<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
----------------------------
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ------------------
Commission File Number 1-13434
Edison Mission Energy
(Exact name of registrant as specified in its charter)
California 95-4031807
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18101 Von Karman Avenue
Irvine, California 92612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 752-5588
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [_]
Number of shares outstanding of the registrant's Common Stock as of
November 13, 1998: 100 shares (all shares held by an affiliate of the
registrant).
<PAGE>
TABLE OF CONTENTS
Item Page
- ---- ----
PART I - Financial Information
1. Financial Statements....................................................1
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................10
PART II - Other Information
6. Exhibits and Reports on Form 8-K.......................................21
PART III
Signatures.............................................................22
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating Revenues
Electric revenues $132,398 $143,919 $ 475,597 $ 546,262
Equity in income from energy projects 81,174 73,857 146,966 135,038
Equity in income from oil and gas 3,155 6,244 13,582 28,970
Operation and maintenance services 10,755 10,525 30,557 30,766
-------- -------- --------- ---------
Total operating revenues 227,482 234,545 666,702 741,036
-------- -------- --------- ---------
Operating Expenses
Fuel 36,817 39,797 126,529 143,552
Plant operations 30,855 31,892 93,324 98,139
Operation and maintenance services 7,725 8,137 22,004 22,578
Depreciation and amortization 20,773 24,027 65,933 80,200
Administrative and general 27,928 39,524 85,090 85,169
-------- -------- --------- ---------
Total operating expenses 124,098 143,377 392,880 429,638
-------- -------- --------- ---------
Income from operations 103,384 91,168 273,822 311,398
-------- -------- --------- ---------
Other Income (Expense)
Interest and other income 9,967 9,826 33,186 23,010
Gain on sale of assets -- -- 1,148 26,642
Interest expense (46,930) (53,737) (137,815) (159,614)
Dividends on preferred securities (3,304) (3,304) (9,905) (9,864)
Minority interest (484) (789) (2,080) (38,494)
-------- -------- --------- ---------
Total other income (expense) (40,751) (48,004) (115,466) (158,320)
-------- -------- --------- ---------
Income before income taxes 62,633 43,164 158,356 153,078
Provision (credit) for income taxes 17,855 (2,937) 57,290 41,812
-------- -------- --------- ---------
Income before extraordinary loss $ 44,778 $ 46,101 $ 101,066 $ 111,266
Extraordinary loss on early
extinguishment of debt, net of
income tax benefit -- -- -- (13,126)
-------- -------- --------- ---------
Net Income $ 44,778 $ 46,101 $ 101,066 $ 98,140
======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1998 1997
------------ -----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 668,574 $ 585,883
Accounts receivable - trade 51,982 76,935
Accounts receivable - affiliates 9,254 18,139
Prepaid expenses and other 25,249 13,630
---------- ----------
Total current assets 755,059 694,587
---------- ----------
Investments
Energy projects 942,125 852,688
Oil and gas 60,303 67,101
---------- ----------
Total investments 1,002,428 919,789
---------- ----------
Property, Plant and Equipment 3,105,500 3,142,551
Less accumulated depreciation and amortization 234,569 201,564
---------- ----------
Net property, plant and equipment 2,870,931 2,940,987
---------- ----------
Other Assets
Long-term receivables 28,339 25,957
Goodwill 316,990 312,606
Restricted cash and other 61,006 91,219
---------- ----------
Total other assets 406,335 429,782
---------- ----------
Total Assets $5,034,753 $4,985,145
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1998 1997
------------ -----------
<S> <C> <C>
Liabilities and Shareholder's Equity
Current Liabilities
Accounts payable - affiliates $ 14,006 $ 13,381
Accounts payable and accrued liabilities 206,751 208,411
Interest payable 31,307 42,627
Current maturities of long-term obligations 185,368 75,383
---------- ----------
Total current liabilities 437,432 339,802
---------- ----------
Long-Term Obligations Net of Current Maturities 2,372,927 2,532,121
---------- ----------
Long-Term Deferred Liabilities
Deferred taxes and tax credits 575,888 517,391
Deferred revenue 483,626 541,176
Other 65,006 68,951
---------- ----------
Total long-term deferred liabilities 1,124,520 1,127,518
---------- ----------
Total liabilities 3,934,879 3,999,441
---------- ----------
Minority Interests 14,877 9,102
---------- ----------
Company - Obligated Mandatorily Redeemable
Security of Partnership Holding Solely Parent
Debentures 150,000 150,000
---------- ----------
Commitments and Contingencies (Note 3)
Shareholder's Equity
Common stock, no par value; 10,000 shares
authorized; 100 shares issued and outstanding 64,130 64,130
Additional paid-in capital 629,406 629,406
Retained earnings 203,382 102,620
Cumulative translation adjustments 38,079 30,446
---------- ----------
Total shareholder's equity 934,997 826,602
---------- ----------
Total Liabilities and Shareholder's Equity $5,034,753 $4,985,145
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income $44,778 $ 46,101 $101,066 $ 98,140
Other comprehensive income (expense),
net of tax:
Foreign currency translation
adjustments net of income
tax benefit (expense) of
$(272) and $2,111 for the
three months and $(1,172)
and $4,902 for the nine
months ended September 30,
1998 and 1997, respectively 6,895 (16,917) 7,633 (36,552)
------- -------- -------- --------
Comprehensive Income $51,673 $ 29,184 $108,699 $ 61,588
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 101,066 $ 98,140
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in income from energy projects (146,966) (135,038)
Equity in income from oil and gas (13,582) (28,970)
Distributions from energy projects 97,452 88,203
Dividends from oil and gas 19,537 38,078
Depreciation and amortization 65,933 80,200
Deferred taxes and tax credits 44,447 (41,859)
Gain on sale of assets (1,148) (26,642)
Extraordinary loss on early extinguishment of debt, net of tax -- 13,126
Decrease in accounts receivable 33,838 10,570
Decrease in prepaid expenses and other 11 2,079
Increase (decrease) in accounts payable and accrued liabilities (7,039) 70,589
Decrease in interest payable (11,320) (11,495)
Other, net (9,737) (2,758)
---------- ----------
Net cash provided by operating activities 172,492 154,223
---------- ----------
Cash Flows From Financing Activities
Borrowings on long-term obligations 66,016 1,033,946
Payments on long-term obligations (72,224) (809,472)
Cash dividend to parent -- (122,000)
---------- ----------
Net cash provided by (used in) financing activities (6,208) 102,474
---------- ----------
Cash Flows From Investing Activities
Investments in energy projects (9,450) (51,514)
Loans to energy projects (42,289) (42,984)
Purchase of common stock of acquired companies (4,109) (63,983)
Proceeds from sale of assets 4,100 71,166
Capital expenditures (62,725) (65,233)
Decrease (increase) in restricted cash 34,169 (15,747)
Other, net (2,573) (13,668)
--------- ----------
Net cash used in investing activities (82,877) (181,963)
--------- ----------
Effect of exchange rate changes on cash (716) (17,111)
--------- ----------
Net increase in cash and cash equivalents 82,691 57,623
Cash and cash equivalents at beginning of period 585,883 383,634
--------- ----------
Cash and cash equivalents at end of period $ 668,574 $ 441,257
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 1. GENERAL
All adjustments, including recurring accruals, have been made that are
necessary to present fairly the consolidated financial position and results of
operations for the periods covered by this report. The results of operations
for the nine months ended September 30, 1998, are not necessarily indicative of
the operating results for the full year.
Edison Mission Energy's (EME) significant accounting policies are described
in Note 2 to EME's Consolidated Financial Statements as of December 31, 1997 and
1996, included in its 1997 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 31, 1998. EME follows the same accounting
policies for interim reporting purposes. This quarterly report should be read in
connection with such financial statements.
Certain prior period amounts have been reclassified to conform to the
current period financial statement presentation.
NOTE 2. INVESTMENTS
The following table presents summarized financial information of the
investments in energy projects and oil and gas accounted for by the equity
method:
<TABLE>
<CAPTION>
(In thousands)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------------
1998 1997 1998 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Energy Projects
Operating Revenues $478,516 $447,228 $1,200,618 $1,184,932
Income from Operations 188,294 177,366 343,069 352,244
Net Income 162,535 146,502 265,549 270,605
Oil and Gas
Operating Revenues $ 49,232 $ 64,940 $ 155,180 $ 225,215
Income from Operations 8,430 16,700 37,112 78,748
Net Income 6,664 14,286 27,770 58,253
</TABLE>
6
<PAGE>
NOTE 3. COMMITMENTS AND CONTINGENCIES
Firm Commitments for Asset Purchase
<TABLE>
<CAPTION>
Project U.S. ($ in millions)
- ------- --------------------
<S> <C>
Homer City (i) 1,801
</TABLE>
(i) Homer City is a 1,884-MW coal-fired generating plant in the mid-Atlantic
region of the United States. A wholly owned subsidiary of EME executed an
Asset Purchase Agreement to purchase 100% of the Homer City Electric
Generating Station. The closing of the transaction is subject to receipt
of various State and Federal regulatory approvals and is expected to be
completed by the first quarter of 1999. Approvals have been obtained from
the Pennsylvania Public Utility Commission and the New York State Public
Service Commission. EME plans to finance the acquisition with a
combination of debt secured by the project, corporate debt and cash.
Firm Commitments to Contribute Project Equity
<TABLE>
<CAPTION>
Projects Local Currency U.S. ($ in millions)
- -------- -------------- --------------------
<S> <C> <C>
ISAB (i) 244 billion Italian Lira 148
Paiton (ii) 84
Tri Energy (iii) 25
Doga (iv) 8
</TABLE>
(i) ISAB is a 512-MW integrated gasification combined cycle power plant under
construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of
EME owns a 49% interest. Equity will be contributed at commercial
operation, which is currently scheduled for late 1999.
(ii) Paiton is a 1,230-MW coal-fired power plant under construction in East
Java, Indonesia. A wholly owned subsidiary of EME owns a 40% interest.
Equity contributions are currently being made and will continue until
commercial operation, which is currently scheduled for the first half of
1999.
(iii) Tri Energy is a 700-MW gas-fired power plant under construction in the
Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25%
interest. Equity will be contributed at commercial operation, which is
currently scheduled for mid 2000.
(iv) Doga is a 180-MW gas-fired power plant under construction near Istanbul,
Turkey. A wholly owned subsidiary of EME owns an 80% interest. Equity
contributions are currently being made and will continue until commercial
operation, which is currently scheduled for the first half of 1999.
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management
7
<PAGE>
has no reason to believe that these events of default will occur to require
acceleration of the firm commitments.
Contingent Obligations to Contribute Project Equity
<TABLE>
<CAPTION>
Projects U.S. ($ in millions)
- -------- -------------------
<S> <C>
Paiton (i) 141
Tri Energy (i) 20
Doga (i) 15
All Other 23
</TABLE>
(i) Contingent obligations to contribute additional equity to the project
would be based on events principally related to capital cost overruns
during plant construction, certain partner obligations or events of
default.
Management has no reason to believe that these contingent obligations or any
other contingent obligations to contribute project equity will be required.
Other Commitments and Contingencies
Certain of EME's subsidiaries entered into indemnification agreements whereby
the subsidiaries agreed to repay capacity payments to the projects' power
purchasers, in the event the projects unilaterally terminate their performance
or reduce their electric power producing capability during the term of the power
contract. Obligations under these indemnification agreements as of September
30, 1998, if payment were required, would be $267 million. Management has no
reason to believe that the projects will either terminate their performance or
reduce their electric power producing capability during the term of the power
contracts.
Paiton is a 1,230-MW coal-fired power plant under construction in East Java,
Indonesia. A wholly owned subsidiary of EME owns a 40% interest. Construction
on the two-unit Paiton project is approximately 97% complete, and commercial
operation is expected in the first half of 1999. The tariff is higher in the
early years and steps down over time, and the tariff for the Paiton project
includes infrastructure to be used in common by other units at the Paiton
complex. The plant's output is fully contracted with the state-owned
electricity company, PT Perusahaan Listrik Negara (PLN), for payment in U.S.
dollars and supported by the Government of Indonesia. The projected rate of
growth of the Indonesian economy and the exchange rate of Indonesian Rupiah into
U.S. dollars have deteriorated significantly since the Paiton project was
contracted, approved and financed. The project received substantial finance and
insurance support from the Export-Import Bank of the United States, The Export-
Import Bank of Japan, the U.S. Overseas Private Investment Corporation and the
Ministry of International Trade and Industry of Japan. The Paiton project's
senior debt ratings have been reduced from investment grade to speculative grade
based on the rating agencies' perceived increased risk that PLN might not be
able to honor the electricity sales contract with Paiton. The
8
<PAGE>
Government of Indonesia has arranged to reschedule sovereign debt owed to
foreign governments and has entered into discussions about rescheduling
sovereign debt owed to private lenders. A presidential decree has deemed some
independent power projects, but not including the Paiton project, subject to
review, postponement or cancellation. The Government of Indonesia has announced
that it will propose a policy with respect to independent power projects, which
is expected in the fourth quarter of 1998. The Paiton project continues to
discuss the situation in Indonesia with PLN, the Government of Indonesia and its
official and commercial lenders.
Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in Brooklyn,
New York. A wholly owned subsidiary of EME owns 50% of the project. In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $136.8 million. BNY has asserted
general monetary claims against the contractor. In connection with a $407
million non-recourse project refinancing in 1997, EME agreed to indemnify BNY
and its partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders. EME
believes that the outcome of this litigation will not have a material adverse
effect on its financial position or results of operations.
EME's projected construction expenditures that will be funded utilizing non-
recourse project financing are $40 million at September 30, 1998.
Litigation
EME is routinely involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based on advice of counsel, does not believe that the
final outcome of any pending litigation will have a material adverse effect on
EME's financial position or results of operations.
Environmental Matters
EME is subject to environmental regulation by federal, state and local
authorities in the U.S. and foreign regulatory authorities with jurisdiction
over projects located outside the U.S. 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 operations.
EME completed a review of some of its sites in 1995 and does not believe that
a material liability exists as of September 30, 1998. The implementation of
Clean Air Act Amendments is expected to result in increased operating expenses;
however, these increased operating expenses are not expected to have a material
impact on EME's financial position or results of operations.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q includes certain forward-looking
statements, the realization of which may be affected by certain important
factors discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" thereunder and elsewhere herein.
GENERAL
- -------
Edison Mission Energy (EME) is one of the leading global producers of
electricity. Through its subsidiaries, EME is engaged in the business of
developing, acquiring, owning and operating electric power generation facilities
worldwide. EME's investments include 52 projects totaling 9,985 megawatts (MW)
of generation capacity, of which 7,363 are in operation and 2,622 are under
construction.
EME's operating revenues are derived primarily from electric revenues and
equity in income from energy projects. Operating revenues also include equity
in income from oil and gas investments and revenue attributable to operation and
maintenance services.
Electric revenues are derived from consolidated results of operations of
several international entities. Equity in income from energy projects relates
to EME's ownership interest of 50% or less in 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.
ACQUISITION
- -----------
In May 1997, Mission Energy Development Australia Pty Ltd, a subsidiary of
EME, completed a transaction with the State Government of Victoria (State)
acquiring the State's 49% interest in the 1,000-MW Loy Yang B Power Station (Loy
Yang B). EME, through its subsidiaries, owns 100% of Loy Yang B.
The acquisition was accounted for utilizing the purchase method. The
consolidated statement of income for the nine months ended September 30, 1997
reflects the operations under the new contracts and the elimination of the
minority interest of Loy Yang B beginning in May 1997.
RESULTS OF OPERATIONS
- ---------------------
OPERATING REVENUES Operating revenues decreased $7.1 million and $74.3 million
for the third quarter and nine months ended September 30, 1998, respectively,
compared with the corresponding periods of 1997, resulting primarily from
decreases in electric revenues and equity in income from oil and gas
investments, partially offset by
10
<PAGE>
increases in equity in income from energy projects. The third quarter decrease
in electric revenues is primarily the result of lower Australian currency
exchange rates and a scheduled maintenance outage at Roosecote. The decrease for
the nine months ended September 30, 1998 is primarily the result of Loy Yang B's
new series of power sales-related contracts associated with the 49% acquisition
in May 1997 and lower Australian currency exchange rates. The decreases were
partially offset by an increase of $19.7 million in revenues from the First
Hydro project, attributable to higher energy revenues as a result of higher
energy prices for the third quarter and nine months ended September 30, 1998.
Equity in income from energy projects increased $7.3 million and $11.9 million
for the third quarter and nine months ended September 30, 1998, respectively,
compared with the corresponding periods of 1997. These increases were
principally due to earnings from a geothermal project which were previously
deferred, partially offset by lower electric and steam revenues for several
cogeneration projects due to lower oil and gas prices upon which the revenues
are based.
A significant number of EME's domestic energy projects are located on the West
Coast. These projects generally have power sales contracts that provide for
higher payments during the summer months. Accordingly, EME's third quarter
revenues from energy projects are materially higher than other quarters of the
year.
Equity in income from oil and gas investments decreased $3.1 million and $15.4
million for the third quarter and nine months ended September 30, 1998,
respectively, compared with the same prior year periods. The decreases were
primarily due to lower oil and gas prices.
OPERATING EXPENSES Operating expenses decreased $19.3 million and $36.8 million
for the third quarter and nine months ended September 30, 1998, respectively,
compared with the same prior year periods. The decrease for the third quarter
was due to lower fuel, depreciation and amortization, and administrative and
general expenses. The decrease for the nine months ended September 30, 1998 was
primarily due to lower fuel and depreciation and amortization expenses. The
third quarter decrease in fuel expense is primarily the result of a scheduled
maintenance outage at Roosecote. The decrease in fuel expense for the nine
months ended September 30, 1998 is primarily due to the new fuel supply
agreement entered into by Loy Yang B related to the 49% acquisition in May 1997,
partially offset by higher fuel expense for First Hydro as a result of higher
prices and increased generation in 1998.
The third quarter decrease in depreciation and amortization expense is
primarily the result of lower Australian currency exchange rates. The decrease
in depreciation and amortization expense for the nine months ended September 30,
1998 resulted from an extension in the useful life of Loy Yang B's plant and
equipment from approximately 30 years, the term of the previous power purchase
agreement, to 50 years, the projected economic life of the plant, as a result of
the May 1997 acquisition.
11
<PAGE>
The administrative and general expense decrease for the third quarter was
primarily related to a decrease in compensation expense as a result of charges
associated with EME's phantom stock plan.
OTHER INCOME (EXPENSE) Interest and other income increased $10.2 million for
the nine months ended September 30, 1998 compared with the same prior year
period. The increase was primarily due to interest earned on higher cash
balances.
Gain on sale of assets in 1997 was comprised of an after-tax gain of
approximately $14 million on the sale of EME's ownership interest in B.C. Star
Partners (B.C. Star) to Remington Energy Ltd.
Interest expense, net of capitalized interest, decreased $6.8 million and
$21.8 million in the third quarter and nine months ended September 30, 1998,
respectively, compared with the corresponding periods in 1997. The decreases
were due to lower Australian currency exchange rates, higher capitalized
interest in 1998 compared to the same period in 1997 as a result of higher
accumulated construction expenditures and a lower principal balance on the $450
million of securities issued by Edison Mission Energy Funding Corp.
Minority interest expense decreased $36.4 million for the nine months ended
September 30, 1998 compared with the corresponding period in 1997. The decrease
resulted from the acquisition of the remaining 49% ownership interest in Loy
Yang B in May 1997.
PROVISION FOR INCOME TAXES EME recorded an effective tax provision rate of 36%
for the nine months ended September 30, 1998, compared with a 27% rate for the
same prior year period. The increase in the 1998 effective tax rate was
primarily due to a lower reduction in the corporate income tax rates in the
United Kingdom (U.K.) in 1998 compared to 1997. In July 1998, the U.K.
government decreased the corporate tax rate from 31% to 30%, effective as of
April 1999. In August 1997, the U.K. government decreased the corporate tax
rate from 33% to 31%, effective as of April 1997. In accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes", these
reductions in U.K. income tax rates result in one-time reductions in income tax
expense of approximately $10 million and $20 million in 1998 and 1997
respectively, to adjust the U.K. deferred income tax liability (primarily First
Hydro) to the new lower rates.
LIQUIDITY AND CAPITAL RESOURCES For the nine months ended September 30, 1998,
net cash provided by operating activities increased to $172.5 million from
$154.2 million for the same period in 1997. The 1998 improvement primarily
reflects lower income taxes and higher distributions from energy projects,
partially offset by an increase in working capital requirements principally due
to a decrease in accrued liabilities and lower distributions from oil and gas.
Net cash used in financing activities totaled $6.2 million during the first
nine months of 1998, compared to net cash provided by financing activities of
$102.5 million in 1997.
12
<PAGE>
The 1998 decrease is primarily due to the Loy Yang B financing of $964 million
(1.265 billion Australian dollars), the proceeds of which were primarily used to
repay Loy Yang B's existing debt facilities of $713 million (935.5 million
Australian dollars) in May 1997, partially offset by a cash dividend paid to
Edison International of $122 million in June 1997.
Net cash used in investing activities decreased to $82.9 million for the nine
months ended September 30, 1998 from $182.0 million for the nine months ended
September 30, 1997. The decrease is primarily due to the purchase of common
stock of acquired companies related to the acquisition of the remaining 49%
ownership interest in Loy Yang B in May 1997, a reduction in restricted cash
balances required for debt payments primarily for the $450 million of securities
issued by Edison Mission Energy Funding Corp. and lower investments in energy
projects in 1998 primarily for the Paiton project. These were partially offset
by the proceeds from the sale of EME's ownership interest in B.C. Star in April
1997.
At September 30, 1998, EME had cash and cash equivalents of $668.6 million and
had available $410 million of borrowing capacity under a $500 million revolving
credit facility that expires in 2001. This borrowing capacity under the
revolving credit facility may be reduced by borrowings for firm commitments to
contribute project equity and to fund capital expenditures and construction
costs of its project facilities.
Firm Commitments for Asset Purchase
<TABLE>
<CAPTION>
Project U.S. ($ in millions)
- ------- --------------------
<S> <C>
Homer City (i) 1,801
</TABLE>
(i) Homer City is a 1,884-MW coal-fired generating plant in the mid-Atlantic
region of the United States. A wholly owned subsidiary of EME executed an
Asset Purchase Agreement to purchase 100% of the Homer City Electric
Generating Station, which is currently scheduled to close during the first
quarter of 1999.
Firm Commitments to Contribute Project Equity
<TABLE>
<CAPTION>
Projects Local Currency U.S. ($ in millions)
- -------- -------------- --------------------
<S> <C> <C>
ISAB (i) 244 billion Italian Lira 148
Paiton (ii) 84
Tri Energy (iii) 25
Doga (iv) 8
</TABLE>
(i) ISAB is a 512-MW integrated gasification combined cycle power plant under
construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of
EME owns a 49% interest. Equity will be contributed at commercial
operation, which is currently scheduled for late 1999.
13
<PAGE>
(ii) Paiton is a 1,230-MW coal-fired power plant under construction in East
Java, Indonesia. A wholly owned subsidiary of EME owns a 40% interest.
Equity contributions are currently being made and will continue until
commercial operation, which is currently scheduled for the first half of
1999.
(iii) Tri Energy is a 700-MW gas-fired power plant under construction in the
Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25%
interest. Equity will be contributed at commercial operation, which is
currently scheduled for mid 2000.
(iv) Doga is a 180-MW gas-fired power plant under construction near Istanbul,
Turkey. A wholly owned subsidiary of EME owns an 80% interest. Equity
contributions are currently being made and will continue until commercial
operation, which is currently scheduled for the first half of 1999.
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.
Contingent Obligations to Contribute Project Equity
<TABLE>
<CAPTION>
Projects U.S. ($ in millions)
- -------- --------------------
<S> <C>
Paiton (i) 141
Tri Energy (i) 20
Doga (i) 15
All Other 23
</TABLE>
(i) Contingent obligations to contribute additional equity to the project
would be based on events principally related to capital cost overruns
during plant construction, certain partner obligations or events of
default.
Management has no reason to believe that these contingent obligations or any
other contingent obligations to contribute project equity will be required.
Other Commitments and Contingencies
Certain of EME's subsidiaries entered into indemnification agreements
whereby the subsidiaries agreed to repay capacity payments to the projects'
power purchasers, in the event the projects unilaterally terminate their
performance or reduce their electric power producing capability during the term
of the power contract. Obligations under these indemnification agreements as of
September 30, 1998, if payment were required, would be $267 million. Management
has no reason to believe that the projects will either terminate their
performance or reduce their electric power producing capability during the term
of the power contracts.
14
<PAGE>
Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in Brooklyn,
New York. A wholly owned subsidiary of EME owns 50% of the project. In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. (BNY) for damages in the amount of $136.8 million. BNY has asserted
general monetary claims against the contractor. In connection with a $407
million non-recourse project refinancing in 1997, EME agreed to indemnify BNY
and its partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to the lenders. EME
believes that the outcome of this litigation will not have a material adverse
effect on its financial position or results of operations.
EME's projected construction expenditures that will be funded utilizing non-
recourse project financing are $40 million at September 30, 1998.
EME and its subsidiaries may incur additional obligations to make equity and
other contributions to projects in the future. EME believes that it will have
sufficient liquidity on both a short and long-term basis to fund pre-financing
project development costs, make equity contributions to partnerships, pay
corporate debt obligations and pay other administrative and general expenses as
they are incurred from (1) distributions from energy projects and dividends from
investments in oil and gas, (2) proceeds from the repayment of loans to energy
projects and (3) funds available from EME's revolving credit facility.
CHANGES IN INTEREST RATES, CHANGES IN ELECTRICITY POOL PRICING, FOREIGN CURRENCY
FLUCTUATIONS AND OTHER CONTRACTUAL OBLIGATIONS Changes in interest rates,
changes in electricity pool pricing and fluctuations in foreign currency
exchange rates can have a significant impact on EME's results of operations.
Interest rate changes affect the cost of capital needed to construct and finance
projects. EME has mitigated the risk of interest rate fluctuations by arranging
for fixed rate financing or variable rate financing with interest rate swaps or
other hedging mechanisms for the majority of its project financing. Interest
expense included $15.6 million and $13.5 million for the nine months ended
September 30, 1998 and 1997, respectively, as a result of interest rate swap and
collar agreements. EME has entered into several interest rate swap and collar
agreements whereby the maturity date of the swaps and collars occurs prior to
the final maturity of the underlying debt. EME does not believe that interest
rate fluctuations will have a materially adverse effect on its financial
position or results of operations.
Projects in the U.K. currently sell their electrical energy and capacity
through a centralized electricity pool, which establishes a half-hourly clearing
price (also referred to as the "pool price") for electrical energy. The pool
price is extremely volatile and can vary by as much as a factor of ten or more
over the course of a few hours, due to the large differentials in demand
according to the time of day. First Hydro mitigates a portion of the market
risk of the pool by entering into contracts for differences (electricity rate
swap agreements), related to either the selling or purchasing price of power,
whereby a contract specifies a price at which the electricity will be traded,
and the parties to the agreement
15
<PAGE>
make payments, calculated based on the difference between the price in the
contract and the pool price for the element of power under contract. These
contracts can be sold in two structures: one-way contracts, where a specified
monthly amount is received in advance and difference payments are made when the
pool price is above the price specified in the contract, and two-way contracts,
where the counter party pays First Hydro when the pool price is below that in
the contract instead of a specified monthly amount. These contracts act as a
means of stabilizing production revenues or purchasing costs by removing an
element of First Hydro's net exposure to pool price volatility. First Hydro
electric revenues were increased by $35.8 million for the nine month period
ended September 30, 1998, compared to a $27.2 million increase for the
corresponding period in 1997, as a result of electricity rate swap agreements.
On July 29, 1998, the Director General of Electricity Supply proposed to the
Minister for Science, Energy and Industry that the current structure of
contracts-for-differences and compulsory trading via the pool at half-hour
clearing prices bid a day ahead be abolished. He proposed in its place, among
other things, the establishment of voluntary forwards and futures markets,
organized by independent market operators and evolving in response to demand; a
short-term bilateral market operating from 24 to 4 hours before a trading
period; a balancing market to enable the system operator to balance generation
and demand and resolve any transmission constraints; a settlement process for
recovering imbalances between contracted and metered volumes with stronger
incentives for being in balance; and a Balancing and Settlement Code Panel to
oversee governance of the short-term bilateral and balancing markets. The
Minister for Science, Energy and Industry has recommended that the proposal be
implemented by April 2000. Further definition of the proposal will be required
before the effects of the changes can be evaluated. Implementation of the
proposal may also require legislation.
Loy Yang B sells their electrical energy through a centralized electricity
pool (the National Electricity Market) 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 Victorian Power Exchange, operator and
administrator of the pool, determines a system marginal price each half hour.
To mitigate the exposure to price volatility of the electricity traded into the
pool, Loy Yang B has entered into a number of financial hedges. From May 8,
1997 to December 31, 2000, approximately 53% to 64% of the plant output sold is
hedged under "Vesting Contracts" with the remainder of the plant capacity hedged
under the "State Hedge" described below. Vesting Contracts were put into place
by the State, between each generator and each distributor, prior to the
privatization of electric power distributors in order to provide more
predictable pricing for those electricity customers that were unable to choose
their electricity retailer. Vesting Contracts set base strike prices at which
the electricity will be traded, and the parties to the agreement make payments,
calculated based on the difference between the price in the contract and the
half-hourly pool clearing price for the element of power under contract. These
contracts can be sold as one-way or two-way contracts which are structured
similar to the electricity rate swap agreements described above. These
contracts are accounted for as electricity rate swap agreements. The State
Hedge is a long-term contractual arrangement based upon a fixed price commencing
May 8, 1997 and terminating October 31, 2016. The State guarantees SECV's
obligations under the
16
<PAGE>
State Hedge. Loy Yang B's electric revenues were increased by $51.8 million for
the nine-month period ended September 30, 1998, compared to a $43.1 million
increase for the corresponding period in 1997, as a result of hedging contract
arrangements. The State Hedge and Vesting Contracts were entered into in
connection with the 49% acquisition of Loy Yang B in May 1997, and therefore
electric revenues were not impacted prior to May 1997.
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 foreign projects. As EME continues to expand into foreign markets,
fluctuations in foreign currency exchange rates can be expected to have a
greater impact on EME's results of operations in the future. At times, EME has
hedged a portion of its current exposure to fluctuations in foreign exchange
rates where it deems appropriate 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. There can be no assurance, however, that
fluctuations in exchange rates will be fully offset by hedges or that currency
movements and the relationship between certain macro economic variables will
behave in a manner consistent with historical or forecasted relationships.
Construction on the two-unit Paiton project is approximately 97% complete, and
commercial operation is expected in the first half of 1999. The tariff is
higher in the early years and steps down over time, and the tariff for the
Paiton project includes infrastructure to be used in common by other units at
the Paiton complex. The plant's output is fully contracted with the state-owned
electricity company, PT Perusahaan Listrik Negara (PLN), for payment in U.S.
dollars and supported by the Government of Indonesia. The projected rate of
growth of the Indonesian economy and the exchange rate of Indonesian Rupiah into
U.S. dollars have deteriorated significantly since the Paiton project was
contracted, approved and financed. The project received substantial finance and
insurance support from the Export-Import Bank of the United States, The Export-
Import Bank of Japan, the U.S. Overseas Private Investment Corporation and the
Ministry of International Trade and Industry of Japan. The Paiton project's
senior debt ratings have been reduced from investment grade to speculative grade
based on the rating agencies' perceived increased risk that PLN might not be
able to honor the electricity sales contract with Paiton. The Government of
Indonesia has arranged to reschedule sovereign debt owed to foreign governments
and has entered into discussions about rescheduling sovereign debt owed to
private lenders. A presidential decree has deemed some independent power
projects, but not including the Paiton project, subject to review, postponement
or cancellation. The Government of Indonesia has announced that it will propose
a policy with respect to independent power projects, which is expected in the
fourth quarter of 1998. The Paiton project continues to discuss the situation
in Indonesia with PLN, the Government of Indonesia and its official and
commercial lenders.
17
<PAGE>
The electric power generated by EME's domestic operating projects is generally
sold to electric utilities pursuant to long-term (typically, 15 to 30-year)
power sales contracts and is expected to result in consistent cash flow under a
wide range of economic and operating circumstances. To accomplish this, EME
structured its power sales contracts so that fluctuations in fuel costs would
produce similar fluctuations in electric and/or steam revenues and entered into
long-term fuel supply and transportation agreements.
ENVIRONMENTAL MATTERS EME is subject to environmental regulation by federal,
state and local authorities in the U.S. and foreign regulatory authorities with
jurisdiction over projects located outside the U.S. 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 operations.
EME completed a review of some of its sites in 1995 and does not believe that
a material liability exists as of September 30, 1998. The implementation of
Clean Air Act Amendments is expected to result in increased operating expenses;
however, these increased operating expenses are not expected to have a material
impact on EME's financial position or results of operations.
YEAR 2000 ISSUE EME has a comprehensive program in place to remediate potential
Year 2000 impacts. EME divides its Year 2000 Issue activities into five phases:
inventory, impact assessment, remediation, documentation and certification.
EME's plan for critical systems is to be 75% complete by year-end 1998, and 100%
complete by July 1999. A critical system is defined as those applications and
systems, including embedded processor technology, which if not appropriately
remediated may have a significant impact on customers, the revenue stream,
regulatory compliance, or the health and safety of personnel. EME is currently
in the remediation and documentation phase.
Assurances from third party operated plants have been received indicating
aggressive Year 2000 remediation programs. Monitoring of these efforts is
ongoing. Plants under construction have obtained assurances from new
construction and development contractors, who have been requested to ensure this
is part of their goals. General warranty of plants would likely include any
equipment issues that may arise regarding Year 2000 in the coming year.
The other essential component of the EME Year 2000 readiness program is to
identify and assess vendor products and business partners for Year 2000
readiness. EME has a process in place to identify and contact vendors and
business partners to determine their Year 2000 status, and is evaluating the
responses. EME's general policy requires that all newly purchased products be
Year 2000-ready or otherwise designed to allow EME to determine whether such
products present Year 2000 issues.
18
<PAGE>
Although EME is confident that its critical systems will be fully remediated
prior to year-end 1999, EME believes that prudent business practices call for
the development of contingency plans. Such contingency plans shall include
developing strategies for dealing with Year 2000-related processing failures or
malfunctions due to EME's internal systems or from external parties. EME's
contingency plans are expected to be completed by March 1999; therefore, these
risk factors are not yet fully known, and EME's reasonably likely worst case
scenario also is unknown at this time. EME does not expect the Year 2000 issue
to have a material adverse effect on its results of operations or financial
position; however, if not effectively remediated, negative effects from Year
2000 issues, including those related to internal systems, vendors, business
partners, the independent system operator, the power exchange or customers,
could cause results to differ.
STATEMENT OF POSITION 98-5 In April 1998, the American Institute of Certified
Public Accountants issued Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-Up Activities", which will be effective in January 1999. The
Statement requires that certain costs related to start-up activities be expensed
as incurred and that certain previously capitalized costs be expensed and
reported as a cumulative change in accounting principle. The impact of adopting
SOP 98-5 on EME's financial statements has not been quantified at this time.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133 In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
will be effective in January 2000. The Statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. A
derivative's gains and losses for qualifying hedges offset related results on
the hedged item in the income statement and a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The impact of adopting Statement 133 on EME's financial statements
has not been quantified at this time.
GENERATING STATION ACQUISITION On August 2, 1998, EME entered into agreements
to acquire the 1,884-MW Homer City Generating Station, one of the largest coal-
fired generating plants in the mid-Atlantic region of the United States, for
approximately $1.8 billion. Homer City, jointly owned by subsidiaries of GPU,
Inc. and New York State Electric & Gas Corporation, is the only major regional
coal-fired facility with direct high voltage interconnection to both the New
York Power Pool and the Pennsylvania-New Jersey-Maryland Power Pool. The plant
is located approximately 45 miles northeast of Pittsburgh, Pennsylvania. EME
will operate the plant, which is one of the lowest-cost generation facilities in
the region.
19
<PAGE>
The closing of the transaction is subject to receipt of various State and
Federal regulatory approvals and is expected to be completed by the first
quarter of 1999. Approvals have been obtained from the Pennsylvania Public
Utility Commission and the New York State Public Service Commission. EME plans
to finance the acquisition with a combination of debt secured by the project,
corporate debt and cash. The acquisition is expected to have no effect on
earnings in 1999 and a positive effect on earnings in 2000 and beyond.
20
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Nos. Description
------------ -----------
10.47 Guarantee by EME dated June 30, 1998 in favor of Tri Energy
Company Limited and the Sanwa Bank, Limited to guarantee
payment of 25% of Tri Energy Company Limited's
aggregate capital contributions under the Equity Bridge Loan
10.48 Guarantee by EME dated June 30, 1998 in favor of Tri Energy
Company Limited and the Sanwa Bank, Limited to guarantee
payment of 37.5% of Tri Energy Company Limited's
aggregate capital contributions attributable to Banpu Gas
and BANPU
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30,
1998.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Edison Mission Energy
---------------------
(Registrant)
Date: November 12, 1998 /s/ JAMES V. IACO, JR.
- ----------------------- ----------------------
JAMES V. IACO, JR.,
Senior Vice President and
Chief Financial Officer
22
<PAGE>
EXHIBIT NO. 10.47
Execution Version
================================================================================
CAPITAL CONTRIBUTION GUARANTEE
by
EME TRI GEN BV
and
EDISON MISSION ENERGY,
Guarantors
in favor of
TRI ENERGY COMPANY LIMITED
and
THE SANWA BANK, LIMITED,
as Equity Facility Agent
================================================================================
<PAGE>
CAPITAL CONTRIBUTION GUARANTEE
THIS CAPITAL CONTRIBUTION GUARANTEE (this "Guarantee"), dated as of
---------
June 30, 1998, is made by EME Tri Gen BV, a corporation organized and validly
existing under the laws of The Netherlands ("ETG" or the "Sponsor"), having its
principal address at Croeselaan 18, 3521 CB Utrecht, The Netherlands and Edison
Mission Energy, a corporation organized and validly existing under the laws of
the State of California ("EME" and together with ETG, the "Guarantors"), having
----------
its principal address at 18101 Von Karman Ave., Suite 1700, Irvine, California
92612-1046 U.S.A., in favor of Tri Energy Company Limited, a limited liability
company organized and existing under the laws of Thailand (the "Borrower"),
--------
having its registered address at 16th Fl., Grand Amarin Tower, New Petchburi
Road, Ratchathewi, Bangkok, 10320 Thailand and The Sanwa Bank, Limited, a
banking institution organized under the laws of Japan, acting by and through its
Tokyo head office, as Equity Facility Agent (in such capacity, together with its
successors and assigns in such capacity, the "Equity Facility Agent") for the
---------------------
Equity Bridge Lenders under the Financing Documents.
WITNESSETH:
----------
A. The Guarantors. ETG is a sponsor of the Borrower. EME is the parent
--------------
corporation of ETG.
B. Common Terms Agreement. The Borrower has entered into that certain
----------------------
Amended and Restated Common Terms Agreement, dated as of June 30, 1998, among
the Borrower, Credit Suisse First Boston, as Documentation and Coordination
Agent and Syndication Agent, the Sanwa Bank, Limited, as Facility Agent, Equity
Facility Agent, Offshore Collateral Agent and Technical Agent, Tokyo-Mitsubishi
International (Singapore) Ltd., as Insurance Agent, The Sumitomo Bank, Limited,
as Onshore Collateral Agent, Citibank, N.A., as a Letter of Credit Facility
Lender and a Working Capital Facility Lender, Siam City Bank Public Company
Limited, as Guarantee Facility Lender and a Working Capital Facility Lender, The
Industrial Finance Corporation of Thailand, as a Working Capital Facility
Lender, and NationsBank, N.A., as a Letter of Credit Facility Lender, and all
financial institutions and trusts that from time to time become Lenders pursuant
to the terms of the Credit Agreement. The Common Terms Agreement sets forth
certain common provisions regarding the Loans, including (i) the conditions
precedent to the initial drawdown and conditions precedent to subsequent
drawdowns of the Credit Facilities and the conditions precedent to the Credit
Facility Conversion, (ii) representations and covenants of the Borrower running
in favor of the Financing Parties, (iii) common Events of Default, and (iv)
reporting and insurance requirements for the Project.
C. Financing Documents. The Borrower has entered into (i) that certain
-------------------
Equity Bridge Loan Credit Agreement with the Equity Bridge Lenders, the
Documentation and Coordination Agent, the Facility Agent, the Equity Facility
Agent and Banpu Gas (solely for purposes of Section 2.5.3 thereof), pursuant to
--------------
which the Equity Bridge Lenders will provide Equity Bridge Loans to the Borrower
during the construction phase of the Project, which are to be guaranteed in part
by this Guarantee, (ii) the Credit Agreements with the Lenders and the Agents
party thereto, and (iii) certain other Financing Documents.
D. Condition to Lending. It is a condition precedent to the Equity
--------------------
Bridge Lenders' obligation to make the Equity Bridge Loan Facility available to
the Borrower under the Common Terms Agreement and the Equity Bridge Loan Credit
Agreement and the Lenders'
-2-
<PAGE>
obligations to make the other Credit Facilities available to the Borrower under
the Common Terms Agreement and the other Credit Agreements that the Guarantors
enter into this Guarantee.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, receipt of which is hereby acknowledged,
and as an inducement to the Equity Bridge Lenders to enter into the Equity
Bridge Loan Credit Agreement with the Borrower, and to the Lenders to enter into
all other Financing Documents, the Guarantors hereby agree as follows:
1. Capitalized Terms. Capitalized terms used but not otherwise
-----------------
defined herein shall have the respective meanings given them in Section 1 of
Schedule 1 to the Common Terms Agreement, and the Principles of Construction
contained in Section 2 of Schedule 1 to the Common Terms Agreement shall apply
hereto.
2. Guarantee of Obligations.
------------------------
(a) The Guarantors hereby, jointly and severally, unconditionally and
irrevocably guarantee to the Equity Bridge Lenders and the Equity Facility Agent
(for the benefit of the Equity Bridge Lenders) to make on or before the Equity
Bridge Loan Repayment Date, whether by acceleration or otherwise, aggregate
capital contributions to the Capital Contributions Account of the Borrower equal
to twenty-five percent (25%) (the "EME Guaranteed Percentage") of all
-------------------------
obligations of the Borrower under the Equity Bridge Loan Credit Agreement and
allocable to the Equity Bridge Loans under any other applicable Financing
Documents (but, for the avoidance of doubt, not including (i) any obligations by
the Borrower in favor of the Offshore Lenders to repay amounts drawn from the
Offshore Loans and used to pay interest due on the Equity Bridge Loans, or (ii)
any amounts owed by the Borrower to any Hedge Provider under Interest Rate
Hedging Agreements entered into by the Borrower with respect to the Equity
Bridge Loans) whether for interest, fees, expenses or otherwise, together with
all expenses incurred by the Equity Facility Agent or the Equity Bridge Lenders
in enforcing any of such obligations or the terms hereof, including reasonable
fees and expenses of legal counsel, but specifically limited solely to amounts
due to the Equity Facility Agent and the Equity Bridge Lenders and not to
include any amounts owed by the Borrower to other Persons under or based upon
any other Financing Documents (the EME Guaranteed Percentage of the total of
such obligations of the Borrower is referred to herein as the "Guaranteed
----------
Obligations"). The Guarantors agree that if for any reason whatsoever the
- -------------
Borrower fails or is unable duly, punctually and fully to pay any such
Guaranteed Obligations, the Guarantors shall, upon demand by the Equity Facility
Agent (acting at the instructions of the Equity Bridge Lenders), make aggregate
capital contributions to the Borrower in the amount of such Guaranteed
Obligations by deposit of such capital contributions into the Capital
Contributions Account within five (5) Business Days after the date of demand,
without regard to any exercise or non-exercise by the Equity Facility Agent or
the Equity Bridge Lenders of any right, remedy, power or privilege under or in
respect of the Equity Bridge Loan Credit Agreement or any other Financing
Document against the Borrower. The Borrower acknowledges and agrees that, upon
receipt of such capital contributions, the Offshore Collateral Agent shall be
obligated to transfer immediately to the Equity Facility Agent the amount of
such capital contributions in payment of the Guaranteed Obligations pursuant to
Section 2.1.8 of the Disbursement Agreement to enable the Borrower to repay the
Equity Bridge Loans. Each payment made by a Guarantor pursuant to this Section
2(a) in respect of the Guaranteed Obligations shall be deemed to be a capital
contribution by the Sponsor to the Borrower. Upon receipt of such capital
contribution, the Borrower agrees promptly to issue shares of its Capital Stock
to the Sponsor in respect of such capital contribution, in accordance with
Section 5.2 of the Shareholders' Agreement and the Charter Documents, and the
Sponsor shall, and EME shall cause the Sponsor to, execute Pledge Agreements
with respect to
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<PAGE>
such shares of Capital Stock; provided, however, that the failure of the
-------- -------
Borrower to deliver such shares of Capital Stock shall not excuse the
Guarantors' obligations hereunder.
(b) The obligations of the Guarantors under this Guarantee are the
Guarantors' primary obligations and are an absolute, unconditional, continuing
and irrevocable guarantee of payment and not of collectibility or performance
and are in no way conditioned on or contingent upon any attempt to enforce in
whole or in part the Borrower's obligations under the Equity Bridge Loan Credit
Agreement or the obligations of any Person under any of the other Financing
Documents. The obligations of the Guarantors under this Guarantee are not, and
shall not be, subject to any defense or right of set-off, counterclaim,
deduction, diminution, abatement, recoupment, suspension, deferment or reduction
or any other legal or equitable defense which the Guarantors have or hereafter
may have, against any other Person (including the Borrower) for any reason
whatsoever (including any action, failure to act or circumstance which
constitutes, or might constitute or be construed as, an equitable or legal
discharge of any or all of the Borrower's obligations under the Equity Bridge
Loan Credit Agreement); provided that nothing in this Guarantee shall affect
--------
any right the Guarantors may have against any of the Equity Bridge Lenders or
the Equity Facility Agent arising out of any gross negligence or willful
misconduct of any such Person under the Equity Bridge Loan Credit Agreement,
the Common Terms Agreement or this Guarantee. Each failure by the Borrower to
pay any Guaranteed Obligations shall give rise to a separate cause of action
hereunder, and separate suits may be brought hereunder as each cause of action
arises.
(c) The Equity Facility Agent, acting pursuant to the Equity Bridge
Loan Credit Agreement or the Equity Bridge Lenders may, at any time and from
time to time without the consent of or notice to the Guarantors, except such
notice as may be required by the Financing Documents or Applicable Law, which
cannot be waived, without incurring responsibility to the Guarantors, without
impairing or releasing the obligations of the Guarantors hereunder, upon or
without any terms or conditions and in whole or in part, (i) change, by mutual
agreement with the Borrower, the manner, place and terms of payment or change or
extend the time of payment of, renew or alter any Guaranteed Obligations or any
obligations (including any hereunder) incurred directly or indirectly in respect
hereof, or in any manner by mutual agreement with the Borrower modify, amend or
supplement the terms of the Equity Bridge Loan Credit Agreement or any
documents, instruments or agreements executed in connection therewith (other
than any document to which either Guarantor is a party), and the guarantee
herein undertaken shall apply to the Guaranteed Obligations as so changed,
extended, renewed, modified, amended, supplemented or altered; (ii) exercise or
refrain from exercising any rights against the Borrower or others (including the
Guarantors), whether under the Financing Documents or otherwise, or otherwise
act or refrain from acting; (iii) add or release any other guarantor or other
Person from its obligations under any of the Financing Documents without
obtaining the consent of the Guarantors, and without affecting or impairing the
obligations of the Guarantors hereunder; (iv) settle or compromise any
Guaranteed Obligations and/or any obligations and liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or hereof,
and may subordinate the payment of all or any part thereof to the payment of any
obligations and liabilities which may be due to the Equity Bridge Lenders or
others; (v) sell, exchange, release, surrender, realize upon or otherwise deal
with in any manner or in any order any property or assets by whomsoever pledged,
transferred, or assigned to secure or howsoever securing the Guaranteed
Obligations or any liabilities or obligations (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof and/or any offset
thereagainst; (vi) apply any sums by whomsoever paid or howsoever realized to
the obligations of the Borrower under the Equity Bridge Loan Credit Agreement in
the manner provided for therein regardless of what obligations and liabilities
remain unpaid; (vii) consent to or waive any breach of, or any act, omission or
default under, the Financing Documents or any of such other instruments or
agreements, or with the mutual agreement of the Borrower and (when such
Guarantor is a party thereto) each respective Guarantor, amend, modify or
supplement the Financing Documents or any
-4-
<PAGE>
of such other instruments or agreements; and/or (viii) act or fail to act in any
manner referred to in this Guarantee which may deprive the Guarantors of any
right it may otherwise have had to subrogation or reimbursement against the
Borrower to recover full indemnity for any payments made pursuant to this
Guarantee or of its right of contribution against any other party.
(d) No invalidity, irregularity or unenforceability of any or all of
the obligations or liabilities hereby guaranteed shall affect, impair, or be a
defense to this Guarantee.
(e) This is a continuing Guarantee and all obligations to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. The Guarantors hereby waive any right to
revoke this Guarantee, and acknowledges that this Guarantee is continuing in
nature and applies to all Guaranteed Obligations, whether existing now or in the
future. In the event that, notwithstanding the provisions of this Section 2,
---------
this Guarantee shall be deemed revocable pursuant to Applicable Law, then any
such revocation shall become effective only upon receipt by the Equity Facility
Agent of written notice of revocation signed by the Guarantors. No revocation or
termination hereof shall affect in any manner rights arising under this
Guarantee with respect to Guaranteed Obligations arising prior to receipt by the
Equity Facility Agent of written notice of such revocation or termination and
the sole effect of revocation and termination hereof shall be to exclude from
this Guarantee all Guaranteed Obligations thereafter arising which are
unconnected with Guaranteed Obligations theretofore arising or transactions
theretofore entered into.
(f) Each Guarantor acknowledges and agrees that (i) it will benefit,
directly and indirectly, if the Equity Bridge Lenders enter into the Equity
Bridge Loan Credit Agreement with the Borrower and (ii) the obligations of such
Guarantor hereunder are being incurred concurrently with the obligations of the
Borrower under the Financing Documents.
(g) The obligations of each Guarantor hereunder shall remain
unchanged and in full force and effect in accordance with the terms hereof
notwithstanding any transfer or other disposition of any interest (whether
direct or indirect) in the Sponsor or any transfer or other disposition by the
Sponsor of its interest in the Borrower.
(h) Anything in this Guarantee or in any other Financing Document to
the contrary notwithstanding, the maximum liability of each Guarantor under this
Guarantee shall in no event exceed the amount that can be guaranteed by each
Guarantor under applicable U.S. federal and state laws relating to the
insolvency of debtors.
3. Waiver. To the fullest extent permitted by Applicable Law, each
------
Guarantor hereby expressly waives and relinquishes all rights and remedies
accorded by Applicable Law to sureties or guarantors and agrees not to assert or
take advantage of any such rights or remedies, including (i) any right to
require the Equity Facility Agent or the Equity Bridge Lenders to proceed
against the Borrower or any other Person or to proceed against or exhaust any
security held by the Equity Facility Agent, on behalf of the Equity Bridge
Lenders, or by the Equity Bridge Lenders at any time or to pursue any other
remedy in the Equity Facility Agent's or the Equity Bridge Lenders' power before
proceeding against such Guarantor; (ii) any right to elect trial by jury, the
benefit of the statute of limitations in any action hereunder or in any action
for the collection or performance of any obligations hereunder or of the
Borrower under the Equity Bridge Loan Credit Agreement; (iii) any defense to
any indebtedness or obligation based on a statute of limitations (as to the time
period within which an action may be brought); (iv) any defense that may arise
by reason of the incapacity, lack of power or authority, dissolution, merger or
termination of the Borrower or any other Person or the failure of the Equity
Facility Agent or the Equity Bridge Lenders to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of the
Borrower or any other Person; (v) any defense based on any act, failure to act,
-5-
<PAGE>
delay or omission whatsoever on the part of the Borrower, the Equity Facility
Agent or the Equity Bridge Lenders or the failure of the Borrower, the Equity
Facility Agent or the Equity Bridge Lenders to do any act or thing or to observe
or perform any covenant, condition or agreement to be observed or performed by
it under the Financing Documents; (vi) diligence, demand, presentment, protest
and notice of any kind, including notice of acceptance of this Guarantee and of
any obligation to which it applies or may apply, and notice of the existence,
creation or incurrence of any new or additional indebtedness or obligation or of
any default, indulgence, enforcement or other action or non-action on the part
of the Borrower, any endorser or creditor of each Guarantor or the Borrower or
on the part of any other Person under this or any other instrument in connection
with any obligation or evidence of indebtedness held by the Equity Facility
Agent, on behalf of the Equity Bridge Lenders, or the Equity Bridge Lenders as
collateral or in connection with any obligations hereunder; (vii) any defense
based upon an election of remedies by the Equity Facility Agent or the Equity
Bridge Lenders, including an election to proceed by non-judicial rather than
judicial foreclosure, which destroys or otherwise impairs the subrogation rights
of the such Guarantor or the right of such Guarantor to proceed against the
Borrower for reimbursement; (viii) any defense based upon any statute or rule of
law which provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the principal; (ix)
any duty on the part of the Equity Facility Agent or the Equity Bridge Lenders
to disclose to such Guarantor any facts that the Equity Facility Agent or the
Equity Bridge Lenders may now or hereafter know about the Borrower, such
Guarantor or any other Person, regardless of whether the Equity Facility Agent
or the Equity Bridge Lenders have reason to believe that any such facts
materially increase the risk beyond that which such Guarantor intends to assume,
or have reason to believe that such facts are unknown to such Guarantor, or have
a reasonable opportunity to communicate such facts to such Guarantor, since each
Guarantor acknowledges that such Guarantor is fully responsible for being and
keeping informed of the financial condition of the Borrower and of all
circumstances bearing on the risk of non-payment of any obligations and
liabilities hereby guaranteed; (x) the fact that EME may at any time in the
future transfer or dispose of all or part of its direct or indirect interest in
the Sponsor and the Sponsor may at any time in the future transfer or dispose of
all or part of its direct or indirect interest in the Borrower; (xi) any defense
based on any change in the time, manner or place of any payment under, or in any
other term of, the Equity Bridge Loan Credit Agreement or any other amendment,
renewal, extension, acceleration, compromise or waiver of or any consent or
departure from the terms of the Equity Bridge Loan Credit Agreement ; and (xii)
any defense based on any offset against any amounts which may be owed by any
Person to such Guarantor for any reason whatsoever. No delay on the part of the
Equity Facility Agent or the Equity Bridge Lenders in exercising any of their
rights (including those hereunder) and no partial or single exercise thereof and
no action or non-action by the Equity Facility Agent or the Equity Bridge
Lenders, with or without notice to such Guarantor or anyone else, shall
constitute a waiver of any rights or shall affect or impair this Guarantee.
4. Subrogation. Until the indefeasible payment and satisfaction in
-----------
full of all Guaranteed Obligations or termination of this Guarantee pursuant to
Section 18, each Guarantor agree not to assert any claim or other rights which
- ----------
it may now have or hereafter acquire, directly or indirectly, against the
Borrower that arise from the existence or performance of such Guarantor's
obligations under this Guarantee, including any claim, remedy or right of
subrogation, reimbursement, exoneration, contribution, indemnification, any
right to participate in any claim, right or remedy of the Equity Facility Agent
or the Equity Bridge Lenders against the Borrower or the Sponsor, or any
security now or hereafter held by the Equity Facility Agent or the Equity Bridge
Lenders, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, by any payment made hereunder or otherwise,
including the right to take or receive from the Borrower or the Sponsor,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights.
5. Bankruptcy.
----------
-6-
<PAGE>
(a) So long as any of the Guaranteed Obligations remain outstanding,
the Guarantors shall not, without the prior written consent of the Equity
Facility Agent, commence, or join with any other Person in commencing, any
bankruptcy, reorganization, or insolvency proceeding against the Borrower. The
obligations of the Guarantors under this Guarantee shall not be altered, limited
or affected by any proceeding, voluntary or involuntary, involving the
bankruptcy, reorganization, insolvency, receivership, liquidation or arrangement
of the Borrower, or by any defense which the Borrower may have by reason of any
order, decree or decision of any court or administrative body resulting from any
such proceeding.
(b) So long as any of the Guaranteed Obligations remain outstanding,
to the extent of such Guaranteed Obligations, the Guarantors shall file, in any
bankruptcy or other proceeding in which the filing of claims is required or
permitted by law, all claims which the Guarantors may have against the Borrower
relating to any indebtedness of the Borrower to the Guarantors and each
Guarantor hereby assigns to the Equity Facility Agent, on behalf of the Equity
Bridge Lenders, all rights of such Guarantor thereunder. If the Guarantors do
not file any such claim, the Equity Facility Agent, as attorney-in-fact for such
party, is hereby authorized to do so in the name of the Guarantors or, in the
Equity Facility Agent's discretion, to assign the claim to a nominee, to cause
proofs of claim to be filed in the name of the Equity Facility Agent's nominee
and to vote or otherwise deal with such party's interests in connection with or
with respect to all matters in any proceeding. The foregoing power of attorney
is coupled with an interest and cannot be revoked. The Equity Facility Agent or
its nominee(s) shall have the sole right to accept or reject any plan proposed
in any such proceeding and to take any other action, which a party filing a
claim is entitled to take. In all such cases, whether in administration,
bankruptcy or otherwise, the Person authorized to pay such a claim shall pay the
same to the Equity Facility Agent, and, to the full extent necessary for that
purpose, each Guarantor hereby assigns to the Equity Facility Agent all of its
rights to all such payments or distributions to which such Guarantor would
otherwise be entitled; provided, however, that the obligations hereunder shall
-------- -------
not be satisfied except to the extent that the Equity Facility Agent receives
cash by reason of any such payment or distribution. If the Equity Facility Agent
receives anything hereunder other than cash, the same shall be held as
collateral for amounts due under this Guarantee.
(c) Without limiting the generality of any of the foregoing provisions
of this Guarantee, each Guarantor irrevocably waives, to the fullest extent
permitted by Applicable Law and for the benefit of, and as a separate
undertaking with the Equity Facility Agent and each Equity Bridge Lender, any
defense to the performance of this Guarantee which may be available to such
Guarantor as a consequence of any proceeding seeking to adjudicate the Borrower
as bankrupt or insolvent or seeking liquidation, winding up, reorganization,
arrangement, protection, relief or composition of the Borrower or the debts of
the Borrower under any law relating to bankruptcy, insolvency or reorganization
or relief or protection of debtors.
6. Subordination. Except as otherwise specifically provided in this
-------------
Guarantee, all existing and future indebtedness of the Borrower to the
Guarantors and the right of the Guarantors to withdraw any capital invested by
the Guarantors in the Borrower, are hereby subordinated to the prior and
indefeasible payment in full of all Guaranteed Obligations. Without the prior
written consent of the Equity Facility Agent, such subordinated indebtedness
shall not be paid or withdrawn in whole or in part, nor shall either Guarantor
accept any payment of or on account of any such indebtedness or as a withdrawal
of capital while this Guarantee is in effect. If any amount shall be paid to the
Guarantors in violation of this Guarantee, and there are outstanding Guaranteed
Obligations, such amount shall be deemed to have been paid to the Guarantors for
the benefit of, and held in trust for the Equity Facility Agent and the Equity
Bridge Lenders, and the Guarantors shall cause the same to be paid to the Equity
Facility Agent for the benefit of the Equity
-7-
<PAGE>
Bridge Lenders immediately upon demand by the Equity Facility Agent to be
credited and applied toward payment of the outstanding Guaranteed Obligations,
whether matured or unmatured.
7. Taxes.
-----
(a) All sums payable by the Guarantors under this Guarantee shall be
paid (i) free of any restriction or condition, (ii) free and clear of and
(except to the extent required by law) without any deduction or withholding on
account of any taxes, levies, imposts, duties or other charges of whatever
nature (excluding taxes on the overall net income or franchise taxes imposed on
the Equity Facility Agent or the Equity Bridge Lenders by the jurisdiction of
their incorporation or in which their lending offices are located) (all such
non-excluded taxes and other amounts being hereinafter referred to as "taxes")
and (iii) without deduction or withholding (except to the extent required by
Applicable Law) on account of any other amount, whether by way of setoff or
otherwise.
(b) If (i) either Guarantor is required by law to make any deduction
or withholding on account of any such taxes or other amount as is referred to in
Section 7(a) from any sum paid or payable by such Guarantor under this Guarantee
- ------------
or (ii) any other party to any of the Financing Documents (or any Person on its
behalf) is required by Applicable Law to make any deduction or withholding from,
or (except on account of taxes on the overall net income or franchise taxes
imposed on the Equity Facility Agent or the Equity Bridge Lenders by their
jurisdiction of incorporation or the jurisdiction in which their lending offices
are located) any payment on or calculated by reference to the amount of, any sum
payable by such Guarantor under this Guarantee:
(w) each Guarantor shall notify the Equity Facility Agent of any
such requirement or any change in any such requirement as soon as it becomes
aware of it;
(x) each Guarantor shall pay any such taxes or other amount
before the date on which penalties attach thereto, such payment to be made (if
the liability is imposed on any other party to any of the Financing Documents)
on behalf of and in the name of that party; and
(y) the sum payable by the Guarantors in respect of which the
relevant deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction, withholding
or payment, that party receives on the due date and retains (free from any
liability in respect of any such deduction, withholding or payment including
additional income taxes payable as a consequence of the payment of any
additional amounts) a net sum equal to what it would have received and so
retained had no such deduction, withholding or payment been required or made.
8. Representations and Warranties of the Guarantors. The Guarantors
------------------------------------------------
make the representations and warranties contained in this Section 8 for the
---------
benefit of the Equity Facility Agent and each Equity Bridge Lender. Each such
representation and warranty shall be deemed made as of the date hereof, as of
the date of Financial Close and as of the date of each subsequent Disbursement
under the Equity Bridge Loan Credit Agreement , as applicable, except with
respect to those representations and warranties which by their express terms
relate solely to an earlier date. The representations and warranties contained
herein shall survive the execution and delivery of this Guarantee.
(a) Organization and Existence. Each Guarantor is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has the corporate power and authority to
execute and deliver this Guarantee and to perform its
-8-
<PAGE>
obligations under this Guarantee and is in good standing in each jurisdiction
material to the Project in which the character of the properties owned or leased
by it or in which the transaction of its business as presently conducted or
proposed to be conducted makes such qualification necessary or desirable.
(b) Corporate Action. Each Guarantor has taken all necessary corporate
----------------
action to authorize its execution and delivery of this Guarantee and the
performance of its obligations under this Guarantee and this Guarantee has or by
the date of Financial Close will have been duly authorized, executed and
delivered.
(c) Binding Effect. This Guarantee constitutes the legal, valid and
--------------
binding obligation of each Guarantor, enforceable against each Guarantor, in
accordance with its terms, except to the extent the enforceability thereof may
be limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and by general equitable principles regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law.
(d) No Breach. The execution, delivery and performance of this
---------
Guarantee by each Guarantor will not (i) violate any organizational documents of
such Guarantor; (ii) require any consent or approval (including any approval of
any Governmental Authority) which has not been obtained; (iii) result in any
contravention or violation of any Applicable Law; or (iv) result in any
contravention or violation or breach of any provision of, or constitute a
default under, or result in the creation or imposition of any Lien on any of the
assets of such Guarantor (except as contemplated hereunder) pursuant to the
provisions of, any mortgage, indenture, contract, agreement or other undertaking
to which such Guarantor is a party or which purports to be binding upon such
Guarantor or upon any of its assets.
(e) No Defaults. Neither Guarantor is in default under any term of
-----------
this Guarantee or any other agreement to which it is a party which could
reasonably be expected to have a Material Adverse Effect.
(f) No Litigation. There is no pending or, to its knowledge,
-------------
threatened, action or proceeding at law or in equity affecting either Guarantor
before any court, Governmental Authority or arbitrator, which, if adversely
determined, could, either individually or in the aggregate, reasonably be
expected to materially impair its ability to perform the obligations under this
Agreement.
(g) Financial Statements. All financial statements of EME delivered in
--------------------
accordance with Section 3.1.16 or 5.4.3 of the Common Terms Agreement are and,
-------------------- -----
in the case of financial statements to be delivered after the date hereof, will
be, true, correct and complete in all respects as of the date of such
statements.
(h) Tax Information. Each Guarantor has filed, or caused to be filed,
---------------
all tax and informational returns that are required to have been filed by it in
all jurisdictions, which failure could reasonably be expected to have a Material
Adverse Effect, and has paid all taxes shown to be due and payable on such
returns and all any other taxes and assessments payable by it, to the extent the
same have become due and payable (other than those taxes that it is contesting
in good faith and by appropriate proceedings, with adequate, segregated reserves
established for such taxes in accordance with generally accepted accounting
principles in the jurisdiction of its incorporation, if applicable), the failure
of which to pay could reasonably be expected to have a Material Adverse Effect.
To the extent such taxes are not due, each Guarantor has established reserves
that are adequate for the payment thereof and are as required by generally
accepted
-9-
<PAGE>
accounting principles in the jurisdiction of its incorporation, except to the
extent that the failure to establish such reserves would not be reasonably
expected to have a Material Adverse Effect.
(i) No Fees. Other than amounts that have been paid in full or will
-------
have been paid in full by the Borrower, the Sponsor or the Guarantors prior to
Financial Close, no fees or taxes, including stamp, transaction, registration or
similar taxes, are required to be paid in connection with the execution and
delivery of this Guarantee.
(j) Compliance with Applicable Law. None of the Guarantors or any of
------------------------------
such Guarantor's officers, directors, employees, agents or affiliates, acting on
such Guarantor's behalf, has taken any action in connection with the Project
that violates any Applicable Laws, including the Corrupt Practices Laws, the
violation of which could be reasonably expected to have a Material Adverse
Effect.
(k) Pension Plans.
-------------
(i) The withdrawal by either Guarantor or any of such
Guarantor's Subsidiaries or any entity under common control within the meaning
of Section 4001 of ERISA from all Multiemployer Plans in which they participate
would not have a Material Adverse Effect on the consolidated financial condition
of such Guarantor and its Subsidiaries taken as a whole.
(ii) Neither Guarantor has been notified that any Multiemployer
Plan to which it or any of its Subsidiaries or any entity under common control
within the meaning of Section 4001 contributed is either in reorganization or
insolvent.
(iii) All single employer plans which are subject to ERISA
maintained by either Guarantor, its Subsidiaries or any entity under common
control within the meaning of Section 4001 of ERISA are in material compliance
with all applicable requirements of ERISA. The sum of the value of all accrued
benefits vested under all single employer plans as of December 31, 1906 did not
exceed the value of the assets of such plans allocable to such vested benefits
as determined by the plan actuaries.
(l) Investment Company Act of 1940. Neither Guarantor is an
------------------------------
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940.
(m) Regulation. Neither of the Guarantors nor such Guarantor's
----------
Affiliates is or will be, solely as a result of the participation by such party
separately or as a group in the transactions contemplated hereby or by any other
Financing Document, or as a result of the ownership, use or operation of the
Project, subject to regulation by any Governmental Authority of the United
States as a "public utility," an "electric utility," an "electric utility
holding company," a "public utility holding company," a "holding company," or an
"electric corporation" or a Subsidiary or Affiliate of any of the foregoing;
provided, however, that Edison International, the ultimate parent of EME, will
- -------- -------
continue to be subject to an annual reporting requirement and other requirements
applicable to holding companies exempt under Section 3 of PUHCA, pursuant to
Sections 3, 9(a)(2), 10, 16, 26, 32 and 33 of PUHCA, and that Southern
California Edison Company, a wholly-owned subsidiary of Edison International and
an Affiliate of EME, as a public utility company that is an "associate company"
of a foreign utility company within the meaning of Section 2(a)(10) of PUHCA,
may be subject to reporting requirements prescribed by the Securities and
Exchange Commission pursuant to Section 33(e)(1) of PUHCA. The Guarantors are
not subject to regulation as a "subsidiary company" or an "affiliate" of a
holding company under (and as defined in) PUHCA. Neither Guarantor has taken any
action which, (i) if and so long as the
-10-
<PAGE>
owner and operator of the Project is an "exempt wholesale generator" under
Section 32 of PUHCA, could reasonably be expected to result in the Project
failing to meet the definition of an "eligible facility" under paragraph
32(a)(2) of PUHCA or (ii) if and so long as the owner and operator of the
Project is a "foreign utility company" under Section 33 of PUHCA, could
reasonably be expected to result in the Project not satisfying the requirements
set forth in paragraph 33(a)(3) of PUHCA.
(n) Margin Stock. No Guarantor is engaged in the business of extending
------------
credit for the purpose of purchasing or carrying margin stock within the meaning
of Regulations G, T and X issued by the Board of Governors of the Federal
Reserve System.
(o) Conditions Precedent. Upon the execution and delivery hereof,
--------------------
there are no conditions precedent to the effectiveness of this Guarantee that
have not been satisfied or waived.
9. Covenants of the Guarantor. So long as any of the Guaranteed
--------------------------
Obligations are outstanding, each Guarantor hereby covenants and agrees that it
shall faithfully observe and fulfill, and shall cause to be observed and
fulfilled, each and all of the following covenants:
(a) Governmental Approvals. It will maintain in full force and effect
----------------------
all approvals or authorizations or Permits from any Governmental Authority that
are required to be obtained by it with respect to this Guarantee (if any) and
will obtain any that may become necessary in the future.
(b) Compliance with Applicable Law. It will comply in all respects
------------------------------
with all Applicable Laws to which it may be subject, the noncompliance with
which could be reasonably expected to have a Material Adverse Effect.
(c) Financial Statements. As soon as available, EME will deliver to
--------------------
the Facility Agent copies of the annual (which shall be audited) and quarterly
financial statements (consisting of a balance sheet and the related statements
of income and cash flows) in accordance with the requirements of Section 5.4.3
-------------
of the Common Terms Agreement.
(d) Litigation. Promptly, and in any event within five (5) Business
----------
Days after an Authorized Officer obtains knowledge thereof, each Guarantor will
give to the Equity Facility Agent and the Facility Agent notice of the
occurrence of any event or of any litigation or governmental proceeding pending
(i) against it or any of its Affiliates which could, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(e) Transfer of Interests. It shall not permit a Change of Control as
---------------------
a result of actions taken by the Sponsor in contravention of Section 6.19 of the
------------
Common Terms Agreement or a transfer of interests in contravention of Section
-------
23.13 of the Power Purchase Agreement.
- -----
(f) Regulation. It shall not take any action which could reasonably
----------
be expected to result in (i) it being subject to regulation by any Governmental
Authority of the United States as a "public utility," an "electric utility," an
"electric utility holding company," a "public utility holding company," a
"holding company," or an "electric corporation" or a Subsidiary or Affiliate of
any of the foregoing, (ii) it being subject to regulation as a "subsidiary
company" or an "affiliate" of a holding company under (and as defined in) PUHCA
or (iii) if and so long as the owner and operator of the Project is an "exempt
wholesale generator" under Section 32 of PUHCA, the Project failing to meet the
definition of an "eligible facility" under paragraph 32(a)(2) of PUHCA, or, if
and so long as the owner and operator of the Project is a "foreign utility
company" under Section 33 of PUHCA, the Project is not satisfying the
requirements set forth in paragraph
-11-
<PAGE>
32(a)(3) of PUHCA; provided, however, that Edison International, the ultimate
-------- -------
parent of EME, will continue to be subject to an annual reporting requirement
and other requirements applicable to holding companies exempt under Section 3 of
PUHCA, pursuant to Sections 3, 9(a)(2), 10, 16, 26, 32 and 33 of PUHCA, and that
Southern California Edison Company, a wholly-owned subsidiary of Edison
International and an Affiliate of EME, as a public utility company that is an
"associate company" of a foreign utility company within the meaning of Section
2(a)(10) of PUHCA, may be subject to reporting requirements prescribed by the
Securities and Exchange Commission pursuant to Section 33(e)(1) of PUHCA.
(g) Corporate Existence. Each Guarantor shall preserve and maintain in
-------------------
full force and effect its corporate existence, rights (charter and statutory),
franchises and privileges and qualify and remain qualified, as a corporation in
good standing in each jurisdiction in which such qualification is from time to
time necessary, except for such jurisdictions where the failure to so qualify
would not have a Material Adverse Effect; provided, however, that neither
-------- -------
Guarantor shall be required to preserve any right, privilege or franchise if the
board of directors thereof shall determine in good faith that such right,
privilege or franchise is no longer useful in the conduct of the business of
such Guarantor, and the loss thereof is not disadvantageous in any material
respect to the Equity Facility Agent and the Equity Bridge Lenders.
(h) Notice of Defaults. Promptly upon any Specified Officer (as
------------------
defined below) of either Guarantor obtaining knowledge thereof, such Guarantor
shall give notice to the Equity Facility Agent of any development, including any
litigation, investigation or proceeding affecting such Guarantor, which has a
Material Adverse Effect, could reasonably be expected to have a Material Adverse
Effect or, in the case of any litigation, investigation or other proceeding,
which could, if adversely decided, reasonably be expected to have a Material
Adverse Effect. For the purpose of this Section 9(h), the term "Specified
------------ ---------
Officer" shall mean the Chairman, any Vice Chairman, the President, the Chief
- -------
Executive Officer, the Chief Financial Officer, any Senior Vice President, any
Vice President, the Secretary, the Treasurer or equivalent officers of such
Guarantor.
(i) Merger, Acquisition or Sales of Assets. Neither Guarantor shall
--------------------------------------
consolidate or merge into, or transfer its properties and assets substantially
as an entirety to, another Person, unless (i) the surviving Person, if other
than such Guarantor, or the transferee, assumes by supplemental agreement
satisfactory in form and substance to the Equity Bridge Lenders all the
Guaranteed Obligations and (ii) after giving effect to such assumption, there
would not exist any Default or Event of Default.
(j) Further Assurances. It will deliver such other documents and other
------------------
information reasonably requested by the Equity Facility Agent.
10. Action by Equity Facility Agent.
-------------------------------
(a) The Equity Facility Agent shall be entitled to rely on any notice
received by it from the Equity Bridge Lenders stating that an Event of Default
shall have occurred under the Financing Documents and shall not be under any
duty or responsibility to make any independent verification of such statement.
Notwithstanding any provisions to the contrary in this Guarantee, if any action
to be taken by the Equity Facility Agent under this Guarantee is to be taken on
a day which is not a Business Day, such action shall be taken on the next
succeeding Business Day.
(b) Each Guarantor hereby agrees to pay all costs, including
reasonable attorneys' fees, incurred with respect to the enforcement of such
provisions of this Guarantee against such Guarantor, which enforcement costs,
regardless of when incurred, shall be payable by
-12-
<PAGE>
such Guarantor on the earlier of (i) the date on which a judgment shall be
obtained against such Guarantor with respect to this Guarantee and (ii) the date
on which such Guarantor and the Equity Facility Agent shall have otherwise
resolved (including by way of settlement) any dispute with respect to the
enforcement of this Guarantee against such Guarantor.
11. Successors and Assigns.
----------------------
(a) This Guarantee shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors or permitted assigns.
(b) Notwithstanding any transfer of its interests permitted under
Section 6.19 of the Common Terms Agreement, Section 23.13 of the Power Purchase
- ------------ -------------
Agreement or any other provision of the Financing Documents, each Guarantor
shall remain liable for any and all of its obligations under this Guarantee and
shall not assign its obligations hereunder to any other Person without the
written consent of the Required Equity Voting Parties, and any purported
assignment in violation of this provision shall be void.
(c) The Equity Facility Agent and any Equity Bridge Lender may
transfer, assign or grant its rights hereunder in connection with an assignment
or transfer of all or any part of its interest in the Guaranteed Obligations
held by it to any other Person in accordance with the provisions of the
Financing Documents; provided that any such assignee has agreed to be bound by
--------
the terms of the Financing Documents, including this Guarantee.
12. Interpretation. The section headings in this Guarantee are for the
--------------
convenience of reference only and shall not affect the meaning or construction
of any provision hereof.
13. Notices. All notices and other communications provided for
-------
hereunder shall be made in the English language and (a) in writing (including
telecopier) and (b) telecopied or sent by overnight courier (if for inland
delivery) or international courier (if for overseas delivery) to a party hereto
at its address and contact number specified below, or at such other address and
contact number as is designated by such party in a written notice to the other
parties hereto or, if not specified below, at the address and contact number for
such Person set forth in Schedule 16 of the Common Terms Agreement.
-----------
All such notices and communications shall be effective (a) if sent by
telecopier, when sent (on receipt of confirmation) and (b) if sent by courier,
(i) one day after timely deposit with an overnight courier if for inland
delivery and (ii) five (5) days after timely deposit with an international
courier if for overseas delivery; provided, however, that no notice or
-------- -------
communication to any Lender or Agent shall be effective until received by such
Lender or Agent.
(a) The address of EME is:
Edison Mission Energy
18101 Von Karman Ave., Suite 1700
Irvine California 92612-1046 U.S.A.
Attention: General Counsel
Telephone No.: 1-949-752-5588
Telecopier No.: 1-949-752-1420
(b) The address of ETG is:
EME Tri Gen BV
-13-
<PAGE>
Croeselaan 18
3521 CB Utrecht
The Netherlands
Attention: Ms. Hetty Solberg
Telephone No.: 31-30-216-1944
Telecopier No.: 31-30-216-1250
(c) The address of TECO is:
Tri Energy Company Limited
1550 Grand Amarin Tower, 16th Floor
New Petchburi Road
Ratchathewi, Makkasan
Bangkok 10320 Thailand
Attention: Khun Rawi Corsiri
President
Telephone No.: (662) 207-0307
Telecopier No.: (662) 207-0315
(d) The address of the Equity Facility Agent is:
The Sumitomo Bank, Limited
11th Floor, Ramaland Building
952 Rama IV Road
Kwaeng Suriyawong
Khet Bangrak
Bangkok 10500
Thailand
Telephone No.: (662) 632-9210
Telecopier No.: (662) 632-9208
Attention: Mr. Anuphap Tharavanij, Assistant Vice President
Mr. Shouichi Yamashiro, Assistant Vice President
14. Amendments. Notwithstanding anything contained herein that may be
----------
construed to the contrary, this Guarantee may be amended only in writing with
the written consent of the Equity Facility Agent and each Guarantor.
15. English Language. This Guarantee is made in the English language.
----------------
Any translation of this Guarantee not approved by the Equity Facility Agent
shall have no legal validity.
16. Jurisdiction.
------------
(a) THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK OTHER THAN THE CONFLICT OF
LAWS RULES THEREOF (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW). ANY LEGAL ACTION OR PROCEEDING AGAINST EACH GUARANTOR WITH RESPECT TO THIS
GUARANTEE, ANY CREDIT AGREEMENT, OR ANY OTHER FINANCING DOCUMENT (AS DEFINED IN
SCHEDULE 1 OF THE COMMON TERMS AGREEMENT) TO WHICH IT IS A PARTY MAY BE BROUGHT
- ----------
IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND
DELIVERY OF THIS GUARANTEE, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS
-14-
<PAGE>
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH GUARANTOR AGREES THAT A JUDGMENT, AFTER EXHAUSTION OF ALL AVAILABLE
APPEALS, IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND BINDING UPON
IT, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION, INCLUDING BY A SUIT UPON SUCH
JUDGMENT, A CERTIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE
JUDGMENT. EACH GUARANTOR HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT
CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK,
NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT WITH RESPECT TO ANY ACTION
OR PROCEEDING IN NEW YORK TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AN ON ITS
BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS,
SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR
PROCEEDING AND AGREES THAT THE FAILURE OF SUCH AGENT TO GIVE ANY ADVICE OF ANY
SUCH SERVICE OF PROCESS TO SUCH GUARANTOR SHALL NOT IMPAIR OR AFFECT THE
VALIDITY OF SUCH SERVICE OR OF ANY BASED THEREON. IF FOR ANY REASON SUCH
DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH
GUARANTOR AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK
CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION ACCEPTABLE TO THE
EQUITY FACILITY AGENT AND THE EQUITY BRIDGE LENDERS. EACH GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GUARANTOR AND CT
CORPORATION SYSTEM, AT THEIR RESPECTIVE ADDRESSES SET FORTH ABOVE AND IN SECTION
-------
13, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING
- --
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST SUCH GUARANTOR IN THAILAND OR IN ANY OTHER COURT OR TRIBUNAL HAVING
JURISDICTION.
(b) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS OR ANY OTHER FINANCING
DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN SECTION 16(a) ABOVE AND HEREBY
-------------
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO ANY OF THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY.
17. Judgment Currency.
-----------------
(a) The Guarantors' obligations hereunder to make payments in Dollars
(the "Obligation Currency") shall not be discharged or satisfied by any tender
-------------------
or recovery pursuant to any judgment expressed in or converted into any currency
other than the Obligation Currency, except to the extent that such tender or
recovery results in the effective receipt by the Equity Facility Agent or the
Equity Bridge Lenders, as applicable, of the full amount of the Obligation
-15-
<PAGE>
Currency expressed to be payable to such party under this Guarantee. If for the
purpose of obtaining or enforcing judgment against the Guarantors in any court
or in any jurisdiction, it becomes necessary to convert into or from any
currency other than the Obligation Currency (such other currency being
hereinafter referred to as the "Judgment Currency") an amount due in the
-----------------
Obligation Currency, the conversion shall be made, at the Dollar Equivalent, in
the case of Baht, and, in the case of other currencies, at the rate of exchange
(as quoted by the Facility Agent which shall be market competitive or if the
Facility Agent fails to quote a rate of exchange on such currency, by a known
dealer in such currency designated by the Facility Agent) determined, in each
case, as of the day on which the judgment is given (such Business Day being
hereinafter referred to as the "Judgment Currency Conversion Date").
---------------------------------
(b) If there is a change in the rate of exchange prevailing between
the Judgment Currency Conversion Date and the date of actual payment of the
amount due, the Guarantors covenant to pay, or cause to be paid, such additional
amounts, if any (but in any event not a lesser amount), as may be necessary to
ensure that the amount paid in the Judgment Currency, when converted at the rate
of exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of Judgment
Currency stipulated in the judgment or judicial award at the rate of exchange
prevailing on the Judgment Currency Conversion Date.
(c) For purposes of determining the Dollar Equivalent or rate of
exchange under this Section 17, such amounts shall include any premium and costs
----------
payable in connection with the purchase of the Obligation Currency.
18. Termination; Reinstatement of Guarantee.
---------------------------------------
(a) Subject to the provisions of Section 18(b), this Guarantee shall
-------------
terminate upon the indefeasible payment and satisfaction in full of all
Guaranteed Obligations and termination of all Commitments under the Equity
Bridge Loan Facility.
(b) Notwithstanding the provisions of Section 18(a), this Guarantee
-------------
shall be reinstated if at any time following the termination of this Guarantee
under Section 18(a), any payment by each Guarantor under this Guarantee is
-------------
rescinded or must otherwise be returned by the Equity Facility Agent or any
other Person upon the insolvency, bankruptcy, reorganization, dissolution or
liquidation of such Guarantor or otherwise, and is so rescinded or returned to
the Person making such payment, all as though such payment had not been made.
Such period of reinstatement shall continue until satisfaction of the conditions
contained in, and shall continue to be subject to, the provisions hereof,
including this Section 18.
----------
19. Interest. Any amount required to be paid by the Guarantors pursuant to
--------
the terms hereof shall bear interest at the Default Rate or the maximum rate
permitted by law, whichever is less, from the date due until paid in full.
20. Entire Agreement. This Guarantee, including the documents referred
----------------
to herein, embodies the entire agreement and understanding of the parties hereto
and supersedes all prior agreements and understandings of the parties hereto
relating to the subject matter herein contained.
21. Execution in Counterparts. This Guarantee may be signed in one or
-------------------------
more duplicate counterparts, and when executed and delivered by all of the
parties listed below shall constitute a single binding agreement. Any party
hereto may execute this Guarantee by signing any such counterpart (including by
facsimile). Signature pages may be detached from multiple separate
-16-
<PAGE>
counterparts and attached to a single counterpart so that all signatures are
physically attached to the same counterpart.
22. Severability. Any provision of this Guarantee which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability, but shall not
invalidate the remaining provisions of this Guarantee or affect such provision
in any other jurisdiction.
23. Joint and Several Liability. The obligations of the Guarantors
---------------------------
under this Guarantee shall be joint and several.
-17-
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Capital
Contribution Guarantee to be duly executed and delivered as of the day and year
first written above.
EDISON MISSION ENERGY,
as a Guarantor
By: /s/ ROBERT E. DRISCOLL
-----------------------
Name: Robert E. Driscoll
Title: Vice President
EME TRI GEN BV,
as a Guarantor
By: /s/ ROBERT E. DRISCOLL
-----------------------
Name: Robert E. Driscoll
Title: Attorney
AGREED AND ACCEPTED:
THE SANWA BANK, LIMITED, as
Equity Facility Agent for the
Equity Bridge Lenders
By:
---------------------------
Name:
-------------------------
Title:
------------------------
ACKNOWLEDGED AND AGREED as to Section 2 only:
TRI ENERGY COMPANY LIMITED,
as the Borrower
By: /s/ RAWI CORSIRI
----------------------------
Name: RAWI CORSIRI
--------------------------
Title: Director & President
-------------------------
[LOGO OF TRI ENERGY COMPANY LIMITED]
By: /s/ MARTIN DENIS CONSIDINE
----------------------------
Name: MARTIN DENIS CONSIDINE
--------------------------
Title: DIRECTOR
-------------------------
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Capital Contribution
Guarantee to be duly executed and delivered as of the day and year first written
above.
EDISON MISSION ENERGY,
as a Guarantor
By:
--------------------
Name: Robert E. Driscoll
Title: Vice President
EME TRI GEN BV,
as a Guarantor
By:
--------------------
Name: Robert E. Driscoll
Title: Attorney
AGREED AND ACCEPTED:
THE SANWA BANK, LIMITED, as
Equity Facility Agent for the
Equity Bridge Lenders
By: /s/ Yoshihiro Kubo
-----------------------
Name: YOSHIHIRO KUBO
---------------------
Title: MANAGER
--------------------
ACKNOWLEDGED AND AGREED as to Section 2 only:
TRI ENERGY COMPANY LIMITED
as the Borrower
By:
-----------------------
Name:
---------------------
Title:
--------------------
By:
-----------------------
Name:
---------------------
Title:
--------------------
<PAGE>
Exhibit No. 10.48
Execution Version
================================================================================
BANPU GAS BACK-UP CAPITAL CONTRIBUTION GUARANTEE
by
EME TRI GEN BV
and
EDISON MISSION ENERGY,
Guarantors
in favor of
TRI ENERGY COMPANY LIMITED
and
THE SANWA BANK, LIMITED,
as Equity Facility Agent
================================================================================
<PAGE>
BANPU GAS BACK-UP CAPITAL CONTRIBUTION GUARANTEE
THIS BANPU GAS BACK-UP CAPITAL CONTRIBUTION GUARANTEE (this "Back-up
-------
Guarantee"), dated as of June 30, 1998, is made by EME Tri Gen BV, a corporation
- ---------
organized and validly existing under the laws of The Netherlands ("ETG" or the
"Sponsor"), having its principal address at Croeselaan 18, 3521 CB Utrecht, The
Netherlands, and Edison Mission Energy, a corporation organized and validly
existing under the laws of the State of California ("EME" and together with ETG,
the "Guarantors"), having its principal address at 18101 Von Karman Ave., Suite
----------
1700, Irvine California 92612-1046 U.S.A., in favor of Tri Energy Company
Limited, a limited liability company organized and existing under the laws of
Thailand (the "Borrower"), having its registered address at 16th Fl., Grand
--------
Amarin Tower, New Petchburi Road, Ratchathewi, Bangkok, 10320 Thailand and The
Sanwa Bank, Limited, a banking institution organized under the laws of Japan,
acting by and through its Tokyo head office, as Equity Facility Agent (in such
capacity, together with its successors and assigns in such capacity, the "Equity
------
Facility Agent") for the Equity Bridge Lenders under the Financing Documents.
- --------------
WITNESSETH:
----------
A. The Guarantors. ETG is a Shareholder of the Borrower. EME is the
--------------
Ultimate Parent of ETG.
B. Common Terms Agreement. The Borrower has entered into that certain
----------------------
Amended and Restated Common Terms Agreement, dated as of June 30, 1998, among
the Borrower, Credit Suisse First Boston, as Documentation and Coordination
Agent and Syndication Agent, the Sanwa Bank, Limited, as Facility Agent, Equity
Facility Agent, Offshore Collateral Agent and Technical Agent, Tokyo-Mitsubishi
International (Singapore) Ltd., as Insurance Agent, The Sumitomo Bank, Limited,
as Onshore Collateral Agent, Citibank, N.A., as a Letter of Credit Facility
Lender and a Working Capital Facility Lender, Siam City Bank Public Company
Limited, as Guarantee Facility Lender and a Working Capital Facility Lender, The
Industrial Finance Corporation of Thailand, as a Working Capital Facility
Lender, and NationsBank, N.A., as a Letter of Credit Facility Lender, and all
financial institutions and trusts that from time to time become Lenders pursuant
to the terms of the Credit Agreement. The Common Terms Agreement sets forth
certain common provisions regarding the Loans, including (i) the conditions
precedent to the initial drawdown and conditions precedent to subsequent
drawdowns of the Credit Facilities and the conditions precedent to the Credit
Facility Conversion, (ii) representations and covenants of the Borrower running
in favor of the Financing Parties, (iii) common Events of Default, and (iv)
reporting and insurance requirements for the Project.
C. Financing Documents. The Borrower has entered into (i) that certain
-------------------
Equity Bridge Loan Credit Agreement with the Equity Bridge Lenders, the
Documentation and Coordination Agent, the Facility Agent, the Equity Facility
Agent and Banpu Gas (solely for purposes of Section 2.5.3 thereof), pursuant to
-------------
which the Equity Bridge Lenders will provide Equity Bridge Loans to the Borrower
during the construction phase of the Project, which are to be guaranteed by the
Capital Contribution Guarantees, including this Back-up Guarantee, (ii) the
Credit Agreements with the Lenders and the Agents party thereto, and (iii)
certain other Financing Documents.
D. Other Capital Contribution Guarantees. In addition to this Back-up
-------------------------------------
Guarantee, (i) Shareholder Banpu Gas and its Ultimate Parent BANPU Public
Company Limited have entered into the Banpu Gas Capital Contribution Guarantee
pursuant to which they have jointly and severally guaranteed to make capital
contributions to the Borrower equal to thirty seven point
-1-
<PAGE>
five percent (37.5%) of all amounts due under the Equity Bridge Loan Credit
Agreement as of the Equity Bridge Loan Repayment Date, (ii) Shareholder TTEC I
and its Ultimate Parent Texaco, Inc. have entered into the TTEC I Capital
Contribution Guarantee pursuant to which they have jointly and severally
guaranteed to make capital contributions to the Borrower equal to thirty seven
point five percent (37.5%) of all amounts due under the Equity Bridge Loan
Credit Agreement as of the Equity Bridge Loan Repayment Date, and (iii) ETG and
EME have entered into the separate ETG Capital Contribution Guarantee pursuant
to which they have jointly and severally guaranteed to make capital
contributions to the Borrower equal to twenty five percent (25%) of all amounts
due under the Equity Bridge Loan Credit Agreement as of the Equity Bridge Loan
Repayment Date.
E. Back-up Capital Contribution Guarantee. Banpu Gas and BANPU Public
--------------------------------------
Company Limited have requested, and ETG and EME have agreed to provide, this
Back-up Guarantee to guarantee on a back-up basis a portion of the amount
guaranteed on a first demand basis by Banpu Gas and BANPU Public Company Limited
pursuant to the Banpu Gas Capital Contribution Guarantee.
F. Condition to Lending. It is a condition precedent to the Equity
--------------------
Bridge Lenders' obligation to make the Equity Bridge Loan Facility available to
the Borrower under the Common Terms Agreement and the Equity Bridge Loan Credit
Agreement and the Lenders' obligations to make the other Credit Facilities
available to the Borrower under the Common Terms Agreement and the other Credit
Agreements that the Guarantors enter into this Back-up Guarantee.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, receipt of which is hereby acknowledged,
and as an inducement to the Equity Bridge Lenders to enter into the Equity
Bridge Loan Credit Agreement with the Borrower, and to the Lenders to enter into
all other Financing Documents, the Guarantors hereby agree as follows:
1. Capitalized Terms. Capitalized terms used but not otherwise
-----------------
defined herein shall have the respective meanings given them in Section 1 of
Schedule 1 to the Common Terms Agreement, and the Principles of Construction
contained in Section 2 of Schedule 1 to the Common Terms Agreement shall apply
hereto.
2. Guarantee of Obligations.
-------------------------
(a) The Guarantors hereby, jointly and severally, unconditionally
and irrevocably guarantee to the Equity Bridge Lenders and the Equity Facility
Agent (for the benefit of the Equity Bridge Lenders) to make on or before the
Equity Bridge Loan Repayment Date, whether by acceleration or otherwise,
aggregate capital contributions to the Capital Contributions Account of the
Borrower equal to an amount (the "Guaranteed Obligations") which shall be
----------------------
calculated as follows:
37.5% of the Equity Bridge Loan Repayment Amount
less (Banpu Gas Pledged Deposit Amount + Accrued Interest)
less Banpu Gas Additional Capital Contribution Amount
-------------------------------------------------------
= Guaranteed Obligations
Where,
"37.5%" means thirty seven point five percent;
-----
"Equity Bridge Loan Repayment Amount" means the amount in Dollars of all
-----------------------------------
obligations of the Borrower under the Equity Bridge Loan Credit Agreement
and allocable to the Equity
-2-
<PAGE>
Bridge Loans under any other applicable Financing Documents (but, for the
avoidance of doubt, not including (i) any obligations by the Borrower in
favor of the Offshore Lenders to repay amounts drawn from the Offshore
Loans and used to pay interest due on the Equity Bridge Loans, or (ii) any
amounts owed by the Borrower to any Hedge Provider under Interest Rate
Hedging Agreements entered into by the Borrower with respect to the Equity
Bridge Loans) whether for interest, fees, expenses or otherwise, together
with all expenses incurred by the Equity Facility Agent or the Equity
Bridge Lenders in enforcing any of such obligations or the terms hereof,
including reasonable fees and expenses of legal counsel, but specifically
limited solely to amounts due to the Equity Facility Agent and the Equity
Bridge Lenders and not to include any amounts owed by the Borrower to other
Persons under or based upon any other Financing Documents;
"Banpu Gas Pledged Deposit Amount" means $18,000,000, the amount pre-funded
--------------------------------
by Banpu Gas for capital contributions to the Borrower and deposited with
the Equity Facility Agent on the date of Financial Close pursuant to the
terms of the Equity Bridge Loan Credit Agreement, the Disbursement
Agreement, and the Singapore Security Document, whether or not such Banpu
Gas Pledged Deposit Amount is applied to repayment of the Equity Bridge
Loans;
"Accrued Interest" means any interest in Dollars which has accrued on the
----------------
Banpu Gas Pledged Deposit Amount held by the Equity Facility Agent from the
date of Financial Close and continuing to, but not including, the Equity
Bridge Loan Repayment Date in accordance with the terms of the Equity
Bridge Loan Credit Agreement and the Singapore Security Document, whether
or not such Accrued Interest is applied to repayment of the Equity Bridge
Loans; and
"Banpu Gas Additional Capital Contribution Amount" means the amount in
------------------------------------------------
Dollars of (i) any capital contributions to the Borrower made by Banpu Gas
or any Person on behalf of Banpu Gas to the Capital Contributions Account
of the Borrower on or before the Equity Bridge Loan Repayment Date, plus
----
(ii) without duplication of any amount set forth in the foregoing clause
(i), any amounts actually paid under the Banpu Gas Capital Contribution
Guarantee.
(b) It is acknowledged and agreed that the Equity Facility Agent
has sole custody of the Banpu Gas Pledged Deposit Amount. The Guarantors do not
have any control over or rights in the Banpu Gas Pledged Deposit Amount, and,
notwithstanding any other provision of this Back-up Guarantee, the Guaranteed
Obligations of the Guarantors hereunder shall not be increased or otherwise
affected if, for any reason, any portion of the Banpu Gas Pledged Deposit Amount
plus the Accrued Interest is not applied to repayment of the Equity Bridge
Loans.
(c) The Guarantors agree that: (i) if for any reason whatsoever
the Borrower fails or is unable duly, punctually and fully to pay any such
Guaranteed Obligations, (ii) if the Equity Facility Agent shall have made a
prior written demand upon Banpu Gas and BANPU Public Company Limited for payment
of capital contributions to the Borrower they owe pursuant to the terms of the
Banpu Gas Capital Contribution Guarantee, and (iii) if five (5) Business Days
after the date of such demand the amount owed under the Banpu Gas Capital
Contribution Guarantee shall not have been paid in full, the Guarantors shall,
upon further written demand by the Equity Facility Agent (acting at the
instructions of the Equity Bridge Lenders), make aggregate capital contributions
to the Borrower in the amount of such Guaranteed Obligations by deposit of such
capital contributions into the Capital Contributions Account within five (5)
Business Days after the date of demand, without regard to any exercise or non-
exercise by the Equity Facility Agent or the Equity Bridge Lenders of any other
right, remedy, power or privilege under or in respect of the Equity Bridge Loan
Credit Agreement or any other Financing Document against the Borrower.
-3-
<PAGE>
(d) The Borrower acknowledges and agrees that, upon receipt of
such capital contributions from a Guarantor, the Offshore Collateral Agent shall
be obligated to transfer immediately to the Equity Facility Agent the amount of
such capital contributions in payment of the Guaranteed Obligations pursuant to
Section 2.1.8 of the Disbursement Agreement to enable the Borrower to repay the
Equity Bridge Loans. Each payment made by a Guarantor pursuant to this Section
2(a) in respect of the Guaranteed Obligations shall be deemed to be a capital
contribution by the Sponsor to the Borrower. Upon receipt of such capital
contribution, the Borrower agrees promptly to issue shares of its Capital Stock
to the Sponsor in respect of such capital contribution, in accordance with
Section 5.2 of the Shareholders' Agreement and the Charter Documents, and the
Sponsor shall, and EME shall cause the Sponsor to, execute Pledge Agreements
with respect to such shares of Capital Stock; provided, however, that the
-------- -------
failure of the Borrower to deliver such shares of Capital Stock shall not excuse
the Guarantors' obligations hereunder.
(e) The obligations of the Guarantors under this Back-up Guarantee
are, except as otherwise expressly set forth herein, the Guarantors' primary
obligations and are an absolute, unconditional, continuing and irrevocable
guarantee of payment and not of collectibility or performance and are, except
for the obligation of the Equity Facility Agent to make a prior written demand
upon Banpu Gas and BANPU Public Company Limited pursuant to the Banpu Gas
Capital Contribution Guarantee for a five (5) Business Day period as set forth
in Sections 2(c)(ii) and (iii), in no way conditioned on or contingent upon any
attempt to enforce in whole or in part the Borrower's obligations under the
Equity Bridge Loan Credit Agreement or the obligations of any Person under any
of the other Financing Documents. The obligations of the Guarantors under this
Back-up Guarantee are not, and shall not be, subject to any defense or right of
set-off, counterclaim, deduction, diminution, abatement, recoupment, suspension,
deferment or reduction or any other legal or equitable defense which the
Guarantors have or hereafter may have, against any other Person (including the
Borrower) for any reason whatsoever (including any action, failure to act or
circumstance which constitutes, or might constitute or be construed as, an
equitable or legal discharge of any or all of the Borrower's obligations under
the Equity Bridge Loan Credit Agreement ); provided that nothing in this Back-up
--------
Guarantee shall affect any right the Guarantors may have against any of the
Equity Bridge Lenders or the Equity Facility Agent arising out of any gross
negligence or willful misconduct of any such Person under the Equity Bridge Loan
Credit Agreement, the Common Terms Agreement or this Back-up Guarantee. Each
failure by the Borrower to pay any Guaranteed Obligations shall give rise to a
separate cause of action hereunder, and separate suits may be brought hereunder
as each cause of action arises.
(f) Subject to Section 2(b), the Equity Facility Agent, acting
pursuant to the Equity Bridge Loan Credit Agreement or the Equity Bridge Lenders
may, at any time and from time to time without the consent of or notice to the
Guarantors, except such notice as may be required by the Financing Documents or
Applicable Law, which cannot be waived, without incurring responsibility to the
Guarantors, without impairing or releasing the obligations of the Guarantors
hereunder, upon or without any terms or conditions and in whole or in part, (i)
change, by mutual agreement with the Borrower, the manner, place and terms of
payment, or change or extend the time of payment of, renew or alter any
Guaranteed Obligations or any obligations (including any hereunder) incurred
directly or indirectly in respect hereof, or in any manner by mutual agreement
with the Borrower modify, amend or supplement the terms of the Equity Bridge
Loan Credit Agreement or any documents, instruments or agreements executed in
connection therewith (other than any document to which either Guarantor is a
party), and the guarantee herein undertaken shall apply to the Guaranteed
Obligations as so changed, extended, renewed, modified, amended, supplemented or
altered; (ii) exercise or refrain from exercising any rights against the
Borrower or others (including the Guarantors), whether under the Financing
Documents or otherwise, or otherwise act or refrain from acting; (iii) add or
release any other guarantor or other Person from its obligations under any of
the Financing Documents without obtaining the consent of the Guarantors, and
without affecting or impairing the obligations of the Guarantors hereunder; (iv)
settle or compromise any Guaranteed Obligations and/or any obligations and
liabilities
-4-
<PAGE>
(including any of those hereunder) incurred directly or indirectly in respect
thereof or hereof, and may subordinate the payment of all or any part thereof to
the payment of any obligations and liabilities which may be due to the Equity
Bridge Lenders or others; (v) sell, exchange, release, surrender, realize upon
or otherwise deal with in any manner or in any order any property or assets by
whomsoever pledged, transferred, or assigned to secure or howsoever securing the
Guaranteed Obligations or any liabilities or obligations (including any of those
hereunder) incurred directly or indirectly in respect thereof or hereof and/or
any offset thereagainst; (vi) apply any sums by whomsoever paid or howsoever
realized to the obligations of the Borrower under the Equity Bridge Loan Credit
Agreement in the manner provided for therein regardless of what obligations and
liabilities remain unpaid; (vii) consent to or waive any breach of, or any act,
omission or default under, the Financing Documents or any of such other
instruments or agreements, or with the mutual agreement of the Borrower and
(when such Guarantor is a party thereto) each respective Guarantor, amend,
modify or supplement the Financing Documents or any of such other instruments or
agreements; and/or (viii) act or fail to act in any manner referred to in this
Back-up Guarantee which may deprive the Guarantors of any right it may otherwise
have had to subrogation or reimbursement against the Borrower to recover full
indemnity for any payments made pursuant to this Back-up Guarantee or of its
right of contribution against any other party.
(g) No invalidity, irregularity or unenforceability of any or all
of the obligations or liabilities hereby guaranteed shall affect, impair, or be
a defense to this Back-up Guarantee.
(h) This is a continuing guarantee and all obligations to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. The Guarantors hereby waive any right to
revoke this Back-up Guarantee, and acknowledges that this Back-up Guarantee is
continuing in nature and applies to all Guaranteed Obligations, whether existing
now or in the future. In the event that, notwithstanding the provisions of this
Section 2, this Back-up Guarantee shall be deemed revocable pursuant to
- ---------
Applicable Law, then any such revocation shall become effective only upon
receipt by the Equity Facility Agent of written notice of revocation signed by
the Guarantors. No revocation or termination hereof shall affect in any manner
rights arising under this Back-up Guarantee with respect to Guaranteed
Obligations arising prior to receipt by the Equity Facility Agent of written
notice of such revocation or termination and the sole effect of revocation and
termination hereof shall be to exclude from this Back-up Guarantee all
Guaranteed Obligations thereafter arising which are unconnected with Guaranteed
Obligations theretofore arising or transactions theretofore entered into.
(i) Each Guarantor acknowledges and agrees that (i) it will
benefit, directly and indirectly, if the Equity Bridge Lenders enter into the
Equity Bridge Loan Credit Agreement with the Borrower and (ii) the obligations
of such Guarantor hereunder are being incurred concurrently with the obligations
of the Borrower under the Financing Documents.
(j) The obligations of each Guarantor hereunder shall remain
unchanged and in full force and effect in accordance with the terms hereof
notwithstanding any transfer or other disposition of any interest (whether
direct or indirect) in the Sponsor or any transfer or other disposition by the
Sponsor of its interest in the Borrower.
(k) Anything in this Back-up Guarantee or in any other Financing
Document to the contrary notwithstanding, the maximum liability of each
Guarantor under this Back-up Guarantee shall in no event exceed the amount that
can be guaranteed by each Guarantor under applicable U.S. federal and state laws
relating to the insolvency of debtors.
3. Waiver. To the fullest extent permitted by Applicable Law but
------
subject to Section 2(b), each Guarantor hereby expressly waives and relinquishes
all rights and remedies accorded by Applicable Law to sureties or guarantors and
agrees not to assert or take advantage of
-5-
<PAGE>
any such rights or remedies, including (i) except for the obligation of the
Equity Facility Agent to make a prior written demand upon Banpu Gas and BANPU
Public Company Limited pursuant to the Banpu Gas Capital Contribution Guarantee
for a five (5) Business Day period as set forth in Sections 2(c)(ii) and (iii),
any right to require the Equity Facility Agent or the Equity Bridge Lenders to
proceed against the Borrower or any other Person or to proceed against or
exhaust any security held by the Equity Facility Agent, on behalf of the Equity
Bridge Lenders, or by the Equity Bridge Lenders at any time or to pursue any
other remedy in the Equity Facility Agent's or the Equity Bridge Lenders' power
before proceeding against such Guarantor; (ii) any right to elect trial by jury,
the benefit of the statute of limitations in any action hereunder or in any
action for the collection or performance of any obligations hereunder or of the
Borrower under the Equity Bridge Loan Credit Agreement; (iii) any defense to
any indebtedness or obligation based on a statute of limitations (as to the time
period within which an action may be brought); (iv) any defense that may arise
by reason of the incapacity, lack of power or authority, dissolution, merger or
termination of the Borrower or any other Person or the failure of the Equity
Facility Agent or the Equity Bridge Lenders to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of the
Borrower or any other Person; (v) any defense based on any act, failure to act,
delay or omission whatsoever on the part of the Borrower, the Equity Facility
Agent or the Equity Bridge Lenders or the failure of the Borrower, the Equity
Facility Agent or the Equity Bridge Lenders to do any act or thing or to observe
or perform any covenant, condition or agreement to be observed or performed by
it under the Financing Documents, except for the obligation of the Equity
Facility Agent to make a prior written demand upon Banpu Gas and BANPU Public
Company Limited pursuant to the Banpu Gas Capital Contribution Guarantee for a
five (5) Business Day period as set forth in Sections 2(c)(ii) and (iii); (vi)
diligence, demand, presentment, protest and notice of any kind, including notice
of acceptance of this Back-up Guarantee and of any obligation to which it
applies or may apply, and notice of the existence, creation or incurrence of any
new or additional indebtedness or obligation or of any default, indulgence,
enforcement or other action or non-action on the part of the Borrower, any
endorser or creditor of each Guarantor or the Borrower or on the part of any
other Person under this or any other instrument in connection with any
obligation or evidence of indebtedness held by the Equity Facility Agent, on
behalf of the Equity Bridge Lenders, or the Equity Bridge Lenders as collateral
or in connection with any obligations hereunder; (vii) any defense based upon an
election of remedies by the Equity Facility Agent or the Equity Bridge Lenders,
including an election to proceed by non-judicial rather than judicial
foreclosure, which destroys or otherwise impairs the subrogation rights of such
Guarantor or the right of such Guarantor to proceed against the Borrower for
reimbursement; (viii) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal; (ix) any duty on the
part of the Equity Facility Agent or the Equity Bridge Lenders to disclose to
such Guarantor any facts that the Equity Facility Agent or the Equity Bridge
Lenders may now or hereafter know about the Borrower, such Guarantor or any
other Person, regardless of whether the Equity Facility Agent or the Equity
Bridge Lenders have reason to believe that any such facts materially increase
the risk beyond that which such Guarantor intends to assume, or have reason to
believe that such facts are unknown to such Guarantor, or have a reasonable
opportunity to communicate such facts to such Guarantor, since each Guarantor
acknowledges that such Guarantor is fully responsible for being and keeping
informed of the financial condition of the Borrower and of all circumstances
bearing on the risk of non-payment of any obligations and liabilities hereby
guaranteed; (x) the fact that EME may at any time in the future transfer or
dispose of all or part of its direct or indirect interest in the Sponsor and the
Sponsor may at any time in the future transfer or dispose of all or part of its
direct or indirect interest in the Borrower; (xi) any defense based on any
change in the time, manner or place of any payment under, or in any other term
of, the Equity Bridge Loan Credit Agreement or any other amendment, renewal,
extension, acceleration, compromise or waiver of or any consent or departure
from the terms of the Equity Bridge Loan Credit Agreement; and (xii) any defense
based on any offset against any amounts which may be owed by any Person to such
Guarantor for any reason whatsoever. No delay on the part of the Equity Facility
Agent or the Equity Bridge Lenders in exercising any of their rights (including
those hereunder) and no partial or single exercise thereof
-6-
<PAGE>
and no action or non-action by the Equity Facility Agent or the Equity Bridge
Lenders, with or without notice to such Guarantor or anyone else, shall
constitute a waiver of any rights or shall affect or impair this Back-up
Guarantee.
4. Subrogation. Until the indefeasible payment and satisfaction in
-----------
full of all Guaranteed Obligations or termination of this Back-up Guarantee
pursuant to Section 18, each Guarantor agrees not to assert any claim or other
----------
rights which it may now have or hereafter acquire, directly or indirectly,
against the Borrower that arise from the existence or performance of such
Guarantor's obligations under this Back-up Guarantee, including any claim,
remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, any right to participate in any claim, right or remedy of the
Equity Facility Agent or the Equity Bridge Lenders against the Borrower or the
Sponsor, or any security now or hereafter held by the Equity Facility Agent or
the Equity Bridge Lenders, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, by any payment made hereunder
or otherwise, including the right to take or receive from the Borrower or the
Sponsor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
5. Bankruptcy.
----------
(a) So long as any of the Guaranteed Obligations remain
outstanding, the Guarantors shall not, without the prior written consent of the
Equity Facility Agent, commence, or join with any other Person in commencing,
any bankruptcy, reorganization, or insolvency proceeding against the Borrower.
The obligations of the Guarantors under this Back-up Guarantee shall not be
altered, limited or affected by any proceeding, voluntary or involuntary,
involving the bankruptcy, reorganization, insolvency, receivership, liquidation
or arrangement of the Borrower, or by any defense which the Borrower may have by
reason of any order, decree or decision of any court or administrative body
resulting from any such proceeding.
(b) So long as any of the Guaranteed Obligations remain
outstanding, to the extent of such Guaranteed Obligations, the Guarantors shall
file, in any bankruptcy or other proceeding in which the filing of claims is
required or permitted by law, all claims which the Guarantors may have against
the Borrower relating to any indebtedness of the Borrower to the Guarantors and
each Guarantor hereby assigns to the Equity Facility Agent, on behalf of the
Equity Bridge Lenders, all rights of such Guarantor thereunder. If the
Guarantors do not file any such claim, the Equity Facility Agent, as
attorney-in-fact for such party, is hereby authorized to do so in the name of
the Guarantors or, in the Equity Facility Agent's discretion, to assign the
claim to a nominee, to cause proofs of claim to be filed in the name of the
Equity Facility Agent's nominee and to vote or otherwise deal with such party's
interests in connection with or with respect to all matters in any proceeding.
The foregoing power of attorney is coupled with an interest and cannot be
revoked. The Equity Facility Agent or its nominee(s) shall have the sole right
to accept or reject any plan proposed in any such proceeding and to take any
other action, which a party filing a claim is entitled to take. In all such
cases, whether in administration, bankruptcy or otherwise, the Person authorized
to pay such a claim shall pay the same to the Equity Facility Agent, and, to the
full extent necessary for that purpose, each Guarantor hereby assigns to the
Equity Facility Agent all of its rights to all such payments or distributions to
which such Guarantor would otherwise be entitled; provided, however, that the
-------- -------
obligations hereunder shall not be satisfied except to the extent that the
Equity Facility Agent receives cash by reason of any such payment or
distribution. If the Equity Facility Agent receives anything hereunder other
than cash, the same shall be held as collateral for amounts due under this Back-
up Guarantee.
(c) Without limiting the generality of any of the foregoing
provisions of this Back-up Guarantee, each Guarantor irrevocably waives, to the
fullest extent permitted by Applicable Law and for the benefit of, and as a
separate undertaking with the Equity Facility Agent
-7-
<PAGE>
and each Equity Bridge Lender, any defense to the performance of this Back-up
Guarantee which may be available to such Guarantor as a consequence of any
proceeding seeking to adjudicate the Borrower as bankrupt or insolvent or
seeking liquidation, winding up, reorganization, arrangement, protection, relief
or composition of the Borrower or the debts of the Borrower under any law
relating to bankruptcy, insolvency or reorganization or relief or protection of
debtors.
6. Subordination. Except as otherwise specifically provided in this
-------------
Back-up Guarantee, all existing and future indebtedness of the Borrower to the
Guarantors and the right of the Guarantors to withdraw any capital invested by
the Guarantors in the Borrower, are hereby subordinated to the prior and
indefeasible payment in full of all Guaranteed Obligations. Without the prior
written consent of the Equity Facility Agent, such subordinated indebtedness
shall not be paid or withdrawn in whole or in part, nor shall either Guarantor
accept any payment of or on account of any such indebtedness or as a withdrawal
of capital while this Back-up Guarantee is in effect. If any amount shall be
paid to the Guarantors in violation of this Back-up Guarantee, and there are
outstanding Guaranteed Obligations, such amount shall be deemed to have been
paid to the Guarantors for the benefit of, and held in trust for the Equity
Facility Agent and the Equity Bridge Lenders, and the Guarantors shall cause the
same to be paid to the Equity Facility Agent for the benefit of the Equity
Bridge Lenders immediately upon demand by the Equity Facility Agent to be
credited and applied toward payment of the outstanding Guaranteed Obligations,
whether matured or unmatured.
7. Taxes.
-----
(a) All sums payable by the Guarantors under this Back-up
Guarantee shall be paid (i) free of any restriction or condition, (ii) free and
clear of and (except to the extent required by law) without any deduction or
withholding on account of any taxes, levies, imposts, duties or other charges of
whatever nature (excluding taxes on the overall net income or franchise taxes
imposed on the Equity Facility Agent or the Equity Bridge Lenders by the
jurisdiction of their incorporation or in which their lending offices are
located) (all such non-excluded taxes and other amounts being hereinafter
referred to as "taxes") and (iii) without deduction or withholding (except to
the extent required by Applicable Law) on account of any other amount, whether
by way of setoff or otherwise.
(b) If (i) either Guarantor is required by law to make any
deduction or withholding on account of any such taxes or other amount as is
referred to in Section 7(a) from any sum paid or payable by such Guarantor under
------------
this Back-up Guarantee or (ii) any other party to any of the Financing Documents
(or any Person on its behalf) is required by Applicable Law to make any
deduction or withholding from, or (except on account of taxes on the overall net
income or franchise taxes imposed on the Equity Facility Agent or the Equity
Bridge Lenders by their jurisdiction of incorporation or the jurisdiction in
which their lending offices are located) any payment on or calculated by
reference to the amount of, any sum payable by such Guarantor under this Back-up
Guarantee:
(w) each Guarantor shall notify the Equity Facility Agent of
any such requirement or any change in any such requirement as soon as it becomes
aware of it;
(x) each Guarantor shall pay any such taxes or other amount
before the date on which penalties attach thereto, such payment to be made (if
the liability is imposed on any other party to any of the Financing Documents)
on behalf of and in the name of that party; and
(y) the sum payable by the Guarantors in respect of which the
relevant deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction, withholding
or payment, that party receives on the
-8-
<PAGE>
due date and retains (free from any liability in respect of any such deduction,
withholding or payment including additional income taxes payable as a
consequence of the payment of any additional amounts) a net sum equal to what it
would have received and so retained had no such deduction, withholding or
payment been required or made.
8. Representations and Warranties of the Guarantors. The Guarantors
------------------------------------------------
make the representations and warranties contained in this Section 8 for the
---------
benefit of the Equity Facility Agent and each Equity Bridge Lender. Each such
representation and warranty shall be deemed made as of the date hereof, as of
the date of Financial Close and as of the date of each subsequent Disbursement
under the Equity Bridge Loan Credit Agreement, as applicable, except with
respect to those representations and warranties which by their express terms
relate solely to an earlier date. The representations and warranties contained
herein shall survive the execution and delivery of this Back-up Guarantee.
(a) Organization and Existence. Each Guarantor is a corporation
--------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has the corporate power and authority to
execute and deliver this Back-up Guarantee and to perform its obligations under
this Back-up Guarantee and is in good standing in each jurisdiction material to
the Project in which the character of the properties owned or leased by it or in
which the transaction of its business as presently conducted or proposed to be
conducted makes such qualification necessary or desirable.
(b) Corporate Action. Each Guarantor has taken all necessary
----------------
corporate action to authorize its execution and delivery of this Back-up
Guarantee and the performance of its obligations under this Back-up Guarantee
and this Back-up Guarantee has or by the date of Financial Close will have been
duly authorized, executed and delivered.
(c) Binding Effect. This Back-up Guarantee constitutes the legal,
--------------
valid and binding obligation of each Guarantor, enforceable against each
Guarantor, in accordance with its terms, except to the extent the enforceability
thereof may be limited by applicable bankruptcy, insolvency and other similar
laws affecting creditors' rights generally and by general equitable principles
regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law.
(d) No Breach. The execution, delivery and performance of this
---------
Back-up Guarantee by each Guarantor will not (i) violate any organizational
documents of such Guarantor; (ii) require any consent or approval (including any
approval of any Governmental Authority) which has not been obtained; (iii)
result in any contravention or violation of any Applicable Law; or (iv) result
in any contravention or violation or breach of any provision of, or constitute a
default under, or result in the creation or imposition of any Lien on any of the
assets of such Guarantor (except as contemplated hereunder) pursuant to the
provisions of, any mortgage, indenture, contract, agreement or other undertaking
to which such Guarantor is a party or which purports to be binding upon such
Guarantor or upon any of its assets.
(e) No Defaults. Neither Guarantor is in default under any term of
-----------
this Back-up Guarantee or any other agreement to which it is a party which could
reasonably be expected to have a Material Adverse Effect.
(f) No Litigation. There is no pending or, to its knowledge,
-------------
threatened, action or proceeding at law or in equity affecting either Guarantor
before any court, Governmental Authority or arbitrator, which, if adversely
determined, could, either individually or in the aggregate, reasonably be
expected to materially impair its ability to perform the obligations under this
Agreement.
-9-
<PAGE>
(g) Financial Statements. All financial statements of EME
--------------------
delivered in accordance with Section 3.1.16 or 5.4.3 of the Common Terms
-------------- -----
Agreement are and, in the case of financial statements to be delivered after the
date hereof, will be, true, correct and complete in all respects as of the date
of such statements.
(h) Tax Information. Each Guarantor has filed, or caused to be
---------------
filed, all tax and informational returns that are required to have been filed by
it in all jurisdictions, which failure could reasonably be expected to have a
Material Adverse Effect, and has paid all taxes shown to be due and payable on
such returns and all any other taxes and assessments payable by it, to the
extent the same have become due and payable (other than those taxes that it is
contesting in good faith and by appropriate proceedings, with adequate,
segregated reserves established for such taxes in accordance with generally
accepted accounting principles in the jurisdiction of its incorporation, if
applicable), the failure of which to pay could reasonably be expected to have a
Material Adverse Effect. To the extent such taxes are not due, each Guarantor
has established reserves that are adequate for the payment thereof and are as
required by generally accepted accounting principles in the jurisdiction of its
incorporation, except to the extent that the failure to establish such reserves
would not be reasonably expected to have a Material Adverse Effect.
(i) No Fees. Other than amounts that have been paid in full or
-------
will have been paid in full by the Borrower, the Sponsor or the Guarantors prior
to Financial Close, no fees or taxes, including stamp, transaction, registration
or similar taxes, are required to be paid in connection with the execution and
delivery of this Back-up Guarantee.
(j) Compliance with Applicable Law. None of the Guarantors or any
------------------------------
of such Guarantor's officers, directors, employees, agents or affiliates, acting
on such Guarantor's behalf, has taken any action in connection with the Project
that violates any Applicable Laws, including the Corrupt Practices Laws, the
violation of which could be reasonably expected to have a Material Adverse
Effect.
(k) Pension Plans.
-------------
(i) The withdrawal by either Guarantor or any of such
Guarantor's Subsidiaries or any entity under common control within the meaning
of Section 4001 of ERISA from all Multiemployer Plans in which they participate
would not have a Material Adverse Effect on the consolidated financial condition
of such Guarantor and its Subsidiaries taken as a whole.
(ii) Neither Guarantor has been notified that any
Multiemployer Plan to which it or any of its Subsidiaries or any entity under
common control within the meaning of Section 4001 contributed is either in
reorganization or insolvent.
(iii) All single employer plans which are subject to ERISA
maintained by either Guarantor, its Subsidiaries or any entity under common
control within the meaning of Section 4001 of ERISA are in material compliance
with all applicable requirements of ERISA. The sum of the value of all accrued
benefits vested under all single employer plans as of December 31, 1996 did not
exceed the value of the assets of such plans allocable to such vested benefits
as determined by the plan actuaries.
(l) Investment Company Act of 1940. Neither Guarantor is an
------------------------------
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940.
(m) Regulation. Neither of the Guarantors nor such Guarantor's
----------
Affiliates is or will be, solely as a result of the participation by such party
separately or as a group
-10-
<PAGE>
in the transactions contemplated hereby or by any other Financing Document, or
as a result of the ownership, use or operation of the Project, subject to
regulation by any Governmental Authority of the United States as a "public
utility," an "electric utility," an "electric utility holding company," a
"public utility holding company," a "holding company," or an "electric
corporation" or a Subsidiary or Affiliate of any of the foregoing; provided,
--------
however, that Edison International, the ultimate parent of EME, will continue to
- -------
be subject to an annual reporting requirement and other requirements applicable
to holding companies exempt under Section 3 of PUHCA, pursuant to Sections 3,
9(a)(2), 10, 16, 26, 32 and 33 of PUHCA, and that Southern California Edison
Company, a wholly-owned subsidiary of Edison International and an Affiliate of
EME, as a public utility company that is an "associate company" of a foreign
utility company within the meaning of Section 2(a)(10) of PUHCA, may be subject
to reporting requirements prescribed by the Securities and Exchange Commission
pursuant to Section 33(e)(1) of PUHCA. The Guarantors are not subject to
regulation as a "subsidiary company" or an "affiliate" of a holding company
under (and as defined in) PUHCA. Neither Guarantor has taken any action which,
(i) if and so long as the owner and operator of the Project is an "exempt
wholesale generator" under Section 32 of PUHCA, could reasonably be expected to
result in the Project failing to meet the definition of an "eligible facility"
under paragraph 32(a)(2) of PUHCA or (ii) if and so long as the owner and
operator of the Project is a "foreign utility company" under Section 33 of
PUHCA, could reasonably be expected to result in the Project not satisfying the
requirements set forth in paragraph 33(a)(3) of PUHCA.
(n) Margin Stock. No Guarantor is engaged in the business of extending
------------
credit for the purpose of purchasing or carrying margin stock within the meaning
of Regulations G, T and X issued by the Board of Governors of the Federal
Reserve System.
(o) Conditions Precedent. Upon the execution and delivery hereof,
--------------------
there are no conditions precedent to the effectiveness of this Back-up Guarantee
that have not been satisfied or waived.
9. Covenants of the Guarantor. So long as any of the Guaranteed
--------------------------
Obligations are outstanding, each Guarantor hereby covenants and agrees that it
shall faithfully observe and fulfill, and shall cause to be observed and
fulfilled, each and all of the following covenants:
(a) Governmental Approvals. It will maintain in full force and effect
----------------------
all approvals or authorizations or Permits from any Governmental Authority that
are required to be obtained by it with respect to this Back-up Guarantee (if
any) and will obtain any that may become necessary in the future.
(b) Compliance with Applicable Law. It will comply in all respects
------------------------------
with all Applicable Laws to which it may be subject, the noncompliance with
which could be reasonably expected to have a Material Adverse Effect.
(c) Financial Statements. As soon as available, EME will deliver to
--------------------
the Facility Agent copies of the annual (which shall be audited) and quarterly
financial statements (consisting of a balance sheet and the related statements
of income and cash flows) in accordance with the requirements of Section 5.4.3
-------------
of the Common Terms Agreement.
(d) Litigation. Promptly, and in any event within five (5) Business
----------
Days after an Authorized Officer obtains knowledge thereof, each Guarantor will
give to the Equity Facility Agent and the Facility Agent notice of the
occurrence of any event or of any litigation or governmental proceeding pending
(i) against it or any of its Affiliates which could, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(e) Transfer of Interests. It shall not permit a Change of Control as
---------------------
a result of actions taken by the Sponsor in contravention of Section 6.19 of the
------------
Common Terms
-11-
<PAGE>
Agreement or a transfer of interests in contravention of Section 23.13 of the
-------------
Power Purchase Agreement.
(f) Regulation. It shall not take any action which could reasonably be
----------
expected to result in (i) it being subject to regulation by any Governmental
Authority of the United States as a "public utility," an "electric utility," an
"electric utility holding company," a "public utility holding company," a
"holding company," or an "electric corporation" or a Subsidiary or Affiliate of
any of the foregoing, (ii) it being subject to regulation as a "subsidiary
company" or an "affiliate" of a holding company under (and as defined in) PUHCA
or (iii) if and so long as the owner and operator of the Project is an "exempt
wholesale generator" under Section 32 of PUHCA, the Project failing to meet the
definition of an "eligible facility" under paragraph 32(a)(2) of PUHCA, or, if
and so long as the owner and operator of the Project is a "foreign utility
company" under Section 33 of PUHCA, the Project is not satisfying the
requirements set forth in paragraph 32(a)(3) of PUHCA; provided, however, that
-------- -------
Edison International, the ultimate parent of EME, will continue to be subject to
an annual reporting requirement and other requirements applicable to holding
companies exempt under Section 3 of PUHCA, pursuant to Sections 3, 9(a)(2), 10,
16, 26, 32 and 33 of PUHCA, and that Southern California Edison Company, a
wholly-owned subsidiary of Edison International and an Affiliate of EME, as a
public utility company that is an "associate company" of a foreign utility
company within the meaning of Section 2(a)(10) of PUHCA, may be subject to
reporting requirements prescribed by the Securities and Exchange Commission
pursuant to Section 33(e)(1) of PUHCA.
(g) Corporate Existence. Each Guarantor shall preserve and maintain in
-------------------
full force and effect its corporate existence, rights (charter and statutory),
franchises and privileges and qualify and remain qualified, as a corporation in
good standing in each jurisdiction in which such qualification is from time to
time necessary, except for such jurisdictions where the failure to so qualify
would not have a Material Adverse Effect; provided, however, that neither
-------- -------
Guarantor shall be required to preserve any right, privilege or franchise if the
board of directors thereof shall determine in good faith that such right,
privilege or franchise is no longer useful in the conduct of the business of
such Guarantor, and the loss thereof is not disadvantageous in any material
respect to the Equity Facility Agent and the Equity Bridge Lenders.
(h) Notice of Defaults. Promptly upon any Specified Officer (as
------------------
defined below) of either Guarantor obtaining knowledge thereof, such Guarantor
shall give notice to the Equity Facility Agent of any development, including any
litigation, investigation or proceeding affecting such Guarantor, which has a
Material Adverse Effect, could reasonably be expected to have a Material Adverse
Effect or, in the case of any litigation, investigation or other proceeding,
which could, if adversely decided, reasonably be expected to have a Material
Adverse Effect. For the purpose of this Section 9(h), the term "Specified
------------ ---------
Officer" shall mean the Chairman, any Vice Chairman, the President, the Chief
- -------
Executive Officer, the Chief Financial Officer, any Senior Vice President, any
Vice President, the Secretary, the Treasurer or equivalent officers of such
Guarantor.
(i) Merger, Acquisition or Sales of Assets. Neither Guarantor shall
--------------------------------------
consolidate or merge into, or transfer its properties and assets substantially
as an entirety to, another Person, unless (i) the surviving Person, if other
than such Guarantor, or the transferee, assumes by supplemental agreement
satisfactory in form and substance to the Equity Bridge Lenders all the
Guaranteed Obligations and (ii) after giving effect to such assumption, there
would not exist any Default or Event of Default.
(j) Further Assurances. It will deliver such other documents and other
------------------
information reasonably requested by the Equity Facility Agent.
10. Action by Equity Facility Agent.
-------------------------------
-12-
<PAGE>
(a) The Equity Facility Agent shall be entitled to rely on any notice
received by it from the Equity Bridge Lenders stating that an Event of Default
shall have occurred under the Financing Documents and shall not be under any
duty or responsibility to make any independent verification of such statement.
Notwithstanding any provisions to the contrary in this Back-up Guarantee, if any
action to be taken by the Equity Facility Agent under this Back-up Guarantee is
to be taken on a day which is not a Business Day, such action shall be taken on
the next succeeding Business Day.
(b) Each Guarantor hereby agrees to pay all costs, including
reasonable attorneys' fees, incurred with respect to the enforcement of such
provisions of this Back-up Guarantee against such Guarantor, which enforcement
costs, regardless of when incurred, shall be payable by such Guarantor on the
earlier of (i) the date on which a judgment shall be obtained against such
Guarantor with respect to this Back-up Guarantee and (ii) the date on which such
Guarantor and the Equity Facility Agent shall have otherwise resolved (including
by way of settlement) any dispute with respect to the enforcement of this Back-
up Guarantee against such Guarantor.
11. Successors and Assigns.
----------------------
(a) This Back-up Guarantee shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors or permitted
assigns.
(b) Notwithstanding any transfer of its interests permitted under
Section 6.19 of the Common Terms Agreement, Section 23.13 of the Power Purchase
- ------------ -------------
Agreement or any other provision of the Financing Documents, each Guarantor
shall remain liable for any and all of its obligations under this Back-up
Guarantee and shall not assign its obligations hereunder to any other Person
without the written consent of the Required Equity Voting Parties, and any
purported assignment in violation of this provision shall be void.
(c) The Equity Facility Agent and any Equity Bridge Lender may
transfer, assign or grant its rights hereunder in connection with an assignment
or transfer of all or any part of its interest in the Guaranteed Obligations
held by it to any other Person in accordance with the provisions of the
Financing Documents; provided that any such assignee has agreed to be bound by
--------
the terms of the Financing Documents, including this Back-up Guarantee.
12. Interpretation. The section headings in this Back-up Guarantee are
--------------
for the convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
13. Notices. All notices and other communications provided for
-------
hereunder shall be made in the English language and (a) in writing (including
telecopier) and (b) telecopied or sent by overnight courier (if for inland
delivery) or international courier (if for overseas delivery) to a party hereto
at its address and contact number specified below, or at such other address and
contact number as is designated by such party in a written notice to the other
parties hereto or, if not specified below, at the address and contact number for
such Person set forth in Schedule 16 of the Common Terms Agreement.
-----------
All such notices and communications shall be effective (a) if sent by
telecopier, when sent (on receipt of confirmation) and (b) if sent by courier,
(i) one day after timely deposit with an overnight courier if for inland
delivery and (ii) five (5) days after timely deposit with an international
courier if for overseas delivery; provided, however, that no notice or
-------- -------
communication to any Lender or Agent shall be effective until received by such
Lender or Agent.
-13-
<PAGE>
(a) The address of EME is:
Edison Mission Energy
18101 Von Karman Ave., Suite 1700
Irvine California 92612-1046 U.S.A.
Attention: General Counsel
Telephone No.: 1-949-752-5588
Telecopier No.: 1-949-752-1420
(b) The address of ETG is:
EME Tri Gen BV
Croeselaan 18
3521 CB Utrecht
The Netherlands
Attention: Ms. Hetty Solberg
Telephone No.: 31-30-216-1944
Telecopier No.: 31-30-216-1250
(c) The address of TECO is:
Tri Energy Company Limited
1550 Grand Amarin Tower, 16th Floor
New Petchburi Road
Ratchathewi, Makkasan
Bangkok 10320 Thailand
Attention: Khun Rawi Corsiri
President
Telephone No.: (662) 207-0307
Telecopier No.: (662) 207-0315
(d) The address of the Equity Facility Agent is:
The Sumitomo Bank, Limited
11th Floor, Ramaland Building
952 Rama IV Road
Kwaeng Suriyawong
Khet Bangrak
Bangkok 10500
Thailand
Telephone No.: (662) 632-9210
Telecopier No.: (662) 632-9208
Attention: Mr. Anuphap Tharavanij, Assistant Vice President
Mr. Shouichi Yamashiro, Assistant Vice President
14. Amendments. Notwithstanding anything contained herein that may be
----------
construed to the contrary, this Back-up Guarantee may be amended only in writing
with the written consent of the Equity Facility Agent and each Guarantor.
15. English Language. This Back-up Guarantee is made in the English
----------------
language. Any translation of this Back-up Guarantee not approved by the Equity
Facility Agent shall have no legal validity.
16. Jurisdiction.
------------
-14-
<PAGE>
(a) THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK OTHER THAN THE CONFLICT OF LAWS RULES
THEREOF (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). ANY
LEGAL ACTION OR PROCEEDING AGAINST EACH GUARANTOR WITH RESPECT TO THIS
GUARANTEE, ANY CREDIT AGREEMENT, OR ANY OTHER FINANCING DOCUMENT (AS DEFINED IN
SCHEDULE 1 OF THE COMMON TERMS AGREEMENT) TO WHICH IT IS A PARTY MAY BE BROUGHT
- ----------
IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND
DELIVERY OF THIS GUARANTEE, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. EACH GUARANTOR AGREES THAT A JUDGMENT, AFTER EXHAUSTION
OF ALL AVAILABLE APPEALS, IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE
AND BINDING UPON IT, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION, INCLUDING BY
A SUIT UPON SUCH JUDGMENT, A CERTIFIED COPY OF WHICH SHALL BE CONCLUSIVE
EVIDENCE OF THE JUDGMENT. EACH GUARANTOR HEREBY IRREVOCABLY DESIGNATES, APPOINTS
AND EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633
BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT WITH
RESPECT TO ANY ACTION OR PROCEEDING IN NEW YORK TO RECEIVE, ACCEPT AND
ACKNOWLEDGE FOR AN ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY
AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY
SUCH ACTION OR PROCEEDING AND AGREES THAT THE FAILURE OF SUCH AGENT TO GIVE ANY
ADVICE OF ANY SUCH SERVICE OF PROCESS TO SUCH GUARANTOR SHALL NOT IMPAIR OR
AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY BASED THEREON. IF FOR ANY REASON
SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH,
EACH GUARANTOR AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW
YORK CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION ACCEPTABLE TO THE
EQUITY FACILITY AGENT AND THE EQUITY BRIDGE LENDERS. EACH GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GUARANTOR AND CT
CORPORATION SYSTEM, AT THEIR RESPECTIVE ADDRESSES SET FORTH ABOVE AND IN SECTION
-------
13, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING
- --
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST SUCH GUARANTOR IN THAILAND OR IN ANY OTHER COURT OR TRIBUNAL HAVING
JURISDICTION.
(b) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS OR ANY OTHER FINANCING
DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN SECTION 16(a) ABOVE AND HEREBY
-------------
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
-15-
<PAGE>
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO ANY OF THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY.
17. Judgment Currency.
-----------------
(a) The Guarantors' obligations hereunder to make payments in Dollars
(the "Obligation Currency") shall not be discharged or satisfied by any tender
-------------------
or recovery pursuant to any judgment expressed in or converted into any currency
other than the Obligation Currency, except to the extent that such tender or
recovery results in the effective receipt by the Equity Facility Agent or the
Equity Bridge Lenders, as applicable, of the full amount of the Obligation
Currency expressed to be payable to such party under this Back-up Guarantee. If
for the purpose of obtaining or enforcing judgment against the Guarantors in any
court or in any jurisdiction, it becomes necessary to convert into or from any
currency other than the Obligation Currency (such other currency being
hereinafter referred to as the "Judgment Currency") an amount due in the
-----------------
Obligation Currency, the conversion shall be made, at the Dollar Equivalent, in
the case of Baht, and, in the case of other currencies, at the rate of exchange
(as quoted by the Facility Agent which shall be market competitive or if the
Facility Agent fails to quote a rate of exchange on such currency, by a known
dealer in such currency designated by the Facility Agent) determined, in each
case, as of the day on which the judgment is given (such Business Day being
hereinafter referred to as the "Judgment Currency Conversion Date").
---------------------------------
(b) If there is a change in the rate of exchange prevailing between
the Judgment Currency Conversion Date and the date of actual payment of the
amount due, the Guarantors covenant to pay, or cause to be paid, such additional
amounts, if any (but in any event not a lesser amount), as may be necessary to
ensure that the amount paid in the Judgment Currency, when converted at the rate
of exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of Judgment
Currency stipulated in the judgment or judicial award at the rate of exchange
prevailing on the Judgment Currency Conversion Date.
(c) For purposes of determining the Dollar Equivalent or rate of
exchange under this Section 17, such amounts shall include any premium and costs
----------
payable in connection with the purchase of the Obligation Currency.
18. Termination: Reinstatement of Guarantee.
---------------------------------------
(a) Subject to the provisions of Section 18(b), this Back-up Guarantee
-------------
shall terminate upon the indefeasible payment and satisfaction in full of all
Guaranteed Obligations and termination of all Commitments under the Equity
Bridge Loan Facility.
(b) Notwithstanding the provisions of Section 18(a), this Back-up
-------------
Guarantee shall be reinstated if at any time following the termination of this
Back-up Guarantee under Section 18(a), any payment by each Guarantor under this
-------------
Back-up Guarantee is rescinded or must otherwise be returned by the Equity
Facility Agent or any other Person upon the insolvency, bankruptcy,
reorganization, dissolution or liquidation of such Guarantor or otherwise, and
is so rescinded or returned to the Person making such payment, all as though
such payment had not been made. Such period of reinstatement shall continue
until satisfaction of the conditions contained in, and shall continue to be
subject to, the provisions hereof, including this Section 18.
----------
19. Interest. Any amount required to be paid by the Guarantors pursuant
--------
to the terms hereof shall bear interest at the Default Rate or the maximum rate
permitted by law, whichever is less, from the date due until paid in full.
-16-
<PAGE>
20. Entire Agreement. This Back-up Guarantee, including the documents
----------------
referred to herein, embodies the entire agreement and understanding of the
parties hereto and supersedes all prior agreements and understandings of the
parties hereto relating to the subject matter herein contained.
21. Execution in Counterparts. This Back-up Guarantee may be signed in
-------------------------
one or more duplicate counterparts, and when executed and delivered by all of
the parties listed below shall constitute a single binding agreement. Any party
hereto may execute this Back-up Guarantee by signing any such counterpart
(including by facsimile). Signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signatures are
physically attached to the same counterpart.
22. Severability. Any provision of this Back-up Guarantee which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability, but shall
not invalidate the remaining provisions of this Back-up Guarantee or affect such
provision in any other jurisdiction.
23. Joint and Several Liability. The obligations of the Guarantors
---------------------------
under this Backup Guarantee shall be joint and several.
-17-
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Back-up Guarantee
to be duly executed and delivered as of the day and year first written above.
EDISON MISSION ENERGY,
as a Guarantor
By: /s/ ROBERT E. DRISCOLL
-----------------------
Name: Robert E. Driscoll
Title: Vice-President
EME TRI GEN BV,
as a Guarantor
By: /s/ ROBERT E. DRISCOLL
-----------------------
Name: Robert E. Driscoll
Title: Attorney
AGREED AND ACCEPTED:
THE SANWA BANK, LIMITED, as
Equity Facility Agent for the
Equity Bridge Lenders
By:
---------------------------
Name:
-------------------------
Title:
------------------------
ACKNOWLEDGED AND AGREED as to Section 2 only:
TRI ENERGY COMPANY LIMITED,
as the Borrower
By: /s/ RAWI CORSIRI
----------------------------
Name: RAWI CORSIRI
--------------------------
Title: Director & President
-------------------------
[LOGO OF TRI ENERGY COMPANY LIMITED]
By: /s/ MARTIN DENIS CONSIDINE
----------------------------
Name: MARTIN DENIS CONSIDINE
--------------------------
Title: DIRECTOR
-------------------------
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Back-up Guarantee to be
duly executed and delivered as of the day and year first written above.
EDISON MISSION ENERGY,
as a Guarantor
By:
--------------------
Name: Robert E. Driscoll
Title: Vice-President
EME TRI GEN BV,
as a Guarantor
By:
--------------------
Name: Robert E. Driscoll
Title: Attorney
AGREED AND ACCEPTED:
THE SANWA BANK, LIMITED, as
Equity Facility Agent for the
Equity Bridge Lenders
By: /s/ Yoshihiro Kubo
-----------------------
Name: YOSHIHIRO KUBO
---------------------
Title: MANAGER
--------------------
ACKNOWLEDGED AND AGREED as to Section 2 only:
TRI ENERGY COMPANY LIMITED.
as the Borrower
By:
-----------------------
Name:
---------------------
Title:
--------------------
By:
-----------------------
Name:
---------------------
Title:
--------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EDISON
MISSION ENERGY AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 668,574
<SECURITIES> 0
<RECEIVABLES> 51,982
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 755,059
<PP&E> 3,105,500
<DEPRECIATION> 234,569
<TOTAL-ASSETS> 5,034,753
<CURRENT-LIABILITIES> 437,432
<BONDS> 2,372,927
150,000
0
<COMMON> 64,130
<OTHER-SE> 870,867
<TOTAL-LIABILITY-AND-EQUITY> 5,034,753
<SALES> 0
<TOTAL-REVENUES> 506,154
<CGS> 0
<TOTAL-COSTS> 241,857
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147,720
<INCOME-PRETAX> 158,356
<INCOME-TAX> 57,290
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,066
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
