicable to such Letter of Credit.

(c) The Administrative Agent will determine the Dollar Equivalent amount and the Required Commitment Amount on (i) the Issuance Date with respect to any Issuances of Letters of Credit, (ii) any date an LC Disbursement is made by an Issuing Lender in an Offshore Currency or an Agreed Alternate Currency, (iii) any date on which any Commitments are reduced pursuant to Section 2.2.5 or Section 3.1, (iv) the last Business Day of each calendar month, (v) any other date that the Administrative Agent, in it sole discretion determines and (vi) any other day the Borrower requests (each such date, a "Computation Date").

(d) Subject to Section 4.5, if on any Computation Date the Administrative Agent shall have determined that the aggregate Credit Exposure exceeds the total Commitment Amount, due to a change in applicable rates of exchange between Dollars and Offshore Currencies, then the Administrative Agent shall give notice to the Borrower that a prepayment is required under this Section 2.6.12(c), and the Borrower agrees thereupon promptly to make prepayments of Loans pursuant to Section 3.1.2 and/or Cash Collateralize LC Exposures pursuant to Section 2.6.13 such that, after giving effect to such prepayment or Cash Collateralization, the Credit Exposure does not exceed the total Commitment Amount.

SECTION 2.6.13 Cash Collateralization.

(a) If an Event of Default shall occur and be continuing and the Borrower receives notice from the Administrative Agent or the Required Lenders, demanding the deposit of cash collateral pursuant to this paragraph the Borrower shall immediately deposit into the LC Collateral Account an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the Borrower's obligation to Cash Collateralize shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind upon the occurrence of any Event of Default with respect to the Borrower described in Section 8.1.8.

(b) If the Borrower is required to Cash Collateralize Letters of Credit pursuant to Section 2.6.12, the Borrower shall immediately deposit into the LC Collateral Account the amount specified in Section 2.6.12.

(c) If the Borrower is required to Cash Collateralize Letters of Credit pursuant to Section 3.1.2, the Borrower shall immediately deposit into the LC Collateral Account the amount specified in Section 3.1.2.

(d) Cash Collateralized amounts shall be held by the Administrative Agent in the first instance for the LC Exposure under this Agreement and thereafter for the payment of Obligations and, for these purposes, the Borrower hereby grants a security interest to the Administrative Agent for the benefit of the Lenders in the LC Collateral Account and in any "financial assets" (as defined in Section 8-102(a)(9) of the UCC) or other property held therein.

ARTICLE III

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

SECTION 3.1 Repayments and Prepayments. The Loans shall mature, and the Borrower hereby unconditionally promises to pay in full the unpaid principal amount and all amounts outstanding and unpaid in respect of the Loans to the Administrative Agent for the account of each Lender, on the Maturity Date.

SECTION 3.1.1 Optional Prepayments and Commitment Reductions. At any time, and from time to time, the Borrower may, on any Business Day, make a voluntary prepayment or permanent commitment reduction, in whole or in part, of the outstanding principal amount of the Loans or the Commitments; provided, however, that:

(a) any such prepayment or commitment reduction shall be applied pro rata among the Lenders in accordance with the respective unpaid principal amounts of the Loans and Commitments held by them; provided, that the Commitments shall not be reduced to an amount that is less than the aggregate Credit Exposure then in effect;

(b) any such prepayment or commitment reduction made shall be applied pro rata among Loans and Commitments, if applicable, having the same Interest Period;

(c) any such prepayment of any LIBO Rate Loan made on any day other than the last day of the Interest Period for such Loan shall be subject to the provisions of Section 4.5;

(d) any such prepayment of LIBO Rate Loans shall require at least two (2) Business Days' prior written notice to the Administrative Agent and any such prepayment of Base Rate Loans may be made on same day's written notice to the Administrative Agent; and

(e) any such partial prepayment of Loans shall be in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000 in excess thereof.

SECTION 3.1.2 Mandatory Prepayments. Upon payment in full of the obligations under the BV Holdings Credit Agreement and any Permitted Refinancing Indebtedness with respect to BV Holdings, the Borrower will prepay the Loans (and/or Cash Collateralize LC Exposure), and/or the Commitments shall be subject to automatic reduction, as follows:

(a) Dispositions of Collateral. In the event that the Net Cash Proceeds of any Disposition with respect to the Collateral Parties (herein, the "Current Disposition"), and of all prior Dispositions with respect to the Collateral Parties (or a Subisidiary of a Collateral Party) as to which a prepayment has not yet been made under this paragraph, shall exceed $100,000,000 then, no later than five (5) Business Days prior to the occurrence of the Current

Disposition, the Borrower will deliver to the Lenders a statement, certified by an Authorized Officer of the Borrower, in form and detail satisfactory to the Administrative Agent, of the amount of the Net Cash Proceeds of the Current Disposition and of all such prior Dispositions and will prepay the Loans (and/or Cash Collateralize LC Exposure), and/or the Commitments shall be subject to automatic reduction, in an aggregate amount equal to the excess of (i) 100% of the Net Cash Proceeds of the Current Disposition and such prior Dispositions over (ii) $100,000,000, such prepayment and/or reduction to be effected in each case in the manner and to the extent specified in Section 3.1.2(c).

(b) Currency Fluctuations. The Borrower shall, on each date when a pre payment is required pursuant to Section 2.6.12(c), prepay the Loans (and/or Cash Collateralize LC Exposure), and/or the Commitments shall be subject to automatic reduction, in the amount specified in Section 2.6.12(c), such prepayment and/or reduction to be effected in each case in the manner and to the extent specified in Section 3.2.1(c).

(c) Application. Prepayments and/or reductions of Commitments pursuant to Section 3.1.2(a) and (b) shall be applied to reduce the aggregate amount of the Commitments (and to the extent that, after giving effect to such reduction, the total Credit Exposure would exceed the total Commitments, the Borrower shall, first, prepay Loans and second, Cash Collateralize LC Exposure in an aggregate amount equal to such excess).

SECTION 3.1.3 Acceleration; Penalty.

(a) The Borrower shall immediately upon any acceleration of any Loans pursuant to Section 8.2 or Section 8.3, repay all Loans, unless, pursuant to Section 8.3, only a portion of all Loans is so accelerated (in which event the Borrower shall repay the portion of the Loans so accelerated).

(b) Each prepayment of Loans made pursuant to Section 3.1 shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid, but shall be without premium or penalty, except as may be required by Section 4.5. No prepayment of principal of any Loan pursuant to Section 3.1.1 or Section 3.1.2(b) shall cause a reduction in the total Commitment Amount. Prepayment of principal of any Loan pursuant to Section 3.1.2(a) shall cause a permanent reduction in such Loan prepaid and the corresponding Commitment.

SECTION 3.2 Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2.

SECTION 3.2.1 Rates.

(a) Pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that the Loans or a portion of the Loans pursuant to Section 2.3 accrue interest at a rate per annum:

(i) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Base Rate Applicable Margin from time to time in effect; and

(ii) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate for such Interest Period plus the LIBOR Applicable Margin from time to time in effect.

(b) All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan.

SECTION 3.2.2 Default Rates. Upon the occurrence and during the continuance of any Event of Default, the Borrower shall pay, but only to the extent permitted by law, in addition to the applicable Alternate Base Rate or LIBO Rate plus the Applicable Margin on each such Loan, then payable on the Loans, additional interest (after as well as before judgment) on the Loans at 2% per annum until such Event of Default is cured.

SECTION 3.2.3 Payment Dates. Interest accrued on each Loan shall be payable, without duplication:

(a) on the Maturity Date;

(b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan, provided that upon a payment or prepayment in part, only the interest accrued on such portion shall be payable;

(d) with respect to LIBO Rate Loans, the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the day three months after such Loan is made or continued); and

(e) on that portion of any Loans which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration.

Interest accrued on Loans or other monetary Obligations after the date such amount is due and payable (whether on the related Maturity Date, upon acceleration or otherwise) shall be payable upon demand.

SECTION 3.2.4 Interest Rate Determination. The Administrative Agent shall determine the interest rate applicable to Loans and shall give prompt notice to the Borrower and the Lenders of such determination, and its determination thereof shall be conclusive in the absence of manifest error.

SECTION 3.3 Fees.

SECTION 3.3.1 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for account of each Lender a commitment fee, which shall accrue at a rate per annum equal to 0.50% on the average daily unused amount of the Commitment of such Lender during the period from and including the Effective Date to but excluding the earlier of the date such Commitment terminates and the Maturity Date. Accrued commitment fees shall be payable on each Quarterly Payment Date and on the Maturity Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees, the Commitment of a Lender shall be deemed to be used to the extent of the outstanding Loans and LC Exposure (as such LC Exposure is adjusted on each Computation Date) of such Lender.

SECTION 3.3.2 Letter of Credit Fees. The Borrower agrees to pay (a) to the Administrative Agent for account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at a rate per annum equal to LIBOR Applicable Margin on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (b) to each Issuing Lender a fronting fee, which shall accrue at the rate of 0.25% per annum (or such lesser amount as shall have been

agreed from time to time between the Borrower and an Issuing Lender) on the average daily amount of the LC Exposure (as such LC Exposure is adjusted on each Computation Date) of each such Issuing Lender (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as each such Issuing Lender's standard fees with respect to the Issuance, of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including each Quarterly Payment Date shall be payable on such Quarterly Payment Date, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Any other fees payable to an Issuing Lender pursuant to this paragraph shall be payable within ten (10) days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

SECTION 3.3.3 Other Fees. The Borrower agrees to pay to the Administrative Agent, for (a) its own account, (b) the account of each of CNAI, CSFB, JPMS and Lehman, (c) the account of the Issuing Lenders and (d) the account of the Lenders, the respective fees as agreed to in the Fee Letters.

SECTION 3.3.4 Payment of Fees. All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Lenders, in the case of fees payable to it) for distribution, in the case of facility fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.

ARTICLE IV

CERTAIN LIBO RATE AND OTHER PROVISIONS

SECTION 4.1 LIBO Rate Lending Unlawful. If any Lender shall reasonably determine (which determination shall, upon notice thereof to the Borrower and the Administrative Agent, be conclusive and binding on the Borrower absent manifest error) that the introduction of or any change in or in the interpretation of any law, rule or regulation makes it unlawful, or any central bank or other Governmental Authority or comparable agency asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make, continue, maintain or convert any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans of such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion.

SECTION 4.2 Inability to Determine Rates. If the Administrative Agent shall have determined that by reason of circumstances affecting the Administrative Agent's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.

SECTION 4.3 Increased LIBO Rate Loan Costs. If after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its LIBOR Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall increase the cost to such Lender of, or result in any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans, then the Borrower agrees to pay to the Administrative Agent for the account of such Lender the amount of any such increase or reduction. Such Lender shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required to compensate fully such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within ten (10) Business Days of its receipt of such notice, and such notice shall be binding on the Borrower absent clear and convincing evidence to the contrary.

SECTION 4.4 Obligation to Mitigate. Each Lender agrees that as promptly as practicable after it becomes aware of the occurrence of an event that would entitle it to give notice pursuant to Section 4.1, 4.3 or 4.6 or to receive additional amounts pursuant to Section 4.7, and in any event if so requested by the Borrower, such Lender shall use reasonable efforts to make, fund or maintain its affected Loans through another lending office if as a result thereof the increased costs would be avoided or materially reduced or the illegality would thereby cease to exist and if, in the reasonable opinion of such Lender, the making, funding or maintaining of such Loans through such other lending office would not in any material respect be disadvantageous to such Lender, contrary to such Lender's normal banking practices or violate any applicable law or regulation. No change by a Lender in its Domestic Office or LIBOR Office made for such Lender's convenience shall result in any increased cost to the Borrower. The Borrower shall not be obligated to compensate any Lender for the amount of any additional amount pursuant to Section 4.1, 4.3 or 4.6 accruing prior to the date which is 90 days before the date on which such Lender first notifies the Borrower that it intends to claim such compensation; it being understood that the calculation of the actual amounts may not be possible within such period and that such Lender may provide such calculation as soon as reasonably practicable thereafter without affecting or limiting the Borrower's payment obligation thereunder. If any Lender demands compensation pursuant to Section 4.1, 4.3 or 4.6 with respect to any LIBO Rate Loan, the Borrower may, at any time upon at least one Business Day's prior notice to such Lender through the Administrative Agent, elect to convert such Loan into a Base Rate Loan. Thereafter, unless and until such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, all such LIBO Rate Loans by such Lender shall bear interest as Base Rate Loans, notwithstanding any prior election by the Borrower to the contrary. If such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, the Borrower may elect that the principal amount of each such Loan again bear interest as LIBO Rate Loans in accordance with this Agreement, on the first day of the next succeeding Interest Period applicable to the related LIBO Rate Loans of other Lenders. Additionally, the Borrower may, at its option, upon at least five (5) Business Days' prior notice to such Lender, elect to prepay in full, without premium or penalty, such Lender's affected

LIBO Rate Loans. If the Borrower elects to prepay any Loans pursuant to this Section 4.4, the Borrower shall pay within ten (10) Business Days after written demand any additional increased costs of such Lender accruing for the period prior to such date of prepayment. If such conversion or prepayment is made on a day other than the last day of the current Interest Period for such affected LIBO Rate Loans, such Lender shall be entitled to make a request for, and the Borrower shall pay, compensation under Section 4.5.

SECTION 4.5 Funding Losses. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of:

(a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; or

(b) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor;

then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within ten (10) Business Days of its receipt thereof, pay to the Administrative Agent for the account of such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall be binding on the Borrower absent manifest error.

SECTION 4.6 Increased Capital Costs. If after the date hereof any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any applicable law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority affects the amount of capital required to be maintained by any Lender or any Issuing Lender, and such Lender or such Issuing Lender reasonably determines that the rate of return on its capital as a consequence of its Loans or participating in issuing or maintaining any Letter of Credits as the case may be, made by such Lender or such Issuing Lender is reduced in a material amount to a level below that which such Lender or such Issuing Lender could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender or such Issuing Lender to the Borrower, the Borrower shall pay within ten (10) Business Days after such demand directly to such Lender or such Issuing Lender additional amounts sufficient to compensate such Lender or such Issuing Lender for such reduction in rate of return. A statement of such Lender or such Issuing Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall be binding on the Borrower absent manifest error.

SECTION 4.7 Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Issuing Lender or Lender as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and

(iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) Payment of Other Taxes by the Borrower. In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Issuing Lender and each Lender, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Issuing Lender or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, by an Issuing Lender or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Lender, shall be conclusive absent manifest error.

(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e) Foreign Lenders. Each Lender that is not a United States Person (a "Non-U.S. Lender"), to the extent that it is legally able to do so, shall deliver to the Borrower and the Administrative Agent two copies of U.S. Internal Revenue Service Form W-8ECI, Form W-8BEN or Form W-8IMY (with supporting documentation), or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments of interest by the Borrower under the Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement. In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose).

SECTION 4.8 Payments, Computations. Unless otherwise expressly provided, all payments by the Borrower pursuant to any Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 Noon, New York City time, on the date due, in immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower; provided that such payment shall be deemed made timely if made by wire transfer and by such time as an Authorized Representative has advised the Administrative Agent of the applicable Federal Reserve System wire transfer confirmation number. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in immediately available funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days).

Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (a) of the definition of the term "Interest Period" with respect to LIBO Rate Loans) be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment.

SECTION 4.9 Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan or LC Disbursement (other than pursuant to the terms of Sections 4.3, 4.4, 4.5, 4.6, 4.7 and 4.11) in excess of its pro rata share of payments then or therewith obtained by all Lenders holding Loans of such type, such Lender shall purchase from the other Lenders such participations in Loans and LC Disbursements made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation in any Loan or LC Disbursement to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 4.9 may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.10) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.

If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 4.9 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.9 to share in the benefits of any recovery on such secured claim.

SECTION 4.10 Setoff. Each of the Lenders and the Issuing Lenders shall, upon the occurrence of any Event of Default described in clause (a) or (b) of Section 8.1.8 and, upon the occurrence of any Default described in clauses (c) and (d) of Section 8.1.8 or, with the consent of the Required Lenders, upon the occurrence and continuance beyond the expiration of the applicable grace period, if any, of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due); provided, however, that any such appropriation and application shall be subject to the provisions of Section 4.9.

Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application.

The rights of each Lender under this Section 4.10 are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have.

SECTION 4.11 Replacement of Lender. The Borrower shall be permitted to replace (with one or more replacement Lenders) any Lender: (a) that does not consent to a waiver, amendment or modification pursuant to Section 10.1 that requires a vote of holders of 100% of the Lenders (provided, that, such replacement Lender consents to such waiver, amendment or modification) or (b) which requests reimbursement for, or is otherwise entitled to, amounts owing pursuant to Section 4.1, 4.3, 4.6 or 4.7; provided that (i) such replacement does not conflict with any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to the Borrower or such Lender or to which the Borrower or such Lender or any of their respective property is subject, (ii) no Default, Event of Default or Significant Collateral Party Event shall have occurred and be continuing at the time of such replacement (other than, in the case of a replacement

predicated upon clause (a) above, the Default, Event of Default or Significant Collateral Party Event that is the subject of the vote referred to in clause (a) above), (iii) the replacement bank or institution shall purchase, at par all Loans and other amounts owing to such replaced Lender prior to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under Section 4.5 if any LIBO Rate Loan owing to such replaced Lender shall be prepaid (or purchased) other than on the last day of the Interest Period relating thereto, (v) the replacement Lender shall be reasonably satisfactory to the Administrative Agent and the Issuing Lenders, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.11.1 (provided that the Borrower or replacement Lender shall be obligated to pay the registration and processing fee), (vii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 4.1, 4.3, 4.6 or 4.7, as the case may be, (viii) any such replacement shall not be deemed to be a waiver of any rights which the Borrower, the Administrative Agent, any Issuing Lender or any other Lender shall have against the replaced Lender, (ix) if such replacement bank or institution is not already a Lender, the Borrower shall pay to the Administrative Agent an administrative fee of $3,500 and (x) in the case of a replacement predicated upon clause (a) above, for the related vote referred to in clause (a) above, no more Lenders than Lenders holding 20% or more of the aggregate outstanding principal amount of the Loans shall be replaced by the Borrower (provided that the Borrower may replace a single Lender holding greater than 20% of the aggregate outstanding principal amount of the Loans).

ARTICLE V

CONDITIONS TO LOANS

SECTION 5.1 Conditions to Effectiveness. This Agreement shall become effective, as between all parties hereto, upon the satisfaction of each of the conditions precedent set forth in this Section 5.1.

SECTION 5.1.1 Delivery of Loan Documents. The Administrative Agent shall have received:

(a) this Agreement, duly executed and delivered by an Authorized Representative of the Borrower, with a counterpart for each Lender party hereto on the Effective Date;

(b) the Borrower Security Agreement, duly executed and delivered by an Authorized Representative of the Borrower; and

SECTION 5.1.2 Officer's Certificates. The Administrative Agent shall have received a certificate from an Authorized Representative of the Borrower (a) certifying that all representations and warranties made by it in this Agreement and each of the Loan Documents to which it is a party are true and correct in all material respects on and as of the Effective Date (except with respect to representations and warranties made as of a prior specific date) and (b) certifying that no Default or Event of Default, has occurred and is continuing.

SECTION 5.1.3 Resolutions. The Administrative Agent shall have received from the Borrower a certificate dated the Effective Date of its Secretary, Assistant Secretary or Authorized Representative as to:

(a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of each Loan Document to be executed by it;

(b) the incumbency and signatures of those of its officers and representatives authorized to act with respect to each Loan Document executed by it; and

The Administrative Agent and each Lender may conclusively rely upon such certificate until it shall have received a further certificate of the Secretary, Assistant Secretary or other Authorized Representative of the Borrower canceling or amending such prior certificate.

SECTION 5.1.4 Opinions of Counsel. The Administrative Agent shall have received opinions, dated the Effective Date and addressed to the Administrative Agent and the Lenders, from Skadden, Arps, Slate, Meagher & Flom LLP and internal counsel to the Borrower reasonably acceptable to the Administrative Agent, substantially in the form of Exhibits E-1 and E-2 and given upon the express instruction of the Borrower.

SECTION 5.1.5 Closing Fees, Expenses. The Administrative Agent shall have received for its own account, or for the account of each Lender, as the case may be, all fees due and payable pursuant to Sections 3.3 and 10.3, and all costs and expenses for which invoices have been presented.

SECTION 5.1.6 Financial Statements. The Administrative Agent shall have received:

(a) an audited consolidated balance sheet of the Borrower and its Subsidiaries at December 31, 2003 and

(b) an audited consolidated income statement of the Borrower and its Subsidiaries for the year ended December 31, 2003.

SECTION 5.1.7 Solvency. The Administrative Agent shall have received a certificate, in form and substance reasonably satisfactory to the Administrative Agent, from the chief financial officer or treasurer of the Borrower to the effect that the Borrower together with its Subsidiaries, taken as a whole, will be Solvent as of the Effective Date.

SECTION 5.1.8 Repayment of Existing Indebtedness. The Administrative Agent shall have received satisfactory evidence that the upon the Effective Date, the Borrower will have repaid in full and terminated all commitments under the Credit Agreement dated as of September 13, 2001 among the Borrower, the Administrative Agent, Citibank, N.A. as the Issuing Lender and the commercial lending institutions party thereto, as amended, supplemented, amended and restated or otherwise in modified and in effect from time to time.

SECTION 5.1.9 Lien Search; Recordings and Filings.

(a) The Administrative Agent shall have received results of a recent search by a Person satisfactory to the Administrative Agent that there are no UCC, judgment or Tax lien filings on any of the assets of the Borrower in each relevant jurisdiction except for (i) Liens pursuant to the Loan Documents and (ii) Liens to be discharged on or prior to the Effective Date pursuant to documentation reasonably satisfactory to the Administrative Agent.

(b) Arrangements reasonably satisfactory to the Administrative Agent shall have been made for filing, registration or recordation of all financing statements and other documents required to be filed, registered or recorded in order to create, in favor of the Administrative Agent for the benefit of the Lenders, a perfected, first priority lien in each office in each jurisdiction in which such filings, registrations and recordations are required to perfect the security interests created by the Borrower Security Agreement, and any other action required in the judgment of the Administrative Agent to perfect such security interests as such first priority liens.

SECTION 5.1.10 Conditions to Other Financings. The Administrative Agent shall have received confirmation from an Authorized Representative of the Borrower that all of the conditions precedent to the closing and funding of (a) the Midwest Notes and (b) the Midwest Credit Agreement have been satisfied or waived in accordance with their respective terms.

SECTION 5.2 All Credit Extensions. The obligation of each Lender and each Issuing Lender to make any Credit Extension (including the initial Credit Extension) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.2.

SECTION 5.2.1 Initial Credit Extension. Prior to the initial Credit Extension, the Administrative Agent shall have received a certificate from an Authorized Representative of the Borrower calculating the Interest Coverage Ratio for the immediately preceding four Fiscal Quarters and the Recourse Debt to Recourse Capital Ratio as of March 31, 2004.

SECTION 5.2.2 Representations and Warranties; No Default. Both before and after giving effect to any Credit Extension (but, if any Default of the nature referred to in Section 8.1.5 or Significant Collateral Party Event shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds of such Credit Extension), the following statements shall be true and correct:

(a) the representations and warranties set forth in Article VI shall be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); and

(b) no (i) Default, (ii) Event of Default or (iii) Significant Collateral Party Event has occurred and is continuing or would result from such Credit Extension.

SECTION 5.2.3 Borrowing Request. The Administrative Agent shall have received, in the case of Loans, a Borrowing Request or, in the case of a Letter of Credit, a Letter of Credit Application for such Credit Extension. Each of the delivery of a Borrowing Request or Letter of Credit Application and the acceptance by the Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct.

SECTION 5.2.4 Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of the Borrower shall be satisfactory in form and substance to the Administrative Agent and its counsel.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

In order to induce the Administrative Agent and each Lender to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants, with respect to itself and with respect to the Collateral Parties, unto the Administrative Agent and each Lender as set forth in this Article VI.

SECTION 6.1 Organization; Power; Compliance with Law and Contractual Obligations. Each of the Borrower and the Collateral Parties (and each Subsidiary of a Collateral Party) (a) is a corporation or limited liability company validly organized and existing and in good standing under the laws of the state of its incorporation or organization, (b) is duly qualified to do business and is in good standing as a foreign corporation or limited liability company in each jurisdiction where the nature of its business requires such qualification, (c) in the case of the Borrower, has all requisite corporate or limited liability company power and authority and holds all material requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under each Loan Document and to conduct its business substantially as currently conducted by it and (d) is in compliance with all laws, governmental regulations (including ERISA and Federal Reserve regulations), court decrees, orders and Contractual Obligations applicable to it, except, with respect to clauses (b), (c) and (d) to the

extent that the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

SECTION 6.2 Due Authorization; Non-Contravention. The execution, delivery and performance by the Borrower of each Loan Document are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not:

(a) contravene the Borrower's Organic Documents;

(b) contravene any law, governmental regulation, court decree or order or material Contractual Obligation binding on or affecting the Borrower; or

(c) result in, or require the creation or imposition of, any Lien on any of the Borrower's properties other than Liens permitted pursuant to Section 7.2.2.

SECTION 6.3 Governmental Approval; Regulation.

(a) No authorization, consent, approval, license, exemption of or filing or registration with any court or governmental authority or regulatory body ("Governmental Approval") is required for the Borrower to execute and perform its obligations under each Loan Document to which it is a party, except for those which have been duly obtained or effected. No material Governmental Approval is required for the Borrower and each Collateral Party (and each Subsidiary of a Collateral Party) to carry on its business, except for those which have been duly obtained or effected.

(b) The Borrower is not subject to any regulation as an "investment company" subject to the Investment Company Act of 1940, as amended, or as a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" subject to the Public Utility Holding Company Act of 1935, as amended ("PUHCA"), except Section 9(a)(2) thereof. The Borrower is not otherwise subject to any regulation as a "public utility" under any other applicable law, rule or regulation, which would have a Material Adverse Effect.

SECTION 6.4 Validity. Each Loan Document constitutes the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms (except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity).

SECTION 6.5 Financial Information. The most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries and the related consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries, copies of which have been furnished to the Administrative Agent pursuant to Section 7.1.1(a) have been prepared in accordance with GAAP consistently applied, and present fairly in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as at the dates thereof and the results of their operations for the periods then ended.

SECTION 6.6 No Material Adverse Change. There has not occurred any event or condition having a Material Adverse Effect since December 31, 2003.

SECTION 6.7 Litigation. There is no pending or, to the knowledge of the Borrower, threatened litigation, action, proceeding, or labor controversy affecting the Borrower or the Collateral Parties (and each Subsidiary of a Collateral Party), or any of its properties, businesses, assets or revenues, which, if adversely determined (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would have a Material Adverse Effect or which purports to adversely affect the legality, validity or enforceability of this or any Loan Document.

SECTION 6.8 Ownership of Properties. The Borrower owns good and marketable title to, or a valid leasehold interest in or other enforceable interest in all properties and assets, real and personal,

tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights) purported to be owned, leased or held by it, free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.2.2.

SECTION 6.9 Taxes. Each of the Borrower and the Collateral Parties (and each Subsidiary of a Collateral Party) has filed all tax returns and reports required by law to have been filed by it and has paid all Taxes thereby shown to be owing, except any such Taxes which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.

SECTION 6.10 Pension and Welfare Plans. During the consecutive twelve-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Borrowing hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could reasonably be expected to result in the incurrence by the Borrower or any member of the Controlled Group of any material liability (other than liabilities incurred in the ordinary course of maintaining the Pension Plan), fine or penalty. Neither the Borrower nor any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan which could reasonably be expected to have a Material Adverse Effect, other than liability for continuation coverage described in Part 6 of Title I of ERISA.

SECTION 6.11 Environmental Warranties.

(a) All facilities and property owned or leased by the Borrower or any of its Subsidiaries or Partnerships have been, and continue to be, owned or leased by the Borrower and its Subsidiaries in compliance with all Environmental Laws, except where the failure so to comply would not have, or be reasonably expected to have, a Material Adverse Effect.

(b) There are no pending or, to the knowledge of the Borrower, threatened:

(i) claims, complaints, notices or requests for information received by the Borrower or any of the Collateral Parties (and each Subsidiary of a Collateral Party) from governmental authorities with respect to any alleged violation by the Borrower or any of the Collateral Parties (and each Subsidiary of a Collateral Party) or Joint Enterprises of any Environmental Law that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect; or

(ii) complaints, notices or inquiries to the Borrower or any of the Collateral Parties (and each Subsidiary of a Collateral Party) from governmental authorities regarding potential liability under any Environmental Law that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect.

(c) There have been no Releases (as defined under any Environmental Law) of Hazardous Materials at, on or under any property now or previously owned or leased by the Borrower or any of the Collateral Parties (and each Subsidiary of a Collateral Party) that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect.

(d) The Borrower or each of the Collateral Parties (and each Subsidiary of a Collateral Party) has obtained and is in compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary for the Person's business, except where the failure to obtain, maintain or comply with such permits, certificates, approvals, licenses or other authorizations would not have, or be reasonably expected to have, a Material Adverse Effect.

(e) To the reasonable knowledge of the Borrower, no property now or previously owned or leased by each of the Borrower or any of the Collateral Parties (and each Subsidiary of a Collateral Party) or Joint Enterprises is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to any Environmental Law, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up.

(f) No conditions exist at, on or under any property now or previously owned or leased by each of the Borrower or any of the Collateral Parties (and each Subsidiary of a Collateral Party) which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law which liability would have, or may reasonably be expected to have, a Material Adverse Effect.

SECTION 6.12 Regulations T, U and X. Neither the Borrower nor any of the Collateral Parties is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation T, U or X. Terms for which meanings are provided in F.R.S. Board Regulation T, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section 6.12 with such meanings.

SECTION 6.13 Accuracy of Information. All material factual information heretofore or contemporaneously furnished by the Borrower in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby (other than projections and other "forward-looking" information which have been prepared on a reasonable basis and in good faith by the Borrower) is, and all other such written factual information hereafter furnished by the Borrower in writing to the Administrative Agent or any Lender will be, true and materially accurate in every material respect on the date as of which such information is dated or certified and as of the date of execution and delivery of this Agreement by the Administrative Agent and such Lender, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not materially misleading.

ARTICLE VII

COVENANTS

SECTION 7.1 Affirmative Covenants. The Borrower agrees with the Administrative Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will, and will cause each of its Subsidiaries, the Collateral Parties and its Joint Enterprises, it may have now or in the future, to perform the obligations set forth in this Section 7.1.

SECTION 7.1.1 Financial Information, Reports, Notices. The Borrower will furnish, or will cause to be furnished, to the Administrative Agent copies of the following financial statements, reports, notices and information:

(a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, consolidated balance sheets of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by an Authorized Representative with responsibility for financial matters;

(b) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Borrower, commencing with the 2004 Fiscal Year, a copy of the annual audit report for such Fiscal Year for the Borrower and its Consolidated Subsidiaries, including therein consolidated balance sheets of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Year

and consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for such Fiscal Year, and accompanied by the unqualified opinion of Pricewaterhouse Coopers LLP or other internationally recognized independent auditors selected by the Borrower which report shall state that such consolidated financial statements present fairly in all material respects the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior periods;

(c) concurrently with the delivery of financial statements referred to in Sections 7.1.1.(a) and 7.1.1(b), a certificate, executed by the controller, treasurer or chief financial officer of the Borrower, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Administrative Agent) compliance with the financial covenants set forth in Section 7.2.9 and Section 7.2.10;

(d) as soon as possible and in any event within five (5) Business Days after any Authorized Representative of the Borrower obtains knowledge of the occurrence of each Default, a statement of such Authorized Representative setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto;

(e) as soon as possible and in any event within five (5) Business Days after (x) the occurrence of any material adverse development with respect to any litigation, action, proceeding, or labor controversy of the type described in Section 6.7 or (y) the commencement of any labor controversy, litigation, action, proceeding of the type described in Section 6.7, notice thereof and, upon request of the Administrative Agent, copies of all non-privileged documentation relating thereto;

(f) promptly after the sending or filing thereof, copies of all reports and registration statements which the Borrower or any Collateral Party (and each Subsidiary of a Collateral Party) files with the Securities and Exchange Commission or any national securities exchange;

(g) immediately upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan (other than a standard termination under ERISA Section 4041(b)), or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower or any member of the Controlled Group of any material liability (other than liabilities incurred in the ordinary course of maintaining the Pension Plan), fine or penalty, or any increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit which has a Material Adverse Effect, notice thereof and copies of all documentation relating thereto;

(h) as soon as known, any changes in Borrower's Debt Rating by Moody's or S&P or any other rating agency which maintains a Debt Rating on the Borrower;

(i) as soon as known, the occurrence of any Affiliate Bankruptcy Event;

(j) as soon as possible and in any event within five (5) Business Days after any Authorized Officer of the Borrower obtains knowledge of the occurrence of each Significant Collateral Party Event, a statement of such Authorized Representative setting forth the details of such Significant Collateral Party Event and a calculation of the Interest Coverage Ratio on a Pro Forma basis as required by Section 7.2.9.

(k) copies of the documents governing Permitted Refinancing Indebtedness of each Financed Subsidiary referred to in the definition of "Correlative Financing Provisions" and all amendments, supplements and modifications thereto; and

(l) other information reasonably requested by the Administrative Agent.

SECTION 7.1.2 Compliance with Laws. The Borrower will, and will cause each of the Collateral Parties (and each Subsidiary of a Collateral Party) and will use reasonable efforts to cause each of its Joint Enterprises (to the extent consistent with its obligations to other members of such Joint Enterprise) to, comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include the payment, before the same become delinquent, of all Taxes imposed upon it or upon its property (except to the extent non-compliance would not reasonably be expected to have a Material Adverse Effect and to the extent that such Taxes are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books); provided that, in the case of each Financed Enterprise, compliance with the Correlative Financing Provisions shall be deemed to be compliance by such Financed Enterprise with this Section 7.1.2 (provided that, in the event that the Financed Enterprise shall not be in compliance with the Correlative Financing Provisions, this Section 7.1.2 will apply to such Financed Enterprise without giving effect to the Correlative Financing Provision).

SECTION 7.1.3 Maintenance of Properties. The Borrower will, and will use reasonable efforts to cause each of its Subsidiaries and Partnerships to, maintain, preserve, protect and keep its property and equipment in good repair, working order and condition (ordinary wear and tear excepted), and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless the Borrower determines in good faith that the continued maintenance of any of its properties or equipment is no longer economically desirable and except where the failure so to do would not have a Material Adverse Effect; provided that, in the case of each Financed Enterprise, compliance with the Correlative Financing Provisions shall be deemed to be compliance by such Financed Enterprise with this Section 7.1.3 (provided that, in the event that the Financed Enterprise shall not be in compliance with the Correlative Financing Provisions, this Section 7.1.3 will apply to such Financed Enterprise without giving effect to the Correlative Financing Provision).

SECTION 7.1.4 Insurance. The Borrower will, and will cause each of the Collateral Parties (and each Subsidiary of a Collateral Party) and will use reasonable efforts to cause each of its Joint Enterprises (to the extent consistent with its obligations to other members of such Joint Enterprise) to maintain or cause to be maintained with responsible insurance companies insurance with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses and in a similar geographic region. In the case of each Financed Enterprise, compliance with the Correlative Financing Provisions shall be deemed to be compliance by such Financed Enterprise with this Section 7.1.4 (provided that, in the event that the Financed Enterprise shall not be in compliance with the Correlative Financing Provisions, this Section 7.1.4 will apply to such Financed Enterprise without giving effect to the Correlative Financing Provision).

SECTION 7.1.5 Books and Records. The Borrower will, and will cause each of its active Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Administrative Agent and each Lender or any of their respective representatives (at the Administrative Agent's or such Lender's expense), at reasonable times and intervals upon reasonable prior notice, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant. The Borrower will at any reasonable time and from time to time upon reasonable prior notice, permit the Administrative Agent and the Lenders or any of their respective agents or representatives to examine and make copies of and abstracts from the records and books of account of the Borrower (at the Administrative Agent's or such Lender's expense); provided that by virtue of this Section 7.1.5 the Borrower shall not be deemed to have waived any right to confidential treatment of the informational obtained, subject to the provisions of applicable law or court order.

SECTION 7.1.6 Environmental Covenant. The Borrower will, and will use reasonable efforts to cause each of its Subsidiaries and Partnerships to:

(a) use and operate all of its facilities and properties in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws, in each case where the failure to do so may reasonably be expected to have a Material Adverse Effect;

(b) promptly cure and have dismissed with prejudice to the reasonable satisfaction of the Administrative Agent any actions and proceedings relating to compliance with Environmental Laws where such action or proceeding may reasonably be expected to have a Material Adverse Effect; provided that the Borrower or such Subsidiary or Partnership may postpone such cure and dismissal during any period in which it is diligently pursuing any available administrative review proceedings, remedial actions or appeals with respect to such action or proceeding so long as such postponement would not be reasonably likely to have a Material Adverse Effect; and

(c) provide such non-privileged information as the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 7.1.6.

SECTION 7.1.7 Conduct of Business and Maintenance of Existence. The Borrower will, and will cause each of the Collateral Parties (and each Subsidiary of a Collateral Party) and will use reasonable efforts to cause each of its Joint Enterprises (to the extent consistent with its obligations to other members of such Joint Enterprise) to, continue to engage in business of the same type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all material rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.2.4; provided that, in the case of each Financed Enterprise, compliance with the Correlative Financing Provisions shall be deemed to be compliance by such Financed Enterprise with this Section 7.1.7 (provided that, in the event that the Financed Enterprise shall not be in compliance with the Correlative Financing Provisions, this Section 7.1.7 will apply to such Financed Enterprise without giving effect to the Correlative Financing Provision).

SECTION 7.1.8 Use of Proceeds. On the Effective Date, the Borrower will repay and/or replace existing Indebtedness of the Borrower (or its Affiliates) in an amount equal to the total Commitment Amount. Any proceeds of Loans will be used, from time to time, for general corporate purposes and working capital requirements of the Borrower; provided, that if a Default or Event of Default has occurred and is continuing, the Borrower will not use such proceeds to make Restricted Payments.

SECTION 7.2 Negative Covenants. The Borrower agrees with the Administrative Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will, and will cause each of its Subsidiaries, the Collateral Parties and Joint Enterprises, it may have now or in the future, to perform the obligations set forth in this Section 7.2.

SECTION 7.2.1 Restrictions on Indebtedness.

(a) (i) The Borrower will not create, incur, assume or suffer to exist any secured Indebtedness other than (A) Capitalized Lease Liabilities and (B) other secured Indebtedness of any kind whatsoever existing on the Effective Date, and (ii) Non-Recourse Debt with respect to which the Borrower has pledged the stock of a Subsidiary in order to secure initial

project financing obtained or being obtained after the Effective Date hereof by such Subsidiary (or the Partnership in which such Subsidiary is a partner).

(b) The Borrower will not, will not permit the Collateral Parties (and each Subsidiary of a Collateral Party) and will use reasonable efforts to not permit its Joint Enterprises (to the extent consistent with such Collateral Party's or such Subsidiary of a Collateral Party's obligations to other members of such Joint Enterprise) to, create, incur, assume or suffer to exist any Indebtedness other than:

(i) Indebtedness of the Collateral Parties, each Subsidiary of a Collateral Party, or its Joint Enterprises of any kind whatsoever existing on the Effective Date;

(ii) Permitted Refinancing Indebtedness;

(iii) Permitted Intercompany Indebtedness;

(iv) interest rate hedging obligations of the Borrower with respect to Indebtedness of the Borrower; and

(v) Indebtedness secured by Liens set forth on Schedule 7.2.1;

provided that, in the case of each Financed Enterprise, compliance with the Correlative Financing Provisions shall be deemed to be compliance by such Financed Enterprise with this Section 7.2.1 (provided that, in the event that the Financed Enterprise shall not be in compliance with the Correlative Financing Provisions, this Section 7.2.1 will apply to such Financed Enterprise without giving effect to the Correlative Financing Provision).

SECTION 7.2.2 Liens. The Borrower will not, and will not permit the Collateral Parties (and each Subsidiary of a Collateral Party), and will use reasonable efforts to not permit its Joint Enterprises (to the extent consistent with its obligations to other members of such Joint Enterprise) to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except:

(a) any Lien existing on the property of the Borrower, the Collateral Parties, each Subsidiary of a Collateral Party and each Joint Enterprise on the Effective Date or Liens securing Permitted Refinancing Indebtedness of the Borrower, the Collateral Parties, each Subsidiary of a Collateral Party and each Joint Enterprise; provided however, that the new Lien shall be limited to all or part of the same property and assets that secured the original Lien (plus repairs, improvements and additions to such property or assets);

(b) Liens for Taxes not at the time delinquent or thereafter payable without penalty or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

(c) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

(d) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; and

(e) judgment Liens in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies;

provided that (i) in the case of each Financed Enterprise, compliance with the Correlative Financing Provisions shall be deemed to be compliance by such Financed Enterprise with this Section 7.2.2 (provided that, in the event that the Financed Enterprise shall not be in compliance with the Correlative Financing Provisions, this Section 7.2.2 will apply to such Financed Enterprise without giving effect to the Correlative Financing Provision) and (ii) notwithstanding anything to the contrary in this Section 7.2.2, no intercompany note or other intercompany obligation payable to the Borrower or a Collateral Party will be pledged, encumbered or otherwise transferred (except as pledged or encumbered under, and pursuant to, the Borrower Security Agreement).

SECTION 7.2.3 Investments. The Borrower will not, and will not permit any of its Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except:

(a) Investments existing on the Effective Date;

(b) Cash Equivalent Investments;

(d) Investments in the Collateral Parties or its Joint Enterprises in the ordinary course of business;

(e) Investments permitted pursuant to Section 7.2.4(b);

(f) Investments in the Collateral Parties, Subsidiaries of a Collateral Party or its Joint Enterprises primarily engaged in the power generation, power sales or power transmission business; and

(g) Investments in any Subsidiary existing on the Effective Date and any other Person if as a result of such Investment such Person becomes a Collateral Party or a Subsidiary of a Collateral Party;

provided that, in the case of each Financed Enterprise, compliance with the Correlative Financing Provisions shall be deemed to be compliance by such Financed Enterprise with this Section 7.2.3 (provided that, in the event that the Financed Enterprise shall not be in compliance with the Correlative Financing Provisions, this Section 7.2.3 will apply to such Financed Enterprise without giving effect to the Correlative Financing Provision).

SECTION 7.2.4 Consolidation, Merger. The Borrower will not, and will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except:

(a) any such Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any other Subsidiary, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary;

(b) so long as no Default or Significant Collateral Party Event has occurred and is continuing or would occur after giving effect thereto, the Borrower or any of its Subsidiaries may purchase all or substantially all of the assets of any Person, or (in the case of any such Subsidiary) acquire such person by merger; and

(c) so long as no Default or Significant Collateral Party Event has occurred and is continuing or would occur after giving effect thereto, the Borrower may consolidate with or merge into any other Person, or convey, transfer or lease its properties and assets substantially as an entirety to any person, or permit any Person to merge into or consolidate with the Borrower if (i) the Borrower is the surviving corporation or the surviving corporation or purchaser or lessee is a corporation incorporated under the laws of the United States of

America or Canada and assumes the Obligations and (ii) the surviving corporation has long term unsecured Debt Ratings of at least BBB- from S&P and Baa3 from Moody's (with a stable outlook from both rating agencies).

SECTION 7.2.5 Asset Dispositions. The Borrower will not, will not permit the Collateral Parties (and each Subsidiary of a Collateral Party) to and will use reasonable efforts to not permit its Joint Enterprises (to the extent consistent with its obligations to other members of such Joint Enterprise) to, Dispose of, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or any substantial part of its assets (including accounts receivable and capital stock of Subsidiaries) to any Person, unless:

(a) such Disposition, lease, contribution, conveyance or grant is to an unaffiliated third party on an arm's-length basis; and

(b) at least 75% of the consideration to be received is paid in cash or Cash Equivalent Investments and such remaining 25% is not a debt instrument of the Borrower or any of its Affiliates (provided that for purposes of this provision, (i) any amounts deposited into an escrow or other type of holdback account and any consideration in the form of readily marketable securities shall be deemed to be cash, (ii) customary purchase price adjustments may be settled on a non-cash basis and (iii) the assumption of Indebtedness relating to the asset being Disposed shall be disregarded for the purposes of this provision);

provided that, in the case of each Financed Enterprise, compliance with the Correlative Financing Provisions shall be deemed to be compliance by such Financed Enterprise with clauses (a) and (b) this Section 7.2.5 (provided that, in the event that the Financed Enterprise shall not be in compliance with the Correlative Financing Provisions, this Section 7.2.5 will apply to such Financed Enterprise without giving effect to the Correlative Financing Provision).

SECTION 7.2.6 Transactions with Affiliates. The Borrower will not enter into, or cause, suffer or permit to exist any arrangement or contract with any of its Affiliates unless such arrangement or contract is fair and equitable to the Borrower and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower with a Person which is not one of its Affiliates; provided that, (a) the Leveraged Lease Transaction and the Leveraged Lease Basic Documents and (b) any other arrangement or contract between the Borrower and any of its Affiliates existing on the Effective Date shall be deemed not to be contracts or arrangements with an Affiliate for the purposes of this Section 7.2.6; provided further that, procurement, sales and trading transactions between the Borrower and EMMT or any other Affiliate engaged in the business of marketing and trading fuel, emissions credits, electric generation or any transaction related thereto, in each case, shall be deemed not to be a Transaction with an Affiliate for the purposes of this Section 7.2.6.

SECTION 7.2.7 Restricted Payments. The Borrower will not, and will not permit the Collateral Parties, to make a Restricted Payment if an Event of Default has occurred and is continuing after giving effect to such Restricted Payment.

SECTION 7.2.8 Restrictive Agreements. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding any Loan Document) prohibiting:

(a) the ability of the Borrower to amend or otherwise modify any Loan Document; or

(b) the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrower by way of dividend, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments ("Subsidiary Payments"), or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower where such prohibition or restriction has a Material Adverse Effect.

The restriction set forth in clause (b) above shall not apply to prohibitions or restrictions on Subsidiary Payments directly or indirectly to the Borrower set forth in any agreement entered into in connection with a refinancing of any Indebtedness of the Borrower or any of its Subsidiaries (each such agreement entered into after the Effective Date, a "Restrictive Financing Document") if, prior to entering into such Restrictive Financing Document, the Borrower shall have delivered to the Administrative Agent: (A) a certificate of an Authorized Representative stating that the projected financial or coverage ratios of the affected Subsidiary as calculated on the basis of the pro forma financials prepared in good faith on the basis of reasonable assumptions in connection with, and after giving effect to, the transactions contemplated by such Restrictive Financing Document will, during the remaining life to maturity of the Obligations, equal or exceed the financial or coverage ratios, if any, required for the affected Subsidiary to make any Subsidiary Payments directly or indirectly to the Borrower in accordance with such Restrictive Financing Document; and (B) letters from Moody's and S&P confirming the then current Debt Rating.

SECTION 7.2.9 Interest Coverage. The Borrower will (a) at the end of each of its Fiscal Quarters and (b) after the occurrence of any Significant Collateral Party Event (after recalculating the Interest Coverage Ratio give Pro Forma effect to each Significant Collateral Party Event that has occurred and continuing), maintain an Interest Coverage Ratio for the immediately preceding four consecutive Fiscal Quarters of the Borrower of not less than 1.30 to 1.00; provided, that, at any time the Administrative Agent receives notice from the Borrower (or otherwise becomes aware) that any such Significant Collateral Party Event is no longer continuing or as directed by the Required Lenders, the Interest Coverage Ratio shall be recalculated giving Pro Forma effect to such Significant Collateral Party Event no longer continuing.

SECTION 7.2.10 Recourse Debt to Recourse Capital Ratio. The Borrower will at the end of each of its Fiscal Quarters maintain a Recourse Debt to Recourse Capital Ratio of not more than 0.675 to 1.00.

SECTION 7.2.11 ERISA. The Borrower will not engage in any prohibited transactions under Section 406 of ERISA or under Section 4975 of the Internal Revenue Code, which would subject the Borrower to any tax, penalty or other liabilities having a Material Adverse Effect.

ARTICLE VIII

EVENTS OF DEFAULT

SECTION 8.1 Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default".

SECTION 8.1.1 Non-Payment of Obligations. (a) The Borrower shall default in the payment when due of principal of any Loan or LC Exposure or the Borrower shall fail to Cash Collateralize its LC Exposure when due or (b) the Borrower shall default (and such default shall continue unremedied for a period of five (5) Business Days) in the payment when due of interest on any Loan or LC Exposure, any fees pursuant to Section 3.3 or of any other Obligation.

SECTION 8.1.2 Breach of Warranty. Any representation or warranty of the Borrower made or deemed to be restated or remade in any Loan Document or any other writing or certificate furnished by or on behalf of the Borrower to the Administrative Agent or any Lender for the purposes of or in connection with any Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made or deemed made in any material respect.

SECTION 8.1.3 Non-Performance of Certain Covenants and Obligations. The Borrower shall default in the due performance and observance of any of its obligations under Section 7.2 (other than Sections 7.2.3 and 7.2.6).

SECTION 8.1.4 Non-Performance of Other Covenants and Obligations. The Borrower shall default in the due performance and observance of any other covenant or agreement contained in any Loan Document, and such default shall continue unremedied for a period of 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent.

SECTION 8.1.5 Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness of the Borrower or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity, in either case, such Indebtedness having a principal amount, individually or in the aggregate, in excess of $20,000,000 (other than Indebtedness described in Section 8.1.1).

SECTION 8.1.6 Judgments. Any judgment or order for the payment of money in excess of $20,000,000 (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) shall be rendered against the Borrower, a Collateral Party or a Subsidiary of a Collateral Party and either:

(a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or

(b) there shall be any period of ninety (90) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.

provided that, with respect to any of the Westside Entities, none of the events described in clauses (a) and (b) shall constitute a Default or an Event of Default unless such event has a Material Adverse Effect.

SECTION 8.1.7 Pension Plans. Any of the following events shall occur with respect to any Pension Plan:

(a) the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $20,000,000; or

(b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.

SECTION 8.1.8 Bankruptcy, Insolvency. The Borrower, a Collateral Party or a Subsidiary of a Collateral Party shall:

(a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due;

(b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower, a Collateral Party or a Subsidiary of a Collateral Party or a substantial portion of its property, or make a general assignment for the benefit of creditors;

(c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestration or other custodian for the Borrower, a Collateral Party or a Subsidiary of a Collateral Party or for a substantial part of its property, and such trustee, receiver, sequestration or other custodian shall not be discharged within 60 days, provided that nothing in the Loan Documents shall prohibit or restrict any right the Administrative Agent or any Lender may have under applicable law to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and the Borrower, a Collateral Party or a Subsidiary of a Collateral Party, as applicable, shall not object to any such appearance);

(d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower, a Collateral Party or a Subsidiary of a Collateral Party, and, if any such case or proceeding is not commenced by the Borrower, a Collateral Party or a Subsidiary of a Collateral Party, such case or proceeding shall be consented to or acquiesced in by the Borrower, a Collateral Party or a Subsidiary of a Collateral Party or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that nothing in the Loan Documents shall prohibit or restrict any right the Administrative Agent or any Lender may have under applicable law to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and the Borrower, a Collateral Party or a Subsidiary of a Collateral Party shall not object to any such appearance); or

(e) take any corporate action authorizing, or in furtherance of, any of the foregoing;

provided that, with respect to any of the Westside Entities, none of the events described in clauses (a) through (e) shall constitute a Default or an Event of Default unless such event has a Material Adverse Effect.

SECTION 8.1.9 Substantive Consolidation. In connection with an Affiliate Bankruptcy Event, any Person shall seek (whether by adversarial proceeding, motion or otherwise) the substantive consolidation of any part of the assets, properties, estate or liabilities of the Borrower with the estate or liabilities of any Person subject of such Affiliate Bankruptcy Event and such application shall be consented to or acquiesced in by the Borrower or shall result in an order for such substantive consolidation or shall remain for 60 days undismissed, provided that nothing in the Loan Documents shall prohibit or restrict any right the Administrative Agent or any Lender may have under applicable law to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend its rights under the Loan Documents (and the Borrower shall not object to any such appearance).

SECTION 8.1.10 Unenforceability of Documents. (a) Any of the Loan Documents shall become unenforceable or the enforceability thereof shall be contested by the Borrower or (b) any Liens against any of the Collateral shall cease to be a first priority, perfected security interest in favor of the Administrative Agent or the enforceability thereof shall be contested by the Borrower or (c) the Borrower or any Affiliate shall enter into any agreements prohibiting the Borrower to amend or otherwise modify the Loan Documents.

SECTION 8.2 Action if Bankruptcy. If any Event of Default described in clauses (a) through (e) of Section 8.1.8 shall occur with respect to the Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other monetary Obligations shall automatically be and become immediately due and payable, without notice or demand.

SECTION 8.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (a) through (e) of Section 8.1.8) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by written notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other monetary Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment and/or, as the case may be, the Commitments shall terminate. The rights provided for in the Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising.

SECTION 8.4 Rescission of Declaration. Any declaration made pursuant to Section 8.3 may, should the Required Lenders in their sole and absolute discretion so elect, be rescinded by written notice to the Borrower at any time after the principal of the Loan shall have become due and payable, but before any judgment or decree for the payment of the monies so due, or any part thereof, shall have been entered; provided that the Borrower shall have paid all arrears of interest upon the Loans and all other amounts then owed to the Administrative Agent and the Lenders including all costs, expenses and liabilities incurred by the Administrative Agent and the Lenders in respect of such declaration and all consequences thereof (except the principal of the Loans which by such declaration shall have become payable) and every other Event of Default shall have been made good, waived or cured; provided that no such rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon.

ARTICLE IX

THE ADMINISTRATIVE AGENT

SECTION 9.1 Actions.

(a) Each Lender and each Issuing Lender hereby appoints CNAI as its Administrative Agent under and for purposes of each Loan Document. Each Lender and each Issuing Lender authorizes the Administrative Agent to act on its behalf under each Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in any Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Issuing Lender or any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into any Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

(b) Each Lender hereby agrees to indemnify (which indemnity shall survive any termination of this Agreement) the Agent-Related Persons pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of

any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent-Related Persons in any way relating to or arising out of any Loan Document, including reasonable attorneys' fees, and as to which the Administrative Agent is not reimbursed by the Borrower; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted from the Agent-Related Person's gross negligence or willful misconduct. No Agent-Related Persons shall be required to take any action under any Loan Document, or to prosecute or defend any suit in respect of or any Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent shall be or become, in its determination, inadequate, the Agent-Related Person may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given.

SECTION 9.2 Funding Reliance. Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 12:00 Noon, New York City time, on the Business Day prior to the Effective Date that such Lender will not make available the amount which would constitute its Percentage of the Borrowing on the Effective Date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, may, but shall not be required to, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing; provided that if such Lender makes available the amount which is its Percentage of the Borrowing on or before the next Business Day following the day when due, the interest rate payable on such amount shall be the Federal Funds Effective Rate.

SECTION 9.3 Exculpation. No Agent-Related Person shall be liable to any Lender for any action taken or omitted to be taken by it under or any Loan Document, or in connection therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of any Loan Document, nor to make any inquiry respecting the performance by the Borrower of its obligations under any Loan Document. Any such inquiry which may be made by the Administrative Agent shall not obligate it to make any further inquiry or to take any action. Each Agent-Related Person shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Administrative Agent believes to be genuine and to have been presented by a proper Person.

SECTION 9.4 Successor. The Administrative Agent may resign as such at any time upon at least 30 days' prior notice to the Borrower, all Lenders and all Issuing Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may, within ten days after such notice and with the consent of the Borrower (not to be unreasonably withheld), appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, after notice to and consultation with the Borrower, appoint a successor Administrative Agent, which shall be one of the Lenders or an Assignee, and shall have a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may

reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After the effective date of any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of (a) this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and (b) Section 10.3 and Section 10.4 shall continue to inure to its benefit.

SECTION 9.5 Loans by CNAI. CNAI shall have the same rights and powers with respect to the Loans made by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Administrative Agent. CNAI and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if CNAI were not the Administrative Agent hereunder.

SECTION 9.6 Reliance by Administrative Agent.

(a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Borrower or any of its Affiliates), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any Loan Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

(b) For purposes of determining compliance with the conditions specified in Section 5.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender.

SECTION 9.7 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, Event of Default or Significant Collateral Party Event, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default, Event of Default or Significant Collateral Party Event and stating that such notice is a "notice of default". The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default, Event of Default as may be requested by the Required Lenders in accordance with Article VIII; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

SECTION 9.8 Credit Decisions. Each Lender acknowledges that it has, independently of the Agent-Related Person and each other Lender, and based on such Lender's review of the financial information of the Borrower, the Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender

has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Administrative Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under any Loan Document.

SECTION 9.9 Copies. The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower). The Administrative Agent will distribute to each Lender each document or instrument (including each document or instrument delivered by the Borrower to the Administrative Agent pursuant to Articles V and VII) received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement.

SECTION 9.10 Collateral. Except as otherwise provided in Section 10.1(a) with respect to this Agreement, the Administrative Agent may, with the prior consent of the Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Loan Documents to which it is a party; provided that, without the prior consent of each Lender, the Administrative Agent shall not (except as provided herein or in the Borrower Security Agreement) release any Collateral or otherwise terminate any Lien under the Borrower Security Agreement, agree to additional obligations being secured by the Collateral (unless the Lien for such additional obligations shall be junior to the Lien in favor of the other obligations secured by the Borrower Security Agreement, in which event the Administrative Agent may consent to such junior Lien, provided that it obtains the consent of the Required Lenders thereto), alter the relative priorities of the obligations entitled to the benefits of the Liens created under the Borrower Security Agreement, except that no such consent shall be required, and the Administrative Agent is hereby authorized, to release any Lien covering property that is the subject of either a disposition of property permitted hereunder or a disposition to which the Required Lenders have consented.

ARTICLE X

MISCELLANEOUS PROVISIONS

SECTION 10.1 Waivers, Amendments.

(a) The provisions of each Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided, however, that no such amendment, modification or waiver shall (i) forgive or reduce the principal amount or extend the final scheduled date of maturity of any Loan or LC Disbursement, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Commitment without the consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section 10.1, or any percentage specified in the definition of "Required Lenders", or consent to the assignment or transfer by the Borrower of any of its rights and obligations under the Loan Documents, in each case without the written consent of all Lenders; (iii) amend, modify or waive any pro rata provision of Section 4.8 or 4.9, or any provision in the Loan Documents which provides for amounts paid in respect of the Obligations to be shared among the Lenders ratably, without the consent of all Lenders; (iv) except as provided in Section 9.10, provide for any material release of Collateral without the consent of all Lenders; or affect the interests, rights or obligations of the Administrative Agent quathe Administrative Agent or the Issuing Lenders qua the Issuing Lenders shall be made without consent of the Administrative Agent or the Issuing Lenders, as the case may be. Any such waiver and any such

amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent, the Issuing Lenders and all future holders of the Loans. In the case of any waiver, the Borrower and its Subsidiaries, the Lenders and the Administrative Agent shall be restored to their former position and rights and under the Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

(b) No failure or delay by the Administrative Agent, any Issuing Lender or any Lender in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right, or any abandonment or discontinuance of steps to enforce such power or right, preclude any other or further exercise thereof or the exercise of any other power or right. The rights and remedies of the Administrative Agent, the Issuing Lenders and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies they would otherwise have. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent, any Issuing Lender, or any Lender under any Loan Document shall, in any event, be effective unless the same is permitted by paragraph (a) of this Section 10.1, and shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.

SECTION 10.2 Notices. All notices and other communications provided to any party hereto under any Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth on the signature pages hereof or Schedule 1.1(b) or set forth in the Assignment Agreement or at such other address or facsimile number as may be designated by such party in a written notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid shall be effective five (5) Business Days after being sent or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted (if confirmed). Each Lender acknowledges and accepts the terms of the Communications Agreement and agrees that Communications (as defined in the Communications Agreement) may be made available to such Lender as provided in the Communications Agreement.

SECTION 10.3 Payment of Costs and Expenses.

(a) The Borrower agrees to pay promptly on demand all reasonable out-of-pocket costs and expenses of the Administrative Agent and the Issuing Lenders and their respective Affiliates (including the reasonable fees and out-of-pocket costs and expenses of special New York counsel and relevant local counsel to the Administrative Agent) in connection with:

(i) the negotiation, preparation, execution, delivery and administration of each Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time hereafter be required;

(ii) the preparation and review of the form of any document or instrument relevant to any Loan Document; provided, however, that the Borrower shall have no obligation to pay for the cost of the documentation of assignments or participations as provided in Section 10.11 (unless such assignment is made pursuant to Section 4.11); and

(iii) in the case of the Issuing Lenders, all out-of-pocket expenses incurred by any Issuing Lender in connection with the Issuance of any Letter of Credit or any demand for payment thereunder;

in each case, upon presentation of statement of account in reasonable detail, whether or not the transactions contemplated hereby are consummated.

(b) Without duplication of the Borrower's obligations under Section 4.7, the Borrower further agrees to pay upon demand, and to save the Administrative Agent, the Issuing Lenders and the Lenders harmless from all liability for all costs, expenses, assessments, or other charges, and any stamp or other similar Taxes which may be payable in connection with the execution, delivery or enforcement of any Loan Document, the Loans or Letter of Credit hereunder or any filing, registration, recording or perfection of any security interest contemplated by the Borrower Security Agreement. The Borrower also agrees to reimburse the Administrative Agent, each Issuing Lender and each Lender, as applicable, promptly upon demand upon presentation of a statement of account in reasonable detail for (i) all reasonable out-of-pocket costs and expenses (including fees and out-of-pocket expenses of counsel) incurred by the Administrative Agent, each Issuing Lender and each Lender in connection with the enforcement or protection of the rights in connection with this Agreement and the other Loan Documents, including its rights under this Section and including the negotiation of any restructuring or work-out, whether or not consummated, of any Obligations and (ii) all out-of-pocket costs and expenses (including fees and out-of-pocket costs and expenses of counsel) by the Administrative Agent, each Issuing Lender and each Lender in connection with the enforcement of any Obligations after an Event of Default or in connection with any insolvency proceedings; provided that, in either case, the Borrower shall not be obligated to reimburse such costs and expenses that are found in a final judgment by a court of competent jurisdiction to have been incurred in an attempt to enforce such rights and remedies that were pursued by such Administrative Agent or Lender in bad faith and without any reasonable basis in fact or law.

SECTION 10.4 Indemnification.

(a) In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments and the Loans, the Borrower hereby indemnifies, exonerates and holds the Administrative Agent, each Issuing Lender and each Lender and each of their respective Affiliates, officers, directors and employees (collectively, the "Indemnified Parties") free and harmless from and against any and all losses, costs, actions, causes of action, suits, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including any amounts paid to any Agent-Related Person pursuant to Section 9.1(b) and reasonable attorneys' fees and disbursements but excluding claims for lost profits (collectively, the "Indemnified Liabilities"), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to:

(i) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or Letter of Credit (including any refusal by any Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit;

(ii) the entering into and performance of any Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article VI not to fund any Loan);

(iii) any investigation, litigation, proceeding, or obligation related to any Environmental Law or other matter in any case arising out of the relationship of the parties under this Agreement; or

(iv) the presence, or alleged presence, on or under, or the escape, seepage, leakage, spillage, discharge, emission or release from, any real property owned, leased or operated by the Borrower or any of its Subsidiaries thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), or at any other locations regardless of whether caused by, or within the control of the Borrower, where such claim or liability arises out of the relationship of the parties under this Agreement;

whether or not such investigation, litigation or proceeding is brought by the Borrower or its Affiliates, any of their respective shareholders or creditors, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's (A) gross negligence or willful misconduct or (B) breach of such Indemnified party's obligations under this Agreement. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

(b) To the extent permitted by applicable law, no Indemnified Party shall have any liability to the Borrower or its Affiliates or any of their respective shareholders or creditors under any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, any Loan or the use of the proceeds thereof.

SECTION 10.5 Survival. The obligations of the Borrower under Sections 2.6.7, 4.3, 4.5, 4.6, 4.7, 10.3 and 10.4, and the obligations of the Lenders under Sections 9.1 and 2.6.7, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by the Borrower in each Loan Document to which it is a party shall survive the execution and delivery of such Loan Document.

SECTION 10.6 Severability. Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.

SECTION 10.7 Headings. The various headings and table of contents of each Loan Document are inserted for convenience only and shall not affect the meaning, construction or interpretation of this Agreement or any other Loan Document or any provisions hereof or thereof.

SECTION 10.8 Execution in Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be executed by the Borrower and the Administrative Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement.

SECTION 10.9 Governing Law; Entire Agreement. This Agreement, and the rights and obligations of the parties under this Agreement, shall be governed by, and construed and interpreted in accordance with, the law of the state of New York. The Loan Documents represent the agreement of the Borrower, the Administrative Agent, the Issuing Lenders and the Lenders and supersede any and all prior agreements and understandings, oral or written, relative or with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, any Issuing Lender or any Lender relative to subject matter hereof not expressly set forth or referred to in the Loan Documents.

SECTION 10.10 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that:

(a) the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent, all Issuing Lenders and all Lenders; and

(b) the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11.

SECTION 10.11 Sale and Transfer of Loans; Participations in Loans. Each Lender may assign, or sell participations in, its Loans to one or more other Persons in accordance with this Section 10.11.

SECTION 10.11.1 Assignments.

(a) Any Lender (an "Assignor") may, in accordance with applicable law, at any time and from time to time assign to any Person (an "Assignee"), with the consent of the Administrative Agent, each Issuing Lender and, except at any time a Default or Event of Default shall have occurred and be continuing, the Borrower (which consent, in each case, shall not be unreasonably withheld or delayed), all or any part of its rights and obligations under this Agreement pursuant to an Assignment Agreement, executed by such Assignee, such Assignor and any other Person whose consent is required pursuant to this paragraph, and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Assignee (other than any Lender or any Affiliate or Approved Fund thereof) shall be in an aggregate principal amount of less than $3,000,000 (other than in the case of an assignment of all of a Lender's interests under this Agreement and treating simultaneous assignments to and from Approved Funds of a single Lender as one assignment), unless otherwise agreed by the Borrower, the Administrative Agent and each Issuing Lender and; provided, further, that after giving effect to any such assignment the assigning Lender shall have Loans or Commitments remaining of at least $3,000,000 in the aggregate amount (other than in the case of an assignment of all of a Lender's interests under this Agreement and treating simultaneous assignments to and from Approved Funds of a single Lender as one assignment). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment Agreement, (i) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment Agreement, have the rights and obligations of a Lender hereunder with Loans and Commitments as set forth therein, and (ii) the Assignor thereunder shall, to the extent provided in such Assignment Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto). Any assignment or sale that does not comply with this clause (a) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.11.2.

(b) The Administrative Agent shall, on behalf of the Borrower, maintain at its address referred to on Schedule 1.1(b) a copy of each Assignment Agreement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and the principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent, the Issuing Lenders and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans or the Commitments, as the case may be, recorded therein for all purposes of this Agreement notwithstanding notice to the contrary. Any assignment of any Loan or any Commitment shall be effective only upon appropriate entries with respect thereto being made in the Register.

(c) Upon its receipt of an Assignment Agreement executed by an Assignor, an Assignee and any other Person whose consent is required by Section 10.11.1(a), together with payment to the Administrative Agent of a registration and processing fee of $3,500 (unless waived by the Administrative Agent in its discretion and provided that only one such fee shall be payable in the case of simultaneous assignments to two or more Approved Funds of a single Lender), the Administrative Agent shall (i) promptly accept such Assignment Agreement and (ii) record the information contained therein in the Register on the effective date determined pursuant thereto.

(d) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section 10.11.1 concerning assignments of Loans and Commitments relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including any pledge or assignment by a Lender of any Loan to any Federal Reserve Bank in accordance with applicable law; provided, that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.

(e) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the related Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 10.11.1, any SPC may (A) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (B) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This Section 10.11.1(e) may not be amended without the written consent of each SPC. The Granting Lender, such SPC and any assignee of such SPC shall comply with the requirements of Section 4.7 as Lender.

SECTION 10.11.2 Participations. With notice to the Borrower and the Administrative Agent, any Lender may at any time sell to one or more Persons (each of such Persons being

herein called a "Participant") participating interests in any of the Loans, Commitments or other interests of such Lender hereunder; provided, however, that:

(a) no participation contemplated in this Section 10.11.2 shall relieve such Lender from its Loans, Commitments or other obligations under any Loan Document;

(b) such Lender shall remain solely responsible for the performance of its Loans, Commitments and such other obligations;

(c) the Borrower, the Administrative Agent and the Issuing Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under each of the Loan Documents;

(d) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action under any Loan Document, except as provided in clause (f) of this Section 10.11.2;

(e) the Borrower shall not be required to pay any amount under Sections 2.6.7, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 10.3 and 10.4, that is greater than the amount which it would have been required to pay had no participating interest been sold;

(f) in no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, extend the due date of such principal, interest or fee payments or increase the amount or extend the Maturity Date of such Loans or Commitments, in each case to the extent subject to such participation;

(g) the Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 4.10 as fully as if it were a Lender hereunder; and

(h) the Borrower also agrees that each Participant shall be entitled to the benefits of Sections 4.3, 4.6 and 4.7 with respect to its participation in the Loans and Commitments outstanding from time to time as if it was a Lender; provided that, in the case of Section 4.7, such Participant shall have complied with the requirements of said Section, as if it were a Lender and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.

SECTION 10.12 USA Patriot Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.

SECTION 10.13 Other Transactions. Nothing contained herein shall preclude the Administrative Agent, any Issuing Lender or any other Lender from engaging in any transaction, in addition to those

contemplated by any Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person.

SECTION 10.14 Submission To Jurisdiction; Waivers. Each of the Borrower, the Administrative Agent, the Issuing Lenders and the Lenders hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to the Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person at its address set forth on Schedule 1.1(b) or at such other address of which the Administrative Agent shall have been notified pursuant to Section 10.2;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, indirect, exemplary, punitive or consequential damages.

SECTION 10.15 WAIVERS OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 10.16 Non-Recourse Persons. The Lenders acknowledge that no Non-Recourse Person shall have any responsibility or liability for the Obligations.

SECTION 10.17 Acknowledgments. The Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of the Loan Documents;

(b) neither the Administrative Agent, any Issuing Lender nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with any of the Loan Documents, and the relationship between Administrative Agent, the Issuing Lenders and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture is created by any of the Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.

SECTION 10.18 Confidentiality. Each of the Administrative Agent, each Issuing Lender and each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement; provided that nothing herein shall prevent the Administrative Agent, any Issuing Lender or any Lender from disclosing any such information (a) to the Administrative Agent, any Issuing Lender, any other Lender or any Affiliate of any Lender, (b) to any transferee or prospective transferee that agrees to comply with the provisions of this Section 10.18, (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its Affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy under any Loan Document. Notwithstanding anything herein to the contrary, the Borrower, Administrative Agent, each Issuing Lender and each Lender (and their Affiliates and their respective partners, officers, directors, employees, accountants, attorneys and other advisors, agents and other representatives) may disclose to any and all Persons, without limitation of any kind, any information with respect to the U.S. federal tax treatment and any facts that may be relevant to the U.S. federal tax structure of the transactions contemplated hereby and all materials of any kind (including opinions and other tax analyses) that are provided to any of them relating to such treatment and tax structure; provided, however, that none of them shall disclose any other information, the disclosure of which is otherwise limited, that is not relevant to understanding the U.S. federal tax treatment or U.S. federal tax structure of the transaction (including the identity of any party and information that could lead another to determine the identity of any party), or any other information to the extent that such disclosure could result in a violation of any federal or state securities law.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of the day and year first above written.

		EDISON MISSION ENERGY
		By:	/s/ STEVEN EISENBERG Name: Steven Eisenberg Title: Vice President
		Address for Notices:
		18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420
		Taxpayer Identification Number: 95-4031807

		CITICORP NORTH AMERICA, INC., as Administrative Agent
		By:	/s/ DALE R. GONCHER Name: Dale R. Goncher Title: Director
		Address for Notices:
		2 Penns Way, Suite 110 New Castle, DE 19720 Attention: Laura Quashne Telecopier No: (302) 894-6012

		CITICORP NORTH AMERICA, INC., as Issuing Lender
		By:	/s/ DALE R. GONCHER Name: Dale R. Goncher Title: Director
		Address for Notices:
		388 Greenwich Street, 21^st Floor New York, NY 10013 Attention: Sarah Terner Telecopier No.: (212) 921-5947

		LENDERS
		CITICORP NORTH AMERICA, INC.
		By:	/s/ DALE R. GONCHER Name: Dale R. Goncher Title: Director
		Address for Notices:
		2 Penns Way New Castle, DE 19720 Attention: Karen Riley Telecopier No.: (212) 994-0847

		CREDIT SUISSE FIRST BOSTON, Acting Through Its Cayman Islands Branch
		By:	/s/ JAMES P. MORAN Name: James P. Moran Title: Director
		By:	/s/ DENISE L. ALVAREZ Name: Denise L. Alvarez Title: Associate
		Address for Notices:
		One Madison Avenue New York, NY 10010 Attention: Ed Markowski Telecopier No.: (212) 538-6851

		JPMORGAN CHASE BANK
		By:	/s/ THOMAS L. CASEY Name: Thomas L. Casey Title: Vice President
		Address for Notices:
		1111 Fannin Street, 10^th Floor Houston, TX 77002 Attention: Debra Torres Telecopier No.: (713) 427-6307

		KBC BANK, N.V.
		By:	/s/ JEAN-PIERRE DIELS Name: Jean-Pierre Diels Title: First Vice President
		By:	/s/ ERIC RASKIN Name: Eric Raskin Title: Vice President
		Address for Notices:
		125 West 55^th Street, 10^th Floor New York, NY 10019 Attention: Rose Pagan Telecopier No.: (212) 956-5580

		LEHMAN COMMERCIAL PAPER INC.
		By:	/s/ FRANK P. TURNER Name: Frank P. Turner Title: Authorized Signatory
		Address for Notices:
		745 Seventh Avenue, 16^th Floor New York, NY 10019 Attention: Michael Herr Telecopier No.: (212) 520-0450

		UBS LOAN FINANCE LLC
		By:	/s/ WILFRED V. SAINT Name: Wilfred V. Saint Title: Director Banking Products Services, US
		By:	/s/ JOSELIN FERNANDES Name: Joselin Fernandes Title: Associate Director Banking Products Services, US
		Address for Notices:
		677 Washington Blvd. 6^th Floor South Stamford, CT 06901 Attention: Deborah Porter Telecopier No.: (203) 719-4176

SCHEDULE 1.1(a)
to Credit Agreement

COMMITMENTS

Name of Lender	Commitment
Citicorp North America, Inc.	$	19,791,666.67
Credit Suisse First Boston	$	19,791,666.67
JPMorgan Chase Bank	$	19,791,666.67
KBC Bank, N.V.	$	8,333,333.33
Lehman Commercial Paper Inc.	$	19,791,666.67
UBS Loan Finance LLC	$	12,500,000.00

SCHEDULE 1.1(b)
to Credit Agreement

LENDING OFFICES

Name of Lender	Domestic Office	Eurodollar Office
Citicorp North America, Inc.	388 Greenwich Street New York, NY 10013	388 Greenwich Street New York, NY 10013
Credit Suisse First Boston	11 Madison Avenue 13^th Floor New York, NY 10010	11 Madison Avenue 13^th Floor New York, NY 10010
JPMorgan Chase Bank	270 Park Avenue New York, NY 10017	270 Park Avenue New York, NY 10017
KBC Bank	125 West 55^th Street 10^th Floor New York, NY 10019	125 West 55^th Street 10^th Floor New York, NY 10019
Lehman Commercial Paper Inc.	3 World Financial Center 8^th Floor New York, NY 10285	3 World Financial Center 8^th Floor New York, NY 10285
UBS Loan Finance LLC	677 Washington Blvd. 6^th Floor South Stamford, CT 06901	677 Washington Blvd. 6^th Floor South Stamford, CT 06901

SCHEDULE 1.1(c)
to Credit Agreement

Collins Facility Lease Agreements

1.: Facility Lease Agreement (T1), dated as of December 15, 1999 (as amended, supplemented or otherwise modified), between Collins Holdings EME, LLC and Nesbitt Asset Recovery, Series C-1 (formerly known as Collins Trust I).
2.: Facility Lease Agreement (T2), dated as of December 15, 1999 (as amended, supplemented or otherwise modified), between Collins Holdings EME, LLC and Nesbitt Asset Recovery, Series C-2 (formerly known as Collins Trust II).
3.: Facility Lease Agreement (T3), dated as of December 15, 1999 (as amended, supplemented or otherwise modified), between Collins Holdings EME, LLC and Nesbitt Asset Recovery, Series C-3 (formerly known as Collins Trust III).
4.: Facility Lease Agreement (T4), dated as of December 15, 1999 (as amended, supplemented or otherwise modified), between Collins Holdings EME, LLC and Nesbitt Asset Recovery, Series C-4 (formerly known as Collins Trust IV).

SCHEDULE 2.6.12
to Credit Agreement

Agreed Alternate Currency Letters of Credit

None

SCHEDULE 7.2.1
to Credit Agreement

Liens

None

QuickLinks

CREDIT AGREEMENT dated as of April 27, 2004
EX-10.14 16 a2135451zex-10_14.htm EXHIBIT 10.14
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Exhibit 10.14

EXECUTION COUTERPART

SECURITY AGREEMENT

between

EDISON MISSION ENERGY

and

CITICORP NORTH AMERICA, INC.,
as Administrative Agent

Dated as of April 27, 2004

TABLE OF CONTENTS

			Page
Section 1.		Definitions	1
Section 2.		Representations and Warranties	2
Section 3.		The Pledge	2
Section 4.		Collateral Accounts; cash proceeds	3
	4.01	Collateral Accounts	3
	4.02	Investment of Balance in Collateral Accounts	4
Section 5.		Further Assurances; Remedies	5
	5.01	Delivery and Other Perfection	5
	5.02	Other Financing Statements and Liens.	5
	5.03	Special Provisions Relating to the Pledged Collateral.	6
	5.04	Credit Agreement Event of Default, Etc.	6
	5.05	Deficiency	8
	5.06	Removals, Etc.	8
	5.07	Private Sale	8
	5.08	Application of Proceeds	8
	5.09	Attorney-in-Fact	8
	5.10	Perfection	9
	5.11	Termination	9
	5.12	Further Assurances	9
Section 6.		Miscellaneous	9
	6.01	Notices	9
	6.02	Delay and Waiver	9
	6.03	Amendments, Etc.	9
	6.04	Successors and Assigns	9
	6.05	Counterparts	9
	6.06	Governing Law; Submission to Jurisdiction	10
	6.07	Headings	10
	6.08	Agents and Attorneys-in-Fact	10
	6.09	Severability	10
Annex 1—Pledged Interests

SECURITY AGREEMENT

SECURITY AGREEMENT (this "Agreement") dated as of April 27, 2004, between EDISON MISSION ENERGY, a corporation organized under the laws of Delaware (the "Obligor"), and CITICORP NORTH AMERICA, INC., as administrative agent for the Lenders and Issuing Lenders under the Credit Agreement referred to below (in such capacity, together with its successors in such capacity, the "Administrative Agent").

The Obligor, the Administrative Agent, the various financial institutions as are or may become parties thereto (collectively, the "Lenders"), and the Issuing Lenders have entered into that certain Credit Agreement (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "Credit Agreement") dated as of April 27, 2004. This Agreement is the Borrower Security Agreement referred to in the Credit Agreement.

The Obligor owns a 100% ownership interest in each of the Collateral Parties on the date hereof and has, subject to the terms and conditions of this Agreement, agreed to grant a Lien and security interest in the Pledged Collateral referred to herein.

NOW, THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and the adequacy of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings set forth in, and the interpretations applicable thereto under, the Credit Agreement. In addition, as used herein:

"Assigned Agreements" has the meaning set forth in Section 3(e).

"Big Four Companies" means Camino Energy Company, a California corporation, Southern Sierra Energy Company, a California corporation, San Joaquin Energy Company, a California corporation and Western Sierra Energy Company, a California corporation.

"Big Four Revenue" has the meaning set forth in Section 5.03(b).

"Big Four Revenue Account" means the Account, as such term is defined in the Account Control Agreement dated as of April 27, 2004 between the Obligor, the Administrative Agent and Citibank, N.A.

"Collateral Accounts" means the Big Four Revenue Account, Default Collateral Account and the LC Collateral Account.

"Credit Agreement Termination Date" means the date on which all Secured Obligations, other than contingent liabilities and Secured Obligations which are unasserted at such date, have been finally paid and satisfied in full and all Loans and Commitments have been terminated.

"Default Collateral Account" has the meaning set forth in Section 4.01(a).

"Homer City" means Edison Mission Holdings Co., a California corporation.

"Indemnitee" has the meaning set forth in Section 5.11(a).

"LC Collateral Account" has the meaning set forth in Section 4.01(b).

"MGE" means Midwest Generation EME, LLC, a Delaware limited liability company.

"Mission del Cielo" means Mission del Cielo, Inc., a Delaware corporation.

"Permitted Investments" means (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of

acquisition, the highest credit rating obtainable from S&P or from Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; and (d) fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above.

"Pledged Collateral" has the meaning set forth in Section 3.

"Pledged Interests" has the meaning set forth in Section 3(a).

"Secured Obligations" means all Obligations of the Obligor under the Loan Documents up to the amount available to be secured under the Obligor's Indebtedness (other than the Credit Agreement) without requiring the Pledged Collateral to be equally and ratably shared with the holders of such Indebtedness.

"Stock Collateral" has the meaning set forth in Section 3(c).

SECTION 2. REPRESENTATIONS AND WARRANTIES. The Obligor represents and warrants to the Administrative Agent and the other Lenders that as of the date hereof:

(a) The Obligor is the sole beneficial owner of the Pledged Collateral in which it purports to grant security interests pursuant to Section 3 and no Lien exists upon such Pledged Collateral, except for the pledges and security interests in favor of the Administrative Agent for the benefit of the Lenders created or provided for herein, which pledges and security interests constitute a first priority perfected pledge and security interest in and to all of such Pledged Collateral as provided in Section 3.

(b) The Pledged Interests evidenced by the certificates identified under the name of the Obligor in Annex 1 are duly authorized, validly existing, fully paid and non-assessable and none of the Pledged Interests is subject to any contractual restriction or any restriction under the certificate of incorporation or certificate of formation of each Collateral Party (except for any restriction contained herein).

(c) The Pledged Interests evidenced by the certificates identified under the name of the Obligor in Annex 1 constitute all the membership interests, shares or other ownership interests of any class or character of each Collateral Party, in each case, beneficially owned by the Obligor on the date hereof (whether or not registered in the name of the Obligor), and Annex 1 correctly identifies, as at the date hereof, the membership interests and shares constituting the Pledged Interests and the respective issuer, certificate numbers, class and amounts of such shares.

(d) As of the Effective Date, all Obligations of the Obligor under the Loan Documents available to be secured under the Obligor's Indebtedness (other than the Credit Agreement) without requiring the Pledged Collateral to be equally and ratably shared with the holders of such Indebtedness is $100,000,000.

SECTION 3. THE PLEDGE. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Obligor hereby pledges and grants to the Administrative Agent, for the benefit of the Lenders, a security interest in all of the Obligor's right, title and interest in the following property, whether now owned by

the Obligor or hereafter acquired and whether now existing or hereafter coming into existence (all being collectively referred to herein as "Pledged Collateral"):

(a) the shares in the Westside Entities, Homer City, Mission del Cielo and the membership interests in MGE identified in Annex 1 or other ownership interests of whatever class or character in these companies, now or hereafter owned by the Obligor, in each case together with the certificates (if any) evidencing the same (collectively, the "Pledged Interests");

(b) all membership interests, stock, securities, moneys or property representing a dividend on any of the Pledged Interests, or representing a distribution or return of capital upon or in respect of the Pledged Interests, or resulting from a split-up, revision, reclassification or any change of the Pledged Interests or otherwise received in exchange therefor, and any subscription warrants, rights or options issued to the holders of, or otherwise in respect of, the Pledged Interests;

(c) in the event of any consolidation or merger involving the Collateral Parties or the Obligor in which a Collateral Party or the Obligor, respectively, is not the surviving entity, all ownership interests of any class or character of the successor entity formed by or resulting from such consolidation or merger (the Pledged Interests together with all other certificates of membership interests, shares, securities, properties or moneys as may from time to time be pledged hereunder pursuant to clause (a) or (b) above and this clause (c)being herein collectively referred to as the "Stock Collateral");

(d) the Collateral Accounts and all amounts, Permitted Investments and other property (including securities, financial assets, investment property, security entitlements and instruments, as applicable) at any time deposited in or credited thereto and all security entitlements with respect thereto, including without limitation the Big Four Revenue; and

(e) all proceeds of and to any of the property of the Obligor described in the preceding clauses of this Section 3(including all causes of action, claims and warranties now or hereafter held by the Obligor in respect of any of the items listed above) and, to the extent related to any property described in said clauses or such proceeds, all books, correspondence, credit files, records, invoices and other papers.

SECTION 4. COLLATERAL ACCOUNTS; CASH PROCEEDS.

4.01 Collateral Accounts.

(a) The Administrative Agent will cause to be established at a banking institution to be selected by the Administrative Agent a cash collateral account (the "Default Collateral Account"), into which there shall be deposited from time to time upon the occurrence and during the continuance of an Event of Default the cash proceeds of any of the Pledged Collateral required to be delivered to the Administrative Agent pursuant hereto. The balance from time to time in the Default Collateral Account shall constitute part of the Pledged Collateral hereunder and shall not constitute payment of the Secured Obligations until applied as hereinafter provided. Except as expressly provided in the next sentence, the Administrative Agent shall remit the collected balance standing to the credit of the Default Collateral Account to or upon the order of the Obligor as the Obligor shall from time to time instruct. However, at any time following the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Required Lenders, shall) in its (or their) discretion apply or cause to be applied (subject to collection) the balance from time to time standing to the credit of the Default Collateral Account to the payment of the Secured Obligations in the manner specified in Section 5.08. The balance from time to time in the Default Collateral Account shall be subject to withdrawal only as provided herein. In addition to the foregoing, the Obligor agrees that, at any time after the occurrence and during the continuance of an Event of Default, if the proceeds of any Pledged Collateral hereunder

shall be received by it, the Obligor shall, upon the request of the Administrative Agent, as promptly as possible deposit such proceeds into the Default Collateral Account. Until so deposited, all such proceeds shall be held in trust by the Obligor for and as the property of the Administrative Agent and shall not be commingled with any other funds or property of the Obligor. The Default Collateral Account shall be established in the name of the Obligor, but under the exclusive dominion and control of the Administrative Agent.

(b) The Administrative Agent will cause to be established at a banking institution to be selected by the Administrative Agent a cash collateral account (the "LC Collateral Account"), into which there shall be deposited from time to time amounts required to be deposited to such account pursuant to Section 2.6.13 of the Credit Agreement. The balance from time to time in the LC Collateral Account shall constitute part of the Pledged Collateral hereunder and shall be held by the Administrative Agent in the first instance for the LC Exposure under the Credit Agreement and thereafter for the payment of the Secured Obligations. The LC Collateral Account shall be established in the name of the Obligor, but under the exclusive dominion and control of the Administrative Agent.

(c) The Obligor shall establish the Big Four Account into which cash and Permitted Investments received from the Big Four Companies shall be deposited or credited pursuant to Section 5.03(b). Except as expressly provided in the next sentence, the Administrative Agent shall remit the collected balance standing to the credit of the Big Four Revenue Account to or upon the order of the Obligor as the Obligor shall from time to time instruct. However, at any time following the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Required Lenders, shall) in its (or their) discretion apply or cause to be applied (subject to collection) the balance from time to time standing to the credit of the Big Four Revenue Account to the payment of the Secured Obligations in the manner specified in Section 5.08. The balance from time to time in the Big Four Revenue Account shall be subject to withdrawal only as provided herein. In addition to the foregoing, the Obligor agrees that, at any time after the occurrence and during the continuance of an Event of Default, if the any amounts required to be deposited into the Big Four Revenue Account hereunder shall be received by it, the Obligor shall, upon the request of the Administrative Agent, as promptly as possible deposit such proceeds into the Big Four Revenue Account. Until so deposited, all such proceeds shall be held in trust by the Obligor for and as the property of the Administrative Agent and shall not be commingled with any other funds or property of the Obligor. The Big Four Revenue Account shall be established in the name of the Obligor, but under the exclusive dominion and control of the Administrative Agent.

(d) Each Collateral Account shall be a "securities account" (as defined in Section 8-501(a) of the UCC) and, to the extent that credit balances not constituting "financial assets" (as defined in Section 8-102(a)(9) of the UCC) are credited thereto, a "deposit account" (as defined in Section 9-102(a)(29) of the UCC).

4.02 Investment of Balance in Collateral Accounts. The cash balance standing to the credit of the Collateral Accounts shall be invested from time to time in such Permitted Investments as the Obligor (or, after the occurrence and during the continuance of an Event of Default, the Administrative Agent) shall determine, which Permitted Investments shall be credited to the Collateral Accounts); provided that at any time after the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and, if instructed by the Required Lenders, shall) in its (or their) discretion at any time and from time to time elect to liquidate any such Permitted Investments and to apply or cause to be applied the proceeds thereof to the payment of the Secured Obligations in the manner specified in Section 5.09.

SECTION 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant of the pledge and security interest pursuant to Section 3, the Obligor hereby agrees until the Credit Agreement Termination Date, with the Administrative Agent and each of the other Lenders as follows:

5.01 Delivery and Other Perfection. The Obligor shall:

(a) if any of the membership interests, shares, securities, moneys or property required to be pledged by the Obligor under clauses (a), (b), and (c) of Section 3 are received by the Obligor, forthwith either (x) transfer and deliver to the Administrative Agent such membership interests, shares of stock or securities so received by the Obligor (together with the certificates for any such membership interests, shares and securities duly endorsed in blank or accompanied by undated stock powers duly executed in blank), all of which thereafter shall be held by the Administrative Agent, pursuant to the terms of this Agreement, as part of the Pledged Collateral or (y) take such other action as the Administrative Agent shall reasonably request, at the direction of the Required Lenders, to duly record the Lien created hereunder in such stock, securities, moneys or property in said clauses (a), (b) and (c);

(b) give, execute, deliver, file and/or record any financing statement, notice, instrument, document, agreement or other papers that may be necessary or reasonably requested by the Administrative Agent, at the direction of the Required Lenders, to create, preserve, perfect or validate the security interest granted pursuant hereto or to enable the Administrative Agent, at any time following the occurrence and continuance of an Event of Default, to exercise and enforce its rights hereunder with respect to such pledge and security interest, causing any or all of the Pledged Collateral to be transferred of record into the name of the Administrative Agent or its nominee (and the Administrative Agent agrees that if any Pledged Collateral is transferred into its name or the name of its nominee, the Administrative Agent will thereafter promptly give to the Obligor copies of any notices and communications received by it with respect to the Pledged Collateral pledged by the Obligor hereunder);

(c) keep full and accurate books and records relating to the Pledged Collateral, and stamp or otherwise mark such books and records in order to reflect the security interests granted by this Agreement; and

(d) permit representatives or agents of the Administrative Agent, upon reasonable notice, at any time during normal business hours to inspect and make abstracts from its books and records pertaining to the Pledged Collateral, and, upon the occurrence and during the continuation of an Event of Default, permit representatives or agents of the Administrative Agent to be present at the Obligor's place of business to receive copies of all communications and remittances relating to the Pledged Collateral, and forward copies of any notices or communications received by the Obligor with respect to the Pledged Collateral, all in such manner as the Administrative Agent may require.

5.02 Other Financing Statements and Liens.

(a) The Obligor shall not create, incur, assume or suffer to exist any Lien upon the Pledged Collateral at any time, except for the pledges and security interests in favor of the Administrative Agent for the benefit of the Lenders created pursuant hereto or provided for herein, which pledges and security interests constitute a first priority perfected pledge and security interest in and to all of the Pledged Collateral.

(b) Without the prior written consent of the Administrative Agent (at the direction of the Required Lenders), the Obligor shall not file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like instrument with respect to the Pledged Collateral in which the Administrative Agent is not named as the sole secured party for the benefit of the Lenders or (ii) cause or permit any

Person, other than the Administrative Agent to have "control" (as such term is defined in Section 9-104 of the UCC) of any existing Collateral Account.

5.03 Special Provisions Relating to the Pledged Collateral.

(a) Stock Collateral.

(i) The Obligor will cause the Stock Collateral to constitute at all times all ownership interests of any class or character of the Collateral Parties then outstanding.

(ii) So long as no Event of Default shall have occurred and be continuing, the Obligor shall have the right to exercise all voting, consensual and other powers of ownership pertaining to the Stock Collateral for all purposes not inconsistent with the terms of this Agreement, any other Loan Document or any other instrument or agreement referred to herein; provided that the Obligor agrees that it will not vote the Stock Collateral in any manner that is inconsistent with the terms of this Agreement or any other Loan Document; and the Administrative Agent, at the direction of the Required Lenders, shall execute and deliver to the Obligor or cause to be executed and delivered to the Obligor all such proxies, powers of attorney, dividend and other orders, and all such instruments, without recourse, as the Obligor may reasonably request for the purpose of enabling the Obligor to exercise the rights and powers that it is entitled to exercise pursuant to this Section 5.03(a)(ii).

(iii) If any Event of Default shall have occurred, then so long as such Event of Default shall continue, and whether or not the Administrative Agent or any Lender exercises any available right to declare any of the Secured Obligations due and payable or seeks or pursues any other relief or remedy available to it under applicable law or under this Agreement, any Loan Document or any other agreement relating to the Secured Obligations, all dividends and other distributions on the Stock Collateral shall be paid directly to the Administrative Agent and retained by it in the Collateral Account as part of the Pledged Collateral, subject to the terms of this Agreement, and, if the Administrative Agent shall so request in writing, the Obligor agrees to execute and deliver to the Administrative Agent appropriate additional dividend, distribution and other orders and documents to that end, provided that if such Event of Default is cured, any such dividend or distribution theretofore paid to the Administrative Agent shall, upon request of the Obligor (except to the extent theretofore applied to the Secured Obligations), be returned by the Administrative Agent to the Obligor.

(iv) All Stock Collateral in which the Obligor shall hereafter grant a security interest pursuant to Section 3 shall be duly authorized, validly existing, fully paid and non-assessable and none of the Stock Collateral, including the Stock Collateral evidenced by the certificates identified under the name of the Obligor in Annex 1, shall be subject to any contractual restriction (except for any such restriction contained herein).

(b) Big Four Revenue Account. The Obligor shall provide irrevocable written instructions (copies of which shall be provided to the Administrative Agent) to each of the Big Four Companies to deliver to the Big Four Revenue Account any cash or Permitted Investments distributed, paid or otherwise transferred to the Obligor (the "Big Four Revenue").

5.04 Credit Agreement Event of Default, Etc. Upon the occurrence and during the continuance of an Event of Default:

(a) the Obligor shall, at the request of the Administrative Agent assemble the Pledged Collateral owned by it at such place or places, reasonably convenient to both the Administrative Agent and the Obligor, designated in its request;

(b) the Administrative Agent may make any reasonable compromise or settlement deemed desirable with respect to any of the Pledged Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Pledged Collateral;

(c) the Administrative Agent shall have all of the rights and remedies with respect to the Pledged Collateral of a secured party under the UCC (whether or not the UCC is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, and the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Pledged Collateral as if the Administrative Agent were the sole and absolute owner thereof (and the Obligor agrees to take all such action as may be appropriate to give effect to such right);

(d) the Administrative Agent may, at the direction of the Required Lenders, in its name or in the name of the Obligor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Pledged Collateral, but shall be under no obligation to do so; and

(e) the Administrative Agent may, with respect to the Pledged Collateral or any part thereof that shall then be or shall thereafter come into the possession, custody or control of the Administrative Agent, any other Lender or any of their respective agents, upon ten (10) Business Days' prior written notice to the Obligor of the time and place, sell, lease, assign or otherwise dispose of all or any part of such Pledged Collateral, at such place or places as the Administrative Agent deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk or liability), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except as provided above and such notice as is required above or by applicable statute that cannot be waived), and upon such other terms as the Administrative Agent, at the direction of the Required Lenders, may reasonably deem commercially reasonable, and the Administrative Agent or any other Lender or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Pledged Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Obligor, any such demand, notice and right or equity being hereby expressly waived and released. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned.

The proceeds of each collection, sale or other disposition under this Section 5.04 shall be applied in accordance with Section 5.08 hereto.

The Obligor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, the Administrative Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Obligor acknowledges that any such private sales may be at prices and on terms less favorable to the Administrative Agent than those obtainable through a public sale without such restrictions. The parties hereto agree that any such private sale shall be made in a commercially reasonable manner and that the Administrative Agent shall have no obligation to engage in public sales and no

obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for public sale.

5.05 Deficiency. If the proceeds of sale, collection or other realization of or upon the Pledged Collateral pursuant to Section 5.04 are insufficient to cover the costs and expenses of such realization and the payment in full of the Secured Obligations, the Obligor shall remain liable for any deficiency to the extent the Obligor is obligated under this Agreement.

5.06 Removals, Etc. Without at least thirty (30) days' prior written notice to the Administrative Agent, the Obligor shall not (a) maintain any of its books and records with respect to the Pledged Collateral at any office at any place other than at the address indicated beneath its signature hereto or (b) change its corporate name, or the name under which it does business, from the name shown on the signature pages hereto.

5.07 Private Sale. The Administrative Agent and the other Lenders shall incur no liability as a result of the sale of the Pledged Collateral, or any part thereof, at any private sale pursuant to Section 5.04 conducted in a commercially reasonable manner. The Obligor hereby waives any claims against the Administrative Agent or any other Lender arising by reason of the fact that the price at which the Pledged Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the Administrative Agent accepts the first offer received and does not offer the Pledged Collateral to more than one offeree.

5.08 Application of Proceeds. Except as otherwise herein expressly provided, the proceeds of any collection, sale or other realization of all or any part of the Pledged Collateral pursuant hereto, and any other cash at the time held by the Administrative Agent under Section 4 or this Section 5, shall be applied by the Administrative Agent:

First, to the payment of the costs and expenses of such collection, sale or other realization, including reasonable out-of-pocket costs and expenses of the Administrative Agent and the fees and expenses of its agents and counsel, and all expenses incurred and advances made by the Administrative Agent in connection therewith;

Next, to the payment in full of the Secured Obligations, in each case equally and ratably in accordance with the respective amounts thereof then due and owing; and

Finally, to the payment to the Obligor, or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining.

As used in this Section 5, "proceeds" of Pledged Collateral means cash, securities and other property realized in respect of, and distributions in kind of, Pledged Collateral, including any thereof received under any reorganization, liquidation or adjustment of debt of the Obligors or any issuer of or obligor on any of the Pledged Collateral.

5.09 Attorney-in-Fact. Without limiting any rights or powers granted by this Agreement to the Administrative Agent while no Event of Default has occurred and is continuing, upon the occurrence and during the continuance of any Event of Default, the Administrative Agent is hereby appointed the attorney-in-fact of the Obligor for the purpose of carrying out the provisions of this Section 5 and taking any action and executing any instruments that the Administrative Agent may, at the direction of the Required Lenders, deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, so long as the Administrative Agent shall be entitled under this Section 5 to make collections in respect of the Pledged Collateral, the Administrative Agent shall have the right and power to receive, endorse and collect all checks

made payable to the order of the Obligor representing any dividend, payment or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same.

5.10 Perfection. Prior to or concurrently with the execution and delivery of this Agreement, the Obligor shall deliver to the Administrative Agent (a) all certificates identified in Annex 1, accompanied by undated stock powers duly executed in blank, (b) a UCC-1 financing statement, for filing in each jurisdiction requested by the Administrative Agent, at the direction of the Required Lenders, naming the Obligor as debtor and the Administrative Agent as secured party and (c) such documents as are necessary to grant the Collateral Trustee control of the Big Four Revenue Account (including an account control agreement).

5.11 Termination. When the Credit Agreement Termination Date shall have occurred, this Agreement shall terminate, and the Administrative Agent shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Pledged Collateral and money received in respect thereof, to or on the order of the Obligor. Upon the request, and at the expense of the Obligor, the Administrative Agent shall execute and deliver but without any recourse, warranty or representation whatsoever all such documentation necessary to release the pledge created pursuant to this Agreement.

5.12 Further Assurances. The Obligor agrees that, from time to time upon the written request of the Administrative Agent, the Obligor will execute and deliver such further documents and do such other acts and things as the Administrative Agent, at the direction of the Required Lenders, may reasonably request in order fully to effect the purposes of this Agreement.

SECTION 6. MISCELLANEOUS.

6.01 Notices. All notices, requests and other communications provided for herein shall be given or made in writing in the manner set forth in Section 10.2 of the Credit Agreement. Unless otherwise changed in accordance with the Credit Agreement by the respective parties hereto, all notices, requests and other communications to each party hereto shall be sent to the address for notices of such party set forth on the signature pages hereto.

6.02 Delay and Waiver. No failure to exercise, no course of dealing with respect to the exercise of, and no delay in exercising, any right, power or remedy arising under this Agreement will impair any such right, power or remedy or operate as a waiver hereof. No single or partial exercise of any such right, power or remedy will preclude any other or future exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law.

6.03 Amendments, Etc. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Obligor and the Administrative Agent (with the consent of the Required Lenders in accordance with the Credit Agreement). Any such amendment or waiver shall be binding upon the Administrative Agent and each other Lender, each holder of any of the Secured Obligations and the Obligor.

6.04 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Obligor, the Administrative Agent, each of the other Lenders and each holder of any of the Secured Obligations (provided, that the Obligor shall not assign or transfer its rights hereunder without the prior written consent of the Administrative Agent).

6.05 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, but all such counterparts together will constitute but one and the same instrument.

6.06 Governing Law; Submission to Jurisdiction. The internal law of the State of New York will govern and be used to construe this Agreement without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

6.07 Headings. Section headings herein have been inserted for convenience of reference only, are not to be considered a part of this Agreement and will in no way modify or restrict any of the terms or provisions hereof.

6.08 Agents and Attorneys-in-Fact. The Administrative Agent may employ agents and attorneys-in-fact in connection herewith and shall not be responsible or liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith.

6.09 Severability. If any provision of this Agreement is invalid, illegal or unenforceable in any respect or in any jurisdiction, the validity, legality and enforceability of such provision in all other respects and of all remaining provisions, and of such provision in all other jurisdictions, will not in any way be affected or impaired thereby.

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the day and year first above written.

		EDISON MISSION ENERGY
		By:	/s/ STEVEN EISENBERG Name: Steven Eisenberg Title: Vice President
		Address for Notices:
		18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420
		CITICORP NORTH AMERICA, INC., not in its individual capacity but solely as Administrative Agent
		By:	/s/ DALE R. GONCHER Name: Dale R. Goncher Title: Director
		Address for Notices:
		2 Penns Way, Suite 110 New Castle, DE 19720 Attention: Laura Quashne Telecopier No: (302) 894-6012

ANNEX 1
to Security Agreement

PLEDGED INTERESTS

Issuer	Certificate No.	Registered Owner	Number of Units
Silverado Energy Company	1	Edison Mission Energy	100
Viejo Energy Company	1	Edison Mission Energy	100
Anacapa Energy Company	1	Edison Mission Energy	100
Del Mar Energy Company	1	Edison Mission Energy	100
Edison Mission Holdings Co.	2	Edison Mission Energy	100
Midwest Generation EME, LLC	1	Edison Mission Energy	100
Mission del Cielo, Inc.	1	Edison Mission Energy	100

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SECURITY AGREEMENT between EDISON MISSION ENERGY and CITICORP NORTH AMERICA, INC., as Administrative Agent Dated as of April 27, 2004
EX-10.15 17 a2135451zex-10_15.htm EXHIBIT 10.15
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Exhibit 10.15

Reimbursement Agreement (this "Agreement"), dated as of October 26, 2001, entered into between Edison Mission Energy, a Delaware corporation ("EME"), and Midwest Generation, LLC, a Delaware limited liability company ("Midwest").

WHEREAS, Midwest is a wholly owned subsidiary of Edison Mission Midwest Holdings Co. ("Holdings"), and is subject to the certain covenants set forth in (A) the Credit Agreement, dated as of December 15, 1999 (as amended, modified or supplemented and in effect from time to time and together with any refinancing or replacement thereof, the "Holdings Credit Agreement"), among Holdings and certain commercial lending institutions party thereto (the "Lenders") and The Chase Manhattan Bank, as the Administrative Agent; (B) the Participation Agreement, dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "Participation Agreement (T1)") among Collins Holdings EME, LLC ("Collins Holdings"), Wilmington Trust Company, as the Owner Trustee, Collins Trust I, as the Owner Lessor, Collins Generation I, LLC, as Owner Participant, Holdings, Midwest, Funding LLC, Bayerische Landesbank International S.A. (the "Midwest LC Issuer"), Bayerische Landesbank Girozentrale ("RCE LC Issuer") and the Holder Representative (as such term is defined therein); (C) the Participation Agreement, dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "Participation Agreement (T2)") among Collins Holdings, Wilmington Trust Company, as the Owner Trustee, Collins Trust II, as the Owner Lessor, Collins Generation II, LLC, as Owner Participant, Holdings, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative (as such term is defined therein); (D) the Participation Agreement, dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "Participation Agreement (T3)") among Collins Holdings, Wilmington Trust Company, as the Owner Trustee, Collins Trust III, as the Owner Lessor, Collins Generation III, LLC, as Owner Participant, Holdings, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative (as such term is defined therein); (E) the Participation Agreement, dated as of December 15, 1999 (as heretofore amended, modified and supplemented, the "Participation Agreement (T4)", together with Participation Agreement (T1), Participation Agreement (T2) and Participation Agreement (T3), "Collins Participation Agreements") among Collins Holdings, Wilmington Trust Company, as the Owner Trustee, Collins Trust IV, as the Owner Lessor, Collins Generation IV, LLC, as Owner Participant, Holdings, Midwest, Funding LLC, the Midwest LC Issuer, the RCE LC Issuer and the Holder Representative (as such term is defined therein); and (F) the Credit Agreement, dated as of May 9, 2000 (as amended, modified or supplemented and in effect from time to time, the "CAPEX Credit Agreement", together with the Holdings Credit Agreement and Collins Participation Agreements (and related Operative Documents defined therein), the "Holdings Credit Facilities") among Holdings, Societe Generale and Bayerische Landesbank Girozentrale ("Capex Lenders", and together with the Lenders and Lease Financing Parties under the Collins Participation Agreements, the "Creditor Parties");

WHEREAS, Midwest has also entered into a transaction pursuant to the Participation Agreements (as defined below) whereby Midwest sold certain of its generating assets to Powerton Trust I, Powerton Trust II, Joliet Trust I and Joliet Trust II (the "Owner Lessors") and the Owner Lessors leased such generating assets to Midwest;

WHEREAS, Midwest loaned to Edison Mission Energy, a California corporation and predecessor to EME ("EME California"), the proceeds of the sale of the generating assets to the Owner Lessor (the "Intercompany Loan");

WHEREAS, in connection with the transactions contemplated by the Participation Agreements (as defined below), Holdings and Midwest requested the Creditor Parties to approve, and the Credit Parties have approved, such sale and lease-back of generating assets;

WHEREAS, in consideration for the Creditor Parties' approval of the transactions contemplated by the Participation Agreements and the Intercompany Loan, EME California and Midwest entered

into a Reimbursement Agreement, dated as of August 17, 2000 (the "Original Reimbursement Agreement"); and

WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated October 11, 2001, by and between EME California and EME, EME California merged with and into EME (the "Merger"), with EME being the surviving corporation of the Merger; and

WHEREAS, this Agreement is being executed and delivered by the parties to evidence the succession of EME to EME California and the assumption by EME of the covenants, agreements, and obligations of EME California under the Operative Documents; and

WHEREAS, all things necessary to make this Agreement a valid agreement according to its terms have been done.

NOW, THEREFORE, for and in consideration for the Creditor Parties' approval of the transactions contemplated by the Participation Agreements (as defined below) and the Intercompany Loan, and mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby covenant and agree as follows:

1. Definitions. Unless otherwise expressly provided herein, capitalized terms used in this Agreement but not defined herein shall have meanings given to such terms in Appendix A to each of the Participation Agreements. The following terms, when used herein, shall have the following meanings:

"Combined Rent" means, collectively, Powerton Rent (T1), Powerton Rent (T2), Joliet Rent (T1) and Joliet Rent (T2).

"Joliet Lease Intercompany Note (T1)" means the EME Note (as defined in the Joliet Lease Participation Agreement (T1)) dated the Closing Date (as defined in the Joliet Lease Participation Agreement (T1)) evidencing the loan by Midwest to EME of the proceeds of the Joliet Lease Transaction (T1).

"Joliet Lease Intercompany Note (T2)" means the EME Note (as defined in the Joliet Lease Participation Agreement (T2)) dated the Closing Date (as defined in the Joliet Lease Participation Agreement (T2)) evidencing the loan by Midwest to EME of the proceeds of the Joliet Lease Transaction (T2).

"Joliet Lease Intercompany Notes" means, collectively, the Joliet Lease Intercompany Note (T1) and the Joliet Intercompany Note (T2).

"Joliet Lease Operative Documents" means, collectively, the Joliet Lease Operative Documents (T1) and the Joliet Lease Operative Documents (T2).

"Joliet Lease Operative Documents (T1)" means, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T1).

"Joliet Lease Operative Documents (T2)" means, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T2).

"Joliet Lease Participation Agreement (T1)" means the Participation Agreement (T1) dated as of August 17, 2000 by and among Midwest, EME, Joliet Trust I, Wilmington Trust Company, Joliet Generation I, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein.

"Joliet Lease Participation Agreement (T2)" means the Participation Agreement (T2) dated as of August 17, 2000 by and among Midwest, EME, Joliet Trust II, Wilmington Trust Company, Joliet

Generation II, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein.

"Joliet Lease Participation Agreements" means, collectively, the Joliet Lease Participation Agreement (T1) and the Joliet Lease Participation Agreement (T2).

"Joliet Rent (T1)" means Rent as defined in the Joliet Lease Participation Agreement (T1).

"Joliet Rent (T2)" means Rent as defined in the Joliet Lease Participation Agreement (T2).

"Joliet Subordination Agreement (T1)" means the Subordination Agreement dated as of August 17, 2000 between Joliet Trust I, the Owner Participant (as defined in the Joliet Participation Agreement (T1)), the Lease Indenture Trustee (as defined in the Joliet Participation Agreement (T1)) and the Holdings Collateral Agent.

"Joliet Subordination Agreement (T2)" means the Subordination Agreement dated as of August 17, 2000 between Joliet Trust II, the Owner Participant (as defined in the Joliet Participation Agreement (T2)), the Lease Indenture Trustee (as defined in the Joliet Participation Agreement (T2)) and the Holdings Collateral Agent.

"Joliet Trust I" means Joliet Trust I, a Delaware business trust.

"Joliet Trust II" means Joliet Trust II, a Delaware business trust.

"Lease Financing Parties" shall mean, as the context shall require, all or any of the parties to Powerton/Joliet Lease Operative Documents, including the Wilmington Trust Company and excluding ComEd and the Holdings Collateral Agent.

"Participation Agreements" means, collectively, the Powerton Lease Participation Agreements and the Joliet Lease Participation Agreements (as amended, modified or supplemented and in effect from time to time).

"Powerton Lease Intercompany Note (T1)" means the EME Note (as defined in the Powerton Lease Participation Agreement (T1)) dated the Closing Date (as defined in the Powerton Lease Participation Agreement (T1)) evidencing the loan by Midwest to EME of the proceeds of the Powerton Lease Transaction (T1).

"Powerton Lease Intercompany Note (T2)" means the EME Note (as defined in the Powerton Lease Participation Agreement (T2)) dated the Closing Date (as defined in the Powerton Lease Participation Agreement (T2)) evidencing the loan by Midwest to EME of the proceeds of the Powerton Lease Transaction (T2).

"Powerton Lease Intercompany Notes" means, collectively, the Powerton Lease Intercompany Note (T1) and the Powerton Lease Intercompany Note (T2).

"Powerton Lease Operative Documents" means, collectively, the Powerton Lease Operative Documents (T1) and the Powerton Lease Operative Documents (T2).

"Powerton Lease Operative Documents (T1)" means, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T1).

"Powerton Lease Operative Documents (T2)" means, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T2).

"Powerton Lease Participation Agreement (T1)" means the Participation Agreement (T1) dated as of August 17, 2000 by and among Midwest, EME, Powerton Trust I, Wilmington Trust Company, Powerton Generation I, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein.

"Powerton Lease Participation Agreement (T2)" means the Participation Agreement (T2) dated as of August 17, 2000 by and among Midwest, EME, Powerton Trust II, Wilmington Trust Company, Powerton Generation II, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein.

"Powerton Lease Participation Agreements" means, collectively, the Powerton Lease Participation Agreement (T1) and the Powerton Lease Participation Agreement (T2).

"Powerton Rent (T1)" means Rent as defined in the Powerton Lease Participation Agreement (T1).

"Powerton Rent (T2)" means Rent as defined in the Powerton Lease Participation Agreement (T2).

"Powerton Subordination Agreement (T1)" means the Subordination Agreement dated as of August 17, 2000 between Powerton Trust I, the Owner Participant (as defined in the Powerton Participation Agreement (T1)), the Lease Indenture Trustee (as defined in the Powerton Participation Agreement (T1)) and the Holdings Collateral Agent.

"Powerton Subordination Agreement (T2)" means the Subordination Agreement dated as of August 17, 2000 between Powerton Trust II, the Owner Participant (as defined in the Powerton Participation Agreement (T2)), the Lease Indenture Trustee (as defined in the Powerton Participation Agreement (T2)) and the Holdings Collateral Agent.

"Powerton Trust I" means Powerton Trust I, a Delaware business trust.

"Powerton Trust II" means Powerton Trust II, a Delaware business trust.

"Powerton/Joliet Lease Intercompany Notes" means, collectively, the Powerton Lease Intercompany Notes and the Joliet Lease Intercompany Notes.

"Powerton/Joliet Lease Operative Documents" means, collectively, the Powerton Lease Operative Documents and the Joliet Lease Operative Documents.

"Powerton/Joliet Lease Participation Agreements" means, collectively, the Powerton Lease Participation Agreement (T1), Powerton Lease Participation Agreement (T2), Joliet Lease Participation Agreement (T1) and Joliet Lease Participation Agreement (T2).

"Powerton/Joliet Subordination Agreements" means, collectively, the Powerton Subordination Agreement (T1), the Powerton Subordination Agreement (T2), the Joliet Subordination Agreement (T1) and the Joliet Subordination Agreement (T2).

2. Obligation to Reimburse Midwest.

(a) Within 5 Business Days after the last day of each Fiscal Quarter, EME shall pay to Midwest an amount equal to the excess of (i) Combined Rent and all amounts paid by Midwest under or in respect of the Powerton/Joliet Lease Operative Documents (including, without limitation, payments made by Midwest to the Lease Financing Parties in violation of the Powerton/Joliet Subordination Agreements or Section 18.19 of each of the Participation Agreements) during such Fiscal Quarter over (ii) Free Cashflow for such Fiscal Quarter calculated as of such date (without deduction for Combined Leveraged Lease Liabilities paid by Midwest during such period); provided, that Base Free Cashflow for such Fiscal Quarter shall be zero in the event that any of the conditions to Restricted Payments set forth in the Holdings Credit Facilities (or the correlative conditions set forth in any credit facility that refinances or replaces any Holdings Credit Facility) have not been satisfied as of such date.

(b) Without limiting the effect of Section 259 of the Delaware General Corporation Law, EME hereby assumes and agrees to be bound by all covenants, agreements and obligations of EME California under the Operative Documents, including, without limitation, the Original Reimbursement Agreement, in each case as though EME were the EME originally named therein.

3. Obligation Absolute. EME's obligation under this Agreement shall be absolute and unconditional and shall not be subject to any defense or be affected by any right of setoff, counterclaim or recoupment which EME may now or hereafter have against Midwest or any other person for any reason whatsoever.

4. Notices. All notices, requests and other communications provided for herein (including, without limitation, any modifications of, or waivers under, this Agreement) shall be given or made in writing (including, without limitation, by telecopy) delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof, or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given (a) when received by certified mail or by an international courier, such as Federal Express, by such Person, at said address of such Person or (b) when transmitted by facsimile to the number specified below and the receipt confirmed telephonically by recipient, provided that such facsimile is promptly followed by a copy of such notice delivered to such Person by postage-prepaid certified mail, or by an international courier, such as Federal Express.

5. Waivers; Etc. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by EME and Midwest. Any such amendment or waiver shall be binding upon EME and Midwest.

6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of each of EME and Midwest.

7. Counterparts; Integration; Effectiveness. This Agreement may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof.

8. Severability. If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by applicable law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

9. Headings. Headings appearing herein are used solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

10. WAIVER OF JURY TRIAL. EACH OF EME AND MIDWEST HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

11. NO THIRD PARTY BENEFICIARIES. THE AGREEMENTS OF THE PARTIES HERETO ARE SOLELY FOR THE BENEFIT OF MIDWEST (AND EACH PERSON WHO CLAIMS THROUGH MIDWEST), AND NO PERSON (OTHER THAN THE PARTIES HERETO AND THEIR SUCCESSORS AND ASSIGNS PERMITTED HEREUNDER) SHALL HAVE ANY RIGHTS HEREUNDER.

12. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. EME hereby submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its

Appellate Division) and of any other appellate court in the State of New York for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. EME hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

IN WITNESS WHEREOF, the parties have cause this Agreement to be duly executed and delivered as of the day and year above written.

		EDISON MISSION ENERGY
		By:	/s/ KEVIN M. SMITH Name: Kevin M. Smith Title: Senior Vice President
		Address for Notices:
		18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420

		MIDWEST GENERATION, LLC
		By:	/s/ DEBORAH L. KELLER Name: Deborah L. Keller Title: Vice President
		Address for Notices:
		One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, Illinois 60605 Attn: President Telecopier No.: (312) 583-6111
		with a copy to:
		Edison Mission Midwest Holdings Co. 18101 Von Karman Avenue Suite 1700 Irvine, CA 92616 Attention: General Counsel Telecopier No.: (949) 752-1420

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Reimbursement Agreement
EX-31.1 18 a2135451zex-31_1.htm EXHIBIT 31.1
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Exhibit 31.1

CERTIFICATIONS

I, Thomas R. McDaniel, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Edison Mission Energy (the "quarterly report");

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a): Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b): Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
(c): Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a): All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b): Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 7, 2004

/s/ THOMAS R. MCDANIEL

Thomas R. McDaniel
President and Chief Executive Officer

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CERTIFICATIONS
EX-31.2 19 a2135451zex-31_2.htm EXHIBIT 31.2
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Exhibit 31.2

CERTIFICATIONS

I, Kevin M. Smith, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Edison Mission Energy (the "quarterly report");

2.

3.

4.

(a): Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b): Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
(c): Disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

(a): All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b): Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 7, 2004

/s/ KEVIN M. SMITH

Kevin M. Smith
Senior Vice President, Chief Financial Officer and Treasurer

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CERTIFICATIONS
EX-32 20 a2135451zex-32.htm EXHIBIT 32
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Exhibit 32

STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 (the "Quarterly Report") of Edison Mission Energy (the "Company"), and pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies, to the best of his knowledge and belief, that:

1.: The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
2.: The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ THOMAS R. MCDANIEL Thomas R. McDaniel Chief Executive Officer Edison Mission Energy
		/s/ KEVIN M. SMITH Kevin M. Smith Chief Financial Officer Edison Mission Energy

This statement accompanies the Quarterly Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Edison Mission Energy and will be retained by Edison Mission Energy and furnished to the Securities and Exchange Commission or its staff upon request.

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STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EX-99.1 21 a2135451zex-99_1.htm EXHIBIT 99.1

Exhibit 99.1

Edison Mission Energy
Homer City—Funds Flow from Operations
Twelve Months Ended March 31, 2004
(In Millions) (Unaudited)

	EME Homer City Generation L.P.			Edison Mission Finance Co.			Mission Energy Westside, Inc.		Chestnut Ridge Energy Co.			Homer City Property Holdings			Edison Mission Holdings Co.			Reclassification Adjustments (Note 1)			Edison Mission Holdings Co.			Sale Leaseback Adjustments (Note 2)			Homer City Facilities
	(SEC Reporting Basis)														(Parent)						(Consolidated)
Project Revenues
Electric revenues	$	490		$	0		$	0	$	0		$	0		$	0		$	0		$	490		$	0		$	490
Income (loss) from price risk management		21			—			—		—			—			—			—			21			—			21

Total operating revenues		511			—			—		—			—			—			—			511			—			511

Project Operating Expenses
Fuel		189			—			—		—			—			—			—			189			—			189
Plant operations		94			—			—		—			—			—			—			94			101			195
Depreciation and amortization		63			—			—		—			0			—			—			63			(47	)		16
Administrative and general		4			0			—		—			—			—			(4	)		0			—			0

Total operating expenses		350			0			—		—			0			—			(4	)		346			54			400

Project Revenues less Operating Expenses		161			(0	)		—		—			(0	)		—			4			165			(54	)		111

Project Other Income (Expense)
Interest and other income		1			—			0		(0	)		0			—			0			1			—			1
Intercompany interest income (expense)		(40	)		40			—		—			—			—			—			0			—			0
Interest expense		(114	)		—			—		—			—			—			—			(114	)		113			(1	)

Total other income (expense)		(153	)		40			0		(0	)		0			—			0			(113	)		113			0

Income (Loss) before Income Taxes and Cumulative Effect		8			40			0		(0	)		0			—			4			52			59			111
Income taxes		7			16			—		(0	)		0			(0	)		2			25			27			52

Income (Loss) before Cumulative Effect		1			24			0		(0	)		0			0			2			27			32			59

Cumulative effect of change in accounting, net of tax		—			—			—		—			—			—			(1	)		(1	)		—			(1	)

Net Income (Loss)	$	1		$	24		$	0	$	(0	)	$	0		$	0		$	1		$	26		$	32		$	58

Funds Flow from Operations
Income (loss) before Income Taxes and Cumulative Effect	$	8		$	40		$	0	$	(0	)	$	0		$	0		$	4		$	52		$	59		$	111
Add (deduct):
Depreciation and amortization		63			—			—		—			0			—			—			63			(47	)		16

Funds Flow from Operations	$	71		$	40		$	0	$	(0	)	$	0		$	0		$	4		$	115		$	12		$	127


Note 1		Includes: (a) reclassification adjustment related to presentation of operations expenses with no impact on income before taxes, (b) push down of parent G&A for SEC reporting, (c) reclassification of cumulative effect of change in accounting for purposes of Funds Flow from Operations.
Note 2		Consolidation adjustment required to report the Homer City leases as operating leases by Edison Mission Energy and subsidiaries in lieu of lease financings recorded by EME Homer City Generation L.P.
		The above schedule is provided as supporting financial information to the Funds Flow from Operations set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations. Homer City Facilities is not a legal entity and accordingly, the above financial information for the Homer City Facilities has not been prepared in accordance with generally accepted accounting standards.

EX-99.2 22 a2135451zex-99_2.htm EXHIBIT 99.2

Exhibit 99.2

Edison Mission Energy
Illinois Plants—Funds Flow from Operations
Twelve Months Ended March 31, 2004
(In Millions) (Unaudited)

				Midwest Generation LLC			Edison Mission Overseas Co.			Edison Mission Midwest Holdings			Consolidation Adjustments (Note 2)			Sale Leaseback Adjustments (Note 1)			Edison Mission Midwest Holdings			Sale Leaseback Adjustments (Note 3)			Illinois Plants
				(SEC Reporting Basis)			(Consolidated)			(Parent)									(Consolidated)
Project Revenues
	Electric revenues			$	1,078		$	0		$	0		$	0		$	0		$	1,078		$	0		$	1,078
	Income (loss) from price risk management				(2	)		—			—			—			—			(2	)		—			(2	)

			Total operating revenues		1,076			—			—			—			—			1,076			—			1,076

Project Operating Expenses
	Fuel				390			—			—			—			—			390			—			390
	Plant operations				323			—			—			30			(1	)		352			75			427
	Depreciation and amortization				160			0			—			(12	)		6			154			(43	)		111
	Asset impairment and other charges				1,025			—			—			(780	)		—			245			—			245
	Settlement of postretirement employee benefit liability				—			—			—			—			—			—			—			—
	Administrative and general				27			1			8			(1	)		(17	)		18			—			18

			Total operating expenses		1,925			1			8			(763	)		(12	)		1,159			32			1,191

Project Revenues less Operating Expenses					(849	)		(1	)		(8	)		763			12			(83	)		(32	)		(115	)

Project Other Income (Expense)
	Interest and other income				(0	)		1			1			—			—			2			—			2
	Intercompany interest income (expense):
		Edison Mission Energy			113			—			—			—			—			113			—			113
		Edison Mission Overseas			(218	)		218			—			—			—			—			—			—
	Interest expense				(123	)		—			(70	)		37			(1	)		(157	)		87			(70	)

			Total other income (expense)		(228	)		219			(69	)		37			(1	)		(42	)		87			45

Income (Loss) before Income Taxes and Cumulative Effect					(1,077	)		218			(77	)		800			11			(125	)		55			(70	)
Income taxes					(418	)		89			(32	)		307			4			(50	)		20			(30	)

Income (Loss) before Cumulative Effect					(659	)		129			(45	)		493			7			(75	)		35			(40	)

Cumulative effect of change in accounting, net of tax					—			—			—			—			(0	)		(0	)		—			(0	)

Net Income (Loss)				$	(659	)	$	129		$	(45	)	$	493		$	7		$	(75	)	$	35		$	(40	)

Funds Flow from Operations
Income (loss) before Income Taxes and Cumulative Effect				$	(1,077	)	$	218		$	(77	)	$	800		$	11		$	(125	)		55		$	(70	)
Add (deduct):
	Depreciation and amortization				160			0			—			(12	)		6			154			(43	)		111
	Asset impairment charge				1,025			—			—			(780	)		—			245						245
	Settlement of postretirement employee benefit liability				—			—			—			—			—			—						—

Funds Flow from Operations				$	108		$	218		$	(77	)	$	8		$	17		$	274		$	12		$	286

Note 1 Consolidation adjustment required to report the Collins leases as operating leases by Edison Mission Midwest Holdings and subsidiaries in lieu of lease financings recorded by Midwest Generation, LLC.

Note 2 Includes: (a) push down of parent G&A for SEC reporting, (b) reclassification of cumulative effect of change in accounting for purposes of Funds Flow from Operations.

Note 3 Consolidation adjustment required to report the Powerton/Joliet leases as operating leases by Edison Mission Energy and subsidiaries in lieu of lease financings recorded by Midwest Generation, LLC.

The above schedule is provided as supporting financial information to the Funds Flow from Operations set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations. Illinois Plants is not a legal entity and accordingly, the above financial information for the Illinois Plants has not been prepared in accordance with generally accepted accounting standards.

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