<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 March 31, 2000
------------------
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission File Number 1-13434
Edison Mission Energy
(Exact name of registrant as specified in its charter)
California 95-4031807
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
18101 Von Karman Avenue
Irvine, California 92612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 752-5588
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
------ ________
Number of shares outstanding of the registrant's Common Stock as of May 12,
2000: 100 shares (all shares held by an affiliate of the registrant).
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
PART I - Financial Information
1. Financial Statements................................................. 1
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 16
PART II - Other Information
6. Exhibits and Reports on Form 8-K..................................... 31
PART III
Signatures........................................................... 32
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
-----------------------
2000 1999
---------- ---------
<S> <C> <C>
Operating Revenues
Electric revenues $ 691,314 $ 196,853
Equity in income from energy projects 29,303 60,745
Equity in income from oil and gas 7,796 3,642
Operation and maintenance services 10,259 8,516
---------- ---------
Total operating revenues 738,672 269,756
---------- ---------
Operating Expenses
Fuel 276,299 54,075
Plant operations 187,962 34,371
Operation and maintenance services 7,981 6,470
Depreciation and amortization 102,995 24,146
Administrative and general 34,123 36,497
---------- ---------
Total operating expenses 609,360 155,559
---------- ---------
Operating income 129,312 114,197
---------- ---------
Other Income (Expense)
Interest and other income 6,414 7,792
Interest expense (172,971) (44,519)
Dividends on preferred securities (8,107) (3,233)
---------- ---------
Total other income (expense) (174,664) (39,960)
---------- ---------
Income (loss) before income taxes (45,352) 74,237
Provision (benefit) for income taxes (15,191) 16,301
---------- ---------
Income (loss) before change in accounting principle (30,161) 57,936
Cumulative effect on prior years of change in
accounting for major maintenance costs, net of tax 17,690 -
Cumulative effect on prior years of change in
accounting for start-up costs, net of tax - (13,840)
---------- ---------
Net Income (Loss) $ (12,471) $ 44,096
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Net Income (Loss) $(12,471) $ 44,096
Other comprehensive expense, net of tax:
Foreign currency translation adjustments, net of income
tax benefit of $807 and $1,378 in 2000
and 1999, respectively (43,533) (12,625)
-------- --------
Comprehensive Income (Loss) $(56,004) $ 31,471
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 684,156 $ 398,695
Accounts receivable - trade, net of allowance:
2000 and 1999, $1,126 254,920 254,538
Accounts receivable - affiliates 8,584 9,597
Inventory 323,442 258,864
Prepaid expenses and other 28,576 35,665
----------- -----------
Total current assets 1,299,678 957,359
----------- -----------
Investments
Energy projects 1,931,503 1,891,703
Oil and gas 48,470 49,173
----------- -----------
Total investments 1,979,973 1,940,876
----------- -----------
Property, Plant and Equipment 12,367,928 12,533,413
Less accumulated depreciation and amortization 490,309 411,079
----------- -----------
Net property, plant and equipment 11,877,619 12,122,334
----------- -----------
Other Assets
Goodwill 284,940 290,695
Deferred financing costs 136,248 133,948
Restricted cash and other 54,666 89,009
----------- -----------
Total other assets 475,854 513,652
----------- -----------
Total Assets $15,633,124 $15,534,221
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
EDISON MISSION ENERGY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Liabilities and Shareholder's Equity
Current Liabilities
Accounts payable - affiliates $ 16,202 $ 7,772
Accounts payable and accrued liabilities 425,318 328,057
Interest payable 92,256 89,272
Short-term obligations 1,190,220 1,122,067
Current maturities of long-term obligations 219,439 225,679
----------- -----------
Total current liabilities 1,943,435 1,772,847
----------- -----------
Long-Term Obligations - Affiliate 316,830 78,000
----------- -----------
Long-Term Obligations Net of Current Maturities 7,365,372 7,361,308
----------- -----------
Long-Term Deferred Liabilities
Deferred taxes and tax credits 1,467,882 1,520,490
Deferred revenue 492,893 534,531
Accrued incentive compensation 206,990 253,513
Other 383,029 468,161
----------- -----------
Total long-term deferred liabilities 2,550,794 2,776,695
----------- -----------
Total Liabilities 12,176,431 11,988,850
----------- -----------
Preferred Securities of Subsidiaries
Company-obligated mandatorily redeemable
security of partnership holding solely
parent debentures 150,000 150,000
Subject to mandatory redemption 198,360 208,840
Not subject to mandatory redemption 118,054 118,054
----------- -----------
Total preferred securities of subsidiaries 466,414 476,894
----------- -----------
Commitments and Contingencies (Note 5)
Shareholder's Equity
Common stock, no par value; 10,000 shares
authorized; 100 shares issued and outstanding 64,130 64,130
Additional paid-in capital 2,629,406 2,629,406
Retained earnings 329,769 364,434
Accumulated other comprehensive income (33,026) 10,507
----------- -----------
Total Shareholder's Equity 2,990,279 3,068,477
----------- -----------
Total Liabilities and Shareholder's Equity $15,633,124 $15,534,221
=========== ===========
</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)
Three Months Ended
March 31,
--------------------------
2000 1999
----------- ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (12,471) $ 44,096
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Equity in income from energy projects (29,303) (60,745)
Equity in income from oil and gas (7,796) (3,642)
Distributions from energy projects 31,600 28,888
Depreciation and amortization 102,995 24,146
Deferred taxes and tax credits (44,543) 3,142
Cumulative effect on prior years of change in accounting (17,690) 13,840
Increase in accounts receivable (1,476) (11,947)
(Increase) decrease in inventory (64,578) 1,117
Decrease in prepaid expenses and other 7,322 9,180
Increase in accounts payable and accrued liabilities 102,841 34,455
Increase (decrease) in interest payable 7,482 (19,402)
Increase (decrease) in accrued incentive compensation (46,523) 10,800
Other, net 4,491 (14,825)
----------- ------------
Net cash provided by operating activities 32,351 59,103
----------- ------------
Cash Flows From Financing Activities
Borrowings long-term obligations 2,101,024 234,878
Payments on long-term obligations (1,767,702) (22,583)
Short-term financing, net 51,886 1,496,522
Dividend to parent (22,000) -
----------- ------------
Net cash provided by financing activities 363,208 1,708,817
----------- ------------
Cash Flows From Investing Activities
Investments in and loans to energy projects (52,089) (20,999)
Purchase of generating station - (1,800,355)
Purchase of acquired companies (8,360) -
Capital expenditures (65,151) (27,512)
Decrease in restricted cash 32,960 27,527
Other, net (7,989) (12,787)
----------- ------------
Net cash used in investing activities (100,629) (1,834,126)
----------- ------------
Effect of exchange rate changes on cash (9,469) (5,853)
----------- ------------
Net increase (decrease) in cash and cash equivalents 285,461 (72,059)
Cash and cash equivalents at beginning of period 398,695 459,178
----------- ------------
Cash and cash equivalents at end of period $ 684,156 $ 387,119
=========== ============
</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
MARCH 31, 2000
NOTE 1. GENERAL
All adjustments, including recurring accruals, have been made that are
necessary to present fairly the consolidated financial position and results of
operations for the periods covered by this report. The results of operations for
the three months ended March 31, 2000, are not necessarily indicative of the
operating results for the full year.
Our significant accounting policies are described in Note 2 to our
Consolidated Financial Statements as of December 31, 1999 and 1998, included in
our 1999 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 30, 2000. We follow the same accounting policies for interim
reporting purposes, with the exception of the change in accounting for major
maintenance costs (see Note 2). This quarterly report should be read in
connection with such financial statements.
Certain prior period amounts have been reclassified to conform to the
current period financial statement presentation.
NOTE 2. CHANGES IN ACCOUNTING
Through December 31, 1999 we have accrued for major maintenance costs
during the period between turnarounds (referred to as "accrue in advance"
accounting method). Such accounting policy has been widely used by independent
power producers as well as several other industries. In March 2000, the U.S.
Securities and Exchange Commission (SEC) issued a letter to the Accounting
Standards Executive Committee, stating its position that the SEC Staff does not
believe it is appropriate to use an "accrue in advance" method for major
maintenance costs. The Accounting Standards Executive Committee agreed to add
accounting for major maintenance costs as part of an existing project and to
issue authoritative guidance by August 2000. Due to the position taken by the
SEC Staff, we decided voluntarily to change our accounting policy so as to
record major maintenance costs as an expense as incurred. Such change in
accounting policy is considered preferable based on the recent guidance provided
by the SEC. In accordance with Accounting Principles Board Opinion No. 20,
"Accounting Changes", we have recorded $17.7 million, after tax, as a cumulative
change in the accounting for major maintenance costs during the quarter ended
March 31, 2000. Pro forma data has not been provided for prior periods, as the
impact would not be material.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities", which became effective in January 1999. The Statement requires that
certain costs related to start-up activities be expensed as incurred and that
certain previously capitalized costs be
6
<PAGE>
expensed and reported as a cumulative change in accounting principle. The impact
of adopting SOP 98-5 on our net income in 1999 was an expense of $13.8 million,
after-tax.
NOTE 3. INVENTORY
Inventory is stated at the lower of weighted average cost or market.
Inventory at March 31, 2000 and December 31, 1999 consisted of the following:
(In millions)
(Unaudited)
March 31, December 31,
2000 1999
---- ----
Coal and fuel oil $ 257.2 $ 190.1
Spare parts, materials and supplies 66.2 68.8
------- -------
Total $ 323.4 $ 258.9
======= =======
NOTE 4. ACQUISITION
On March 15, 2000, we completed a transaction with UPC International
Partnership CV II to acquire Edison Mission Wind Power Italy B.V., formerly
known as Italian Vento Power Corporation Energy 5 B.V., which owns a 50%
interest in a series of power projects that are in operation or under
development in Italy. All of the projects use wind to generate electricity from
turbines which is sold under fixed-price, long-term tariffs. Assuming all of the
projects under development are completed, currently scheduled for 2002, the
total capacity of these projects will be 283 megawatts (MWs). The purchase price
is approximately $45 million (90 billion Italian Lira) with equity contribution
obligations of up to $17 million (33 billion Italian Lira), depending on the
number of projects that are ultimately developed. As of March 2000, payments
included $8 million towards the purchase price and $14 million in equity
contributions.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Firm Commitment for Asset Purchase
Project Local Currency U.S. ($ in millions)
- ------- -------------- --------------------
Italian Wind Projects (i) 74 billion Italian Lira $ 37
(i) Italian Wind Projects are a series of power projects that are in operation
or under development in Italy. A wholly owned subsidiary of Edison Mission
Energy owns a 50% interest. Purchase payments will continue through 2002,
depending on the number of projects that are ultimately developed.
7
<PAGE>
Firm Commitments to Contribute Project Equity
Projects Local Currency U.S. ($ in millions)
-------- -------------- --------------------
ISAB (i) 244 billion Italian Lira $ 121
EcoElectrica (ii) 34
Tri Energy (iii) 25
Italian Wind Projects (iv) 6 billion Italian Lira 3
(i) ISAB is a 512-MW integrated gasification combined cycle power plant near
Siracusa in Sicily, Italy. A wholly owned subsidiary of Edison Mission
Energy owns a 49% interest. Commercial operations commenced in April 2000.
Equity is scheduled to be contributed in June 2000.
(ii) EcoElectrica is a 540-MW liquefied natural gas combined cycle cogeneration
facility in Penuelas, Puerto Rico. A wholly owned subsidiary of Edison
Mission Energy owns a 50% interest. Commercial operations commenced in
March 2000. Equity was contributed in April 2000.
(iii) Tri Energy is a 700-MW gas-fired power plant under construction in
Ratchaburi Province, Thailand. A wholly owned subsidiary of Edison Mission
Energy owns a 25% interest. Equity will be contributed at commercial
operation, which is currently scheduled for mid-2000.
(iv) Italian Wind Projects are a series of power projects that are in operation
or under development in Italy. A wholly owned subsidiary of Edison Mission
Energy owns a 50% interest. Equity will be contributed depending on the
number of projects that are ultimately developed.
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.
Contingent Obligations to Contribute Project Equity
Projects U.S. ($ in millions)
-------- --------------------
Paiton (i) $ 76
Tri Energy (ii) 20
All Other 27
(i) Contingent obligations to contribute additional project equity will be
based on events principally related to insufficient cash flow to cover
interest on project debt and operating expenses, project cost overruns
during the plant construction, specified partner obligations or events of
default. In any and all circumstances, our obligation to contribute
contingent equity will not exceed $141 million, of which $65 million has
been contributed as of March 31, 2000.
8
<PAGE>
As more fully described below under the caption "Other Commitments and
Contingencies," PT PLN (Persero) (PLN), formerly referred to as PT
Perusahaan Listrik Negara, the main source of revenue for the project, has
failed to pay the project in respect of its invoices through February 2000
(with the exception of a partial payment made in June 1999). In February
2000, Paiton Energy entered into an Interim Agreement with PLN which called
for a termination of all legal actions by both parties, interim monthly
payments through the end of 2000 (total payments US $115 million), dispatch
of the facility at partial load and, in addition to the fixed monthly
payments, payment for energy actually delivered. To date, PLN has made the
fixed monthly payments for the months of March and April, and has paid for
energy delivered in the month of March. Paiton Energy will continue to
invoice PLN for capacity payments at the rate determined under the power
purchase agreement. These invoices (minus the fixed monthly payments
received under the Interim Agreement) will accrue and will be dealt with
under the overall tariff restructuring negotiations.
In October 1999, in response to PLN's failure to pay, Paiton Energy entered
into an interim agreement with its lenders (the Lender Interim Agreement)
which modified the contingent equity provisions of the Paiton debt
documents related to the authorized usage of the monies during the agreed
interim period, which extends from October 15, 1999 through July 31, 2000.
The Lender Interim Agreement provides, among other things, that contingent
equity from us and the other Paiton Energy shareholders shall be
contributed from time to time as needed to enable Paiton Energy to pay
interim project costs. Interim project costs include interest on project
debt and operating costs which become due and payable during the term of
the Lender Interim Agreement and other costs related to the construction of
the project, provided that in the latter case no more than an aggregate of
$30 million of contingent equity can be used for this purpose. The Lender
Interim Agreement provides that a portion of the contingent equity
(originally $206 million, of which our current unfunded share is $32
million), will become due and payable by the shareholders in the event that
certain events of default, other than those specifically waived under the
Lender Interim Agreement, occur. The Lender Interim Agreement further
provides that all unfunded contingent equity (originally $300 million, of
which our current unfunded share is $76 million), will become due and
payable by the shareholders in the event that Paiton Energy fails to make
any interest payment during the pendency of the Lender Interim Agreement.
As of March 31, 2000, Paiton Energy's shareholders have contributed to
Paiton $138 million of contingent equity, of which our share is $65
million.
The contractor for the Paiton project and Paiton Energy reached a global
settlement in principal, the terms of which are being finalized. The global
settlement deals with all claims, including contractor claims for
retention, costs relating to a dispute involving a slope adjacent to the
Paiton site and other cost overruns related to delays in the completion of
the construction of the project and Paiton Energy's claims under the
construction contract. Terms and conditions of this settlement will require
the
9
<PAGE>
approval of Paiton Energy's lenders. Paiton Energy is presently discussing
this settlement agreement with its lenders and contractor, and expects that
an accommodation of lender requirements can be achieved, and therefore that
the required lender approval can be obtained. As noted, the shareholders'
obligation to contribute contingent equity to Paiton Energy to enable it to
pay the contractor for the finally agreed amount is limited to $30 million.
Paiton Energy's obligations to the contractor exceed this amount. The
shortfall will be met through funds that may be made available to the
project and ultimately will be paid out of revenues received as a result of
the renegotiation of the power purchase agreement and the project's debt
agreements, as more fully discussed under the caption, "Other Commitments
and Contingencies."
Our contingent equity obligations for the Paiton project are to be
cancelled, if unused, as of the later of the date of term financing by the
Export-Import Bank of the United States and August 1, 2000. Term financing
by the Export-Import Bank of the United States is the subject of a
comprehensive set of conditions. The obligation of the Export-Import Bank
of the United States to provide term financing was initially scheduled to
terminate on October 15, 1999. The Export-Import Bank of the United States
agreed to extend the term financing commitment through December 31, 2000
and has determined that the project will need to meet additional terms and
conditions for take-out of the construction lenders. Paiton Energy and its
lenders expect to enter into discussions in May 2000 with regard to the
extension of the Lender Interim Agreement through December 31, 2000 to
coincide with the US-EXIM take-out date and the time period of the Interim
Agreement with PLN.
(ii) Contingent obligations to contribute additional equity to the project
relate specifically to an agreement between EME and Banpu Public Company (a
project shareholder) to provide certain back-up equity assurances to the
project's lenders should Banpu be unable to fund the full portion of its
equity when due. At present, we do not anticipate a requirement to fund
this additional equity.
Other than as noted above, we are not aware, at this time, of any other
contingent obligations or obligations to contribute project equity.
Other Commitments and Contingencies
Subsidiary Indemnification Agreements
Some of our subsidiaries have entered into indemnification agreements,
under which the subsidiaries agreed to repay capacity payments to the projects'
power purchasers in the event the projects unilaterally terminate their
performance or reduce their electric power producing capability during the term
of the power contracts. Obligations under these indemnification agreements as of
March 31, 2000, if payment were required, would be $271 million. We have no
reason to believe that the projects will either terminate their performance or
reduce their electric power producing capability during the term of the power
contracts.
10
<PAGE>
Paiton
Paiton is a 1,230-MW coal-fired power plant in operation in East Java,
Indonesia. A wholly owned subsidiary of Edison Mission Energy owns a 40%
interest and has a $453 million investment at March 31, 2000. The project's
tariff is higher in the early years and steps down over time. The tariff for the
Paiton project includes infrastructure to be used in common by other units at
the Paiton complex. The plant's output is fully contracted with the state-owned
electricity company, PLN. Payments are in Indonesian Rupiah, with the portion of
such payments intended to cover non-Rupiah project costs, including returns to
investors, indexed to the Indonesian Rupiah/U.S. dollar exchange rate
established at the time of the power purchase agreement in February 1994. The
project received substantial finance and insurance support from the Export-
Import Bank of the United States, The Export-Import Bank of Japan, the U.S.
Overseas Private Investment Corporation and the Ministry of International Trade
and Industry of Japan. PLN's payment obligations are supported by the Government
of Indonesia. The projected rate of growth of the Indonesian economy and the
exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated
significantly since the Paiton project was contracted, approved and financed.
The Paiton project's senior debt ratings have been reduced from investment grade
to speculative grade based on the rating agencies' determination that there is
increased risk that PLN might not be able to honor the electricity sales
contract with Paiton. The Government of Indonesia has arranged to reschedule
sovereign debt owed to foreign governments and has entered into discussions
about rescheduling sovereign debt owed to private lenders. Specified events,
including those discussed in the paragraph below, which, with the passage of
time or upon notice, may mature into defaults of the project's debt agreements
have occurred. On October 15, 1999, the project entered into an interim
agreement with its lenders pursuant to which the lenders waived such defaults
until July 31, 2000. However, this waiver may expire on an earlier date if
additional defaults, other than those specifically waived, or other specified
events occur.
In May 1999, Paiton Energy notified PLN that Unit 7 of the Paiton project
achieved commercial operation under terms of the power purchase agreement and,
in July 1999, that Unit 8 of the Paiton project had similarly achieved such
commercial operation. Because of the economic downturn, PLN is experiencing low
electricity demand and PLN had, through February of this year, been dispatching
the Paiton plant to zero; however, under the terms of the power purchase
agreement, PLN is required to continue to pay for capacity and fixed operating
costs once each unit and the plant achieve commercial operation. An invoice for
these charges for May 1999 in the amount of $7.8 million was submitted to PLN.
The project and PLN met to review the invoice and a partial payment of $2.5
million was subsequently received. The primary reason for the payment shortage
was the use of an arbitrary Indonesian Rupiah/U.S. dollar exchange rate of 2,450
Indonesian Rupiah to one U.S. dollar by PLN. The use of this exchange rate is
not in agreement with the power purchase agreement, but is the exchange rate on
which PLN payments to other independent power producers in Indonesia were then
being based. Additional invoices for capacity charges and fixed operating costs
in an aggregate
11
<PAGE>
amount of $312 million were later submitted to PLN. PLN has yet to make any
payments in respect of such latter invoices. In addition, PLN filed a lawsuit
contesting the validity of its agreement to purchase electricity from the
project. The lawsuit was withdrawn by PLN on January 20, 2000.
On February 21, 2000, Paiton Energy and PLN executed an Interim Agreement
pursuant to which the power purchase agreement will be administered pending a
long-term restructure of the power purchase agreement. Among other things, the
Interim Agreement provides for dispatch of the project, fixed monthly capacity
payments to Paiton Energy by PLN, the first two payments of which were received
totaling $15 million, and the standstill of any further legal proceedings by
either party during the term of the Interim Agreement, which runs through
December 31, 2000 and may be extended by mutual agreement. PLN and Paiton Energy
have agreed that negotiations on a long-term restructuring of the tariff will
begin in May 2000. Any material modifications of the power purchase agreement
could also require a renegotiation of the Paiton project's debt agreements. The
impact of any such renegotiations with PLN, the Government of Indonesia or the
project's creditors on our expected return on our investment in Paiton Energy is
uncertain at this time; however, we believe that we will ultimately recover our
investment in the project.
Brooklyn Navy Yard
Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in
Brooklyn, New York. Our wholly owned subsidiary owns 50% of the project. In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. for damages in the amount of $136.8 million. Brooklyn Navy Yard
Cogeneration Partners has asserted general monetary claims against the
contractor. In connection with a $407 million non-recourse project refinancing
in 1997, we agreed to indemnify Brooklyn Navy Yard Cogeneration Partners and its
partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to Brooklyn Navy Yard
Cogeneration Partners' lenders. At the present time, we cannot reasonably
estimate the amount that would be due, if any, related to this litigation.
Additional amounts, if any, which would be due to the contractor with respect to
completion of construction of the power plant would be accounted for as an
additional part of its power plant investment. Furthermore, our partner has
executed a reimbursement agreement with us that provides recovery of up to $10
million over an initial amount, including legal fees, payable from its
management and royalty fees. At March 31, 2000, no accrual has been recorded in
connection with this litigation. We believe that the outcome of this litigation
will not have a material adverse effect on our consolidated financial position
or results of operations.
Litigation
We are routinely involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, we, based on
12
<PAGE>
advice of counsel, do not believe that the final outcome of any pending
litigation will have a material adverse effect on our financial position or
results of operations.
Other
In support of the businesses of our subsidiaries, we have made, from time
to time, guarantees, and have entered into indemnity agreements with respect to
our subsidiaries' obligations like those for debt service, fuel supply or the
delivery of power, and have entered into reimbursement agreements with respect
to letters of credit issued to third parties to support our subsidiaries'
obligations.
We may incur additional guaranty, indemnification, and reimbursement
obligations, as well as obligations to make equity and other contributions to
projects in the future. We believe that we will have sufficient liquidity on
both a short- and long-term basis to fund pre-financing project development
costs, make equity contributions to project subsidiaries, pay our debt
obligations and pay other administrative and general expenses as they are
incurred from (1) distributions from energy projects and dividends from
investments in oil and gas, (2) proceeds from the repayment of loans made by us
to our project subsidiaries, and (3) funds available from our revolving credit
facility.
Environmental Matters or Regulations
We are subject to environmental regulation by federal, state, and local
authorities in the United States and foreign regulatory authorities with
jurisdiction over projects located outside the United States. We believe that as
of the filing date of this report, we are in substantial compliance with
environmental regulatory requirements and that maintaining compliance with
current requirements will not materially affect our financial position or
results of operations.
We expect that the implementation of Clean Air Act Amendments will result
in increased capital expenditures and operating expenses. For example, we spent
$77 million in 1999 and expect to spend approximately $139 million for 2000 and
$42 million in 2001 to install upgrades to the environmental controls at the
Homer City plant to control sulfur dioxide and nitrogen oxide emissions.
Similarly, we plan to upgrade the environmental controls at the Illinois Plants
to control nitrogen oxide emissions and expect to spend approximately $54
million, $45 million and $80 million for 2000, 2001 and 2002, respectively. In
addition, at the Ferrybridge and Fiddler's Ferry plants, we expect to incur
environmental costs arising from plant modification, totaling approximately $320
million for the 2000-2004 period. We do not expect these increased capital
expenditures and operating expenses to have a material effect on our financial
position or results of operation.
13
<PAGE>
NOTE 6. BUSINESS SEGMENTS
We operate predominately in one line of business, electric power
generation, with reportable segments organized by geographic region: United
States, Asia Pacific and Europe, Central Asia, Middle East and Africa. Our
plants are located in different geographic areas, which mitigate the effects of
regional markets, economic downturns or unusual weather conditions.
<TABLE>
<CAPTION>
(In millions) Europe,
(Unaudited) Central Asia,
Three Months Ended Asia Middle East Corporate/
March 31, 2000 Americas Pacific and Africa Other/(i)/ Total
-------------- ---------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 279.7 $ 55.0 $ 404.0 $ -- $ 738.7
Net income (loss) (32.6) (5.3) 58.7 (33.3) (12.5)
Total assets $ 7,735.3 $ 2,790.7 $ 5,107.1 $ -- $15,633.1
March 31, 1999
--------------
Operating revenues $ 84.6 $ 50.2 $ 135.0 $ -- $ 269.8
Net income (loss) 30.0 (10.0) 27.2 (3.1) 44.1
Total assets $ 2,973.6 $ 1,745.6 $ 2,212.0 $ -- $ 6,931.2
</TABLE>
(i) Includes corporate net interest expense
NOTE 7. INVESTMENTS
The following table presents summarized financial information of the
significant subsidiary investments in energy projects accounted for by the
equity method. The significant subsidiary investments include the Cogeneration
Group. The Cogeneration Group consists of Kern River Cogeneration Company,
Sycamore Cogeneration Company and Watson Cogeneration Company, of which we own
50 percent, 50 percent and 49 percent interests in, respectively.
(In millions)
(Unaudited)
Three Months Ended
March 31,
--------------------
2000 1999
------- -------
Operating Revenues $ 116.5 $ 133.7
Operating Expenses 80.5 79.5
Net Income 35.7 54.8
14
<PAGE>
NOTE 8. LONG-TERM INCENTIVE PLAN
As disclosed in our Annual Report on Form 10-K, Edison International and
Edison Mission Energy have been considering an exchange offer of cash and stock
equivalent units, relating to Edison International Common Stock, for outstanding
Edison Mission Energy phantom stock options. Such an exchange offer was reviewed
and approved by the Edison International Board of Directors at its meetings in
January and February 2000, subject to final approval by the Edison International
Compensation and Executive Personnel Committee of the offer terms and
documentation. The Compensation and Executive Personnel Committee and the Edison
International Board of Directors have subsequently concluded that, in view of
unexpected events adversely impacting the earnings from merchant plants in the
United Kingdom and the price of Edison International stock, it is not advisable
to make an exchange offer to the holders of Edison Mission Energy's phantom
stock options at this time. Accordingly, the Compensation and Executive
Personnel Committee, the Edison International Board of Directors and management
are now concentrating on developing methods to be used for valuing the 1999
merchant plant acquisitions for purposes of phantom option exercise windows and
on other matters relating to future exercise windows (including other steps
necessary to value the project portfolio at December 31, 1999). Upon resolution
of the matters noted above, any adjustments which may be required to the accrued
incentive liability will be recorded at that time.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that reflect
Edison Mission Energy's current expectations and projections about future events
based on our knowledge of present facts and circumstances and our assumptions
about future events. In this discussion, the words "expects," "believes,"
"anticipates," "estimates," "intends," "plans" and variations of these words and
similar expressions are intended to identify forward-looking statements. These
statements necessarily involve risks and uncertainties that could cause actual
results to differ materially from those anticipated. The information contained
in this discussion is subject to change without notice. Unless otherwise
indicated, the information presented in this section is with respect to Edison
Mission Energy and its consolidated subsidiaries.
General
- -------
We are an independent power producer engaged in the business of developing,
acquiring, owning and operating electric power generation facilities worldwide.
Our current investments include 77 projects totaling 28,827 megawatts (MW) of
generation capacity, of which 27,844 MW are in operation and our share is 22,693
MW. 983 MW are under construction of which our share is 317 MW.
Our operating revenues are derived primarily from electric revenues and
equity in income from energy projects. Consolidated operating revenues also
include equity in income from oil and gas investments and revenues attributable
to operation and maintenance services.
Electric revenues are derived from our majority owned domestic and
international entities. Equity in income from energy projects relates to energy
projects where our ownership interest is 50% or less in the projects. The equity
method of accounting is generally used to account for the operating results of
entities over which we have a significant influence but in which we do not have
a controlling interest. With respect to entities accounted for under the equity
method, we recognize our proportional share of the income or loss of such
entities.
Acquisition
- -----------
On March 15, 2000, we completed a transaction with UPC International
Partnership CV II to acquire Edison Mission Wind Power Italy B.V., formerly
known as Italian Vento Power Corporation Energy 5 B.V., which owns a 50%
interest in a series of power projects that are in operation or under
development in Italy. All of the projects use wind to generate electricity from
turbines which is sold under fixed-price long-term tariffs. Assuming all of the
projects under development are completed, currently scheduled for 2002, the
total capacity of these projects will be 283 megawatts (MWs). The purchase price
is approximately $45 million (90 billion Italian Lira) with equity contribution
obligations of up to $17 million (33 billion Italian Lira), depending on
16
<PAGE>
the number of projects that are ultimately developed. As of March 2000, payments
included $8 million towards the purchase price and $14 million in equity
contributions.
Results of Operations
- ---------------------
Operating Revenues
Operating revenues increased $468.9 million for the first quarter of 2000,
compared with the first quarter of 1999. The increase resulted from electric
revenues from the Ferrybridge and Fiddler's Ferry plants acquired in July 1999,
the generating assets acquired from Commonwealth Edison (Illinois Plants) in
December 1999, the Homer City plant acquired in March 1999 and the start of
commercial operation of the Doga project in May 1999. Equity in income from
energy projects decreased during the first quarter of 2000, compared with the
same prior year period. This decrease was primarily the result of higher
revenues in the first quarter of 1999, first, from several cogeneration projects
as the result of a final settlement on energy prices tied to short-run avoided
cost with the applicable public utilities and, second, from one cogeneration
project as the result of a gain on termination of a power sales agreement.
Due to warmer weather during the summer months, electric revenues generated
from the Homer City plant and the Illinois Plants are usually higher during the
third quarter of each year. In addition, our third quarter revenues from energy
projects are materially higher than other quarters of the year due to a
significant number of our domestic energy projects located on the West Coast,
which have power sales contracts that provide for higher payments during the
summer months. The First Hydro plant and Ferrybridge and Fiddler's Ferry plants
provide for higher electric revenues during the winter months.
Operating Expenses
Operating expenses increased $453.8 million for the first quarter of 2000,
compared with the same prior year period. The increase was due primarily to
higher fuel, plant operations and depreciation and amortization expenses as a
result of there being no comparable first quarter 1999 expenses for the
Ferrybridge and Fiddler's Ferry plants, the Illinois Plants and the Homer City
plant or for the Doga project, the first three having been acquired and the
latter commencing commercial operation in May 1999.
Operating Income
Operating income increased $15.1 million for the first quarter of 2000,
compared with the same prior year period. The increase was due to operating
income from Ferrybridge and Fiddler's Ferry plants and the Homer City plant
partially offset by losses from the Illinois Plants and lower equity in income
from energy projects discussed above. The operating income from Ferrybridge and
Fiddler's Ferry, which is expected to be higher during the winter months, was
adversely affected by lower energy prices during the first quarter in 2000 due
to warmer than average weather and regulatory uncertainty
17
<PAGE>
regarding planned changes in the electricity trading arrangements. Operating
losses from the Illinois Plants were due primarily to lower non-summer
electricity prices under the power purchase agreement with Commonwealth Edison
and lower non-summer generation.
Other Income (Expense)
Interest expense increased $128.5 million for the first quarter of 2000,
compared with the first quarter of 1999. The increase was primarily the result
of additional debt financing associated with the acquisition of the Illinois
Plants, the Ferrybridge and Fiddler's Ferry plants and the Homer City plant.
Provision (Benefit) for Income Taxes
During the first quarter of 2000, we recorded an income tax benefit based
on projected income for the year and benefits under the tax sharing agreement.
The annual effective tax rate for the first quarter of 1999 was 22%. The annual
effective tax rate in 1999 was below the Federal statutory rate of 35% due to
lower foreign income taxes that result from the permanent reinvestment of
earnings from foreign affiliates located in different tax jurisdictions. The
annual effective tax rate for the first quarter of 2000 was 33%. The annual
effective tax rate is expected to increase from the prior year due to lower
foreign income tax benefits from 1999 and higher state income taxes due to the
Homer City plant and Illinois Plants.
We are, and may in the future be, under examination by tax authorities in
varying tax jurisdictions with respect to positions we take in connection with
the filing of our tax returns. Matters raised upon audit may involve substantial
amounts, which, if resolved unfavorably, an event not currently anticipated,
could possibly be material. However, in our opinion, it is unlikely that the
resolution of any such matters will have a material adverse effect upon our
financial condition or results of operations.
Cumulative Effect of Change in Accounting Principle
Through December 31, 1999 we have accrued for major maintenance costs
during the period between turnarounds (referred to as "accrue in advance"
accounting method). Such accounting policy has been widely used by independent
power producers as well as several other industries. In March 2000, the U.S.
Securities and Exchange Commission ("SEC") issued a letter to the Accounting
Standards Executive Committee, stating its position that the SEC Staff does not
believe it is appropriate to use an "accrue in advance" method for major
maintenance costs. The Accounting Standards Executive Committee agreed to add
accounting for major maintenance costs as part of an existing project and to
issue authoritative guidance by August 2000. Due to the position taken by the
SEC Staff, we decided voluntarily to change our accounting policy so as to
record major maintenance costs as an expense as incurred. Such change in
accounting policy is considered preferable based on the recent guidance provided
by the SEC. In accordance with Accounting Principles Board Opinion No. 20,
"Accounting Changes", we have
18
<PAGE>
recorded $17.7 million, after tax, as a cumulative change in the accounting for
major maintenance costs during the quarter ended March 31, 2000.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities", which became effective in January 1999. The Statement requires that
certain costs related to start-up activities be expensed as incurred and that
certain previously capitalized costs be expensed and reported as a cumulative
change in accounting principle. The impact of adopting SOP 98-5 on our net
income in 1999 was an expense of $13.8 million, after-tax.
Liquidity and Capital Resources
- -------------------------------
For the three months ended March 31, 2000, net cash provided by operating
activities decreased to $32.4 million from $59.1 million for the same period in
1999. The 2000 decrease primarily reflects the decrease in net income, higher
working capital requirements and payments of accrued incentive compensation.
Net cash provided by financing activities totaled $363.2 million during the
first quarter of 2000, compared to $1,708.8 million in 1999 for the same period.
The decrease is primarily due to the 1999 Edison Mission Energy Holding Co.,
parent company of Homer City, borrowing of $800 million, our financing of $700
million, and borrowing on the corporate revolver of $220 million, the proceeds
of which were used to purchase the Homer City plant. In February 2000, Edison
Mission Midwest Holdings Co. issued $1.7 billion of commercial paper under its
credit facility and repaid a similar amount of outstanding bank borrowings for
the Illinois Plants. In January 2000, one of our foreign subsidiaries borrowed
$242.7 million from Edison Capital, an indirect affiliate. In February 2000, a
dividend of $22 million was paid to Edison International, our parent company. As
of March 31, 2000, we had recourse debt of $2.8 billion, with an additional $6.3
billion of non-recourse debt (debt which is recourse to specific assets or
subsidiaries) on our consolidated balance sheet.
Net cash used in investing activities decreased to $100.6 million for the
three months ended March 31, 2000 from $1,834.1 million for the three months
ended March 31, 1999. The decrease is primarily due to the $1.8 billion purchase
of Homer City in March 1999. In March 2000, $21.7 million was paid towards the
purchase price and contributions for the Italian Wind Projects. We invested
$65.2 million and $27.5 million, respectively in the first quarter of 2000 and
1999, in new plant equipment principally related to the Homer City plant and
Illinois Plants in 2000 and Doga in 1999.
Capital expenditures, including environmental expenditures disclosed under
the caption "Environmental Matters or Regulation," in 2000 are expected to
approximate $308 million. In addition, we have entered into a reservation
agreement with an turbine equipment manufacture to obtain the right to purchase
nine turbines at specified delivery dates in 2002 and 2003. We plan to use this
equipment in connection with expansion of our gas-fired generation projects in
the United States.
19
<PAGE>
At March 31, 2000, we had cash and cash equivalents of $684.2 million and
had available $74 million of borrowing capacity under a $500 million revolving
credit facility that expires in 2001 and $5 million of borrowing capacity under
a $700 million commercial paper facility that expires in 2000. The borrowing
capacity under the revolving credit facility may be reduced by borrowings for
firm commitments to contribute project equity and to fund capital expenditures
and construction costs of its project facilities.
Firm Commitment for Asset Purchase
Project Local Currency U.S. ($ in millions)
- ------- -------------- --------------------
Italian Wind Projects (i) 74 billion Italian Lira $ 37
(i) Italian Wind Projects are a series of power projects that are in operation
or under development in Italy. A wholly owned subsidiary of Edison Mission
Energy owns a 50% interest. Purchase payments will continue through 2002,
depending on the number of projects that are ultimately developed.
Firm Commitments to Contribute Project Equity
Projects Local Currency U.S. ($ in millions)
- -------- -------------- --------------------
ISAB (i) 244 billion Italian Lira $ 121
EcoElectrica (ii) 34
Tri Energy (iii) 25
Italian Wind Projects (iv) 6 billion Italian Lira 3
(i) ISAB is a 512-MW integrated gasification combined cycle power plant near
Siracusa in Sicily, Italy. A wholly owned subsidiary of Edison Mission
Energy owns a 49% interest. Commercial operations commenced in April
2000. Equity is scheduled to be contributed in June 2000.
(ii) EcoElectrica is a 540-MW liquefied natural gas combined cycle
cogeneration facility in Penuelas, Puerto Rico. A wholly owned subsidiary
of Edison Mission Energy owns a 50% interest. Commercial operations
commenced in March 2000. Equity was contributed in April 2000.
(iii) Tri Energy is a 700-MW gas-fired power plant under construction in
Ratchaburi Province, Thailand. A wholly owned subsidiary of Edison
Mission Energy owns a 25% interest. Equity will be contributed at
commercial operation, which is currently scheduled for mid-2000.
(iv) Italian Wind Projects are a series of power projects that are in
operation or under development in Italy. A wholly owned subsidiary of
Edison Mission Energy owns a 50% interest. Equity will be contributed
depending on the number of projects that are ultimately developed.
20
<PAGE>
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management has no reason to believe that these events of default
will occur to require acceleration of the firm commitments.
Contingent Obligations to Contribute Project Equity
Projects U.S. ($ in millions)
- -------- --------------------
Paiton (i) $ 76
Tri Energy (ii) 20
All Other 27
(i) Contingent obligations to contribute additional project equity will be
based on events principally related to insufficient cash flow to cover
interest on project debt and operating expenses, project cost overruns
during the plant construction, specified partner obligations or events of
default. In any and all circumstances, our obligation to contribute
contingent equity will not exceed $141 million, of which $65 million has
been contributed as of March 31, 2000.
As more fully described below under the caption "Other Commitments and
Contingencies," PT PLN (Persero) (PLN), formerly referred to as PT
Perusahaan Listrik Negara, the main source of revenue for the project, has
failed to pay the project in respect of its invoices through February 2000
(with the exception of a partial payment made in June 1999). In February
2000, Paiton Energy entered into an Interim Agreement with PLN which called
for a termination of all legal actions by both parties, interim monthly
payments through the end of 2000 (total payments US $115 million), dispatch
of the facility at partial load and, in addition to the fixed monthly
payments, payment for energy actually delivered. To date, PLN has made the
fixed monthly payments for the months of March and April, and has paid for
energy delivered in the month of March. Paiton Energy will continue to
invoice PLN for capacity payments at the rate determined under the Power
Purchase Agreement. These invoices (minus the fixed monthly payments
received under the Interim Agreement) will accrue and will be dealt with
under the overall tariff restructuring negotiations.
In October 1999, in response to PLN's failure to pay, Paiton Energy entered
into an interim agreement with its lenders (the Lender Interim Agreement)
which modified the contingent equity provisions of the Paiton Energy debt
documents related to the authorized usage of the monies during the agreed
interim period, which extends from October 15, 1999 through July 31, 2000.
The Lender Interim Agreement provides, among other things, that contingent
equity from us and the other Paiton Energy shareholders shall be
contributed from time to time as needed to enable Paiton Energy to pay
interim project costs. Interim project costs include interest on project
debt and operating costs which become due and payable during the term of
the Lender Interim Agreement and other costs related to the construction of
the project, provided that in the latter case no more than an aggregate of
$30 million of contingent equity can be
21
<PAGE>
used for this purpose. The Lender Interim Agreement provides that a portion
of the contingent equity (originally $206 million, of which our current
unfunded share is $32 million), will become due and payable by the
shareholders in the event that certain events of default, other than those
specifically waived under the Lender Interim Agreement, occur. The Lender
Interim Agreement further provides that all unfunded contingent equity
(originally $300 million, of which our current unfunded share is $76
million), will become due and payable by the shareholders in the event that
Paiton Energy fails to make any interest payment during the pendency of the
Lender Interim Agreement. As of March 31, 2000, Paiton Energy's
shareholders have contributed to Paiton $138 million of contingent equity,
of which our share is $65 million.
The contractor for the Paiton project and Paiton Energy reached a global
settlement in principal, the terms of which are being finalized. The global
settlement deals with all claims, including contractor claims for
retention, costs relating to a dispute involving a slope adjacent to the
Paiton site and other cost overruns related to delays in the completion of
the construction of the project and Paiton Energy's claims under the
construction contract. Terms and conditions of this settlement will require
the approval of Paiton Energy's lenders. Paiton Energy is presently
discussing this settlement agreement with its lenders and contractor, and
expects that an accommodation of lender requirements can be achieved, and
therefore that the Lender approval can be obtained. As noted, the
shareholders' obligation to contribute contingent equity to Paiton Energy
to enable it to pay the contractor for the finally agreed amount is limited
to $30 million. Paiton Energy's obligations to the contractor exceed this
amount. The shortfall will be met through funds that may be made available
to the project and ultimately will be paid out of revenues received as a
result of the renegotiation of the power purchase agreement and the
project's debt agreements, as more fully discussed under the caption,
"Other Commitments and Contingencies."
Our contingent equity obligations for the Paiton project are to be
cancelled, if unused, as of the later of the date of term financing by the
Export-Import Bank of the United States and August 1, 2000. Term financing
by the Export-Import Bank of the United States is the subject of a
comprehensive set of conditions. The obligation of the Export-Import Bank
of the United States to provide term financing was initially scheduled to
terminate on October 15, 1999. The Export-Import Bank of the United States
agreed to extend the term financing commitment through December 31, 2000
and has determined that the project will need to meet additional terms and
conditions for take-out of the construction lenders. Paiton Energy and its
lenders are in discussions with regard to the extension of the Lender
Interim Agreement through December 31, 2000 to coincide with the US-EXIM
take-out date and the time period of the Interim Agreement with PLN.
(ii) Contingent obligations to contribute additional equity to the project
relate specifically to an agreement between EME and Banpu Public Company (a
project shareholder) to provide certain back-up equity assurances to the
project's lenders should Banpu be
22
<PAGE>
unable to fund the full portion of its equity when due. At present, we do
not anticipate a requirement to fund this additional equity.
Other than as noted above, we are not aware, at this time, of any other
contingent obligations or obligations to contribute project equity.
Other Commitments and Contingencies
Subsidiary Indemnification Agreements
Some of our subsidiaries have entered into indemnification agreements,
under which the subsidiaries agreed to repay capacity payments to the projects'
power purchasers in the event the projects unilaterally terminate their
performance or reduce their electric power producing capability during the term
of the power contracts. Obligations under these indemnification agreements as of
March 31, 2000, if payment were required, would be $271 million. We have no
reason to believe that the projects will either terminate their performance or
reduce their electric power producing capability during the term of the power
contracts.
Paiton
Paiton is a 1,230-MW coal-fired power plant in operation in East Java,
Indonesia. A wholly owned subsidiary of Edison Mission Energy owns a 40%
interest and has a $453 million investment at March 31, 2000. The project's
tariff is higher in the early years and steps down over time. The tariff for the
Paiton project includes infrastructure to be used in common by other units at
the Paiton complex. The plant's output is fully contracted with the state-owned
electricity company, PLN. Payments are in Indonesian Rupiah, with the portion of
such payments intended to cover non-Rupiah project costs, including returns to
investors, indexed to the Indonesian Rupiah/U.S. dollar exchange rate
established at the time of the power purchase agreement in February 1994. The
project received substantial finance and insurance support from the
Export-Import Bank of the United States, The Export-Import Bank of Japan, the
U.S. Overseas Private Investment Corporation and the Ministry of International
Trade and Industry of Japan. PLN's payment obligations are supported by the
Government of Indonesia. The projected rate of growth of the Indonesian economy
and the exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated
significantly since the Paiton project was contracted, approved and financed.
The Paiton project's senior debt ratings have been reduced from investment grade
to speculative grade based on the rating agencies' determination that there is
increased risk that PLN might not be able to honor the electricity sales
contract with Paiton Energy. The Government of Indonesia has arranged to
reschedule sovereign debt owed to foreign governments and has entered into
discussions about rescheduling sovereign debt owed to private lenders. Specified
events, including those discussed in the paragraph below, which, with the
passage of time or upon notice, may mature into defaults of the project's debt
agreements have occurred. On October 15, 1999, the project entered into an
interim agreement with its lenders pursuant to which the lenders waived
23
<PAGE>
such defaults until July 31, 2000. However, this waiver may expire on an earlier
date if additional defaults, other than those specifically waived, or other
specified events occur.
In May 1999, Paiton Energy notified PLN that Unit 7 of the Paiton project
achieved commercial operation under terms of the power purchase agreement and,
in July 1999, that Unit 8 of the Paiton project had similarly achieved such
commercial operation. Because of the economic downturn, PLN is experiencing low
electricity demand and PLN had, through February of this year, been dispatching
the Paiton plant to zero; however, under the terms of the power purchase
agreement, PLN is required to continue to pay for capacity and fixed operating
costs once each unit and the plant achieve commercial operation. An invoice for
these charges for May 1999 in the amount of $7.8 million was submitted to PLN.
The project and PLN met to review the invoice and a partial payment of $2.5
million was subsequently received. The primary reason for the payment shortage
was the use of an arbitrary Indonesian Rupiah/U.S. dollar exchange rate of 2,450
Indonesian Rupiah to one U.S. dollar by PLN. The use of this exchange rate is
not in agreement with the power purchase agreement, but is the exchange rate on
which PLN payments to other independent power producers in Indonesia were then
being based. Additional invoices for capacity charges and fixed operating costs
in an aggregate amount of $312 million were later submitted to PLN. PLN has yet
to make any payments in respect of such latter invoices. In addition, PLN filed
a lawsuit contesting the validity of its agreement to purchase electricity from
the project. The lawsuit was withdrawn by PLN on January 20, 2000.
On February 21, 2000, Paiton Energy and PLN executed an Interim Agreement
pursuant to which the power purchase agreement will be administered pending a
long-term restructure of the power purchase agreement. Among other things, the
Interim Agreement provides for dispatch of the project, fixed monthly capacity
payments to Paiton Energy by PLN, the first two payments of which were received
totaling $15 million, and the standstill of any further legal proceedings by
either party during the term of the Interim Agreement, which runs through
December 31, 2000 and may be extended by mutual agreement. PLN and Paiton Energy
have agreed that negotiations on a long-term restructuring of the tariff will
begin in May 2000. Any material modifications of the power purchase agreement
could also require a renegotiation of the Paiton project's debt agreements. The
impact of any such renegotiations with PLN, the Government of Indonesia or the
project's creditors on our expected return on our investment in Paiton Energy is
uncertain at this time; however, we believe that we will ultimately recover our
investment in the project.
Brooklyn Navy Yard
Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in
Brooklyn, New York. Our wholly owned subsidiary owns 50% of the project. In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. for damages in the amount of $136.8 million. Brooklyn Navy Yard
Cogeneration Partners has asserted general monetary claims against the
contractor. In connection with a $407 million non-recourse
24
<PAGE>
project refinancing in 1997, we agreed to indemnify Brooklyn Navy Yard
Cogeneration Partners and its partner from all claims and costs arising from or
in connection with the contractor litigation, which indemnity has been assigned
to Brooklyn Navy Yard Cogeneration Partners' lenders. At the present time, we
cannot reasonably estimate the amount that would be due, if any, related to this
litigation. Additional amounts, if any, which would be due to the contractor
with respect to completion of construction of the power plant would be accounted
for as an additional part of its power plant investment. Furthermore, our
partner has executed a reimbursement agreement with us that provides recovery of
up to $10 million over an initial amount, including legal fees, payable from its
management and royalty fees. At March 31, 2000, no accrual has been recorded in
connection with this litigation. We believe that the outcome of this litigation
will not have a material adverse effect on our consolidated financial position
or results of operations.
Litigation
We are routinely involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, we, based on advice of counsel, do not believe that the final outcome
of any pending litigation will have a material adverse effect on our financial
position or results of operations.
Other
In support of the businesses of our subsidiaries, we have made, from time
to time, guarantees, and have entered into indemnity agreements with respect to
our subsidiaries' obligations like those for debt service, fuel supply or the
delivery of power, and have entered into reimbursement agreements with respect
to letters of credit issued to third parties to support our subsidiaries'
obligations.
We may incur additional guaranty, indemnification, and reimbursement
obligations, as well as obligations to make equity and other contributions to
projects in the future. We believe that we will have sufficient liquidity on
both a short- and long-term basis to fund pre-financing project development
costs, make equity contributions to project subsidiaries, pay our debt
obligations and pay other administrative and general expenses as they are
incurred from (1) distributions from energy projects and dividends from
investments in oil and gas, (2) proceeds from the repayment of loans made by us
to our project subsidiaries, and (3) funds available from our revolving credit
facility.
MARKET RISK EXPOSURES
Edison Mission Energy's primary market risk exposures arise from changes in
interest rates, changes in oil and gas prices and electricity pool pricing and
fluctuations in foreign currency exchange rates. We manage these risks by using
derivative financial instruments in accordance with established policies and
procedures. We do not use derivative financial instruments for speculative
purposes.
25
<PAGE>
Interest Rate Risk
Interest rate changes affect the cost of capital needed to finance the
construction and operation of our projects. We have mitigated the risk of
interest rate fluctuations by arranging for fixed rate financing or variable
rate financing with interest rate swaps or other hedging mechanisms for a number
of our project financings. Interest expense included $5.1 million and $6.2
million of additional interest expense for the three months ended March 31, 2000
and 1999, respectively, as a result of interest rate hedging mechanisms. We have
entered into several interest rate swap agreements under which the maturity date
of the swaps occurs prior to the final maturity of the underlying debt.
Commodity Price Risk
Electric power generated at our uncontracted plants is generally sold under
bilateral arrangements with utilities and power marketers under short-term
contracts with terms of two years or less, or in the case of the Homer City
plant, to the Pennsylvania-New Jersey-Maryland power market (PJM) or the New
York independent system operator (NYISO). We hedge a portion of the electric
output of our merchant plants, whose output is not committed to be sold under
long term contracts, in order to lock in desirable outcomes. When appropriate,
we manage the "spark spread" or margin, which is the spread between electric
prices and fuel prices, and use forward contracts, swaps, futures, or options
contracts to achieve those objectives.
Our plants in the United Kingdom (UK) sell their electrical energy and
capacity through a centralized electricity pool, which establishes a half-hourly
clearing price, also referred to as the pool price, for electrical energy. The
pool price is extremely volatile and can vary by as much as a factor of ten or
more over the course of a few hours, due to the large differentials in demand
according to the time of day. The First Hydro and Ferrybridge and Fiddler's
Ferry plants mitigate a portion of the market risk of the pool by entering into
contracts for differences, which are electricity rate swap agreements, related
to either the selling or purchasing price of power. These contracts specify a
price at which the electricity will be traded, and the parties to the agreement
make payments calculated based on the difference between the price in the
contract and the pool price for the element of power under contract. These
contracts are sold in various structures and act to stabilize revenues or
purchasing costs by removing an element of their net exposure to pool price
volatility.
In July 1998, the UK Director General of Electricity Supply proposed to
the Minister for Science, Energy and Industry that the current structure of
contracts for differences and compulsory trading via the pool at half-hourly
clearing prices bid a day ahead be abolished. The UK Government accepted the
proposals in October 1998 subject to certain reservations. Following this,
further proposals were published by the Regulator in July and October 1999. The
proposals include, among other things, the establishment of voluntary long-term
forwards and futures markets, organized by independent market operators and
evolving in response to demand; voluntary short-term power exchanges operating
from 24 to 4-hours before a trading period; a balancing mechanism to enable
26
<PAGE>
the system operator to balance generation and demand and resolve any
transmission constraints; a mandatory settlement process for recovering
imbalances between contracted and metered volumes with stronger incentives for
being in balance; and a Balancing and Settlement Code Panel to oversee
governance of the balancing mechanism. The Minister for Science, Energy and
Industry has recommended that the proposal be implemented by the end of October
2000. It is difficult at this stage to evaluate the future impact of the
proposals. However, a key feature of the new trading arrangements is to move to
firm physical delivery which means that a generator must deliver, and a consumer
take delivery, against their contracted positions or face the uncertain
consequences of the system operator buying or selling in the balancing market,
on their behalf, and passing the costs back to them. A consequence of this will
be to increase greatly the motivation of parties to contract in advance. Recent
experience has been that this has placed a significant downward pressure on
forward contract prices. Legislation in the form of a Utilities Bill, published
on January 20, 2000, is being introduced to allow for the implementation of new
trading arrangements and the necessary amendments to generators' licenses. A
warmer than average winter, the entry of new operations into the generation
market, the introduction of the new electricity trading arrangements coupled
with uncertainties surrounding the new Utilities Bill and a proposed "good
behavior" clause, discussed below, contributed to a drop in electricity market
prices in the first quarter of 2000 and have depressed forward prices for winter
2000/2001. As a result of these events, we expect lower than anticipated revenue
from our Ferrybridge and Fiddler's Ferry plants.
The Utilities Bill is scheduled to become law by July 2000. The core of
the proposals is a fair deal for consumers through the provision of proper
incentives to innovate and improve efficiency, growth of competition, protection
for consumers and contribution of the utilities of a better environment. While
the UK Government recognizes the need to strike a balance between consumer and
shareholder interest, the proposals have far reaching implications for the
utilities sector.
In December 1999, the UK Director General of Electricity Supply gave
notice of an intention to introduce a new condition into the licenses of a
number of generators to curb the perceived exercise of market power in the
determination of wholesale electricity prices. The majority of the major
generators have accepted the new clauses, including Edison Mission Energy, which
has sought and received specific assurances from the Regulator on the definition
of market abuse and the way the clauses will be interpreted in the future.
Electric power generated at the Homer City plant is sold under bilateral
arrangements with domestic utilities and power marketers under short-term
contracts with terms of two years or less, or to the PJM or the NYISO. These
pools have short-term markets, which establish an hourly clearing price. The
Homer City plant is situated in the PJM control area and is physically connected
to high-voltage transmission lines serving both the PJM and NYISO markets. The
Homer City plant can also transmit power to the Midwestern United States.
27
<PAGE>
Electric power generated at the Illinois Plants is sold under power
purchase agreements with Commonwealth Edison, in which Commonwealth Edison will
purchase capacity and have the right to purchase energy generated by the
Illinois Plants. The agreements, which began on December 15, 1999, and have a
term of up to five years, provide for capacity and energy payments. Commonwealth
Edison will be obligated to make a capacity payment for the plants under
contract and an energy payment for the electricity produced by these plants and
taken by Commonwealth Edison. The capacity payment will provide the Illinois
Plants revenue for fixed charges, and the energy payment will compensate the
Illinois Plants for variable costs of production. If Commonwealth Edison does
not fully dispatch the plants under contract, the Illinois Plants may sell,
subject to specified conditions, the excess energy at market prices to
neighboring utilities, municipalities, third party electric retailers, large
consumers and power marketers on a spot basis. A bilateral trading
infrastructure already exists with access to the Mid-America Interconnected
Network and the East Central Area Reliability Council.
The Loy Yang B plant sells its electrical energy through a centralized
electricity pool, which provides for a system of generator bidding, central
dispatch and a settlements system based on a clearing market for each half-hour
of every day. The National Electricity Market Management Company, operator and
administrator of the pool, determines a system marginal price each half-hour. To
mitigate exposure to price volatility of the electricity traded into the pool,
the Loy Yang B plant has entered into a number of financial hedges. From May 8,
1997 to December 31, 2000, approximately 53% to 64% of the plant output sold is
hedged under vesting contracts with the remainder of the plant capacity hedged
under the State Hedge described below. Vesting contracts were put into place by
the State Government of Victoria, Australia, between each generator and each
distributor, prior to the privatization of electric power distributors in order
to provide more predictable pricing for those electricity customers that were
unable to choose their electricity retailer. Vesting contracts set base strike
prices at which the electricity will be traded. The parties to the vesting
contracts make payments, which are calculated based on the difference between
the price in the contract and the half-hourly pool clearing price for the
element of power under contract. Vesting contracts are sold in various
structures and are accounted for as electricity rate swap agreements. In
addition, the Loy Yang B plant has entered into a State Hedge agreement with the
State Electricity Commission of Victoria. The State Hedge is a long-term
contractual arrangement based upon a fixed price commencing May 8, 1997 and
terminating October 31, 2016. The State Government of Victoria, Australia
guarantees the State Electricity Commission of Victoria's obligations under the
State Hedge.
Our electric revenues were increased by $36.6 million and $22.1 million
for the three months ended March 31, 2000 and 1999, respectively as a result of
electricity rate swap agreements and other hedging mechanisms. An electricity
rate swap agreement is an exchange of a fixed price of electricity for a
floating price. As a seller of power, we receive the fixed price in exchange for
a floating price, like the index price associated with electricity pools.
28
<PAGE>
Foreign Exchange Rate Risk
Fluctuations in foreign currency exchange rates can affect, on a United
States dollar equivalent basis, the amount of our equity contributions to, and
distributions from, our international projects. As we continue to expand into
foreign markets, fluctuations in foreign currency exchange rates can be expected
to have a greater impact on our results of operations in the future. At times,
we have hedged a portion of our current exposure to fluctuations in foreign
exchange rates through financial derivatives, offsetting obligations denominated
in foreign currencies, and indexing underlying project agreements to United
States dollars or other indices reasonably expected to correlate with foreign
exchange movements. In addition, we have used statistical forecasting techniques
to help assess foreign exchange risk and the probabilities of various outcomes.
There can be no assurance, however, that fluctuations in exchange rates will be
fully offset by hedges or that currency movements and the relationship between
certain macro economic variables will behave in a manner that is consistent with
historical or forecasted relationships. Foreign exchange considerations for
three major international projects, other than Paiton which was discussed
earlier, are discussed below.
The First Hydro and Ferrybridge and Fiddler's Ferry plants in the United
Kingdom and the Loy Yang B plant in Australia have been financed in their local
currency, pound sterling and Australian dollars, respectively, thus hedging the
majority of their acquisition costs against foreign exchange fluctuations.
Furthermore, we have evaluated the return on the remaining equity portion of
these investments with regard to the likelihood of various foreign exchange
scenarios. These analyses use market derived volatilities, statistical
correlations between specified variables, and long-term forecasts to predict
ranges of expected returns. Based upon these analyses, we believe that the
investment returns for the First Hydro, Ferrybridge and Fiddler's Ferry, and Loy
Yang B plants are adequately insulated from a broad range of foreign exchange
scenarios at this time.
We will continue to monitor our foreign exchange exposure and analyze the
effectiveness and efficiency of hedging strategies in the future.
Other
The electric power generated by some of our domestic operating projects,
excluding the Homer City plant and the Illinois Plants, is sold to electric
utilities under long-term (typically with terms of 15 to 30-years) power
purchase agreements and is expected to result in consistent cash flow under a
wide range of economic and operating circumstances. To accomplish this, we
structure our long-term contracts so that fluctuations in fuel costs will
produce similar fluctuations in electric and/or steam revenues and enter into
long-term fuel supply and transportation agreements. The degree of linkage
between these revenues and expenses varies from project to project, but
generally permits the projects to operate profitably under a wide array of
potential price fluctuation scenarios.
ENVIRONMENTAL MATTERS OR REGULATIONS
- ------------------------------------
29
<PAGE>
We are subject to environmental regulation by federal, state, and local
authorities in the United States and foreign regulatory authorities with
jurisdiction over projects located outside the United States. We believe that as
of the filing date of this report, we are in substantial compliance with
environmental regulatory requirements and that maintaining compliance with
current requirements will not materially affect our financial position or
results of operations.
We expect that the implementation of Clean Air Act Amendments will result
in increased capital expenditures and operating expenses. For example, we spent
$77 million in 1999 and expect to spend approximately $139 million for 2000 and
$42 million in 2001 to install upgrades to the environmental controls at the
Homer City plant to control sulfur dioxide and nitrogen oxide emissions.
Similarly, we plan to upgrade the environmental controls at the Illinois Plants
to control nitrogen oxide emissions and expect to spend approximately $54
million, $45 million and $80 million for 2000, 2001 and 2002, respectively. In
addition, at the Ferrybridge and Fiddler's Ferry plants, we expect to incur
environmental costs arising from plant modification, totaling approximately $320
million for the 2000-2004 period. We do not expect these increased capital
expenditures and operating expenses to have a material effect on our financial
position or results of operation.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which, as amended, will be effective in January 2001.
The Statement establishes accounting and reporting standards requiring that
every derivative instrument be recorded in the balance sheet as either an asset
or liability measured at its fair value. The Statement requires that changes in
the derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. A derivative's gains and losses for
qualifying hedges offset related results on the hedged item in the income
statement and a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. The impact of
adopting Statement 133 on our financial statements has not been quantified at
this time.
30
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10.76 Agreement among Edward R. Muller, Edison International
and Edison Mission Energy concerning the terms of Mr.
Muller's employment separation
10.77 Agreement By and Between S. Linn Williams and Edison
Mission Energy dated February 5, 2000
10.78 Form of Agreement for 2000 Employee Awards under the
Equity Compensation Plan
10.79 Resolution regarding the computation of disability and
survivor benefits prior to age 55 for Alan J. Fohrer
10.80 Shareholder Interest Purchase Agreement dated 3 March
2000 between MEC International B.V. and UPC
International Partnership CV II
18.1 Preferability Letter Regarding Change in Accounting
Principle for Major Maintenance Costs
27 Financial Data Schedule
(b) Reports on Form 8-K
The registrant filed the following report on Form 8-K/A during the quarter
ended March 31, 2000.
Date of Report Date Filed Item Reported
-------------- ---------- -------------
July 17, 1999 February 8, 2000 7
31
<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: May 12, 2000 /s/ KEVIN M. SMITH
- ------------------ --------------------------
KEVIN M. SMITH
Senior Vice President and
Chief Financial Officer
32
<PAGE>
EXHIBIT 10.76
Execution Copy
AGREEMENT
By And Among
Edward R. Muller
Edison Mission Energy
And
Edison International
(As To Certain Sections Only)
January 17, 2000
<PAGE>
Execution Copy
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS................................................... 1
Section 1.01 Definitions.................................................................. 1
Section 1.02 Interpretive Matters......................................................... 3
ARTICLE 2: EMPLOYMENT AND COMPENSATION......................................................... 4
Section 2.01 Resignation.................................................................. 4
Section 2.02 Further Assurances........................................................... 4
Section 2.03 Effect of Resignation........................................................ 4
Section 2.04 Compensation and Benefits.................................................... 4
Section 2.05 Withholding.................................................................. 7
Section 2.06 Company Property............................................................. 7
Section 2.07 Releases..................................................................... 8
ARTICLE 3: CONSULTING.......................................................................... 8
Section 3.01 Consulting Services.......................................................... 8
Section 3.02 Compensation................................................................. 8
Section 3.03 Expense Reimbursement........................................................ 10
Section 3.04 Indemnity.................................................................... 10
Section 3.05 Relationship Between Parties................................................. 10
Section 3.06 Limitations on Authority..................................................... 11
Section 3.07 Early Termination............................................................ 11
ARTICLE 4: ADDITIONAL COVENANTS OF EXECUTIVE................................................... 12
Section 4.01 Confidentiality.............................................................. 12
Section 4.02 Stock Activity............................................................... 14
Section 4.03 Non-Competition.............................................................. 15
Section 4.04 Non-Solicitation; Non-Disparagement; Non-Interference........................ 16
Section 4.05 Ownership of Works........................................................... 17
Section 4.06 Cooperation With Legal Process............................................... 17
ARTICLE 5: GENERAL PROVISIONS.................................................................. 18
Section 5.01 Opportunity to Review With Counsel........................................... 18
Section 5.02 Choice of Law................................................................ 18
Section 5.03 Remedies..................................................................... 18
Section 5.04 Severability................................................................. 18
Section 5.05 No Amendment; Entire Agreement; No Waiver.................................... 19
Section 5.06 Right Of Offset.............................................................. 19
Section 5.07 Parties of Interest.......................................................... 19
Section 5.08 Notices...................................................................... 19
Section 5.09 Counterparts................................................................. 20
Section 5.10 Publicity.................................................................... 20
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.11 Headings..................................................................... 20
Section 5.12 Attorneys Fees............................................................... 20
Section 5.13 Further Assurances........................................................... 20
Section 5.14 Additional Covenants of the Company.......................................... 20
Section 5.15 Dispute Resolution........................................................... 20
Section 5.16 Approvals.................................................................... 21
</TABLE>
SCHEDULE OF ADDRESSES
SCHEDULE OF DEFERRED COMPENSATION
SCHEDULE OF OTHER TERMINATED BENEFITS
SCHEDULE OF POSITIONS
SCHEDULE OF RETIREMENT BENEFITS
SCHEDULE OF VESTED OPTIONS
FORM OF GENERAL RELEASE
FORM OF AGE DISCRIMINATION RELEASE
ii
<PAGE>
Execution Copy
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into as of January 17, 2000 by and
among Edward R. Muller (the "Executive"), Edison Mission Energy, a California
corporation (the "Company"), and, as to Sections 2.04(d)(in respect of options
for Parent company stock) and 3.02(d), Edison International, a California
corporation (the "Parent").
RECITALS
WHEREAS, the Executive is currently employed as the President and Chief
Executive Officer of the Company; and
WHEREAS, the Executive and the Company have mutually agreed that Executive
will resign from his full-time position at the Company; and
WHEREAS, the Company desires to retain certain consultant services of
Executive as described and for the term set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements and covenants of
the parties herein contained, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows.
ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS
SECTION 1.01 Definitions. As used herein the following terms have the
following meanings:
(a) "Affiliate" means, with respect to a specified Person, any
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
(b) "Agreement" has the meaning specified in the introductory
paragraph of this Agreement.
(c) "Claims" has the meaning specified in the form of General
Releases attached hereto.
(d) "Company" has the meaning specified in the introductory
paragraph of this Agreement.
(e) "Confidential Information" has the meaning specified in Section
4.01(a).
1
<PAGE>
(f) "Consulting Services" has the meaning specified in Section 3.01.
(g) "Consulting Term" means the period commencing on the Effective
Date and ending on the earlier of the second anniversary of the Effective Date
or the date on which the Consulting Term is sooner terminated in accordance with
the provisions hereof, provided that, if the Consulting Term is otherwise
terminated pursuant to Section 3.07(a)(iv), the Consulting Term shall
nevertheless be deemed to continue until its originally scheduled expiration
date solely for purposes of Section 3.02.
(h) "Deferral Plans" means the Edison International Executive
Deferred Compensation Plan and the Edison International Option Gain Deferral
Plan.
(i) "Effective Date" shall be January 18, 2000.
(j) "Equity Plans" has the meaning specified in Section 2.04(d).
(k) "Executive" has the meaning specified in the introductory
paragraph of this Agreement.
(l) "Group" means two or more Persons which agree to act together
for the purpose of acquiring, holding, voting or disposing of Voting Stock or of
acquiring, holding or disposing of any significant subsidiary, or significant
amount of assets, of the Company or any Affiliate of the Company.
(m) "Materials" has the meaning specified in Section 4.05.
(n) "Options" has the meaning specified in Section 2.04(d).
(o) "Line of Business" means the construction, development,
financing, acquisition, ownership, disposition, operation or maintenance of
electrical power generating facilities and/or the transmission or distribution
of electrical power or natural gas.
(p) "Parent" has the meaning specified in the introductory paragraph
of this Agreement.
(q) "Person" means and includes an individual, a partnership, a
limited liability company, a joint venture, a corporation, a trust, an
unincorporated organization, a government or any department or agency thereof or
any entity similar to any of the foregoing.
(r) "Releasee" has the meaning specified in the form of General
Release attached hereto.
(s) "Releasor" has the meaning specified in the form of General
Release attached hereto.
2
<PAGE>
(t) "Schedule of Addresses" means the Schedule of Addresses attached
hereto and incorporated herein by reference.
(u) "Schedule of Deferred Compensation" means the Schedule of
Deferred Compensation attached hereto and incorporated herein by reference.
(v) "Schedule of Other Terminated Benefits" means the Schedule of
Other Terminated Benefits attached hereto and incorporated herein by reference.
(w) "Schedule of Positions" means the Schedule of Positions attached
hereto and incorporated herein by reference.
(x) "Schedule of Retirement Benefits" means the Schedule of
Retirement Benefits attached hereto and incorporated herein by reference.
(y) "Schedule of Vested Options" means the Schedule of Vested
Options attached hereto and incorporated herein by reference.
(z) "Voting Stock" means shares of capital stock of the Parent that
are entitled to vote in periodic elections for directors and any shares of
capital stock, or similar securities, of any Affiliate of the Parent which are
entitled to vote in periodic elections for directors or other similar governing
board members.
(aa) "Works" has the meaning specified in Section 4.05.
SECTION 1.02 INTERPRETIVE MATTERS. In this Agreement, unless the context
otherwise requires, the singular shall include the plural, the masculine shall
include the feminine and neuter, and vice versa. The terms "includes" or
"including" shall mean "including without limitation." References to a Section,
Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule
of this Agreement, and reference to a given agreement or instrument shall be a
reference to that agreement or instrument as modified, amended, supplemented and
restated through the date as of which such reference is made. This Agreement
and any documents or instruments delivered pursuant hereto shall be construed
without regard to the identity of the Person who drafted the various provisions
of the same. Each and every provision of this Agreement and such other
documents and instruments shall be construed as though the parties participated
equally in the drafting of the same. Consequently, the parties acknowledge and
agree that any rule of construction that a document is to be construed against
the drafting party shall not be applicable either to this Agreement or such
other documents and instruments.
3
<PAGE>
ARTICLE 2: EMPLOYMENT AND COMPENSATION
SECTION 2.01 RESIGNATION. Effective upon the Company's approval and
execution of this Agreement, Executive does hereby resign from any and all
positions of responsibility or authority at the Company, any subsidiary or
Affiliate of the Company, any other entity in which the Company or any of its
Affiliates has an investment where Executive's position with such entity is
related to such investment, and any division, unit, plan, program, trust, fund,
project or other subdivision established, organized or sponsored by the Company
or any of its subsidiaries or Affiliates or any such other entity, whether such
position is that of an agent, officer, manager, member, partner, executive,
trustee, administrator, director or otherwise, provided that with respect to any
membership that Executive may have on the board of directors or similar
governing board of any publicly traded entity, Executive's resignation shall be
deemed deferred until the Company makes written request therefor. Without
limiting the generality of the foregoing, Executive hereby resigns from all
positions set forth or described in the Schedule of Positions attached hereto
and incorporated herein by reference. Notwithstanding the foregoing, if the
Effective Date is after the date hereof, then between the date hereof and the
Effective Date, Executive shall remain an employee of the Company on
administrative leave, entitled to compensation for such period at his current
base rate of salary and existing fringe benefits, but it is understood that
Executive shall have no authority to bind or to determine or direct any activity
of, or represent, the Company or any of its Affiliates during such period. Upon
the Effective Date, and without any further action by Executive or the Company,
Executive's employment with the Company shall end.
SECTION 2.02 FURTHER ASSURANCES. To the extent necessary, Executive
agrees from time-to-time, upon the Company's reasonable request, to execute any
and all documents as may be necessary or desirable, in the reasonable and good
faith judgment of the Company or any of its Affiliates, to further confirm
and/or effectuate the aforesaid resignations.
SECTION 2.03 EFFECT OF RESIGNATION. Executive and the Company agree that
the resignation contained herein arises from the mutual agreement of the
Executive and the Company, resulting in a cessation of Executive's continued
employment. Accordingly, such resignation shall not be construed or deemed to be
a termination of Executive's employment by the Company, whether with or without
cause, or to constitute or be deemed to be any breach of any employment or other
obligation or duty by either the Executive or by the Company or any of its
Affiliates, whether express or implied, for any purpose, provided that for
purposes of construing the provisions of any employee benefit plan in which
Executive has been a participant, Executive's resignation shall be given the
same effect as a termination without cause.
SECTION 2.04 COMPENSATION AND BENEFITS. Executive hereby agrees that the
following, together with amounts that shall be payable to Executive under
Article 3 hereof in respect of Executive's Consulting Services, accurately
reflect all of the compensation,
4
<PAGE>
benefits or perquisites payable or otherwise to be provided to Executive by the
Company and its Affiliates on and after the Effective Date as a result of
Executive's employment by and separation from the Company and its Affiliates and
that Executive is not entitled to any other compensation, benefits, or
perquisites except as set forth in this Agreement:
(a) Salary. On the Effective Date, Executive will receive accrued
base salary from the end of the immediately preceding payroll period for which
payment has been made through the Effective Date.
(b) Accrued Vacation. On the Effective Date, the Company will pay
Executive such amounts as are due Executive for accrued and unused vacation time
in accordance with the Company's usual policies. After the Effective Date,
Executive will not accrue or be paid for vacation time in connection with his
provision of consulting services to the Company.
(c) Executive Incentive Compensation Plan. On the Effective Date,
the Company will pay Executive a bonus amount for the 1999 year under the
Company's Executive Incentive Compensation Plan equal to a gross amount, before
withholding, of Three Hundred Forty-Seven Thousand Two Hundred Fifty Dollars
Exactly ($347,250). Executive shall not be entitled to any further payments
under the Company's Executive Incentive Compensation Plan, including for any
period after 1999. Nothing in this paragraph shall create any inference or
expectation regarding bonuses actually to be paid to participants in such Plan
for the 1999 year, which may be above or below target amounts for individuals or
in the aggregate.
(d) Options. For purposes of the vesting of any unvested awards
previously made to Executive under the Edison International Equity Compensation
Plan or under the Edison International Management and Officer Long-Term
Incentive Compensation Plans (the "Equity Plans"), Executive's employment by the
Company shall be given the same effect as if Executive had remained regularly
employed through the Effective Date. Executive and the Company agree that, as
of the Effective Date, Executive's vested options to acquire stock of the Parent
and vested phantom options in respect of the Company will be as set forth in the
Schedule of Vested Options attached hereto and incorporated herein by reference
(the "Options"). From and after the Effective Date, the Executive shall no
longer be eligible for grants of any awards under the Equity Plans or under any
other long-term incentive plan of the Company or its Affiliates, and except as
set forth in Section 3.02, all unvested awards shall terminate as of the
Effective Date. On March 16, 2000, the Company shall pay to Executive, by wire
transfer in accordance with Executive's reasonable written instructions given at
least forty-eight (48) hours in advance, a gross amount, before withholding,
that is equal to the difference between $471.0642 per phantom share and the
pertinent exercise price of such share as shown on the Schedule of Vested
Options for each vested phantom Option of the Company. From and after the date
hereof, Executive shall have no further rights or entitlements in respect of
such phantom Options or any phantom options in respect of the Company, except as
set forth in Section 3.02; provided that if,
5
<PAGE>
within six (6) months of the date hereof, the Company or any Affiliate of the
Company consummates an exchange offer with holders of phantom options of the
Company in which the stated exchange value (before interest and any contingent
amounts) per phantom share for purposes of the exchange offer exceeds $471.0642
per phantom share, then, within thirty (30) days following the completion of
such exchange offer, the Company shall pay to Executive a gross amount, before
withholding, equal to such excess multiplied by the number of vested phantom
Options of Executive shown on the Schedule of Vested Options. Following the
Effective Date, Options for stock of the Parent listed on the Schedule of Vested
Options, shall remain subject to the terms of the award and the Plan under which
they were granted, subject to the provisions of Section 3.02.
(e) Deferral Plans. The Schedule of Deferred Compensation attached
hereto and incorporated herein by reference sets forth, as of the date shown,
the vested balance of Executive's deferral account in the Edison International
Executive Deferred Compensation Plan and units credited to Executive's stock
unit account in the Edison International Option Gain Deferral Plan. All
deferred compensation benefits shown on the Schedule of Deferred Compensation,
following the Effective Date, shall remain subject to the terms of the Deferred
Compensation Plan applicable thereto.
(f) Retirement Benefits. The Schedule of Retirement Benefits
attached hereto and incorporated herein by reference sets forth, as of the
Effective Date, the vested benefits payable to Executive under retirement plans
of the Company and its Affiliates in which he has been a participant. All such
benefits shown on the Schedule of Retirement Benefits, following the Effective
Date, shall remain subject to the terms of the pertinent retirement plan
applicable thereto, including the conditions to payment set forth therein.
After the Effective Date, there will be no further accrual of benefits for
Executive under such retirement plans.
(g) Health Benefits. From the Effective Date until eighteen (18)
months thereafter, Executive and his family shall remain eligible to continue to
participate in medical and dental plans of the Company and its Affiliates on the
same basis as if Executive had remained employed by the Company in his current
position, provided that Executive shall be responsible for paying the premium
costs therefor in accordance with the Company's ordinary practices in respect of
former employees, subject to the further provisions of Section 3.02.
(h) Other Insurance Coverage. Executive acknowledges that, except
as provided in Section 2.04(g) above and Section 3.02(c), no life, health,
accident, disability or other insurance policies or health or welfare benefits
will be provided for him by the Company or its Affiliates after the Effective
Date.
(i) Contract Costs. The Company will reimburse Executive for the
reasonable fees and costs of any attorney, financial advisor, accountant and/or
other professional
6
<PAGE>
advising and assisting Executive in the negotiations of this Agreement, up to
Twenty-Five Thousand Dollars ($25,000) in the aggregate.
(j) Outstanding Expense Reports. Executive agrees to submit to the
Company an expense report for all reimbursable and reasonable expenses he has
incurred as an employee of the Company no later than the fifteenth business day
following the Effective Date, and acknowledges that the business expenses to be
contained in such expense report will be the only remaining reimbursable
business expenses incurred by Executive while in the Company's employ. The
Company will reimburse Executive for such expenses within thirty (30) days of
Executive's submission of the report, to the extent such expenses are valid and
reimbursable under Company policy.
(k) Severance. On the Effective Date, the Company shall make a one-
time severance payment to Executive in an amount, prior to withholding, that is
equal to Five Hundred Thousand Dollars Exactly ($500,000).
(l) Other Compensation. Executive acknowledges that from and after
the Effective Date, all other compensation, benefits and perquisites to which he
has been entitled as an employee of the Company shall forthwith terminate and
that he shall no longer be entitled to receive the same, including without
limitation, reimbursement for the costs of a car and driver and for private club
memberships. Without limiting the generality of the foregoing, the other
benefits and perquisites in which Executive currently participates which shall
no longer be available to him after the Effective Date are as set forth in the
Schedule of Other Terminated Benefits attached hereto and incorporated herein by
reference.
SECTION 2.05 WITHHOLDING. Executive agrees that all compensation,
benefits and perquisites payable hereunder shall be paid after withholding for
taxes which, in the Company's reasonable good faith judgment, are required to be
withheld by the Company, including income taxes at the then current published
federal and state rate unless Executive elects to use a higher rate.
Notwithstanding the foregoing, it is understood that all personal income and
related taxes applicable to any and all compensation, benefits and perquisites
payable hereunder shall be paid by Executive, and the Company shall not be
obligated to pay any such taxes or to provide Executive with funds for the
payment of same.
SECTION 2.06 COMPANY PROPERTY. Executive agrees to return to the
Company, as soon as practicable, but in any event on or prior to the Effective
Date, all Company property, including, but not limited to, all keys, credit
cards, documents, equipment (including computer and telephone equipment)
automobiles, files, data and records of any kind whatsoever that he has in his
possession or control (except for any Company property that the Company
authorizes Executive in writing to retain for purposes of his providing the
Consulting Services hereunder) regardless of the form for storage thereof
(whether documentary, on discs or present on other electronic media). The
Company agrees to permit Executive to retain copies of documents that are
contained in his office files and that are personal
7
<PAGE>
in nature, subject to the Company's prior review of such materials and approval
of their retention by the Executive. Notwithstanding the foregoing, (a) subject
to the Company's satisfaction that all Company information and programs have
been removed therefrom, Executive may retain the Company's personal computer
currently at Executive's residence, and (b) the Company will cooperate and work
together with Executive to facilitate Executive's assumption of the Company's
future obligations in respect of the automobile currently leased by the Company
for Executive.
SECTION 2.07 RELEASES. In further consideration of the Company's entry
into this Agreement with Executive and its promise to make payments and to
provide benefits hereunder to which Executive is not otherwise entitled,
Executive is, concurrent with the Company's execution of this Agreement,
delivering to the Company executed copies of the forms of releases attached
hereto, respectively, as "Form of General Release" and "Form of Age
Discrimination Release." In the event that the Executive exercises his right to
rescind the Age Discrimination Release, then notwithstanding any other provision
of this Agreement, the Company shall have the right, within five (5) days
thereafter, to terminate any and all further obligations of the parties under
this Agreement.
ARTICLE 3: CONSULTING
SECTION 3.01 CONSULTING SERVICES. During the Consulting Term, Executive
will, when reasonably requested to do so by the Company's Chairman, Chief
Executive Officer or Board of Directors, provide the Company and its officers
and directors with strategic consulting and advisory services related to
material aspects of the Company's business. All Consulting Services provided
hereunder will be provided on an "as requested" basis, subject to Executive's
reasonable availability. Without limiting the generality of the foregoing, and
subject to the Company's compensating the Executive for additional time as
provided for herein, Executive shall not be required to expend more than forty
(40) hours per month on providing Consulting Services hereunder. When requested
to provide Consulting Services, Executive shall endeavor to do so in a
professional, diligent and workmanlike manner, providing the Company and its
Affiliates with the benefit of his best, informed and professional judgment.
All Consulting Services shall be provided by Executive personally, but Executive
shall have the right to obtain the assistance of his employees at no additional
cost to the Company.
SECTION 3.02 COMPENSATION. In consideration of his providing the
Consulting Services and subject to the terms and provisions of this Agreement
and Executive's compliance therewith, the Company shall pay to the Executive the
following compensation:
8
<PAGE>
(a) The Company shall pay Executive a consulting fee at the rate of
Three Hundred Thousand Dollars ($300,000) per annum, payable in equal monthly
installments on the last day of each month during the Consulting Term (pro-rated
for partial months during the Term).
(b) In the event that Executive provides more than forty (40) hours
of Consulting Services in any calendar month, then the Company shall also pay
Executive $[300] for each such additional hour, provided that within thirty (30)
days following the close of such month, Executive submits to the Company an
invoice setting forth time expended for Consulting Services during such month in
reasonable detail and with such supporting documentation as the Company may
reasonably request.
(c) During the Consulting Term, the Company shall reimburse
Executive, or, if requested by Executive, pay directly on Executive's behalf, up
to Twenty Thousand Dollars ($20,000) per annum in the aggregate, for Executive's
premium costs for health care benefits comparable to those referred to in
Section 2.04(g) and premium costs for disability insurance coverage comparable
to that now enjoyed by Executive under the Company's long-term disability plan
(to the extent commercially available), subject in each case to the Company's
receipt from time-to-time and upon request of customary certifications of
Executive's ineligibility for health care or disability benefits, as the case
may be, under a plan of another employer.
(d) Notwithstanding any other provision of the Equity Plans, certain
unvested awards of options for Parent company stock granted to the Executive in
1998 and 1999 shall continue to vest as follows. One twenty-fourth (1/24) of
the 6,650 currently unvested Parent company options granted to Executive on
January 2, 1998, and one twenty-fourth (1/24) of the 17,325 currently unvested
Parent company options granted to Executive on January 4, 1999, shall continue
to vest at the end of each calendar month completed during the Consulting Term
(pro-rated for the partial periods from the Effective Date to January 31, 2000,
and from January 1, 2002 to January 18, 2002). Furthermore, the term for the
exercise by Executive of any vested options to acquire capital stock of the
Parent that are listed on the Schedule of Vested Options or that are vested
pursuant to the provisions of this Section 3.02(d) shall be extended to, and
including, the 180/th/ day following the end of the Consulting Term.
(e) Notwithstanding any other provision of the Equity Plans, certain
unvested awards for phantom options in respect of the Company granted to the
Executive in 1998 and 1999 shall continue to vest as follows. One twenty-fourth
(1/24) of the 3,930 currently unvested phantom options granted to Executive on
January 2, 1998, and one twenty-fourth (1/24) of the 8,010 currently unvested
phantom options granted to Executive on January 4, 1999, shall continue to vest
at the end of each calendar month completed during the Consulting Term (pro-
rated for the partial periods from the Effective Date to January 31, 2000, and
from January 1, 2002 to January 18, 2002). Within ten (10) days following the
close of each calendar month as of the end of which unvested options have vested
pur-
9
<PAGE>
suant to the preceding sentence, the Company shall pay to Executive a gross
amount, before withholding, that is equal to the difference between $471.0642
(subject to adjustment in accordance with the proviso to the penultimate
sentence of Section 2.04(d)) for each phantom option that vested at the end of
the preceding month under this Section 3.02(e) and the pertinent exercise price
thereof. By way of example, if there were 12,000 unvested options, 500 options
would vest monthly, and the Company would pay Executive on a monthly basis the
excess of $471.0642 (subject to adjustment in accordance with the proviso to the
penultimate sentence of Section 2.04(d)) per option over the exercise price of
each of such 500 options.
(f) The Company may, in its discretion, withhold taxes from amounts
due Executive under this Section 3.02 unless and to the extent an acceptable
legal opinion is received from Executive's legal counsel to the effect that
withholding is either not applicable or not required.
SECTION 3.03 EXPENSE REIMBURSEMENT. The Company will reimburse
Executive, in accordance with the Company's customary practices, for reasonable
and customary out-of-pocket expenses which are pre-approved by the Company and
actually incurred and paid by Executive as a result of and directly related to
the provision of Consulting Services, provided that such expenses would be
reimbursable to management executives of the Company under then prevailing
Company policies. In no event shall such expenses include salaries of
Executive's employees, or other overhead costs.
SECTION 3.04 INDEMNITY. The Company shall indemnify and hold harmless
Executive and his Affiliates from and against any and all Claims, actual or
threatened (including all expenses incurred in connection therewith as they are
incurred) arising from or related to Executive's performance of the Consulting
Services, except to the extent that such Claims or threatened Claims arise from
or are related to the breach of this Agreement by Executive or the gross
negligence or willful misconduct of Executive or his Affiliates, for which
Executive shall indemnify and hold harmless the Company and its Affiliates to
the same extent as the Company would otherwise be obligated to provide indemnity
to Executive.
SECTION 3.05 RELATIONSHIP BETWEEN PARTIES. The parties acknowledge and
agree that the provision of the Consulting Services shall not create any
association, partnership, joint venture, agency or employer and employee
relationship between the Company and the Executive. Executive acknowledges that
Executive is being engaged as an independent contractor, and Executive will not
be eligible for benefits generally available to the employees of the Company. In
the performance of the Consulting Services, Executive agrees at his sole cost
and expense to materially comply with all applicable laws and with such
requirements or restrictions as may be imposed by any governmental authority,
including the procurement of any applicable permits and compliance with any
applicable laws now or hereafter in effect relating to Executive's provision of
Consulting Services or Execu-
10
<PAGE>
tive's hiring of any employees in connection therewith, including any applicable
workers' compensation, unemployment, and wages and hours laws.
SECTION 3.06 LIMITATIONS ON AUTHORITY. Except as may be expressly
authorized in writing from time to time by the Company's chief executive
officer, Executive agrees that he will not have authority to, and that he will
not, in connection with the Consulting Services, (a) enter into any contracts
or other undertakings binding on, or imposing any obligations or liabilities on,
the Company or any of its Affiliates, or (b) make any representations to any
Person(s) that either Executive or any Person acting under his authority has the
authority to act for the Company or any of its Affiliates or represent that
either Executive or any Person in his employ or under his authority is engaged
by the Company or any of its Affiliates in any capacity other than the
engagement hereunder as a consultant.
SECTION 3.07 EARLY TERMINATION. In addition to any other rights or
remedies at law, in equity or pursuant to any other provisions of this
Agreement, the consulting relationship created hereby may be terminated as
follows:
(a) By the Company at any time:
(i) Upon written notice to Executive in the event of his
material breach or default hereunder, provided that if such material breach
or default is curable, then Executive shall have thirty (30) days to cure
the default or breach;
(ii) Upon written notice to Executive pursuant to the
provisions of Section 4.03(a), or in the event of his habitual neglect of
duty, or in the event of his failure to follow reasonable instructions
consistent with the scope of his engagement from the Company's Chief
Executive Officer, Chairman or Board of Directors, or in the event of any
gross negligence, willful misconduct or intentionally tortious acts or
omissions, or in the event of any acts of material dishonesty, committed by
Executive in the course of providing Consulting Services;
(iii) Upon the death or permanent disability of Executive (as
determined in accordance with the Company's customary policy); or
(iv) Upon thirty (30) days' prior written notice to Executive
for any other reason or for no reason; or
(b) By the Executive, at any time on or after the expiration of
six (6) calendar months from the Effective Date, upon thirty (30) days'
prior written notice to the Company for any reason or for no reason.
In the event of any termination arising under Section 3.07(a)(i), (ii) or (iii)
or Section 3.07(b), then and in such event the Company shall be obligated to pay
the compensation set
11
<PAGE>
forth in Section 3.02 that is due hereunder to the date of termination only and
shall have no obligation to provide further compensation thereafter, and all
currently unvested options and phantom options shall cease vesting under
Sections 3.02(d) and (e) or otherwise as of the end of the calendar month
immediately preceding such date of termination, provided that if the Consulting
Term has not earlier terminated pursuant to Section 3.07(a)(i) or (ii) or under
Section 3.07(b), all then unvested options and phantom options shall vest and be
paid upon any termination under Section 3.07(a)(iii). In the event of any
termination under Section 3.07(a)(iv), the Company shall remain obligated to
continue to provide the compensation to Executive that would otherwise become
due thereafter under the terms of Section 3.02 of this Agreement but for such
termination, and Executive's rights under Sections 3.02(d) and (e) shall be
unaffected by such termination. In the event the Company wishes to obtain
insurance for its obligations in the event of Executive's death or disability,
Executive agrees to reasonably cooperate with the Company in such endeavor.
ARTICLE 4: ADDITIONAL COVENANTS OF EXECUTIVE
SECTION 4.01 CONFIDENTIALITY.
(a) Executive acknowledges that he has held a sensitive management
position with the Company and that, by virtue of having held such position, he
has had access to and has learned the Company's and its subsidiaries' and
Affiliates' confidential and proprietary information and trade secrets
pertaining to its and their past, present, planned or projected operations,
results of operations, prospects, processes, know-how, services, projects,
strategies, techniques, procedures, financial capabilities, assets,
transactions, partners, financing sources and personnel, disclosure of any of
which to present or future competitors, investors, partners or the general
public would be highly detrimental to the best interests of the Company and its
Affiliates. All such confidential and proprietary information to which
Executive has had prior access as a result of his position with the Company, and
all similar information to which Executive may have access in the future as a
result of performing Consulting Services, are herein referred to as
"Confidential Information." Examples of such confidential and proprietary
information include, but are not limited to, the Company's investigations of and
development and analytical work on potential future electric generation assets,
both those potentially to be constructed and those potentially to be acquired.
Executive further acknowledges and agrees that the right to maintain the
confidentiality of such Confidential Information constitutes a proprietary right
which the Company and its Affiliates are entitled to protect.
(b) Accordingly, without limiting any obligations of Executive
arising at law or pursuant to any existing agreement to which Executive is
bound, Executive covenants and agrees to and in favor of the Company that,
subject to the further provisions of this
12
<PAGE>
Agreement, Executive shall not disclose any Confidential Information to any
Person other than as approved by the Company in writing in advance in connection
with Executive providing Consulting Services hereunder, and Executive shall not
use for the Executive's own purposes or for any purpose other than those of the
Company and its Affiliates any Confidential Information during the Consulting
Term or at any time thereafter until such Confidential Information has been
otherwise publicly disclosed. Without limiting the generality of the foregoing,
Executive agrees that, except as permitted in writing by the Company, he will
not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way related to
Confidential Information or, subject to Section 5.10, any matters concerning his
employment at the Company. Executive agrees that any disclosure by him of any of
the Confidential Information shall constitute a material breach of this
Agreement and of his fiduciary obligations to the Company.
(c) For purposes of this Section 4.01, "Confidential Information"
does not include information which (i) is or becomes generally available to the
public other than as a result of disclosure by Executive, or (ii) was within the
Executive's possession prior to being furnished to the Executive by or on behalf
of the Company or its Affiliates, provided that the Executive did not receive
such information in a fiduciary capacity and provided further that the scope of
such information was not known to the Executive to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Company or any of its Affiliates or any other Person with
respect to such information.
(d) If Executive is requested or required (by oral questions,
interrogatories, requests for information or documents in connection with any
legal proceedings, subpoena, civil investigative demand or other similar
process) to disclose any Confidential Information, then Executive shall provide
the Company with prompt written notice of any such request or requirement so
that the Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver from the Company,
the Executive is, in the written opinion of counsel reasonably acceptable to the
Company (the reasonable attorney's fees and costs of which opinion the Company
shall reimburse), legally compelled to disclose Confidential Information to any
tribunal or else stand liable for contempt, or suffer other censure or penalty,
then Executive may, without liability hereunder, disclose to such tribunal only
that portion of the Confidential Information which such counsel advises the
Executive is legally required to disclose, provided that Executive exercises
commercially reasonable efforts to preserve the confidentiality of the
Confidential Information, including, without limitation, by cooperating with the
Company to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded the Confidential Information by
such tribunal.
(e) Without limiting the provisions of Section 2.06, all files,
forms, brochures, books, materials, written correspondence, memoranda,
documents, manuals, computer
13
<PAGE>
disks, software products and lists that have in the past or may in the future
come into the possession or control of the Executive as a result of his being an
employee of or consultant to the Company shall at all times remain as the
property of the Company and not of the Executive. At the times required by
Section 2.06, upon conclusion of the Consulting Term and at any other time or
times demanded by the Company, Executive shall deliver promptly to the Company
all such property in the possession of the Executive or directly or indirectly
under the control of the Executive. Executive agrees not to make, for the use of
the Executive or of any other Person, reproductions or copies of any such
property or other property of the Company.
(f) Executive agrees that following his employment by the Company,
he will not, without the prior written consent of the Chief Executive Officer of
the Company, undertake employment or provide services for any Person other than
the Company or its Affiliates if the loyal and complete fulfillment of his
duties in connection with such employment or services would require him to
reveal or otherwise use any Confidential Information in violation of the
provisions hereof.
SECTION 4.02 STOCK ACTIVITY. Executive hereby agrees that from the date
hereof until the second anniversary of the Effective Date, Executive shall not:
(a) Acquire, by purchase or otherwise (except pursuant to
Executive's participation in employee benefit plans), offer to acquire or
obtain the right to acquire, propose to acquire, announce any intention or
plan to acquire, or announce or make any request for permission to acquire,
directly or indirectly, any shares of Voting Stock, or any other security
convertible into or exercisable or exchangeable for Voting Stock, unless
(i) following such acquisition and after giving effect thereto, the
Executive and any Group of which he is a member, would not be directly or
indirectly the beneficial owners of more than five percent (5%) of the
outstanding shares of Voting Stock of the Parent, the Company or any
Affiliate thereof, as the case may be, and (ii) such acquisitions or offers
or agreements to acquire are made in open market transactions (or pursuant
to the Equity Plans);
(b) Directly or indirectly engage in, or become a member of a
Group which is engaging or which subsequently engages in, any tender offer
or exchange offer for any shares of Voting Stock;
(c) Take any other action, participate in or become a member of
any Group, or make any proposal, offer to acquire or obtain a right to
acquire, propose to acquire, announce any intention or plan to acquire, or
announce or make any request for permission to acquire, directly or
indirectly or alone or together with others, control of the Company or of
any Affiliate of the Company or of any division, business segment or
significant amount of assets of the Company or of any Affiliate of the
Company;
14
<PAGE>
(d) Enter into any voting agreement or proxy arrangement with
respect to shares of Voting Stock, or deposit any shares of Voting Stock
into any voting trust or similar entity, as a result of which the voting
rights associated with any or all of Executive's Voting Stock are vested in
another Person, other than proxies (or their substitutes) designated by the
Board of Directors of the issuer of such Voting Stock in proxy material for
any meeting of stockholders of such issuer;
(e) Conduct or become a participant in any solicitation of
proxies with respect to Voting Stock, or make any announcement with respect
to any solicitation of proxies, for the purpose of opposing a solicitation
(for election of directors or otherwise) approved by a majority of the
whole Board of Directors of the issuer of such Voting Stock, or present any
proposal, or solicit or become a participant in the solicitation of proxies
in favor of a proposal, for action at a meeting of the stockholders of such
issuer, which is not approved by a majority of the whole Board of Directors
of such issuer;
(f) Enter into any plan, agreement or arrangement, or become a
member of any Group, for the purpose of engaging in any activity prohibited
by the foregoing paragraphs of this Section 4.02; or
(g) Assist any other Person in connection with such other
Person's engaging in any activity which, if engaged in by the Executive,
would constitute a violation of this Section 4.02.
SECTION 4.03 NON-COMPETITION.
(a) Without limiting the provisions of Sections 4.01. 4.02 and 4.04,
and as a further inducement to the Company to enter into this Agreement,
Executive agrees that, except as otherwise permitted hereby, until the
expiration of six (6) calendar months from the Effective Date, or until the end
of the Consulting Term if the Consulting Term ends after the expiration of six
(6) calendar months from the Effective Date, Executive shall not, directly or
indirectly, for his own account or as agent for another, carry on or participate
in the ownership, management or control of, or be employed by, or serve as a
director of, or consult for, or license or provide know-how to, or otherwise
render services to, or allow his name or reputation to be used in or by, any
other present or future business enterprise that, either alone or together with
its Affiliates, engages in the Line of Business and competes with current or
planned activities of the Company and its Affiliates anywhere in the world
without the prior written approval of the Chief Executive Officer of the
Company. In the event of any violation of the foregoing, then and in such event
the Company may, upon notice to Executive, terminate the consulting relationship
between Executive and Company without limiting any other remedies of the
Company.
15
<PAGE>
(b) Notwithstanding the foregoing, nothing herein shall limit the
right of Executive, as an investor, to hold and make investments in securities
of any corporation or other entity that competes in the Line of Business with
the Company and its Affiliates and that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded in a
generally recognized over-the-counter market, provided that the aggregate of all
of Executive's beneficial ownership therein does not exceed one percent (1%) of
the outstanding equity interests in such corporation or other entity.
(c) Executive acknowledges that he considers the restrictions set
forth in this Section 4.03 to be reasonable both individually and in the
aggregate and that the duration, geographic scope, extent and application of
each of such restrictions are no greater than is necessary for the protection of
the legitimate interests of the Company and its Affiliates. In the event that
any restriction herein shall be found to be void or unenforceable but would be
valid or enforceable if some part or parts thereof were deleted or the period or
area of application reduced, each of the parties hereby agrees that such
restriction shall apply with such modification as may be necessary to make it
valid.
SECTION 4.04 NON-SOLICITATION; NON-DISPARAGEMENT; NON-INTERFERENCE.
During the period that begins on the date hereof and that ends on the second
anniversary of the Effective Date, Executive agrees that he will not, directly
or indirectly, for his own benefit, for the benefit of any Person other than the
Company or its Affiliates, or otherwise:
(a) Solicit, encourage or induce, or assist any Person to solicit,
encourage or induce, any officer, director, executive or employee of the
Company or its Affiliates to leave his or her employment with the Company
or its Affiliates for any reason, it being agreed that the foregoing shall
not prohibit Executive from soliciting the employment of his current
secretarial assistant;
(b) Induce or attempt to induce any customer, supplier, financier,
government agency, independent contractor, developer, promoter or other
Person having any business or regulatory relationship with the Company or
any of its Affiliates to cease, reduce or alter the nature, amount or terms
of business conducted or regulatory oversight or practices followed with
respect to the Company or any of its Affiliates or to engage in any
business, regulatory or other activity which might materially harm the
Company or any of its Affiliates or which is opposed by the Company and its
Affiliates;
(c) Make or cause to be made any public statement that is
disparaging of the Company or any of its Affiliates or their respective
businesses or that materially injures the business or reputation of the
Company or any of its Affiliates or their respective businesses; or
(d) Directly or indirectly advise, consult or discuss with, provide
information to, or assist any Person, including any holder of phantom
16
<PAGE>
options in the Company or any advisor or representative of any such holder,
or make any comment or offer or provide any opinion or otherwise make
statements, concerning the phantom options, or the grant, appreciation,
value, or exercise thereof, or any transaction or proposed transaction in
respect of such phantom options, including without limitation any planned
or actual exchange offer by the Company therefor, or any interpretation or
action by the Company planned or actually made with respect to such phantom
options, or any claims or proceedings, whether pending or threatened,
relating to such phantom options, without the prior written consent of the
Chief Executive Officer of the Company, except and to the extent compelled
by law.
SECTION 4.05 OWNERSHIP OF WORKS. As between the Company and Executive,
the Company shall be the sole and exclusive owner, throughout the universe, in
perpetuity, of all right, title, interest, benefits and profits of every kind
and nature whatsoever, whether now known or unknown, in, to and from all
programs, financial or business plans, all non-generic ideas and concepts,
logos, discoveries, trade secrets, prospect lists, or other tangible work
product and materials (including, without limitation, tangible materials
containing market, financial and other research) of every kind and nature
whatsoever (collectively, the "Works") written, conceived, developed, furnished
or created by or under the auspices of Executive in connection with his
performance of duties as an employee of or consultant to the Company, and all
results, benefits and proceeds of such Works (all of such Works, results,
benefits and proceeds being collectively referred to as the "Materials"). All
of such Materials shall constitute a "work made for hire" for the Company within
the meaning of the United States Copyright Act of 1976, as amended. In the
event that the Materials or any portion thereof are for any reason whatsoever
not deemed to be a "work made for hire" for the Company, Executive hereby grants
and assigns to the Company all right, title, interest, benefits and profits of
every kind and nature whatsoever, whether now known or unknown, in, to and from
the Materials. As between the Company and Executive, the Company shall at all
times have the perpetual and exclusive right to exploit such Materials and all
works derived therefrom throughout the universe, and all revenues and other
benefits and profits derived by the Company from such exploitation, as between
the Company and Executive, shall be the sole and exclusive property of the
Company. Executive agrees to execute, and to cause each of his employees or
agents to execute, any and all formal assignments, recordations and any other
documents which the Company reasonably deems are necessary or desirable to
effectuate and/or evidence the Company's rights in and to the Materials.
SECTION 4.06 COOPERATION WITH LEGAL PROCESS. From and after Executive's
employment with the Company, the Company shall, consistent with the Company's
then existing policies for indemnification of officers, continue to indemnify
Executive for his activities as an officer, director and employee of the Company
to the extent provided under and permitted by, and subject to the provisions and
conditions of, law and the charter documents of the Company in effect at the
time, as though Executive remained an officer,
17
<PAGE>
director and/or employee of the Company. In return, Executive agrees to provide
reasonable cooperation and assistance to the Company, when and as requested by
the Company and without charge to the Company except for the Executive's
reasonable and bona fide out-of-pocket costs (including reasonable attorney's
fees and costs), in connection with any and all pending or threatened claims,
proceedings and investigations (whether on behalf of or against the Company)
arising out of, or alleged to arise out of, facts or circumstances existing
during the term of Executive's employment by the Company.
ARTICLE 5: GENERAL PROVISIONS
SECTION 5.01 OPPORTUNITY TO REVIEW WITH COUNSEL. Executive represents
that he has discussed all aspects of this Agreement with an attorney of his
choice, that he has carefully read and fully understands all of the provisions
of this Agreement and that he is voluntarily entering into this Agreement.
SECTION 5.02 CHOICE OF LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
reference to the choice of law doctrine of California.
SECTION 5.03 REMEDIES. The rights and remedies of each party under this
Agreement are not, except as expressly provided herein to the contrary, to the
exclusion of each other or of any other rights or remedies of such party. Each
party may exercise or decline to exercise any one or more of its rights and
remedies without waiver of any such subsequent exercise of such right and remedy
or any other rights and remedies of such party. Executive acknowledges that the
Company cannot be properly protected from adverse consequences if Executive
should default under specified provisions of this Agreement. Accordingly, the
Executive agrees that in the event of any breach or threatened breach by
Executive of any of the provisions of Sections 3.06, 4.01, 4.02, 4.03, 4.04 or
4.05, the Company, in addition to any other right or relief to which it may be
entitled, shall be entitled to an order enjoining such breach or threatened
breach and specifically enforcing Executive's compliance with the provisions
thereof, Executive agreeing that he is hereby estopped and prohibited from
arguing that damages are an adequate remedy for any such breach or threatened
breach or that such equitable relief is inappropriate under the circumstances.
SECTION 5.04 SEVERABILITY. Without limiting the applicability of Section
4.03(c), if any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the provisions hereof is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order
18
<PAGE>
that the provisions hereof are implemented and enforced as originally
contemplated to the greatest extent possible.
SECTION 5.05 NO AMENDMENT; Entire Agreement; No Waiver. This Agreement
and the Schedules and attachments hereto constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, between the parties with
respect to the subject matter hereof. Without limiting the generality of the
foregoing, Executive specifically represents and acknowledges that in executing
this Agreement, he does not rely and has not relied on any representations or
statements made by the Company, or any of the Company's agents, representatives
or attorneys with regard to the subject matter, basis or effect of this
Agreement, or otherwise. This Agreement may not be amended except by an
instrument in writing signed by the parties. Either party may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, or (b) waive compliance with any of the agreements applicable to the
other party contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of a
party to assert any of its rights hereunder shall not constitute a waiver of any
of such right.
SECTION 5.06 RIGHT OF OFFSET. The Company shall have the right to offset
against amounts owed Executive by the Company any amounts which, in the future,
Executive owes to the Company.
SECTION 5.07 PARTIES IN INTEREST. This Agreement may not be assigned or
transferred by either party, by operation of law or otherwise, without the prior
written consent of the other party (which consent may be granted or withheld in
the sole discretion of such other party). This Agreement shall be binding upon
and inure solely to the benefit of the parties and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 5.08 NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be deemed to have been delivered, given, and received for all
purposes (a) if delivered personally to the Person to whom it is addressed, or
(b) when the same is actually received, if sent by a nationally recognized
courier service (which provides proof of delivery), by registered or certified
mail (postage and charges prepaid), or by facsimile (if such facsimile is
followed by a hard copy of the facsimile communication sent promptly thereafter
by a nationally recognized courier service (which provides proof of delivery) or
registered or certified mail (postage and charges prepaid)), addressed as set
forth in the Schedule of Addresses attached hereto and incorporated herein by
reference or to such other address as such Person may from time to time specify
by due notice.
19
<PAGE>
SECTION 5.09 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the Parties in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 5.10 PUBLICITY. The parties agree that, for a period of at least
six (6) months, they will keep the terms, amounts and facts of this Agreement
completely confidential, and that they will not during such period disclose any
information concerning this Agreement to anyone except their respective
attorneys or accountants, including, but not limited to, any past, present or
prospective employees of the Company or any of its Affiliates, except in each
case as may be required by law, including, without limitation, filings required
by the Company and by its parent entity with the Securities and Exchange
Commission. Notwithstanding the foregoing, the parties shall mutually agree
upon forms for a press release, internal communications and answers to press
questions to be used in connection with announcing Executive's resignation.
Subject to Executive conforming and limiting his statements to the substance of
such mutually agreed upon press release, internal communications and answers to
press questions, Executive may respond to press or analyst inquiries concerning
his resignation.
SECTION 5.11 HEADINGS. The descriptive headings contained in this
Agreement and table of contents of this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 5.12 ATTORNEYS FEES. In any litigation or proceeding relating to
this Agreement, the prevailing party shall be entitled to recover its costs and
reasonable attorney fees.
SECTION 5.13 FURTHER ASSURANCES. The parties agree to execute such
further instruments and perform such further acts as may be reasonably necessary
to carry out the intent and purposes of this Agreement.
SECTION 5.14 ADDITIONAL COVENANTS OF THE COMPANY. The Company agrees
that, for a period of two (2) years from the Effective Date, the Company and its
Affiliates will not publicly issue any press release that disparages, or
materially injures the business or reputation of, the Executive, and will make
reasonable efforts to prevent their executive officers and official
spokespersons from making public statements on behalf of the Company or its
Affiliates that are disparaging of Executive or materially injure his business
or reputation. The Company further agrees to exercise reasonable efforts to
cause personal mail addressed to Executive to be forwarded to him in a timely
fashion (Executive agreeing to make reasonable efforts to notify third parties
of the change in his business address).
SECTION 5.15 DISPUTE RESOLUTION. All disputes arising out of or relating
to this Agreement shall be resolved pursuant to the reference procedure set
forth in California Code of Civil Procedure 638 et seq. The parties hereby
agree to submit to the jurisdiction of
20
<PAGE>
the Superior Court of Los Angeles County for such purpose. Either party may
initiate the procedure set forth in this Section by providing the other party
with notice setting forth the nature of the dispute. The parties shall designate
to the Superior Court a referee who is an active attorney or retired judge
living in Los Angeles County who shall resolve the dispute. If the parties are
unable to designate a referee within 20 days after the receipt of the original
referral notice, the parties shall request that the Superior Court appoint a
referee. In connection with any proceeding pursuant to this Section, the parties
shall have all discovery rights which would have been available had the matters
which are the subject of the dispute been decided by the Superior Court.
Discovery proceedings may be noticed and commenced immediately after delivery of
the original referral notice. The hearing before the referee shall begin no
later than 60 days after the receipt of such referral notice. All discovery in
connection with the reference procedure shall be concluded no later than 15 days
prior to the commencement of the hearing. Judgment upon the award rendered by
the referee shall be entered in the Superior Court. Nothing in this Section
shall be construed to impair the right of either party to appeal from such
judgment.
SECTION 5.16 APPROVALS. The effectiveness and implementation of this
Agreement are subject to the approval of the Boards of Directors of the Company
and the Parent and the Compensation and Executive Personnel Committee of the
Board of Directors of the Parent.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
/s/ Edward R. Muller
-------------------------------------
Edward R. Muller
EDISON MISSION ENERGY
By: /s/ John E. Bryson
--------------------------------
Title: Chairman
-----------------------------
By: /s/ Alan J. Fohrer
--------------------------------
Title: /s/ Pres & CEO
-----------------------------
With respect to Sections 2.04 and 3.02 only:
EDISON INTERNATIONAL
By: /s/ John E. Bryson
--------------------------------
Title: Chairman
-----------------------------
By: /s/ Bryant C. Danner
--------------------------------
Title: /s/ Exec VP & General Counsel
-----------------------------
22
<PAGE>
SCHEDULE OF ADDRESSES
Notices to the Company and to the Parent shall be addressed as follows:
Edison International
Edison Mission Energy
C/O Bryant C. Danner
Executive Vice President and
General Counsel
Edison International
2244 Walnut Grove Avenue
Rosemead, California 91770
FAX: (626) 302-4775
Notices to the Executive shall be addressed as follows:
Mr. Edward R. Muller
502 20/th/ Street
Santa Monica, California 90402
FAX: (310) 394-5756
With a courtesy copy to:
Ronald M. Greenberg, Esq.
Rosenfeld, Meyer & Susman
9601 Wilshire Blvd., 4/th/ Floor
Beverly Hills, California 90210
FAX: (310) 271-6430
<PAGE>
SCHEDULE OF DEFERRED COMPENSATION*
Balances as of January 10, 2000
Edison 401(k) Savings Plan and Profit Sharing $ 129,460
Executive Deferred Compensation Plan (EDCP) $1,015,808
----------
Total $1,145,268
==========
*Additional amounts, if any, arising from Profit Sharing amounts for the
1999 year will be added in the ordinary course when calculated.
<PAGE>
SCHEDULE OF RETIREMENT BENEFITS*
Employee Life Insurance
Executive Incentive Compensation Plan
Long-Term Incentive Compensation Plan
Equity Compensation Plan
Affiliate Long Term Incentive Program
401(k) Savings Plan
Executive Deferred Compensation Plan
Option Gain Deferral Plan
Executive Retirement Plan
Retirement Plan
Estate and Financial Planning
Comprehensive Disability and Executive Disability Plan
Long-Term Disability
Dependent Life Insurance
Dependent AD&D Insurance
Dependent Care Reimbursement Account
Vacation
Vacation Buying and Selling
Holidays
Personal Use of Company Car/Auto Allowance/Driver
Executive Physical
Accidental Death and Dismemberment
24-Hour Business Travel Accident Insurance
Club Memberships
Health Care Reimbursement Account
Preventive Health Care Account
Employee Assistance Plan (EAP)
Retiree Health Care and Medicare
__________________________________
* Executive is entitled to any vested benefits and/or balances in any of the
above plans but will have no further entitlements under any of the plans
except as otherwise provided in this Agreement.
<PAGE>
SCHEDULE OF POSITIONS
<TABLE>
<CAPTION>
Company Position
------- --------
<S> <C>
Edison Mission Energy Director, President and Chief Executive Officer
Edison Mission Energy Global Management, Inc. Director, President and Chief Executive Officer
Edison Mission Operation & Maintenance, Inc. Director and President
Mission Energy Holdings, Inc. Director and President
Edison Mission Energy Australia Limited Director
Edison Mission Energy Holdings Pty Ltd Director
Edison Mission Operation & Maintenance Director
Kwinana Pty Ltd
Edison Mission Operation & Maintenance Loy Director
Wang Pty Ltd
Latrobe Power Pty Ltd Director
Loy Yang Holdings Pty Ltd Director
Mission Energy Development Australia Pty Ltd Director
Mission Energy (Kwinana) Pty Ltd Director
Mission Energy Ventures Australia Pty Ltd Director
Traralgon Power Pty Ltd Director
</TABLE>
In addition, any and all positions of responsibility or authority at any entity
appearing on the attached list of subsidiaries.
<PAGE>
SCHEDULE OF RETIREMENT BENEFITS(1)(2)
Projected annual and lump-sum values(3)
<TABLE>
<CAPTION>
Executive Retirement
Retirement Plan Plan
----------------- ------------
Annual Value of Life Annuity
- ----------------------------
<S> <C> <C>
Payment commencing March 1, 2000 N/A 6,360
Payment commencing March 1, 2007 63,720 N/A
Lump Sum Value
- --------------
As of February 1, 2000 N/A 89,500(4)
As of March 1, 2007 730,000(4)(5) N/A
</TABLE>
-----------------------------
(1) All benefits under these Plans are subject to the express terms of
the relevant Plans.
(2) Benefit payment commencement on March 1, 2000 for the Retirement Plan
and March 1, 2007 (age 55) for the Executive Retirement Plan,
assuming final date of employment is during January 2000.
(3) Assumes Executive receives a bonus of 75% of base pay (125% of his
target bonus of 60%) for 1999.
(4) The annuity value of the Retirement Plan is determined as of the
assumed payment commencement date using a 6.07% interest rate. The
lump sum for the Executive Retirement Plan uses an interest rate of
7.33%.
(5) Lump-sum distributions are not available for those employees
terminating prior to age 55. This value is shown for illustrative
purposes only.
<PAGE>
SCHEDULE OF VESTED OPTIONS
- ----------------------------------------------------------------------------
Date Grant Vesting Grant Vested
Grant Type Schedule Price Shares
- ----------------------------------------------------------------------------
Options For Parent Company Stock
- ----------------------------------------------------------------------------
8/23/93 EIXD 3 $ 24.4375 20,000
1/3/94 EIXD 3 $ 20.1875 10,000
1/3/94 EIXD 3 $ 20.1875 4,100
1/3/95 EIXD 3 $ 14.5625 10,000
1/2/96 EIXD 3 $ 17.6250 10,200
1/2/97 EIXD 3 $ 19.7500 10,500
1/2/98 EIXD 4 $ 27.2500 6,650
1/4/99 EIX 4 $ 28.1250 3,935
1/4/99 EIXD 4 $ 28.1250 1,840
Total 77,225
- ----------------------------------------------------------------------------
Company Phantom Options
- ----------------------------------------------------------------------------
1/3/94 EME 3 $ 169.2742 17,820
1/3/95 EME 3 $ 154.2317 43,190
1/2/96 EME 3 $ 181.0666 30,800
1/2/97 EME 3 $ 226.6772 22,800
1/4/98 EME 4 $ 313.8153 3,930
1/4/99 EME 4 $ 334.4392 2,670
Total 121,210
<PAGE>
GENERAL RELEASE
THIS GENERAL RELEASE ("Release") is being delivered as of January 17,
2000 by Edward R. Muller (the "Executive") to Edison Mission Energy, a
California corporation (the "Company"), pursuant to Section 2.07 of that certain
agreement related to Executive's employment with the Company being executed
concurrently herewith by Executive and the Company (the "Agreement"). All
capitalized terms not otherwise defined herein have the same meaning as is given
to them in the Agreement.
(a) Executive, on behalf of himself and his descendants, ancestors,
heirs, executors, successors, assigns and administrators (collectively,
"Releasor"), hereby releases, remises, acquits and forever discharges, and
agrees to indemnify and hold harmless, (x) the Company, (y) each of its
Affiliates, and (z) each of its and/or their partners, predecessors, successors,
assigns, officers, directors, shareholders, representatives, insurers,
attorneys, employees and agents, past, present and future, in their respective
capacities as such (collectively, "Releasees"), from and against any and all
claims, demands, obligations, causes of action, debts, expenses, damages,
judgments, orders and liabilities of whatever kind or nature, in law, equity or
otherwise, whether now known or unknown, suspected or unsuspected, matured or
unmatured, and whether concealed or hidden (collectively, "Claims"), which
Executive now owns or holds or has at any time heretofore owned or held or had,
or may at any time own or hold or have, against the Releasees or any of them,
including, but not limited to any Claim arising out of or in any way connected
to any transactions, occurrences, acts or omissions regarding or relating to his
employment with the Company, or the end of his employment with the Company,
including, but not limited to, Claims arising from any alleged violation by the
Company of any federal, state or local constitutions, statutes, ordinances or
common laws, including but not limited to, the California Fair Employment and
Housing Act, Employee Retirement Income Security Act, Americans With
Disabilities Act and Title VII of the Civil Rights Act of 1964 and/or the Civil
Rights Act of 1991.
(b) Except for those matters that are expressly excluded, the
release set forth herein is intended as a release of all Claims that the
Releasor may have against the Releasees or any of them, whether now known or
unknown. In furtherance thereof, Executive expressly waives and relinquishes
any right to assert hereafter that any claim, demand, obligation and/or cause of
action has, through ignorance, oversight, error or otherwise, been omitted from
the terms of this Agreement. Executive makes this waiver with full knowledge of
his rights, after consulting with legal counsel, and with specific intent to
release both his known and unknown claims. Accordingly, Releasor specifically
waives all rights and benefits
1
<PAGE>
afforded by California Civil Code Section 1542 and does so understanding and
acknowledging the significance of such specific waiver of such statutory
protection, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Thus, notwithstanding the foregoing provisions of the California Civil Code, and
for the purposes of implementing a full and complete release and discharge of
the Releasees, Executive expressly acknowledges that the foregoing release is
intended to include in its effect, without limitation, all Claims that Executive
does not know or suspect to exist in his favor at the time of the execution
hereof, and the foregoing release contemplates the extinguishment of any such
Claim or Claims except to the extent expressly set forth herein. Executive
further acknowledges that he has been advised to consult with an attorney and is
receiving compensation beyond that to which he is entitled.
(c) Executive represents and warrants that he has not filed or
caused to be filed any complaints or charges against the Company, any of its
Affiliates or any of its or their officers, directors, agents, employees or
representatives with or before any local, state or federal governmental agency
or court or any arbitrator or other tribunal, and no such complaint or charge by
or on behalf of the Executive is currently pending. Executive further agrees
not to file any complaints, actions or charges of any nature against the
Releasees relating to any event or alleged event including, but not limited to,
those arising from Executive's employment with and/or separation from employment
with the Company, which occurred from the beginning of time until the execution
of this Release.
(d) Nothing in this Release shall be construed or interpreted as a
release, acquittal, discharge or waiver of:
(i) Executive's rights to the compensation, reimbursements,
benefits and perquisites described in Article 2 of the Agreement;
(ii) Any of the Company's other obligations arising under the
Agreement;
(iii) Any right which Executive now has or may have to claim
indemnity (including advancement of expenses) for liabilities in connection
with his lawful activities as a director, officer or employee of the
Company
2
<PAGE>
and certain of its Affiliates, pursuant to the terms of any applicable
statute, under any insurance policy, pursuant to the certificate or
articles of incorporation, bylaws or similar charter documents of any
Releasee, or pursuant to the terms of any applicable indemnification
agreement to which Executive and the Company or any Affiliate of the
Company are or have been parties; or
(iv) Claims arising under the Federal Age Discrimination in
Employment Act.
(e) The provisions of Section 5.01 through 5.05, 5.07, 5.08, and
5.12 through 5.14 of the Agreement apply to this Release and are incorporated
herein by reference as though fully set forth hereat.
IN WITNESS WHEREOF, the Executive has executed and delivered this Release
as of the day and year first above written.
/s/ Edward R. Muller
______________________________________
Edward R. Muller
3
<PAGE>
FORM OF AGE DISCRIMINATION RELEASE
THIS AGE DISCRIMINATION RELEASE ("Release") is being delivered as of
January 17, 2000 by Edward R. Muller (the "Executive") to Edison Mission Energy,
a California corporation (the "Company"), pursuant to Section 2.07 of that
certain agreement related to Executive's employment with the Company being
executed concurrently herewith by Executive and the Company (the "Agreement").
All capitalized terms not otherwise defined herein have the same meaning as is
given to them in the Agreement.
(a) Executive, on behalf of himself and his descendants, ancestors,
heirs, executors, successors, assigns and administrators (collectively,
"Releasor"), hereby releases, remises, acquits and forever discharges, and
agrees to indemnify and hold harmless, (x) the Company, (y) each of its
Affiliates, and (z) each of its and/or their partners, predecessors, successors,
assigns, officers, directors, shareholders, representatives, insurers,
attorneys, employees and agents, past, present and future, in their respective
capacities as such (collectively, "Releasees"), from and against any and all
claims, demands, obligations, causes of action, debts, expenses, damages,
judgments, orders and liabilities of whatever kind or nature, in law, equity or
otherwise, whether now known or unknown, suspected or unsuspected, matured or
unmatured, and whether concealed or hidden (collectively, "Claims"), which
Executive now owns or holds or has at any time heretofore owned or held or had,
or may at any time own or hold or have, against the Releasees or any of them,
arising out of or in any way connected to the Federal Age Discrimination in
Employment Act.
(b) Except for those matters that are expressly excluded, the
release set forth herein is intended as a release of all Claims that the
Releasor may have against the Releasees or any of them, whether now known or
unknown, arising under the Federal Age Discrimination in Employment Act. In
furtherance thereof, Executive expressly waives and relinquishes any right to
assert hereafter that any such claim, demand, obligation and/or cause of action
has, through ignorance, oversight, error or otherwise, been omitted from the
terms of this Agreement. Executive makes this waiver with full knowledge of his
rights, after consulting with legal counsel, and with specific intent to release
both his known and unknown claims. Accordingly, Releasor specifically waives
all rights and benefits afforded by California Civil Code Section 1542 and does
so understanding and acknowledging the significance of such specific waiver of
such statutory protection, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
1
<PAGE>
OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Thus, notwithstanding the foregoing provisions of the California Civil Code, and
for the purposes of implementing a full and complete release and discharge of
the Releasees in respect of Claims arising under Federal Age Discrimination in
Employment Act, Executive expressly acknowledges that the foregoing release is
intended to include in its effect, without limitation, all Claims arising under
such Act that Executive does not know or suspect to exist in his favor at the
time of the execution hereof, and the foregoing release contemplates the
extinguishment of any such Claim or Claims except to the extent expressly set
forth herein.
(c) Executive acknowledges that as of the date hereof, he will have
had at least twenty-one (21) days to consider the terms of the release set forth
herein and that he has been advised that he has a period of seven (7) days
following his execution of this Release in which to revoke the entire release
granted hereby and that any such revocation must be in writing, signed by
Executive, and hand delivered to the Chairman of the Board of the Company prior
to the expiration of such seven (7) day period. Executive further acknowledges
that he has been advised to consult with an attorney and is receiving
compensation beyond that to which he is entitled.
(d) Executive represents and warrants that he has not filed or
caused to be filed any complaints or charges against the Company, any of its
Affiliates or any of its or their officers, directors, agents, employees or
representatives with or before any local, state or federal governmental agency
or court or any arbitrator or other tribunal arising under the Federal Age
Discrimination in Employment Act, and no such complaint or charge by or on
behalf of the Executive is currently pending. Executive further agrees not to
file any such complaints, actions or charges of any nature against the Releasees
relating to any event or alleged event including, but not limited to, those
arising from Executive's employment with and/or separation from employment with
the Company, which occurred from the beginning of time until the execution of
this Release.
(e) Nothing in this Release shall be construed or interpreted as a
release, acquittal, discharge or waiver of:
(i) Executive's rights to the compensation, reimbursements,
benefits and perquisites described in Article 2 of the Agreement;
(ii) Any of the Company's other obligations arising under
the Agreement; or
2
<PAGE>
(iii) Any right which Executive now has or may have to claim
indemnity (including advancement of expenses) for liabilities in connection
with his lawful activities as a director, officer or employee of the
Company and certain of its Affiliates, pursuant to the terms of any
applicable statute, under any insurance policy, pursuant to the certificate
or articles of incorporation, bylaws or similar charter documents of any
Releasee, or pursuant to the terms of any applicable indemnification
agreement to which Executive and the Company or any Affiliate of the
Company are or have been parties.
(f) The provisions of Section 5.01 through 5.05, 5.07, 5.08, and
5.12 through 5.14 of the Agreement apply to this Release and are incorporated
herein by reference as though fully set forth hereat.
IN WITNESS WHEREOF, the Executive has executed and delivered this Release
as of the day and year first above written.
/s/ Edward R. Muller
______________________________________
Edward R. Muller
3
<PAGE>
02 EDISON MISSION ENERGY is a California corporation having its principal
place of business at 18101 Von Karman Avenue, Suite 1700, Irvine,
California 92612- 1046. Edison Mission Energy owns the stock of a
group of corporations which, primarily through partnerships with non-
affiliated entities, are engaged in the business of developing, owning
and/or operating cogeneration, geothermal and other energy or
energy-related projects pursuant to the Public Utility Regulatory
Policies Act of 1978. Edison Mission Energy, through wholly owned
subsidiaries, also has ownership interests in a number of independent
power projects in operation or under development that either have been
reviewed by the Commission's staff for compliance with the Act or are
or will be exempt wholesale generators or foreign utility companies
under the Energy Policy Act of 1992. In addition, some Edison Mission
Energy subsidiaries have made fuel-related investments and a limited
number of non-energy related investments. The subsidiaries and
partnerships of Edison Mission Energy are listed below. Unless
otherwise indicated, all entities are corporations, are organized
under the laws of the State of California and have the same principal
place of business as Edison Mission Energy.
EDISON MISSION ENERGY DOMESTIC COMPANIES:
03 AGUILA ENERGY COMPANY (LP)
04 American Bituminous Power Partners, LP (Delaware limited
partnership) 49.5%; 50% with Pleasant Valley
05 American Kiln Partners, LP (Delaware limited partnership)
49.5% of 53%
03 ANACAPA ENERGY COMPANY (GP)
04 Salinas River Cogeneration Company 50%
03 ARROWHEAD ENERGY COMPANY (inactive)
03 BALBOA ENERGY COMPANY (GP)
04 Smithtown Cogeneration, LP (Delaware partnership) 50%; 100%
w/Kingspark
03 BERGEN POINT ENERGY COMPANY (GP)
04 TEVCO/Mission Bayonne Partnership (Delaware G.P.) 50%
05 Cogen Technologies NJ Ventures (Delaware G.P.) 0.75%
04 Cogen Technologies NJ Ventures (Delaware G.P.) 0.375%
03 BLUE RIDGE ENERGY COMPANY (GP)
04 Bretton Woods Cogeneration, LP (Delaware limited partnership)
50%; 100% w/Bretton Woods
03 BRETTON WOODS ENERGY COMPANY (GP & LP)
04 Bretton Woods Cogeneration, LP (Delaware LP) 50%; 100%
w/Blue Ridge
03 CAMINO ENERGY COMPANY (GP)
04 Watson Cogeneration Company (general partnership) 49%
03 CAPISTRANO COGENERATION COMPANY (GP)
04 James River Cogeneration Company (North Carolina partnership) 50%
03 CENTERPORT ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration I, LP (Delaware partnership) 50%; 100%
w/Ridgecrest
03 CHESAPEAKE BAY ENERGY COMPANY (GP)
04 Delaware Clean Energy Project (Delaware general partnership) 50%
03 CHESTER ENERGY COMPANY (no partners; option Chesapeake,VA)
03 CLAYVILLE ENERGY COMPANY
04 Oconee Energy, LP (Delaware LP) 50%; 100% w/Coronado
03 COLONIAL ENERGY COMPANY (inactive)
03 CORONADO ENERGY COMPANY
04 Oconee Energy, LP (Delaware LP) 50%; 100% w/Clayville
03 DEL MAR ENERGY COMPANY (GP)
04 Mid-Set Cogeneration Company 50%
03 DELAWARE ENERGY CONSERVERS, INC. (Delaware corporation) (inactive)
03 DESERT SUNRISE ENERGY COMPANY (Nevada corporation) (inactive)
03 DEVEREAUX ENERGY COMPANY (LP)
04 Auburndale Power Partners, LP (Delaware LP) 49%; 50% w/El
Dorado [see 4.03]
17
<PAGE>
03 EASTERN SIERRA ENERGY COMPANY (GP & LP)
04 Saguaro Power Company, LP 50%
03 EAST MAINE ENERGY COMPANY (inactive) [dissolving]
03 EDISON ALABAMA GENERATING COMPANY
03 EDISON MISSION ENERGY FUEL
04 EDISON MISSION ENERGY OIL AND GAS
05 Four Star Oil & Gas Company 50.1% (owns Lost Hills
Cogeneration Facility)
04 EDISON MISSION ENERGY PETROLEUM (Gas contracts w/ Tex. Gas Mktg)
04 POCONO FUELS COMPANY (inactive)
04 SOUTHERN SIERRA GAS COMPANY
05 TM Star Fuel Company (general partnership) 50%
03 EDISON MISSION ENERGY FUEL SERVICES, INC. [PowerGen project]
03 EDISON MISSION ENERGY FUNDING CORP. (Delaware corporation) 1%
03 EDISON MISSION ENERGY GLOBAL MANAGEMENT, INC. (Delaware corporation)
Address:
04 Majestic Energy Limited (UK private limited company)
Address:
05 EME Royale Limited (New Zealand private limited company)
Address:
06 Edison Mission Energy Taupo Limited (New Zealand company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Contact Energy Limited (New Zealand company) 40%
Address: Level 1, Harbor City Tower, 29 Brandon Street,
Wellington, New Zealand
03 Edison Mission Energy Interface Ltd. (British Columbia company)
04 The Mission Interface Partnership (Province of Ontario G.P.) 50%
03 EDISON MISSION FINANCIAL MARKETING & TRADING CO.
04 EDISON MISSION MARKETING & TRADING, INC.
03 EDISON MISSION HOLDINGS CO. (formerly EME Homer City Holdings Co.)
04 CHESTNUT RIDGE ENERGY COMPANY 100%
05 EME Homer City Generation LP (Pennsylvania) 99%LP
04 EDISON MISSION FINANCE CO. 100%
04 HOMER CITY PROPERTY HOLDINGS, INC. 100%
04 MISSION ENERGY WESTSIDE, INC. 100%
05 EME Homer City Generation LP (Pennsylvania) 1%GP
03 EDISON MISSION OPERATION & MAINTENANCE, INC. (no partnership)
04 Mission Operations de Mexico, S.A. de C.V. 99%
03 EDISON MISSION PROJECT CO. (formerly EME UK International, Inc.)
(Delaware corp) 100%
03 EL DORADO ENERGY COMPANY (GP)
04 Auburndale Power Partners, LP (Delaware LP) 1%; 50% w/
Devereaux [see 4.03]
03 EME UK International LLC (Delaware LLC) 100% [owns 100% of Class B
Shares of MEC International B.V.]
03 EMP, INC. (Oregon corporation) (GP & LP) (inactive)
03 FOUR COUNTIES GAS COMPANY (inactive)
03 GLOBAL POWER INVESTORS, INC.
03 HANOVER ENERGY COMPANY
04 Chickahominy River Energy Corp. (Virginia corporation) (GP & LP)
05 Commonwealth Atlantic LP (Delaware partnership) [see 4.05]
50%
03 HOLTSVILLE ENERGY COMPANY (GP & LP)
04 Brookhaven Cogeneration, LP (Delaware partnership) 50%; 100%
w/Madera
03 INDIAN BAY ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration III, LP (Delaware partnership) 50%; 100%
w/Santa Ana
03 JEFFERSON ENERGY COMPANY (GP & LP) (inactive)
03 KINGS CANYON ENERGY COMPANY (inactive)
03 KINGSPARK ENERGY COMPANY (GP & LP)
04 Smithtown Cogeneration, LP (Delaware partnership) 50%; 100%
w/Balboa
03 LAGUNA ENERGY COMPANY (inactive) (former interest in Ambit)
18
<PAGE>
03 LA JOLLA ENERGY COMPANY (inactive) (used for Belridge)
03 LAKEVIEW ENERGY COMPANY
04 Georgia Peaker, LP (Delaware LP) 50%; 100% w/Silver Springs
03 LEHIGH RIVER ENERGY COMPANY (inactive)
03 LONGVIEW COGENERATION COMPANY (held for Weyerhauser)
03 MADERA ENERGY COMPANY (GP)
04 Brookhaven Cogeneration, LP (Delaware partnership) 50%; 100%
w/Holtsville
03 MADISON ENERGY COMPANY (LP)
04 Gordonsville Energy, LP (Delaware partnership) [see 4.06] 49%;
50% w/Rapidan
03 Midwest Generation EME, LLC (Delaware LLC) 100%
04 Edison Mission Midwest Holdings Co. 100%
05 Edison Mission Overseas Co. (Com Ed project) 100%
06 Edison Mission Overseas Ltd. (Com Ed project) 100%
05 Midwest Generation, LLC (Com Ed project) 100%
03 Mission Capital, LP (Delaware LP) 3%; MIPS partnership
03 MISSION/EAGLE ENERGY COMPANY (inactive)
03 MISSION ENERGY CONSTRUCTION SERVICES, INC. (Provides construction
services for Paiton Project)
03 MISSION ENERGY GENERATION, INC. (Inactive)
03 MISSION ENERGY HOLDINGS, INC.
04 Mission Capital, LP (Delaware LP) 97%; MIPS partnership
03 MISSION ENERGY HOLDINGS INTERNATIONAL, INC. [holds all the issued and
outstanding stock of MEC International B.V.--see INTERNATIONAL section]
03 MISSION ENERGY INDONESIA (inactive) 03 MISSION ENERGY MEXICO (inactive)
formerly the branch office in Mexico (no partnership)
03 MISSION ENERGY NEW YORK, INC. (GP & LP)
04 Brooklyn Navy Yard Cogeneration Partners, LP (Delaware
partnership) 50% [see 4.04]
03 MISSION ENERGY WALES COMPANY
04 Mission Hydro Limited Partnership (UK limited partnership)
[See International section for structure of Mission Hydro LP]
03 Mission Operations de Mexico, S.A. de C.V. 1%
03 MISSION TRIPLE CYCLE SYSTEMS COMPANY (GP)
04 Triple Cycle Partnership (Texas G.P.) 50%
03 NORTH JACKSON ENERGY COMPANY (inactive) [held for Akso Salt Proj]
03 NORTHERN SIERRA ENERGY COMPANY (GP)
04 Sobel Cogeneration Company (general partnership) 50%
03 ORTEGA ENERGY COMPANY (Mid-County Cogen gas contracts)
03 PANTHER TIMBER COMPANY (GP)
04 American Kiln Partners, LP (Delaware limited partnership) 2%
03 PARADISE ENERGY COMPANY (inactive)
03 PLEASANT VALLEY ENERGY COMPANY (GP)
04 American Bituminous Power Partners, LP (Delaware limited
partnership) 0.5%; 50% w/Aguila
05 American Kiln Partners, LP (Delaware Limited Partnership)
0.5% of 53%
03 PRINCE GEORGE ENERGY COMPANY (LP)
04 Hopewell Cogeneration Limited Partnership (Delaware limited
partnership) 24.75%
04 Hopewell Cogeneration Inc. (Delaware corporation) 25%
05 Hopewell Cogeneration Limited Partnership (Delaware limited
partnership) 1%
03 QUARTZ PEAK ENERGY COMPANY (LP)
04 Nevada Sun-Peak LP (Nevada partnership) [see 4.07] 50%
03 RAPIDAN ENERGY COMPANY (GP)
04 Gordonsville Energy, LP (Delaware partnership) [see 4.06] 1%;
50% w/Madison
03 REEVES BAY ENERGY COMPANY (GP & LP)
04 North Shore Energy LP (Delaware partnership) 50%; 100% w/Santa
Clara
05 Northville Energy Corporation (New York corporation) 100%
03 RIDGECREST ENERGY COMPANY (GP)
19
<PAGE>
04 Riverhead Cogeneration I, LP (Delaware partnership) 50%; 100%
w/Centerport
03 RIO ESCONDIDO ENERGY COMPANY
03 RIVERPORT ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration II, LP (Delaware partnership) 50%; 100%
w/San Pedro
03 SAN GABRIEL ENERGY COMPANY (inactive) (McKenzie gas contracts)
03 SAN JOAQUIN ENERGY COMPANY (GP)
04 Midway-Sunset Cogeneration Company, LP 50%
03 SAN JUAN ENERGY COMPANY (GP)
04 March Point Cogeneration Company 50%
03 SAN PEDRO ENERGY COMPANY (GP)
04 Riverhead Cogeneration II, LP (Delaware partnership) 50%; 100%
w/Riverport
03 SANTA ANA ENERGY COMPANY (GP)
04 Riverhead Cogeneration III, LP (Delaware partnership) 50%; 100%
w/Indian Bay
03 SANTA CLARA ENERGY COMPANY (GP)
04 North Shore Energy, LP (Delaware partnership) 50%; 100%
w/Reeves Bay
05 Northville Energy Corporation (New York corporation) 100%
03 SILVERADO ENERGY COMPANY (GP)
04 Coalinga Cogeneration Company 50%
03 SILVER SPRINGS ENERGY COMPANY
04 Georgia Peaker, LP (Delaware limited partnership) 50%; 100%
w/Lakeview
03 SONOMA GEOTHERMAL COMPANY (GP & LP)
04 Geothermal Energy Partners Ltd. (Aidlin) 5%LP
03 SOUTH COAST ENERGY COMPANY (GP)
04 Harbor Cogeneration Company 30%
03 SOUTHERN SIERRA ENERGY COMPANY (GP)
04 Kern River Cogeneration Company (general partnership) 50%
03 THOROFARE ENERGY COMPANY (inactive)
03 VIEJO ENERGY COMPANY (GP)
04 Sargent Canyon Cogeneration Company 50%
03 VISTA ENERGY COMPANY (New Jersey corporation) (inactive)
03 WESTERN SIERRA ENERGY COMPANY (GP)
04 Sycamore Cogeneration Company (general partnership) 50%
EDISON MISSION ENERGY INTERNATIONAL COMPANIES:
04 MEC International B.V. (Netherlands corporation) (Holding Company
100% owned by MEC Holdings International, Inc. (California corp.))
Address: Apoliolaan 15, 1077 AB Amsterdam, The Netherlands
05 Adelaide Ventures Ltd. (Cayman Island company) 100%
05 Beheer-en Beleggingsmaatschappij Botara B.V. (LYB Peakers Project)
100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Valley Power Pty Ltd. (proprietary limited Australia company;
LYB Peakers Project)
05 Beheer-en Beleggingsmaatschappij Hagra B.V. 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Beheer-en Beleggingsmaatschappij Trepo B.V. 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Edison Mission Energy Asia Pte Ltd. (Singapore private company
limited by shares) 100% (EME's Regional Asia Pacific Headquarters)
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Edison Mission Energy Asia Pacific Pte Ltd. (Singapore
corporation) 100%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Edison Mission Energy Fuel Company Pte Ltd. (Singapore
corporation) 100%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
20
<PAGE>
06 Edison Mission Operation & Maintenance Services Pte Ltd 100%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 P.T. Edison Mission Operation and Maintenance Indonesia
(Indonesian company) 99%
Address: Jl. Gen. A Yani No. 54
Probolinggo, East Java, Indonesia
05 Edison Mission Energy International B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Edison Mission Energy Services B.V. (Netherlands company) 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Edison Mission Operation & Maintenance Services B.V.
(Netherlands company) 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Edison Mission Operation & Maintenance (Thailand) 100%
05 EME Tri Gen B.V. 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Tri Energy Company Limited (Thai limited liability company)
(Tri Energy Project) (equity) 25% [see 4.17]
Address: 16th Floor, Grant Amarin Tower, New Petchburi Road,
Ratchathewi, Bangkok 10320 Thailand
05 EME Victoria B.V. 100% (inactive)
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Global Generation B.V. 100%
Address: Apoliolaan 15, 1077 AB Amsterdam, The Netherlands
06 Caresale Services Limited
06 Edison First Power Holdings I 100% [PowerGen project]
07 Edison Mission Marketing and Services Limited (UK company)
100%
07 EME Finance UK Limited 100%
07 Energy Generation Finance PLC 100%
07 Maplekey Holdings Limited 100%
08 Maplekey UK Finance Limited (UK company) 100% [Steamboat
project]
09 Maplekey UK Limited (UK company) 100% [Steamboat
project]
10 Edison First Power Limited (Guernsey company) 100%
07 South Australia Holdings Ltd. 100%
08 Edison Mission Ausone Pty Ltd. (Australian company) 100%
08 EME Adelaide Energy Ltd. (UK company) 100%
08 EME Monet Ltd. (UK company) 100%
09 Edison Mission De Laide Pty Ltd. (Australian company)
100%
09 Edison Mission Vendesi Pty Ltd. (Australian company)
100%
09 Edison Mission Utilities Pty. Ltd. (Australian
company) 100%
06 Redbill Contracts Limited 100%
05 Hydro Energy B.V. (Netherlands limited liability company) 10%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Iberica de Energias, S.A. (Spain corp) 96.65% [see 4.08]
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
07 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain
corporation) 91.32% [see 4.09]
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
08 Monasterio de Rueda, S.L. (Spain) 100%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
05 Iberian Hy-Power Amsterdam B.V. (Netherlands limited liability
company) 100%
Address: Strawinskylaan 1725, Amsterdam, NOORD-HOLL 1077 XX
06 Hydro Energy B.V. (Netherlands company) 90%
07 Iberica de Energias, S.A. (Spain corporation) 96.65% [see
4.08]
08 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain
corporation) 91.32% [see 4.09]
09 Monasterio de Rueda, S.L. (Spain) 100%
06 Iberica de Energias, S.A. (Spain corporation) 3.35% [see 4.08]
07 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain
21
<PAGE>
corporation) 91.32% [see 4.09]
08 Monasterio de Rueda, S.L. (Spain) 100%
05 Latrobe Power Pty. Ltd. (Australian corporation) 99%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Mission Victoria Partnership (Australian partnership) 52.31%
(100% w/ Traralgon PPL 46.69% and MEVALP 1%)
07 Latrobe Power Partnership (Australian partnership) 99% (owns
51% of the Loy Yang B facility; 49% to Gippsland
05 Loy Yang Holdings Pty Ltd (Australia corporation) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Edison Mission Energy Holdings Pty Ltd (Australian corp.) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Edison Mission Energy Australia Ltd. (Australian public
company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
08 Latrobe Power Partnership (Australian partnership) 1% %
(owns
51% of the Loy Yang B facility; 49% to Gippsland
07 Edison Mission Energy Australia Pilbara Power Pty Ltd.
(Australia company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Edison Mission Operation & Maintenance Kwinana Pty Ltd.
(Australia) 100% (Operator of Kwinana Project)
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Edison Mission Operation & Maintenance Loy Yang Pty Ltd.
(Australian corporation) 100%
Address: P.O. Box 1792, Traralgon, Victoria 3844,Australia
07 Mission Energy Development Australia Pty Ltd.
08 Gippsland Power Pty Ltd 100% (owns 49% of the Loy
Yang B facility; 51% to Latrobe Power Partnership)
07 Mission Energy Holdings Superannuation Fund Pty Ltd.
(retirement fund required by Australia law) 100%
07 Mission Energy (Kwinana) Pty Ltd. (Australia) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
08 Kwinana Power Partnership (Australian G.P.) 1%
Address: Level 23, St. Martins Tower
44 St George's Terrace, Perth WA 6000
06 Latrobe Power Pty. Ltd. (Australian corporation) 1%
07 Mission Victoria Partnership (Australian partnership) 52.31%
08 Latrobe Power Partnership (Australian partnership) 99%
(owns
51% of the Loy Yang B facility; 49% to Gippsland
06 Mission Energy Ventures Australia Pty. Ltd. (Australian
company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Mission Victoria Partnership (Australian partnership) 1%
08 Latrobe Power Partnership (Australian partnership) 99%
(owns
51% of the Loy Yang B facility; 49% to Gippsland
06 Traralgon Power Pty. Ltd. (Australian corporation) 1%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Mission Victoria Partnership (Australian partnership)
46.69%
08 Latrobe Power Partnership (Australian partnership) 99%
(owns
51% of the Loy Yang B facility; 49% to Gippsland
05 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Doga Enerji Uretim Sanayi ve Ticaret L.S. (Turkish
corporation) (Project company) 80%
22
<PAGE>
Address: Merkez Man, Mahallesi Caddesi 11/8,
Esenyurt, Istanbul, Turkey
06 Doga Isi Satis Hizmetleri ve Ticaret L.S. (Turkish corporation)
(Heat company) 80%
Address: Merkez Man, Mahallesi Caddesi 11/8,
Esenyurt, Istanbul, Turkey
06 Doga Isletme ve Bakim Ticaret L.S. (Turkish corporation) (O&M
company) 80%
Address: Merkez Man, Mahallesi Caddesi 11/8,
Esenyurt, Istanbul, Turkey
05 MEC IES B.V. (Netherlands company) (ISAB Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 ISAB Energy Services s.r.l. 49% (services co ISAB
Project)
05 MEC India B.V. (Netherlands company) (Jojobera Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Edison Mission Energy Power (Mauritius corporation) (Branch
office in India)
Address: Louis Leconte Street, Curepipe, Mauritius
05 MEC Indo Coal B.V. (Netherlands company) (Adaro Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 P. T. Adaro Indonesia (equity) 10%
Address: Suite 704, World Trade Centre, Jl. Jend.
Sudirman Kav. 31, Jakarta 12920 Indonesia
05 MEC Indonesia B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 P. T. Paiton Energy Company (Indonesia company) (equity)
(Paiton Project) 40% [see 4.11]
Address: Menara Batavia, 8th Floor, Jl. K. H.
Mas Mansyur Kav. 126, Jakarta 10220 Indonesia
05 MEC International Holdings B.V. (Netherlands corp) 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Edison Mission Energy International B.V. (Netherlands company)
1%
06 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 1%
07 Doga Enerji Uretim Sanayi ve Ticaret L.S. (Turkish
corporation) (Project company) 80%
07 Doga Isi Satis Hizmetleri ve Ticaret L.S. (Turkish
corporation) (Heat company) 80%
07 Doga Isletme Bakim Ticaret L.S. (Turkish corporation)
(O&M company) 80%
06 MEC IES B.V. (Netherlands company) (ISAB Project) 1%
07 ISAB Energy Services s.r.l. 49%
06 MEC India B.V. (Netherlands company) 1%
07 Edison Mission Energy Power (Mauritius corporation)
06 MEC Indo Coal B.V. (Netherlands company) (Adaro Project) 1%
07 P. T. Adaro Indonesia (equity) 10%
06 MEC Indonesia B.V. (Netherlands company) 1%
07 P. T. Paiton Energy Company (Indonesia company) (equity)
(Paiton Project) 40% [see 4.11]
06 MEC Laguna Power B.V. (Netherlands company) (Thailand
Project) 1%
07 Gulf Power Generation Co. Ltd. (Bangkok corporation) 40%
06 MEC Perth B.V. (Netherlands company) (Kwinana Project) 1%
07 Kwinana Power Partnership (Australian G.P.) [see 4.16]
06 MEC Priolo B.V. (Netherlands company) (ISAB Project) 1%
07 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see
4.12] 1% of 49% (quota, not shares)
06 MEC San Pascual B.V. (Netherlands company) 1%
07 San Pascual Cogeneration Company International B.V. 50%
08 San Pascual Cogeneration Company (Philippines) Ltd.
(San Pascual Project) (equity) 1%GP and 74%LP
07 Morningstar Holdings B.V. (formerly Beheer-en
Beleggingsmaatschappij Vestra B.V.) 50%
06 MEC Sidi Krir B.V. (Netherlands company) 1%
23
<PAGE>
06 MEC Sumatra B.V. (Netherlands company) 1%
06 MEC Wales B.V. (Netherlands Company) 1%
07 Mission Hydro Limited Partnership (UK limited partnership)
08 EME Generation Holdings Limited (UK company) 100%
09 Loyvic Pty Ltd. (Australia company) 100%
10 Energy Capital Partnership (Australia partnership)
1%
11 Enerloy Pty Ltd. (Australia company) 100%
09 EME Victoria Generation Limited (UK company) 100%
10 Energy Capital Partnership (Australia partnership
98%
11 Enerloy Pty Ltd. (Australia company) 100%
09 Energy Capital Partnership (Australia partnership)
1%LP
10 Enerloy Pty Ltd. (Australia company) 100%
09 First Hydro Holdings Company (Australia partnership)
99%
10 First Hydro Company [see 4.13] 99%
10 First Hydro Finance plc
11 First Hydro Company [see 4.13] 1%
06 Mission Energy Italia s.r.l. 10% (Office in Italy)
06 P.T. Edison Mission Operation and Maintenance Indonesia
(Indonesian company) 1%
05 MEC Laguna Power B.V. (Netherlands co) (Malaya Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Gulf Power Generation Co. Ltd. (Bangkok corporation) 40%
Address: 888/101 Mahatun Plaza Tower, 10th Floor, Ploenchit,
Lumphini, Patumwan, Bangkok 10330
05 MEC Perth B.V. (Netherlands company) (Kwinana Project) 99%
06 Kwinana Power Partnership (Australian G.P.) 99% [See 4.16]
Address: Level 23, St. Martins Tower
44 St George's Terrace, Perth WA 6000
05 MEC Priolo B.V. (Netherlands company) (ISAB Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see
4.12] 99% of 49% (quota, not shares)
Address: Corso Gelone No. 103, Siracusa, Sicily, Italy
05 MEC San Pascual B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands
06 San Pascual Cogeneration Company International B.V. 50%
Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands
07 San Pascual Cogeneration Company (Philippines) Ltd (San
Pascual Project) (equity) 1%GP and 74%LP
Address: Unit 1610/1611, Tower One, Ayala Triangle, Ayala
Avenue, 1200 Makati City, Metro Manila, Republic of the
Philippines
06 Morningstar Holdings B.V. (formerly Beheer-en
Beleggingsmaatschappij Vestra B.V.) 50%
Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands
05 MEC Sidi Krir B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 MEC Sumatra B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 MEC Wales B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Mission Hydro Limited Partnership 69%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 EME Generation Holdings Limited (UK company) 100%
08 Loyvic Pty Ltd. (Australia company) 100%
09 Energy Capital Partnership (Australia partnership) 1%
10 Enerloy Pty Ltd. (Australia company) 100%
08 EME Victoria Generation Limited (UK company) 100%
09 Energy Capital Partnership (Australia partnership 98%
10 Enerloy Pty Ltd. (Australia company) 100%
08 Energy Capital Partnership (Australia partnership) 1%LP
09 Enerloy Pty Ltd. (Australia company) 100%
08 First Hydro Holdings Company (Australia partnership) 99%
24
<PAGE>
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
09 First Hydro Company [see 4.13] 99%
Address: Bala House, St. David's Park
Ewloe, Dlwyd, Wales CH5 3XJ
09 First Hydro Finance plc 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
10 First Hydro Company [see 4.13] 1%
Address: Bala House, St. David's Park
Ewloe, Dlwyd, Wales CH5 3XJ
05 Mission Energy Company (UK) Limited (United Kingdom private
limited company) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Derwent Cogeneration Limited (United Kingdom private limited
liability company) (equity) [see 4.14] 33%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Energy Limited (UK private limited company) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Operation & Maintenance Limited (a United
Kingdom corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Services Limited (UK private limited company)
100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Mission Hydro (UK) Limited 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 First Hydro Holdings Company 1%
08 First Hydro Company [see 4.13] 99%
08 First Hydro Finance plc 100%
09 First Hydro Company [see 4.13] 1%
07 Mission Hydro Limited Partnership 1%GP
08 EME Generation Holdings Limited (UK company) 100%
09 Loyvic Pty Ltd. (Australia company) 100%
10 Energy Capital Partnership (Australia partnership)
1%
11 Enerloy Pty Ltd. (Australia company) 100%
09 EME Victoria Generation Limited (UK company) 100%
10 Energy Capital Partnership (Australia partnership
98%
11 Enerloy Pty Ltd. (Australia company) 100%
09 Energy Capital Partnership (Australia partnership)
1%LP
10 Enerloy Pty Ltd. (Australia company) 100%
09 First Hydro Holdings Company (Australia partnership)
99%
10 First Hydro Company [see 4.13] 99%
10 First Hydro Finance plc 99%
11 First Hydro Company [see 4.13] 1%
06 Mission (No. 2) Limited (UK private limited company) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Pride Hold Limited (United Kingdom corporation) 99%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 Lakeland Power Ltd. (United Kingdom private limited
liability company) [see 4.15] 80%
Address: Roosecote Power Station, Barrow-In-Furness,
Cumbria, England LA13 OPX
07 Lakeland Power Development Company (UK corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Rapid Energy Limited
05 Mission Energy Italia s.r.l. 90% Representative Office in Italy
25
<PAGE>
Address: Villa Brasini, Via Flaminia 497, 00191 Rome Italy
05 Pride Hold Limited (United Kingdom corporation) 1%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Lakeland Power Ltd. (United Kingdom private limited liability
company) [see 4.15] 80%
Address: Roosecote Power Station, Barrow-In-Furness,
Cumbria, England LA13 OPX
06 Lakeland Power Development Company (UK corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
05 Rillington Holdings Limited (Gibraltar)
Address: 57/63 Line Wall Road, Gibraltar
06 EcoElectrica S.a.r.l. (Luxemburg) to be dissolved by 08/99
Address: Luxemburg
07 EME del Caribe Holding GmbH (Austria)
Address: 4020 Linz, Landstrasse 12, Austria
08 EME del Caribe (Cayman Islands)
Address: First Floor, Caledonian House, Mary Street,
George Town, Grand Cayman, Cayman Islands
09 EcoElectrica Holdings, Ltd. (Cayman Islands) 50%
Address: 1350 GT, The Huntlaw Building, Fort Street,
Grand Cayman, Cayman Islands
10 EcoElectrica Ltd. (Cayman Islands) 100%
Address: 1350 GT, The Huntlaw Building, Fort
Street,
Grand Cayman, Cayman Islands
11 EcoElectrica LP (Bermuda partnership) (equity)
1%
Address: Plaza Scotiabank, 273 Ponce de Leon
Avenue,
Suite 902, Hato Rey, Puerto Rico 00918
10 EcoElectrica LP (Bermuda partnership) (equity) 99%
Address: Plaza Scotiabank, 273 Ponce de Leon
Avenue,
Suite 902, Hato Rey, Puerto Rico 00918
05 Southwestern Generation B.V. 100%
Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands
05 Traralgon Power Pty. Ltd. (Australian corporation) 99%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Mission Victoria Partnership (Australian partnership) 46.69%
(100% w/ Latrobe PPL 52.31% and MEVALP 1%)
07 Latrobe Power Partnership (Australian partnership) (owns 49%
of the Loy Yang B facility; 51% to Latrobe Power
Partnership)
26
<PAGE>
Exhibit 10.77
Execution Copy
AGREEMENT
By And Between
S. Linn Williams
And
Edison Mission Energy
February 5, 2000
<PAGE>
Execution Copy
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS......................................... 1
Section 1.01 Definitions...................................................... 1
Section 1.02 Interpretive Matters............................................. 3
ARTICLE 2: EMPLOYMENT AND COMPENSATION............................................... 3
Section 2.01 Resignation...................................................... 3
Section 2.02 Further Assurances............................................... 4
Section 2.03 Effect of Resignation............................................ 4
Section 2.04 Compensation and Benefits........................................ 4
Section 2.05 Withholding...................................................... 8
Section 2.06 Company Property................................................. 8
Section 2.07 Releases......................................................... 8
ARTICLE 3: ADDITIONAL COVENANTS OF EXECUTIVE......................................... 9
Section 3.01 Confidentiality.................................................. 9
Section 3.02 Stock Activity................................................... 11
Section 3.03 Intentionally Omitted............................................ 12
Section 3.04 Non-Solicitation; Non-Disparagement; Non-Interference............ 12
Section 3.05 Ownership of Works............................................... 13
Section 3.06 Cooperation With Legal Process................................... 13
ARTICLE 4: GENERAL PROVISIONS........................................................ 14
Section 4.01 Opportunity to Review With Counsel............................... 14
Section 4.02 Choice of Law.................................................... 14
Section 4.03 Remedies......................................................... 14
Section 4.04 Severability..................................................... 14
Section 4.05 No Amendment; Entire Agreement; No Waiver........................ 14
Section 4.06 Right Of Offset.................................................. 15
Section 4.07 Parties of Interest.............................................. 15
Section 4.08 Notices.......................................................... 15
Section 4.09 Counterparts..................................................... 15
Section 4.10 Publicity........................................................ 16
Section 4.11 Headings......................................................... 16
Section 4.12 Attorneys Fees................................................... 16
Section 4.13 Further Assurances............................................... 16
Section 4.14 Additional Covenants of the Company.............................. 16
Section 4.15 Dispute Resolution............................................... 16
Section 4.16 Approvals........................................................ 17
</TABLE>
i
<PAGE>
Execution Copy
SCHEDULE OF ADDRESSES
SCHEDULE OF DEFERRED COMPENSATION
SCHEDULE OF OTHER TERMINATED BENEFITS
SCHEDULE OF RETIREMENT BENEFITS
SCHEDULE OF VESTED OPTIONS
FORM OF GENERAL RELEASE
FORM OF AGE DISCRIMINATION RELEASE
ii
<PAGE>
Execution Copy
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into as of February 5, 2000 by and
between S. Linn Williams (the "Executive") and Edison Mission Energy, a
California corporation (the "Company").
RECITALS
WHEREAS, the Executive is an American citizen who was hired by the Company
in California and employed there during most of his employment with the Company;
WHEREAS, the Executive has recently been working for the Company in the
United Kingdom as Senior Vice President of the Company with responsibility for
its European operations; and
WHEREAS, the Company has requested and Executive has agreed to resign from
his positions at the Company on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements and covenants of
the parties herein contained, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows.
ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS
SECTION 1.01 DEFINITIONS. As used herein the following terms have the
following meanings:
(a) "Affiliate" means, with respect to a specified Person, any
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
(b) "Agreement" has the meaning specified in the introductory
paragraph of this Agreement.
(c) "Claims" has the meaning specified in the form of General
Release attached hereto.
(d) "Company" has the meaning specified in the introductory
paragraph of this Agreement.
(e) "Confidential Information" has the meaning specified in Section
3.01(a).
1
<PAGE>
(f) "Deferral Plans" means the Edison International Executive
Deferred Compensation Plan and the Edison International Option Gain Deferral
Plan.
(g) "Effective Date" shall be February 8, 2000.
(h) "Equity Plans" has the meaning specified in Section 2.04(d).
(i) "Exchange Offer" means the exchange offer for the Company's
phantom options contemplated by that certain memorandum dated January 17, 2000
from Alan J. Fohrer to holders of the Company's phantom options, which is based
on an Exchange Offer assumed gross amount of $471.0647 per phantom EME Share
(less exercise prices) as the terms of which may be amplified, extended or
modified by the Company in the future, but the term "Exchange Offer" shall not
include any exchange offer made after the expiration or termination of the first
such exchange offer.
(j) "Executive" has the meaning specified in the introductory
paragraph of this Agreement.
(k) "Group" means two or more Persons which agree to act together
for the purpose of acquiring, holding, voting or disposing of Voting Stock or of
acquiring, holding or disposing of any significant subsidiary, or significant
amount of assets, of the Company or any Affiliate of the Company.
(l) "Materials" has the meaning specified in Section 3.05.
(m) "Options" has the meaning specified in Section 2.04(d).
(n) "Parent" means Edison International, a California corporation.
(o) "Person" means and includes an individual, a partnership, a
limited liability company, a joint venture, a corporation, a trust, an
unincorporated organization, a government or any department or agency thereof or
any entity similar to any of the foregoing.
(p) "Releasee" has the meaning specified in the form of General
Release attached hereto.
(q) "Releasor" has the meaning specified in the form of General
Release attached hereto.
(r) "Schedule of Addresses" means the Schedule of Addresses attached
hereto and incorporated herein by reference.
(s) "Schedule of Deferred Compensation" means the Schedule of
Deferred Compensation attached hereto and incorporated herein by reference.
2
<PAGE>
(t) "Schedule of Other Terminated Benefits" means the Schedule of
Other Terminated Benefits attached hereto and incorporated herein by reference.
(u) "Schedule of Retirement Benefits" means the Schedule of
Retirement Benefits attached hereto and incorporated herein by reference.
(v) "Schedule of Vested Options" means the Schedule of Vested
Options attached hereto and incorporated herein by reference.
(w) "Voting Stock" means shares of capital stock of the Parent that
are entitled to vote in periodic elections for directors and any shares of
capital stock, or similar securities, of the Company and any Affiliate of the
Parent which are entitled to vote in periodic elections for directors or other
similar governing board members.
(x) "Works" has the meaning specified in Section 3.05.
SECTION 1.02 INTERPRETIVE MATTERS. In this Agreement, unless the context
otherwise requires, the singular shall include the plural, the masculine shall
include the feminine and neuter, and vice versa. The terms "includes" or
"including" shall mean "including without limitation." References to a Section,
Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule
of this Agreement, and reference to a given agreement or instrument shall be a
reference to that agreement or instrument as modified, amended, supplemented and
restated through the date as of which such reference is made. This Agreement
and any documents or instruments delivered pursuant hereto shall be construed
without regard to the identity of the Person who drafted the various provisions
of the same. Each and every provision of this Agreement and such other
documents and instruments shall be construed as though the parties participated
equally in the drafting of the same. Consequently, the parties acknowledge and
agree that any rule of construction that a document is to be construed against
the drafting party shall not be applicable either to this Agreement or such
other documents and instruments.
ARTICLE 2: EMPLOYMENT AND COMPENSATION
SECTION 2.01 RESIGNATION. Effective upon the Company's approval and
execution of this Agreement, Executive does hereby resign from any and all
positions of responsibility or authority at the Company, any subsidiary, parent
or Affiliate of the Company, any other entity in which the Company or any of its
Affiliates has an investment where Executive's position with such entity is
related to such investment, and any division, unit, plan, program, trust, fund,
project or other subdivision established, organized or sponsored by the Company
or any of its subsidiaries, parents or Affiliates or any such other entity,
whether such position is that of an agent, officer, manager, member, partner,
executive, trustee,
3
<PAGE>
administrator, director or otherwise. Notwithstanding the foregoing, if the
Effective Date is after the date hereof, then between the date hereof and the
Effective Date, Executive shall remain an employee of the Company on
administrative leave, entitled to compensation for such period at his current
base rate of salary and existing fringe benefits, but it is understood that
Executive shall have no authority to bind or to determine or direct any activity
of, or represent, the Company or any of its Affiliates during such period. Upon
the Effective Date, and without any further action by Executive or the Company,
Executive's employment with the Company shall end.
SECTION 2.02 FURTHER ASSURANCES. To the extent necessary, Executive
agrees from time-to-time, upon the Company's reasonable request, to execute any
and all documents as may be necessary or desirable, in the reasonable and good
faith judgment of the Company or any of its Affiliates, to further confirm
and/or effectuate the aforesaid resignations.
SECTION 2.03 EFFECT OF RESIGNATION. Executive and the Company agree that
the resignation contained herein arises from the mutual agreement of the
Executive and the Company, resulting in a cessation of Executive's continued
employment. Such resignation shall be given the same effect as a termination of
Executive's employment by the Company without cause for purposes of the
Company's benefit plans including the Deferral and Equity Plans, but shall not
constitute or be deemed to be any breach of any employment or other obligation
or duty by either the Executive or by the Company or any of its Affiliates,
whether express or implied, for any purpose.
SECTION 2.04 COMPENSATION AND BENEFITS. Executive hereby agrees that the
following accurately reflect all of the compensation, benefits or perquisites
payable or otherwise to be provided to Executive by the Company and its
Affiliates on and after the Effective Date as a result of Executive's employment
by and separation from the Company and its Affiliates and that Executive is not
entitled to any other compensation, benefits, or perquisites except as set forth
in this Agreement:
(a) Salary. On the Effective Date, Executive will receive accrued
base salary from the end of the immediately preceding payroll period for which
payment has been made through the Effective Date.
(b) Accrued Vacation. On the Effective Date, the Company will pay
Executive such amounts as are due Executive for accrued and unused vacation time
in accordance with the Company's usual policies.
(c) Executive Incentive Compensation Plan. On the Effective Date,
the Company will pay Executive a bonus amount for the 1999 year under the
Company's Executive Incentive Compensation Plan equal to a gross amount, before
withholding, of One Hundred Seventy-Seven Thousand Five Hundred U.S. Dollars
Exactly (U.S.$177,500). Executive shall not be entitled to any further payments
under the Company's Executive Incentive Compensation Plan, including for any
period after 1999. Nothing in this paragraph shall
4
<PAGE>
create any inference or expectation regarding bonuses actually to be paid to
participants in such Plan for the 1999 year, which may be above or below target
amounts for individuals or in the aggregate.
(d) Options. For purposes of the vesting of any unvested awards
previously made to Executive under the Edison International Equity Compensation
Plan or under the Edison International Management and Officer Long-Term
Incentive Compensation Plans (the "Equity Plans"), Executive's employment by the
Company shall be given the same effect as if Executive had remained regularly
employed through the Effective Date. Executive and the Company agree that, as
of the Effective Date, Executive's vested options to acquire stock of the Parent
have been exercised in full and that vested phantom options in respect of the
Company are as set forth in the Schedule of Vested Options attached hereto and
incorporated herein by reference (the "Options"). From and after the Effective
Date, the Executive shall no longer be eligible for grants of any awards under
the Equity Plans or under any other long-term incentive plan of the Company or
its Affiliates, and all unvested awards shall terminate as of the Effective
Date. On March 16, 2000, the Company shall pay to Executive, by wire transfer
in accordance with Executive's reasonable written instructions given at least
forty-eight (48) hours in advance, a gross amount, before withholding, that is
equal to the difference between U.S.$441.008 per phantom share and the pertinent
exercise price of such share as shown on the Schedule of Vested Options for each
vested phantom Option of the Company. From and after the date hereof, Executive
shall have no further rights or entitlements in respect of such phantom Options
or any phantom options in respect of the Company subject to the following:
provided that in the event that (i) such Exchange Offer is closed, and (ii) the
terms on which such Exchange Offer is closed provide to holders of phantom
options who were employed on the Effective Date (excluding any employee whose
employment ends due to death, disability or normal retirement) a non-contingent
exchange value per phantom share (excluding interest and anything of value that
is subject to vesting on the performance of future services) that exceeds, as of
the consummation of the Exchange Offer, U.S.$441.008 per phantom share, then and
in such event, within thirty (30) days following the close of such Exchange
Offer, the Company shall pay to Executive a gross amount, in cash, before
withholding, equal to such excess multiplied by the number of total phantom
Options of Executive shown on the Schedule of Vested Options. For the purpose
of this section, the Exchange Offer will close when the Company determines that
the conditions of the Exchange Offer are met and the Exchange Offer is
consummated which is currently contemplated for April 1, 2000.
(e) Deferral Plans. The Schedule of Deferred Compensation attached
hereto and incorporated herein by reference sets forth, as of the date shown,
the vested balance of Executive's deferral account in the Edison International
Executive Deferred Compensation Plan and units credited to Executive's stock
unit account in the Edison International Option Gain Deferral Plan. All
deferred compensation benefits shown on the Schedule of Deferred Compensation,
following the Effective Date, shall remain subject to the terms of the Deferred
Compensation Plan applicable thereto.
5
<PAGE>
(f) Retirement Benefits. The Schedule of Retirement Benefits
attached hereto and incorporated herein by reference sets forth, as of the
Effective Date, the vested benefits payable to Executive under retirement plans
of the Company and its Affiliates in which he has been a participant. All such
benefits shown on the Schedule of Retirement Benefits, following the Effective
Date, shall remain subject to the terms of the pertinent retirement plan
applicable thereto, including the conditions to payment set forth therein.
After the Effective Date, there will be no further accrual of benefits for
Executive under such retirement plans.
(g) Health Benefits. From the Effective Date until eighteen (18)
months thereafter, Executive and his family shall remain eligible to continue to
participate in medical and dental plans of the Company and its Affiliates on the
same basis as if Executive had remained employed by the Company in his current
position, provided that Executive shall be responsible for paying the premium
costs therefor in accordance with the Company's ordinary practices in respect of
former employees.
(h) Other Insurance Coverage. Executive acknowledges that, except
as provided in Section 2.04(g) above, no life, health, accident, disability or
other insurance policies or health or welfare benefits will be provided for him
by the Company or its Affiliates after the Effective Date.
(i) Contract Costs. The Company will reimburse Executive for the
reasonable fees and costs of any attorney, financial advisor, accountant and/or
other professional advising and assisting Executive in the negotiations of this
Agreement, up to Twenty-Five Thousand U.S. Dollars Exactly (U.S$25,000) in the
aggregate.
(j) Outstanding Expense Reports. Executive agrees to submit to the
Company an expense report for all reimbursable and reasonable expenses he has
incurred as an employee of the Company no later than the fifteenth business day
following the Effective Date, and acknowledges that the business expenses to be
contained in such expense report will be the only remaining reimbursable
business expenses incurred by Executive while in the Company's employ. The
Company will reimburse Executive for such expenses within thirty (30) days of
Executive's submission of the report, to the extent such expenses are valid and
reimbursable under Company policy.
(k) Severance. As further consideration for Executive's execution
of this Agreement, the Company agrees to provide the following severance
benefits to Executive:
(i) On the Effective Date, the Company shall make a one-time
severance payment to Executive in an amount, prior to withholding, that is equal
to Three Hundred Seventy-Five Thousand U.S. Dollars Exactly (U.S.$375,000).
(ii) The Company currently pays Executive One Thousand Eight
Hundred Twenty-Five U.S. Dollars Exactly (U.S.$1,825), before withholding, every
other week as an overseas living allowance. The Company shall continue to make
such payments
6
<PAGE>
until the earlier of (x) the first anniversary of this Agreement, and (y) the
relocation of the primary residence of Executive's family back to the United
States.
(iii) In the event that the primary residence of Executive's
family is relocated from London, England to the United States prior to the
second anniversary of the date hereof, then the Company shall reimburse the
reasonable costs of such relocation in accordance with the usual policies and
practices of the Company in respect of similar relocations, including provision
of supporting documentation, provided that, the Company's obligation for such
reimbursement shall not exceed One Hundred Fifty Thousand U.S. Dollars Exactly
(U.S.$150,000) in the aggregate. Notwithstanding the foregoing, such reasonable
costs shall not include any costs related to finding or acquiring a residence in
the United States and the Company shall have the right to select and/or approve
all providers of services to Executive and his family in connection with such
relocation if the Company is responsible for the reimbursement of the costs of
same.
(iv) The Company shall permit Executive and his family to
occupy the Company-owned residence currently occupied by Executive and his
family until the first anniversary of the date hereof on the same terms and
conditions (i.e., rent-free) as such apartment is currently occupied by
Executive. If Executive desires to continue to occupy such premises after such
date, then he shall so notify the Company in writing no later than November 1,
2000. In such event, from and after the first anniversary of the date hereof,
the Executive shall, subject to the availability of and the terms of the lease
for such apartment, assume all of the Company's obligations in respect of such
apartment and shall pay and discharge the same as and when due or, at the
Company's election, reimburse the Company for the actual costs of all such
obligations. Executive shall execute customary documents reasonably requested by
the Company to memorialize such arrangement. Such arrangement shall be
terminable by Executive at any time on sixty (60) days' prior written notice to
the Company and shall be terminable by the Company only for Executive's breach
of his obligations in respect of such apartment and unless such breach has been
cured within thirty (30) days following the Company's written notice of breach,
provided that, Executive's right to occupy such premises shall in all events
expire on July 31, 2001. If Executive fails timely to notify the Company of his
intent to continue to occupy the premises and assume all of the Company's
obligations therefor, he shall voluntarily and entirely vacate the premises by
the first anniversary of the date hereof.
(v) Executive hereby acknowledges that he is not entitled to
any of the foregoing severance benefits or compensation described in Section
2.04(k) either by contract or California law. The Company is providing these
severance benefits and compensation in consideration for Executive's execution
of this Agreement and to compensate him for any alleged and/or claimed losses
allegedly due to the resignation of his employment.
(vi) If for any reason, any claim, demand, obligation, cause of
action, debt, expense, damage, judgment, order or liability is not released or
is found to survive the Form of General Release and Form of Age Discrimination
Release executed by Ex-
7
<PAGE>
ecutive, the full amount of the monetary benefits provided under Section 2.04(k)
shall be a credit towards and/or a set off against any monetary or other award
on such claim, demand, obligation, cause of action, debt, expense, damage,
judgment, order or liability regardless of the jurisdiction, foreign or
domestic, in which it arises or is issued.
(l) Other Compensation. Executive acknowledges that from and after
the Effective Date, all other compensation, benefits and perquisites to which he
has been entitled as an employee of the Company shall forthwith terminate and
that he shall no longer be entitled to receive the same, including without
limitation, reimbursement for the costs of a car and driver and for private club
memberships. Without limiting the generality of the foregoing, the other
benefits and perquisites in which Executive currently participates which shall
no longer be available to him after the Effective Date are as set forth in the
Schedule of Other Terminated Benefits attached hereto and incorporated herein by
reference.
SECTION 2.05 WITHHOLDING. Executive agrees that all compensation,
benefits and perquisites payable hereunder shall be paid after withholding for
taxes which, in the Company's reasonable good faith judgment, are required to be
withheld by the Company, including income taxes at the then current published
rates unless Executive elects to use higher rates. Notwithstanding the
foregoing, it is understood that all personal income and related taxes
applicable to any and all compensation, benefits and perquisites payable
hereunder shall be paid by Executive, and the Company shall not be obligated to
pay any such taxes or to provide Executive with funds for the payment of same.
SECTION 2.06 COMPANY PROPERTY. Subject to Section 2.04(k)(iv), Executive
agrees to return to the Company, as soon as practicable, but in any event on or
prior to the Effective Date, all Company property, including, but not limited
to, all keys, credit cards, documents, equipment (including computer and
telephone equipment) automobiles, files, data and records of any kind whatsoever
that he has in his possession or control regardless of the form for storage
thereof (whether documentary, on discs or present on other electronic media).
The Company agrees to permit Executive to retain copies of documents that are
contained in his office files and that are personal in nature, subject to the
Company's prior review of such materials and approval of their retention by the
Executive. Notwithstanding the foregoing, the Company will cooperate and work
together with Executive to facilitate Executive's assumption of the Company's
future obligations in respect of any automobile currently leased by the Company
for Executive if Executive chooses to assume such obligations.
SECTION 2.07 RELEASES. In further consideration of the Company's entry
into this Agreement with Executive and its promise to make payments and to
provide benefits hereunder to which Executive is not otherwise entitled,
Executive is, concurrent with the Company's execution of this Agreement,
delivering to the Company executed copies of the forms of releases attached
hereto, respectively, as "Form of General Release" and "Form of Age
Discrimination Release." In the event that the Executive exercises his right to
rescind
8
<PAGE>
the Age Discrimination Release, then notwithstanding any other provision of this
Agreement, the Company shall have the right, within five (5) days thereafter, to
terminate any and all further obligations of the parties under this Agreement.
ARTICLE 3: ADDITIONAL COVENANTS OF EXECUTIVE
SECTION 3.01 CONFIDENTIALITY.
(a) Executive acknowledges that he has held a sensitive management
position with the Company and that, by virtue of having held such position, he
has had access to and has learned the Company's and its subsidiaries' and
Affiliates' confidential and proprietary information and trade secrets
pertaining to its and their past, present, planned or projected operations,
results of operations, prospects, processes, know-how, services, projects,
strategies, techniques, procedures, financial capabilities, assets,
transactions, partners, financing sources and personnel, disclosure of any of
which to present or future competitors, investors, partners or the general
public would be highly detrimental to the best interests of the Company and its
Affiliates. All such confidential and proprietary information to which
Executive has had access as a result of his position with the Company are herein
referred to as "Confidential Information." Examples of such confidential and
proprietary information include, but are not limited to, the Company's
investigations of and development and analytical work on potential future
electric generation assets, both those potentially to be constructed and those
potentially to be acquired. Executive further acknowledges and agrees that the
right to maintain the confidentiality of such Confidential Information
constitutes a proprietary right which the Company and its Affiliates are
entitled to protect.
(b) Accordingly, without limiting any obligations of Executive
arising at law or pursuant to any existing agreement to which Executive is
bound, Executive covenants and agrees to and in favor of the Company that,
subject to the further provisions of this Agreement, Executive shall not
disclose any Confidential Information to any Person other than as approved by
the Company in writing in advance, and Executive shall not use for the
Executive's own purposes or for any purpose other than those of the Company and
its Affiliates any Confidential Information until such Confidential Information
has been otherwise publicly disclosed. Without limiting the generality of the
foregoing, Executive agrees that, except as permitted in writing by the Company,
he will not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way related to
Confidential Information or, subject to Section 4.10, any confidential matters
concerning his employment at the Company. Executive agrees that any disclosure
by him of any of the Confidential Information shall constitute a material breach
of this Agreement and of his fiduciary obligations to the Company.
9
<PAGE>
(c) For purposes of this Section 3.01, "Confidential Information"
does not include information which (i) is or becomes generally available to the
public other than as a result of disclosure by Executive, or (ii) was within the
Executive's possession prior to being furnished to the Executive by or on behalf
of the Company or its Affiliates, provided that the Executive did not receive
such information in a fiduciary capacity and provided further that the scope of
such information was not known to the Executive to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Company or any of its Affiliates or any other Person with
respect to such information.
(d) If Executive is requested or required (by oral questions,
interrogatories, requests for information or documents in connection with any
legal proceedings, subpoena, civil investigative demand or other similar
process) to disclose any Confidential Information, then Executive shall provide
the Company with prompt written notice of any such request or requirement so
that the Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver from the Company,
the Executive is, in the written opinion of counsel reasonably acceptable to the
Company (the reasonable attorney's fees and costs of which opinion the Company
shall reimburse), legally compelled to disclose Confidential Information to any
tribunal or else stand liable for contempt, or suffer other censure or penalty,
then Executive may, without liability hereunder, disclose to such tribunal only
that portion of the Confidential Information which such counsel advises the
Executive is legally required to disclose, provided that Executive exercises
commercially reasonable efforts to preserve the confidentiality of the
Confidential Information, including, without limitation, by cooperating with the
Company to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded the Confidential Information by
such tribunal.
(e) Without limiting the provisions of Section 2.06, all files,
forms, brochures, books, materials, written correspondence, memoranda,
documents, manuals, computer disks, software products and lists that have in the
past or may in the future come into the possession or control of the Executive
as a result of his being an employee of or consultant to the Company shall at
all times remain as the property of the Company and not of the Executive. At
the time required by Section 2.06, and at any other time or times demanded by
the Company, Executive shall deliver promptly to the Company all such property
in the possession of the Executive or directly or indirectly under the control
of the Executive. Executive agrees not to make, for the use of the Executive or
of any other Person, reproductions or copies of any such property or other
property of the Company.
SECTION 3.02 STOCK ACTIVITY. Executive hereby agrees that from the date
hereof until the second anniversary of the Effective Date, Executive shall not:
(a) Acquire, by purchase or otherwise (except pursuant to
Executive's participation in employee benefit plans), offer to acquire or obtain
the right to acquire, propose
10
<PAGE>
to acquire, announce any intention or plan to acquire, or announce or make any
request for permission to acquire, directly or indirectly, any shares of Voting
Stock, or any other security convertible into or exercisable or exchangeable for
Voting Stock, unless (i) following such acquisition and after giving effect
thereto, the Executive and any Group of which he is a member, would not be
directly or indirectly the beneficial owners of more than five percent (5%) of
the outstanding shares of Voting Stock of the Parent, the Company or any
Affiliate thereof, as the case may be, and (ii) such acquisitions or offers or
agreements to acquire are made in open market transactions (or pursuant to the
Equity Plans);
(b) Directly or indirectly engage in, or become a member of a Group
which is engaging or which subsequently engages in, any tender offer or exchange
offer for any shares of Voting Stock;
(c) Take any other action, participate in or become a member of any
Group, or make any proposal, offer to acquire or obtain a right to acquire,
propose to acquire, announce any intention or plan to acquire, or announce or
make any request for permission to acquire, directly or indirectly or alone or
together with others, control of the Company or of any Affiliate of the Company
or of any division, business segment or significant amount of assets of the
Company or of any Affiliate of the Company;
(d) Enter into any voting agreement or proxy arrangement with
respect to shares of Voting Stock, or deposit any shares of Voting Stock into
any voting trust or similar entity, as a result of which the voting rights
associated with any or all of Executive's Voting Stock are vested in another
Person, other than proxies (or their substitutes) designated by the Board of
Directors of the issuer of such Voting Stock in proxy material for any meeting
of stockholders of such issuer;
(e) Conduct or become a participant in any solicitation of proxies
with respect to Voting Stock, or make any announcement with respect to any
solicitation of proxies, for the purpose of opposing a solicitation (for
election of directors or otherwise) approved by a majority of the whole Board of
Directors of the issuer of such Voting Stock, or present any proposal, or
solicit or become a participant in the solicitation of proxies in favor of a
proposal, for action at a meeting of the stockholders of such issuer, which is
not approved by a majority of the whole Board of Directors of such issuer;
(f) Enter into any plan, agreement or arrangement, or become a
member of any Group, for the purpose of engaging in any activity prohibited by
the foregoing paragraphs of this Section 3.02 ; or
(g) Assist directly or indirectly any other Person in connection
with such other Person's engaging in any activity which, if engaged in by the
Executive, would constitute a violation of this Section 3.02.
SECTION 3.03 INTENTIONALLY OMITTED.
11
<PAGE>
SECTION 3.04 NON-SOLICITATION; NON-DISPARAGEMENT; NON-INTERFERENCE.
During the period that begins on the date hereof and that ends on the second
anniversary of the Effective Date, Executive agrees that he will not, directly
or indirectly, for his own benefit, for the benefit of any Person other than the
Company or its Affiliates, or otherwise:
(a) Solicit, encourage or induce, or assist any Person to solicit,
encourage or induce, any officer, director, executive or employee of the Company
or its Affiliates to leave his or her employment with the Company or its
Affiliates for any reason, it being agreed that the foregoing shall not prohibit
Executive from soliciting the employment of his current secretarial assistant;
(b) Induce or attempt to induce any customer, supplier, financier,
government agency, independent contractor, developer, promoter or other Person
having any business or regulatory relationship with the Company or any of its
Affiliates to cease, reduce or alter the nature, amount or terms of business
conducted or regulatory oversight or practices followed with respect to the
Company or any of its Affiliates or to engage in any business, regulatory or
other activity which might materially harm the Company or any of its Affiliates
or which is opposed by the Company and its Affiliates;
(c) Make or cause to be made any public statement that is
disparaging of the Company or any of its Affiliates or their respective
businesses or that materially injures the business or reputation of the Company
or any of its Affiliates or their respective businesses; or
(d) Directly or indirectly advise, consult or discuss with, provide
information to, or assist any Person, including any holder of phantom options in
the Company or any advisor or representative of any such holder, or make any
comment or offer or provide any opinion or otherwise make statements, concerning
the phantom options, or the grant, appreciation, value, or exercise thereof, or
any transaction or proposed transaction in respect of such phantom options,
including without limitation any planned or actual exchange offer by the Company
therefor, or any interpretation or action by the Company planned or actually
made with respect to such phantom options, or any claims or proceedings, whether
pending or threatened, relating to such phantom options, without the prior
written consent of the Chief Executive Officer of the Company, except and to the
extent compelled by law.
SECTION 3.05 OWNERSHIP OF WORKS. As between the Company and Executive,
the Company shall be the sole and exclusive owner, throughout the universe, in
perpetuity, of all right, title, interest, benefits and profits of every kind
and nature whatsoever, whether now known or unknown, in, to and from all
programs, financial or business plans, all non-generic ideas and concepts,
logos, discoveries, trade secrets, prospect lists, or other tangible work
product and materials (including, without limitation, tangible materials
containing market, financial and other research) of every kind and nature
whatsoever (collectively, the "Works") written, conceived, developed, furnished
or created by or under the auspices of Executive in connection with his
performance of duties as an employee of or consultant to the Company, and all
results, benefits and proceeds of such Works (all of such Works, results,
12
<PAGE>
benefits and proceeds being collectively referred to as the "Materials"). All
of such Materials shall constitute a "work made for hire" for the Company within
the meaning of the United States Copyright Act of 1976, as amended. In the
event that the Materials or any portion thereof are for any reason whatsoever
not deemed to be a "work made for hire" for the Company, Executive hereby grants
and assigns to the Company all right, title, interest, benefits and profits of
every kind and nature whatsoever, whether now known or unknown, in, to and from
the Materials. As between the Company and Executive, the Company shall at all
times have the perpetual and exclusive right to exploit such Materials and all
works derived therefrom throughout the universe, and all revenues and other
benefits and profits derived by the Company from such exploitation, as between
the Company and Executive, shall be the sole and exclusive property of the
Company. Executive agrees to execute, and to cause each of his employees or
agents to execute, any and all formal assignments, recordations and any other
documents which the Company reasonably deems are necessary or desirable to
effectuate and/or evidence the Company's rights in and to the Materials.
SECTION 3.06 COOPERATION WITH LEGAL PROCESS. From and after Executive's
employment with the Company, the Company shall, consistent with the Company's
then existing policies for indemnification of officers, continue to indemnify
Executive for his activities as an officer, director and employee of the Company
to the extent provided under and permitted by, and subject to the provisions and
conditions of, law and the charter documents of the Company in effect at the
time, as though Executive remained an officer, director and/or employee of the
Company. In return, Executive agrees to provide reasonable cooperation and
assistance to the Company, when and as requested by the Company and without
charge to the Company except for the Executive's reasonable and bona fide out-
of-pocket costs (including reasonable attorney's fees and costs), in connection
with any and all pending or threatened claims, proceedings and investigations
(whether on behalf of or against the Company) arising out of, or alleged to
arise out of, facts or circumstances existing during the term of Executive's
employment by the Company. Should reasonable cooperation from Executive require
more than two (2) consecutive days in any two (2) month period, the Company will
provide Executive with reasonable compensation for such excess time actually
expended by Executive.
ARTICLE 4: GENERAL PROVISIONS
SECTION 4.01 OPPORTUNITY TO REVIEW WITH COUNSEL. Executive represents
that he has discussed all aspects of this Agreement with an attorney of his
choice, that he has carefully read and fully understands all of the provisions
of this Agreement and that he is voluntarily entering into this Agreement.
13
<PAGE>
SECTION 4.02 CHOICE OF LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
reference to the choice of law doctrine of California.
SECTION 4.03 REMEDIES. The rights and remedies of each party under this
Agreement are not, except as expressly provided herein to the contrary, to the
exclusion of each other or of any other rights or remedies of such party. Each
party may exercise or decline to exercise any one or more of its rights and
remedies without waiver of any such subsequent exercise of such right and remedy
or any other rights and remedies of such party. Executive acknowledges that the
Company cannot be properly protected from adverse consequences if Executive
should default under specified provisions of this Agreement. Accordingly, the
Executive agrees that in the event of any breach or threatened breach by
Executive of any of the provisions of Sections 3.01, 3.02, 3.04 or 3.05 of the
Agreement or of any warranty or representation in the Form of General Release or
the Form of Age Discrimination Release, the Company, in addition to any other
right or relief to which it may be entitled, shall be entitled to an order
enjoining such breach or threatened breach and specifically enforcing
Executive's compliance with the provisions thereof, Executive agreeing that he
is hereby estopped and prohibited from arguing that damages are an adequate
remedy for any such breach or threatened breach or that such equitable relief is
inappropriate under the circumstances.
SECTION 4.04 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the provisions hereof is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the provisions hereof are implemented and enforced as originally
contemplated to the greatest extent possible.
SECTION 4.05 NO AMENDMENT; ENTIRE AGREEMENT; NO WAIVER. This Agreement
and the Schedules and attachments hereto constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, between the parties with
respect to the subject matter hereof. Without limiting the generality of the
foregoing, Executive specifically represents and acknowledges that in executing
this Agreement, he does not rely and has not relied on any representations or
statements made by the Company, or any of the Company's agents, representatives
or attorneys with regard to the subject matter, basis or effect of this
Agreement, or otherwise. This Agreement may not be amended except by an
instrument in writing signed by the parties. Either party may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, or (b) waive compliance with any of the agreements applicable to the
other party contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be
14
<PAGE>
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of a party to assert any of its rights hereunder shall not constitute a
waiver of any of such right.
SECTION 4.06 RIGHT OF OFFSET. The Company shall have the right to offset
against amounts owed Executive by the Company (except for Deferral Plans and
Retirement Benefits) any amounts which, in the future, Executive owes to the
Company.
SECTION 4.07 PARTIES IN INTEREST. This Agreement may not be assigned or
transferred by either party, by operation of law or otherwise, without the prior
written consent of the other party (which consent may be granted or withheld in
the sole discretion of such other party). This Agreement shall be binding upon
and inure solely to the benefit of the parties and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 4.08 NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be deemed to have been delivered, given, and received for all
purposes (a) if delivered personally to the Person to whom it is addressed, or
(b) when the same is actually received, if sent by a nationally recognized
courier service (which provides proof of delivery), by registered or certified
mail (postage and charges prepaid), or by facsimile (if such facsimile is
followed by a hard copy of the facsimile communication sent promptly thereafter
by a nationally recognized courier service (which provides proof of delivery) or
registered or certified mail (postage and charges prepaid)), addressed as set
forth in the Schedule of Addresses attached hereto and incorporated herein by
reference or to such other address as such Person may from time to time specify
by due notice.
SECTION 4.09 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the Parties in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 4.10 PUBLICITY. Executive represents that neither he nor his
representatives have communicated with any past, present or prospective employee
of the Company or any of its Affiliates concerning the amounts payable under
this Agreement and the parties agree that, for a period of at least six (6)
months, they will keep the terms, amounts and facts of this Agreement completely
confidential, and that they will not during such period disclose any information
concerning this Agreement to anyone except their respective attorneys or
accountants, including, but not limited to, any past, present or prospective
employees of the Company or any of its Affiliates, except in each case as may be
required by law, including, without limitation, filings required by the Company
and/or by the Parent with the Securities and Exchange Commission. The parties
agree that any press release by
15
<PAGE>
the Company in respect of the end of Executive's employment with the Company
shall simply refer to the fact that Executive has resigned from the Company.
SECTION 4.11 HEADINGS. The descriptive headings contained in this
Agreement and table of contents of this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 4.12 ATTORNEYS FEES. In any litigation or proceeding relating to
this Agreement, the prevailing party shall be entitled to recover its costs and
reasonable attorney fees.
SECTION 4.13 FURTHER ASSURANCES. The parties agree to execute such
further instruments and perform such further acts as may be reasonably necessary
to carry out the intent and purposes of this Agreement.
SECTION 4.14 ADDITIONAL COVENANTS OF THE COMPANY. The Company agrees
that, for a period of two (2) years from the Effective Date, the Company and its
Affiliates will not publicly issue any press release that disparages, or
materially injures the business or reputation of, the Executive, and will make
reasonable efforts to prevent their executive officers and official
spokespersons from making public statements on behalf of the Company or its
Affiliates that are disparaging of Executive or materially injure his business
or reputation. The Company further agrees to exercise reasonable efforts to
cause personal mail addressed to Executive to be forwarded to him in a timely
fashion (Executive agreeing to make reasonable efforts to notify third parties
of the change in his business address).
SECTION 4.15 DISPUTE RESOLUTION. All disputes arising out of or relating
to this Agreement shall be resolved pursuant to the reference procedure set
forth in California Code of Civil Procedure 638 et seq. The parties hereby
agree to submit to the jurisdiction of the Superior Court of Los Angeles County
for such purpose. Each party hereby acknowledges that it is waiving any right
to a trial by jury. Either party may initiate the procedure set forth in this
Section by providing the other party with notice setting forth the nature of the
dispute. The parties shall designate to the Superior Court a referee who is an
active attorney or retired judge living in Los Angeles County who shall resolve
the dispute. If the parties are unable to designate a referee within 20 days
after the receipt of the original referral notice, the parties shall request
that the Superior Court appoint a referee. In connection with any proceeding
pursuant to this Section, the parties shall have all discovery rights which
would have been available had the matters which are the subject of the dispute
been decided by the Superior Court. Discovery proceedings may be noticed and
commenced immediately after delivery of the original referral notice. The
hearing before the referee shall begin no later than 60 days after the receipt
of such referral notice. All discovery in connection with the reference
procedure shall be concluded no later than 15 days prior to the commencement of
the hearing. Judgment upon the award rendered by the referee shall be entered
in the Superior Court. Nothing in this Section shall be construed to impair the
right of either party to appeal from such judgment.
16
<PAGE>
SECTION 4.16 APPROVALS. The effectiveness and implementation of this
Agreement are subject to the approval of the Board of Directors of the Company
and, at the Company's election, the Compensation and Executive Personnel
Committee of the Board of Directors of the Parent.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
/s/ S Linn Williams
---------------------
S. Linn Williams
EDISON MISSION ENERGY
By:/s/ Alan J. Fohrer
---------------------
Title:Pres & CEO
------------------
By:
---------------------
Title:
------------------
17
<PAGE>
SCHEDULE OF ADDRESSES
Notices to the Company and to the Parent shall be addressed as follows:
Chief Executive Officer
Edison Mission Energy
18101 Von Karman Avenue
Suite 1700
Irvine, California 92612-1046
FAX: 949-757-0807
Notices to the Executive shall be addressed as follows:
66 Acacia Road
London NW8 6 A E
United Kingdom
FAX: 011-44171-722-0767
With a courtesy copy to:
Ronald M. Greenberg, Esq.
Rosenfeld, Meyer & Susman
9601 Wilshire Blvd., 4/th/ Floor
Beverly Hills, California 90210
FAX: (310) 271-6430
<PAGE>
SCHEDULE OF DEFERRED COMPENSATION*
Balance as of January 27, 2000:
Edison 401(k) Savings Plan and Profit Sharing U.S.$ 77,032
Balance as of January 31, 2000:
Executive Deferred Compensation Plan (EDCP) U.S.$588,652
Total U.S.$665,684
* Additional amounts, if any, arising from Profit Sharing amounts for
the 1999 year will be added in the ordinary course when calculated.
All benefits under these Plans are subject to the expressed terms of
the relevant Plans.
<PAGE>
SCHEDULE OF OTHER TERMINATED BENEFITS*
Employee Life Insurance
Executive Incentive Compensation Plan
Long-Term Incentive Compensation Plan
Equity Compensation Plan
Affiliate Long Term Incentive Program
401(k) Savings Plan
Executive Deferred Compensation Plan
Option Gain Deferral Plan
Executive Retirement Plan
Retirement Plan
Estate and Financial Planning
Comprehensive Disability and Executive Disability Plan
Long-Term Disability
Dependent Life Insurance
Dependent AD&D Insurance
Dependent Care Reimbursement Account
Vacation
Vacation Buying and Selling
Holidays
Personal Use of Company Car/Auto Allowance/Driver
Executive Physical
Accidental Death and Dismemberment
24-Hour Business Travel Accident Insurance
Club Memberships
Health Care Reimbursement Account
Preventive Health Care Account
Employee Assistance Plan (EAP)
Retiree Health Care and Medicare
________________________
* Executive is entitled to any vested benefits and/or balances in any of the
above plans but will have no further entitlements under any of the plans
except as otherwise provided in this Agreement.
<PAGE>
SCHEDULE OF RETIREMENT BENEFITS(1)(2)
Projected annual and lump-sum values(3)
Executive Retirement
Retirement Plan Plan
--------------- ----------
Annual Value of Life Annuity
- ----------------------------
Payment commencing April 1, 2002 N/A U.S.$6,420
Payment commencing July 1, 2002 U.S.$31,200 N/A
Lump Sum Value
- --------------
As of March 1, 2000 N/A U.S.$84,000 (4)
As of July 1, 2002 U.S.$358,000 (4)(5) N/A
- ---------------------------
(1) All benefits under these Plans are subject to the express terms of the
relevant Plans.
(2) Benefit payment commencement on April 1, 2000 for the Retirement Plan and
July 1, 2002 (age 55) for the Executive Retirement Plan, assuming last
day of employment is during February 2000.
(3) Assumes Executive receives a bonus of 50% of base pay (125% of his target
bonus of 40%) for 1999.
(4) The annuity value of the Retirement Plan is determined as of the assumed
payment commencement date using a 6.07% interest rate. The lump sum for
the Executive Retirement Plan uses an interest rate of 7.33%.
(5) Lump-sum distributions are not available for those employees terminating
prior to age 55. This value is shown for illustrative purposes only.
<PAGE>
SCHEDULE OF VESTED OPTIONS
-----------------------------------------------------
Date Grant Vesting Grant Vested
Grant Type Schedule Price Shares
-----------------------------------------------------
1/3/95 EME 3 $154.2317 19,890
1/2/96 EME 3 $181.0666 14,700
1/2/97 EME 3 $226.6772 9,900
1/4/98 EME 4 $313.8153 1,610
1/4/99 EME 4 $334.4392 1,150
------
Total 47,250
<PAGE>
FORM OF GENERAL RELEASE
THIS GENERAL RELEASE ("Release") is being delivered as of February 5,
2000 by S. Linn Williams (the "Executive") to Edison Mission Energy, a
California corporation (the "Company"), pursuant to Section 2.07 of that certain
agreement related to Executive's employment with the Company being executed
concurrently herewith by Executive and the Company (the "Agreement"). All
capitalized terms not otherwise defined herein have the same meaning as is given
to them in the Agreement.
(a) Executive, on behalf of himself and his descendants, ancestors,
heirs, executors, successors, assigns and administrators (collectively,
"Releasor"), hereby releases, remises, acquits and forever discharges, and
agrees to indemnify and hold harmless, (x) the Company, (y) each of its
Affiliates, and (z) each of its and/or their partners, predecessors, successors,
assigns, officers, directors, shareholders, representatives, insurers,
attorneys, employees and agents, past, present and future, in their respective
capacities as such (collectively, "Releasees"), from and against any and all
claims, demands, obligations, causes of action, debts, expenses, damages,
judgments, orders and liabilities of whatever kind or nature, in law, equity or
otherwise, whether arising under the law of any jurisdiction in the United
States or of any foreign jurisdiction, whether now known or unknown, suspected
or unsuspected, matured or unmatured, and whether concealed or hidden
(collectively, "Claims"), which Executive now owns or holds or has at any time
heretofore owned or held or had, or may at any time own or hold or have, against
the Releasees or any of them, including, but not limited to any Claim arising
out of or in any way connected to any transactions, occurrences, acts or
omissions regarding or relating to his employment with the Company, or the end
of his employment with the Company, including, but not limited to, Claims
arising from any alleged violation by the Company of any federal, state or local
constitutions, statutes, ordinances or common laws, including but not limited
to, the California Fair Employment and Housing Act, Employee Retirement Income
Security Act, Americans With Disabilities Act and Title VII of the Civil Rights
Act of 1964 and/or the Civil Rights Act of 1991.
(b) Except for those matters that are expressly excluded, the
release set forth herein is intended as a release of all Claims that the
Releasor may have against the Releasees or any of them, whether now known or
unknown. In furtherance thereof, Executive expressly waives and relinquishes
any right to assert hereafter that any claim, demand, obligation and/or cause of
action has, through ignorance, oversight, error or otherwise, been omitted from
the terms of this Agreement. Executive makes this waiver with full knowledge of
his rights, after consulting with legal counsel, and with specific intent to
release both his known and unknown claims. Accordingly, Releasor specifically
waives all rights and benefits afforded by California Civil Code Section 1542
and does so understanding and acknowledging the significance of such specific
waiver of such statutory protection, which provides as follows:
1
<PAGE>
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Thus, notwithstanding the foregoing provisions of the California Civil Code, and
for the purposes of implementing a full and complete release and discharge of
the Releasees, Executive expressly acknowledges that the foregoing release is
intended to include in its effect, without limitation, all Claims that Executive
does not know or suspect to exist in his favor at the time of the execution
hereof, and the foregoing release contemplates the extinguishment of any such
Claim or Claims except to the extent expressly set forth herein. Executive
further acknowledges that he has been advised to consult with an attorney and is
receiving compensation beyond that to which he is entitled. Executive
acknowledges that he has been advised by his counsel and hereby confirms that
his employment by the Company has been and is subject to California law.
(c) Executive represents and warrants that he has not filed or
caused to be filed any complaints, claim forms or charges against the Company,
any of its Affiliates or any of its or their officers, directors, agents,
employees or representatives with or before any local, state, federal or foreign
governmental agency or court or any arbitrator or other tribunal (including
without limitation, any Industrial Tribunal in England or Wales or English
Courts), and no such complaint or charge by or on behalf of the Executive is
currently pending. Executive further agrees not to file any complaints, claim
forms, actions or charges of any nature against the Releasees relating to any
event or alleged event including, but not limited to, those arising from
Executive's employment with and/or separation from employment with the Company,
which occurred from the beginning of time until the execution of this Release.
Executive acknowledges that the Company has expressly relied on Executive's
representation and warranty in this section in providing compensation and
benefits under Article 2 of the Agreement in excess of what he would be entitled
to in the absence of the Agreement. Accordingly, Executive acknowledges and
agrees that if he should file or pursue any such claim in violation of this
section, then the Company shall be entitled to injunctive relief against
Executive to prevent him from pursuing any such claim and/or to rescind the
Agreement and seek repayment of all such excess compensation and benefits.
(d) Nothing in this Release shall be construed or interpreted as a
release, acquittal, discharge or waiver of:
(i) Executive's rights to the compensation, reimbursements,
benefits and perquisites described in Article 2 of the Agreement;
(ii) Any of the Company's other obligations arising under the
Agreement;
2
<PAGE>
(iii) Any right which Executive now has or may have to claim
indemnity (including advancement of expenses) for liabilities in connection
with his lawful activities as a director, officer or employee of the
Company and certain of its Affiliates, pursuant to the terms of any
applicable statute, under any insurance policy, pursuant to the certificate
or articles of incorporation, bylaws or similar charter documents of any
Releasee, or pursuant to the terms of any applicable indemnification
agreement to which Executive and the Company or any Affiliate of the
Company are or have been parties; or
(iv) Claims arising under the Federal Age Discrimination in
Employment Act.
(e) The provisions of Section 4.01 through 4.05, 4.07, 4.08, and
4.12 through 4.14 of the Agreement apply to this Release and are incorporated
herein by reference as though fully set forth hereat.
IN WITNESS WHEREOF, the Executive has executed and delivered this Release
as of the day and year first above written.
/s/ S. Linn Williams
______________________________________
S. Linn Williams
3
<PAGE>
FORM OF AGE DISCRIMINATION RELEASE
THIS AGE DISCRIMINATION RELEASE ("Release") is being delivered as of
February 5, 2000 by S. Linn Williams (the "Executive") to Edison Mission Energy,
a California corporation (the "Company"), pursuant to Section 2.07 of that
certain agreement related to Executive's employment with the Company being
executed concurrently herewith by Executive and the Company (the "Agreement").
All capitalized terms not otherwise defined herein have the same meaning as is
given to them in the Agreement.
(a) Executive, on behalf of himself and his descendants, ancestors,
heirs, executors, successors, assigns and administrators (collectively,
"Releasor"), hereby releases, remises, acquits and forever discharges, and
agrees to indemnify and hold harmless, (x) the Company, (y) each of its
Affiliates, and (z) each of its and/or their partners, predecessors, successors,
assigns, officers, directors, shareholders, representatives, insurers,
attorneys, employees and agents, past, present and future, in their respective
capacities as such (collectively, "Releasees"), from and against any and all
claims, demands, obligations, causes of action, debts, expenses, damages,
judgments, orders and liabilities of whatever kind or nature, in law, equity or
otherwise, whether now known or unknown, suspected or unsuspected, matured or
unmatured, and whether concealed or hidden (collectively, "Claims"), which
Executive now owns or holds or has at any time heretofore owned or held or had,
or may at any time own or hold or have, against the Releasees or any of them,
arising out of or in any way connected to the Federal Age Discrimination in
Employment Act.
(b) Except for those matters that are expressly excluded, the
release set forth herein is intended as a release of all Claims that the
Releasor may have against the Releasees or any of them, whether now known or
unknown, arising under the Federal Age Discrimination in Employment Act. In
furtherance thereof, Executive expressly waives and relinquishes any right to
assert hereafter that any such claim, demand, obligation and/or cause of action
has, through ignorance, oversight, error or otherwise, been omitted from the
terms of this Agreement. Executive makes this waiver with full knowledge of his
rights, after consulting with legal counsel, and with specific intent to release
both his known and unknown claims. Accordingly, Releasor specifically waives
all rights and benefits afforded by California Civil Code Section 1542 and does
so understanding and acknowledging the significance of such specific waiver of
such statutory protection, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
1
<PAGE>
Thus, notwithstanding the foregoing provisions of the California Civil Code, and
for the purposes of implementing a full and complete release and discharge of
the Releasees in respect of Claims arising under Federal Age Discrimination in
Employment Act, Executive expressly acknowledges that the foregoing release is
intended to include in its effect, without limitation, all Claims arising under
such Act that Executive does not know or suspect to exist in his favor at the
time of the execution hereof, and the foregoing release contemplates the
extinguishment of any such Claim or Claims except to the extent expressly set
forth herein. Executive acknowledges that he has been advised by his counsel
and hereby confirms that his employment by the Company has been and is subject
to California law.
(c) Executive acknowledges that as of the date hereof, he will have
had at least twenty-one (21) days to consider the terms of the release set forth
herein and that he has been advised that he has a period of seven (7) days
following his execution of this Release in which to revoke the entire release
granted hereby and that any such revocation must be in writing, signed by
Executive, and hand delivered to the Chairman of the Board of the Company prior
to the expiration of such seven (7) day period. Executive further acknowledges
that he has been advised to consult with an attorney and is receiving
compensation beyond that to which he is entitled.
(d) Executive represents and warrants that he has not filed or
caused to be filed any complaints or charges against the Company, any of its
Affiliates or any of its or their officers, directors, agents, employees or
representatives with or before any local, state or federal governmental agency
or court or any arbitrator or other tribunal arising under the Federal Age
Discrimination in Employment Act, and no such complaint or charge by or on
behalf of the Executive is currently pending. Executive further agrees not to
file any such complaints, actions or charges of any nature against the Releasees
relating to any event or alleged event including, but not limited to, those
arising from Executive's employment with and/or separation from employment with
the Company, which occurred from the beginning of time until the execution of
this Release. Executive acknowledges that the Company has expressly relied on
Executive's representation and warranty in this section in providing
compensation and benefits under Article 2 of the Agreement in excess of what he
would be entitled to in the absence of the Agreement. Accordingly, Executive
acknowledges and agrees that if he should file or pursue any such claim in
violation of this section, then the Company shall be entitled to injunctive
relief against Executive to prevent him from pursuing any such claim and/or to
rescind the Agreement and seek repayment of all such excess compensation and
benefits.
(e) Nothing in this Release shall be construed or interpreted as a
release, acquittal, discharge or waiver of:
(i) Executive's rights to the compensation, reimbursements,
benefits and perquisites described in Article 2 of the Agreement;
(ii) Any of the Company's other obligations arising under
the Agreement; or
2
<PAGE>
(iii) Any right which Executive now has or may have to
claim indemnity (including advancement of expenses) for liabilities in
connection with his lawful activities as a director, officer or employee of
the Company and certain of its Affiliates, pursuant to the terms of any
applicable statute, under any insurance policy, pursuant to the certificate
or articles of incorporation, bylaws or similar charter documents of any
Releasee, or pursuant to the terms of any applicable indemnification
agreement to which Executive and the Company or any Affiliate of the
Company are or have been parties.
(f) The provisions of Section 4.01 through 4.05, 4.07, 5.08, and
4.12 through 4.14 of the Agreement apply to this Release and are incorporated
herein by reference as though fully set forth hereat.
IN WITNESS WHEREOF, the Executive has executed and delivered this Release
as of the day and year first above written.
/s/ S. Linn Williams
______________________________________
S. Linn Williams
3
<PAGE>
EXHIBIT 10.78
[LOGO] EDISON
INTERNATIONAL (SM)
EQUITY COMPENSATION PLAN
2000 AWARD CERTIFICATE
This award is made by Edison International to ((name)) ("Employee") as of
((date)), pursuant to the Equity Compensation Plan. Edison International hereby
grants to Employee, as a matter of separate agreement and not in lieu of salary
or any other compensation for services the following:
--------------------------------------------
The right and option to purchase ( )
shares of authorized Edison International
Common Stock at an exercise price of $(
) per share.
--------------------------------------------
--------------------------------------------
A target grant of ( ) Performance Shares
at an initial value of ( ) per share,
the final number and value of which will
be contingent upon Edison's relative
Total Shareholder return and stock price.
--------------------------------------------
This award is made subject to the conditions contained in the 2000 Long-Term
Incentives Terms and Conditions statement which is incorporated herein by
reference.
EDISON INTERNATIONAL
By: [Theodore F. Craver, Jr.]
- --------------------------------
<PAGE>
EDISON INTERNATIONAL
2000 LONG-TERM INCENTIVES
TERMS AND CONDITIONS
Long-term incentives (LTI) for the year 2000 for eligible persons (Holders) at
Edison International (EIX) or its participating affiliates (the Companies, or
individually, the Company) include EIX nonqualified stock options to purchase
EIX common stock (EIX Options) to be awarded under the Equity Compensation Plan
(Plan) and contingent EIX Performance Shares, 50% of which will be payable as
Stock Grants under the Plan and 50% of which will be payable in cash outside of
the Plan. The LTI are subject to the following terms and conditions:
1. PRICE
The exercise price of an EIX Option stated in the award certificate is the
average of the high and low sales prices of EIX Common Stock as reported in the
Western Edition of The Wall Street Journal for the New York Stock Exchange
Composite Transactions for the date of the award.
2. VESTING
(a) Subject to the provisions of Section 3, EIX Options may only be exercised or
paid to the extent vested. The initial vesting date will be January 2nd of the
year following the date of the grant, or six months after the date of the grant,
whichever date is later. The EIX Options will vest as follows:
. On the initial vesting date, one-fourth of the EIX Options will vest.
. On January 2nd of the following year, an additional one-fourth of the EIX
Options will vest.
. On January 2nd of the following year, an additional one-fourth of the EIX
Options will vest
. On January 2nd of the fourth year following the date of grant, the balance of
the EIX Options will vest.
(b) The vested portions of the EIX Options will accumulate to the extent not
exercised, and be exercisable by the Holder subject to the provisions of Section
3, in whole or in part, in any subsequent period but not later than the first
business day of the 10th calendar year following the date of the award.
(c) One-half of the Performance Shares will vest and become payable to the
extent earned at the end of the second year of the Performance Period (defined
in Section 4) (first payment date). The remaining one-half of the Performance
Shares will vest and become payable to the extent earned at the end of the full
three-year Performance Period (second payment date).
(d) If, during the vesting period or a Performance Period, the Holder retires,
terminates employment while on leave with a permanent and total disability, or
dies, then the vesting and exercise provisions of this Section 2(d) will apply.
The EIX Options will vest to the extent necessary to cause the aggregate amount
of vested EIX Options (including any previously exercised) to equal the product
of 1/48th of the number of shares granted times the number of full months of
service the Holder has completed during the vesting period, and such vested
options will be exercisable for the full original term. The Performance Shares
will vest on a pro rata basis based on each full month of service the Holder
completes during the first two years of the Performance Period for the first
payment date, and during the full three-year Performance Period for the second
payment date. Performance Shares will be payable to the Holder on such pro rata
basis on the applicable payment date to the extent of the EIX total shareholder
return (TSR) ranking achieved as specified in Section 4. Notwithstanding the
foregoing, the LTI of a Holder who served as a member of the Southern California
Edison Company Management Committee (which was dissolved in 1993) will fully
vest upon his or her retirement or death, or upon employment termination while
on leave of absence with a permanent and total disability.
(e) Upon termination of employment during the EIX Option term for any reason
other than those specified in Section 2(d), only those EIX Options that have
vested as of the prior vesting date may be exercised, and they will be forfeited
unless they are exercised within 180 days following the date of termination or
by the end of the applicable EIX Option term, if that date is earlier. If such
termination occurs (i) during the first two years of the Performance Period, all
Performance Shares will be forfeited, or (iii) during the third year of the
Performance Period, those Performance Shares subject to payment at the end of
the three-year Performance Period will be forfeited.
2
<PAGE>
(f) Notwithstanding the foregoing, LTI may vest in accordance with Section 3.4
of the Plan as a result of certain events, including liquidation of EIX or
merger, reorganization or consolidation of EIX as a result of which EIX is not
the surviving corporation. Upon a change of control of EIX following the
occurrence of a Distribution Date, as that term is defined in the Rights
Agreement approved by the EIX Board of Directors on November 20, 1996, as
amended, the LTI will vest and EIX Options will remain exercisable for at least
two years following the Distribution Date. During that period, (i) the Plan may
not be terminated, (ii) individual awards may not be cashed out, terminated, or
modified without the Holder's consent, and (iii) valuation procedures and
exercise periods will occur on a basis consistent with past practice.
3. EIX OPTION EXERCISE
(a) The Holder may exercise an EIX Option by providing written notice to EIX on
the form prescribed by EIX for this purpose accompanied by full payment of the
applicable exercise price. Payment must be in cash, or its equivalent, including
EIX Common Stock valued on the exercise date at a per share price equal to the
average of the high and low sales prices of EIX Common Stock as reported in the
Western Edition of The Wall Street Journal for the New York Stock Exchange
Composite Transactions acceptable to EIX. A "cashless" exercise may be
accommodated for EIX Options at the discretion of EIX. Until payment is
accepted, the Holder will have no rights in the optioned stock. EIX Options may
be exercised at any time after they have vested through the first business day
of the 10th calendar year following the date of the award except as otherwise
provided in Sections 2(e) and 8.
(b) The Holder agrees that any securities acquired by him or her hereunder are
being acquired for his or her own account for investment and not with a view to
or for sale in connection with any distribution thereof and that he or she
understands that such securities may not be sold, transferred, pledged,
hypothecated, alienated, or otherwise assigned or disposed of without either
registration under the Securities Act of 1933 or compliance with the exemption
provided by Rule 144 or another applicable exemption under such act.
(c) The Holder will have no right or claim to any specific funds, property or
assets of EIX as a result of the award.
4. PERFORMANCE SHARES
(a) Performance Shares are EIX stock-based units subject to a performance
measure based on the percentile ranking of EIX total shareholder return (TSR)
compared to the TSR for each stock in the Dow Jones Electric Utilities Group
Index over all or part of a three-calendar-year period commencing on January
1/st/ of the year the Performance Shares are granted ("Performance Period"). TSR
is calculated using a 20-day trading average on the measurement dates. A target
number of contingent Performance Shares will be awarded during the first two
months of the Performance Period. The actual amount of Performance Shares to be
paid will depend on the EIX TSR percentile ranking. The target number of
Performance Shares will be paid if the EIX TSR rank is at the 60/th/ percentile.
Payment may range from nothing if the EIX TSR is below the 40/th/ percentile to
three times the target number of Performance Shares if the EIX TSR percentile
ranking is at the 90th percentile or higher. The payment multiples for the
various EIX TSR rankings are as follows:
-----------------------------------------------------------------
Performance Share Payment
-----------------------------------------------------------------
EIX TSR Rank Payment Multiple/(1)/
-----------------------------------------------------------------
Above 90/th/ Percentile 3 times
-----------------------------------------------------------------
75/th/ to 89/th/ Percentile Between 2 and 3 times
-----------------------------------------------------------------
60/th/ to 74/th/ Percentile Between 1 and 2 times
-----------------------------------------------------------------
40/th/ to 59/th/ Percentile Between 0.25 and 1
times
-----------------------------------------------------------------
Below 40/th/ Percentile 0 times
-----------------------------------------------------------------
(1) The multiple is interpolated for performance between
the points indicated.
3
<PAGE>
(b) There will be two performance measurement dates and payment dates during the
three-year Performance Period for the initial grant of Performance Shares in the
year 2000, each covering one-half of the contingent target Performance Shares
awarded. The first measurement and payment date covering the first two years of
performance will be the last business day of the second year of the Performance
Period, the second measurement and payment date will be the last business day of
the Performance Period covering all three years of performance. The applicable
target multiple earned as provided in the table above for one-half of the
Performance Shares will be paid for each Performance Period to the extent of the
EIX TSR percentile ranking achieved on the date of measurement.
(c) Each Performance Share earned will be worth one share of EIX Common Stock.
One-half of the earned Performance Shares will be paid in EIX Common Stock as a
Stock Payment under the Plan. The remaining one-half of the earned Performance
Shares will be paid in cash and the value of each Performance Share will be
equal to the average of the high and low sales prices per share of EIX Common
Stock as reported in the Western Edition of The Wall Street Journal for the New
York Stock Exchange Composite Transactions for the measurement date. The shares
of EIX Common Stock and the cash payable for the earned Performance Shares will
be delivered within 30 days following the end of the Performance Periods
described in Section 4(b).
5. DELAYED PAYMENT OR DELIVERY OF LTI GAINS
Notwithstanding the terms of any LTI, Holders who are eligible to defer salary
under the EIX Executive Deferred Compensation Plan (EDCP) may irrevocably elect
to alternatively exercise all or part of any vested EIX Option pursuant to the
terms of the Option Gain Deferral Program (OGDP), and/or may irrevocably elect
to defer receipt of all or a part of the cash portion of any Performance Shares
pursuant to the terms of the EDCP. To make such an election, the Holder must
submit a signed agreement in the form approved by the Administrator at least six
months prior to the expiration date of the EIX Option, or the payment date of a
Performance Share. An EIX Option may not be exercised for six months thereafter
except under the limited circumstances specified in the OGDP. Any subsequent
exercises or payments will be subject to the terms, conditions and restrictions
of the OGDP or the EDCP, as applicable.
6. TRANSFER AND BENEFICIARY
(a) The LTI will not be transferable by the Holder. During the lifetime of the
Holder, the LTI will be exercisable only by him or her. The Holder may designate
a beneficiary who, upon the death of the Holder, will be entitled to exercise
the then vested portion of the LTI during the remaining term subject to the
provisions of the Plan and these terms and conditions.
(b) Notwithstanding the foregoing, EIX Options of the CEOs of EIX, Edison
Mission Energy, Edison Capital and Edison Enterprises, the COO of Southern
California Edison and the EVPs of EIX are transferable to a spouse, children or
grandchildren, or trusts or other vehicles established exclusively for their
benefit. Any transfer request must specifically be authorized by EIX in writing
and shall be subject to any conditions, restrictions or requirements as the
administrator may determine.
8. TERMINATION OF LONG TERM INCENTIVES
As set forth in Section 2(e), in the event of termination of the employment of
the Holder for any reason other than retirement, permanent and total disability
or death of the Holder, EIX Options will terminate 180 days from the date on
which such employment terminated, and Performance Shares will be forfeited. In
addition, the LTI may be terminated if EIX elects to substitute cash awards as
provided under Section 12.
9. TAXES
EIX will have the right to retain and withhold the amount of taxes required by
any government to be withheld or otherwise deducted and remitted with respect to
the exercise of any LTI. In its discretion, EIX may require the Holder to
reimburse EIX for any such taxes required to be withheld by EIX and may withhold
any distribution in whole or in part until EIX is so reimbursed. In lieu
thereof, EIX will have the right to withhold from any other cash amounts due
from EIX to the Holder an amount equal to such taxes required to be withheld by
EIX, or to retain and withhold a number of shares of EIX Common Stock having a
market value equal to such taxes and cancel (in whole or in part) the shares, or
to repurchase such shares from the Holder within six months after the shares of
Common Stock were acquired by the Holder. Shares withheld or repurchased to
reimburse EIX for federal and state income and payroll taxes shall be limited to
the number of shares which have a Fair Market Value on the date of withholding
or repurchase
4
<PAGE>
equal to the aggregate amount of such tax liabilities based on the minimum
statutory withholding rates that are applicable to such supplemental taxable
income.
Each recipient of an EIX Option must attach a statement to his or her federal
and state tax returns for the year in which the EIX Option was granted
containing certain information specified in tax regulations. A sample statement
is attached.
10. CONTINUED EMPLOYMENT
Nothing in the award certificate or this Statement of Terms and Conditions will
be deemed to confer on the Holder any right to continue in the employ of EIX or
an EIX affiliate or interfere in any way with the right of the employer to
terminate his or her employment at any time.
11. NOTICE OF DISPOSITION OF SHARES AND SECTION 16
(a) Holder agrees that if he or she should dispose of any shares of stock
acquired on the exercise of EIX Options, including a disposition by sale,
exchange, gift or transfer of legal title within six months from the date such
shares are transferred to the Holder, the Holder will notify EIX promptly of
such disposition.
(b) If an LTI is granted to a person who later becomes subject to the provisions
of Section 16 of the Securities Exchange Act of 1934, as amended ("Section 16"),
the LTI will immediately and automatically become subject to the requirements of
Rule 16b-3(d)(3) ("Rule") and may not be exercised, paid or transferred until
the Rule has been satisfied. In its sole discretion, the Administrator may take
any action to assure compliance with the requirements of the Rule, including
withholding delivery to Holder (or any other person) of any security or of any
other payment in any form until the requirements of the Rule have been
satisfied. The Secretary of Edison International may waive compliance with the
requirements of the Rule if he or she determines the transaction to be exempt
from the provisions of paragraph (b) of Section 16.
12. AMENDMENT
The LTI are subject to the terms of the Plan as amended from time to time. EIX
reserves the right to substitute cash awards substantially equivalent in value
to the LTI. The LTI may not otherwise be restricted or limited by any Plan
amendment or termination approved after the date of the award without the
Holder's consent.
13. FORCE AND EFFECT
The various provisions herein are severable in their entirety. Any determination
of invalidity or unenforceability of any one provision will have no effect on
the continuing force and effect of the remaining provisions.
14. GOVERNING LAW
The terms and conditions of the LTI will be construed under the laws of the
State of California.
15. NOTICE
Unless waived by EIX, any notice required under or relating to the LTI must be
in writing, with postage prepaid, addressed to: Edison International, Attn:
Corporate Secretary, P.O. Box 800, Rosemead, CA 91770.
EDISON INTERNATIONAL
[Theodore F. Craver, Jr]
- ----------------------------------
5
<PAGE>
STATEMENT PURSUANT TO INCOME TAX
REGULATION SECTION 1.61-15(C)
This statement is attached to my income tax return in compliance with
the requirements of Income Tax Regulation (Section)1.61-15(c) relative to a
nonqualified stock option I received on ____________________.
(1) Name and address of the taxpayer:
_________________________
_________________________
_________________________
(2) Description of Securities subject to the option:
On ______________________, I was granted a nonqualified stock option
covering _______ shares of Edison International common stock.
(3) Period during which the option is exercisable:
The option vests and becomes exercisable as to one-fourth of the
covered shares on January 2nd of the first year after the date of grant (or six
months after the date of grant if later) and as to an additional one-fourth on
January 2nd of each of the three years thereafter. To the extent vested, the
option may be exercised at any time through the first business day of the 10th
calendar year following the date of the award.
(4) Whether the option had an ascertainable market value:
The option did not have a readily ascertainable fair market value on
the date of the grant.
(5) Whether the option was granted as compensation:
The option was granted as compensation and is subject to
Reg.(Section)1.61-15(a).
Respectfully Submitted,
6
<PAGE>
EXHIBIT 10.79
RESOLUTION OF THE COMPENSATION AND EXECUTIVE PERSONNEL
COMMITTEES OF THE BOARDS OF DIRECTORS OF
EDISON INTERNATIONAL AND
SOUTHERN CALIFORNIA EDISON COMPANY
Adopted: February 17, 2000
RE: Plan Deviation
WHEREAS, Alan J. Fohrer has been elected as chief executive officer of
Edison Mission Energy; and
WHEREAS, it has been proposed that the benefits that would be payable
under the nonqualified executive benefit plans of the companies in the event Mr.
Fohrer's employment is terminated prior to age 55 as a result of his death or
disability be determined as if he had attained age 55, and the members of the
Committees having conferred thereon;
NOW, THEREFORE, BE IT RESOLVED, that the nonqualified executive
benefit plans of the companies in which Mr. Fohrer participates shall be
administered and applied with respect to him as provided above.
[Charles D. Miller]
- ---------------------------------
Chairman of the Committees
[M. D. McDonald]
- ---------------------------------
Counsel
<PAGE>
EXHIBIT 10.80
EXECUTION COPY
_______________________________________
SHAREHOLDER INTEREST PURCHASE AGREEMENT
Dated 3 March 2000
Between
MEC International B.V.
and
UPC INTERNATIONAL PARTNERSHIP CV II
_______________________________________
<PAGE>
SHAREHOLDER INTEREST PURCHASE AGREEMENT
THIS SHAREHOLDER INTEREST PURCHASE AGREEMENT ("Agreement") dated 3 March 2000,
by and between:
MEC International B.V., a limited liability company organized under the laws of
The Netherlands ("MECI"); and
UPC INTERNATIONAL PARTNERSHIP CV II, a limited partnership established under the
laws of the Netherlands Antilles ("UPC").
MECI and UPC are hereinafter jointly referred to as the "Parties" and each of
them as a "Party".
RECITALS:
A. Through its indirectly wholly-owned subsidiary I.V.P.C. 4 S.r.l. (ITALIAN
VENTO POWER CORPORATION) ("IVPC4") UPC holds or will hold the rights to several
wind energy projects totalling an aggregate of 283.1 MW in various locations in
the south of Italy and Sardinia.
B. Fifty percent of the quotaholder interest in IVPC4 is held by each of IVPC
Energy 5 B.V. ("IEBV5") and IVPC Energy 4 B.V. ("IEBV4"), 100% of the
shareholder interests in each of which are held by UPC.
C. The Parties contemplate obtaining senior debt financing for the Project in
various stages related to specific sites as follows: Stage A consisting of 99,1
MW; Stage B consisting of 122,7 MW; Stage C consisting of 29,7 MW; and Stage D
consisting of 31,68 MW.
D. Pursuant to the terms hereof, the Parties wish to provide for the purchase
by MECI of 100% of the shareholder interest in IEBV5 and thereby a fifty percent
(50%) interest in IVPC4 and the Project with the remaining fifty percent (50%)
interest in IVPC4 being retained directly or indirectly by UPC and Finance
Investment Projects S.r.l. ("FIP") through direct investment in IEBV4.
E. The Parties also wish to agree between them certain other matters with
respect to the Project.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements hereinafter contained, the Parties hereto hereby agree as follows:
<PAGE>
1. DEFINITIONS, INTERPRETATION AND CONDITIONS PRECEDENT
1.1 Definitions and Interpretation:
The defined terms and rules of interpretation in Schedule I are hereby
incorporated herein.
1.2 Pre -Conditions to MECI's Execution of Agreement.
MECI's execution of this Agreement is subject to satisfaction of the
conditions precedent specified in this Section 1.2, which MECI now
acknowledges, by the execution of this Agreement, have been satisfied or
waived (subject to Section 1.3 (e) (iii)):
(a) Due Diligence
Satisfactory completion of MECI's due diligence of the Project, IEBV5 and
IVPC4.
(b) Corporate Approvals.
Approval of Edison Mission's and Edison International's Board of Directors.
(c) Equity Base Case.
The Equity Base Case for the Project attached hereto as Schedule II, shows
a 15.71% IRR to MECI.
(d) Quotaholders Agreement.
Agreement on the form of an IVPC4 Quotaholders Agreement, attached hereto
as Schedule III.
(e) Consulting Services Agreement.
Agreement on the form of a Consulting Services Agreement attached hereto as
Schedule IV.
(f) Share Transfer
Agreement on the form of the notarial deed of transfer of shares to effect
the transfer of the Interest, to be executed before a Dutch civil law
notary (notaris), substantially in the form as attached to this Agreement
as Schedule V (the "Notarial Deed").
1.3 Pre-Conditions to Sale and Purchase of the Interest.
MECI's purchase of the Interest is subject to satisfaction of the following
conditions precedent:
<PAGE>
(a) Satisfaction or waiver (provided, however, that any waiver shall
require the written approval of MECI, such approval not to be
unreasonably withheld or delayed) of all the conditions precedent
required for Financial Close and funding of Stages A and B as
confirmed in writing by the Senior Lender to IVPC4, except for payment
into the Disbursement Account of the Equity for Stages A and B.
(b) Execution by UPC of the Consulting Services Agreement.
(c) Delivery by UPC of the following financial statements, audited by
Reconta Ernst & Young S.p.A. (as to IVPC4) and Rennie and Co. (as to
IEBV5 and UPC) in accordance with Applicable GAAP:
(i) IVPC4 1999 Year End
(for the avoidance of doubt the audited IVPC4
financial statements for 1999 shall include and
incorporate the financial statements of IVPC
Puglia S.r.l.);
(ii) IEBV5 1999 Year End;
(iii) UPC 1999 Year End,
showing, in each case, no material change from the form of the
Financial Statements attached hereto as Schedule VI and attesting, in
each case, that the audited statements present fairly, in all material
respects, (i) the financial position of each company as of the above
dates, and (ii) the results of their operations and cash flows for the
year 1999 are in conformity with Applicable GAAP.
(d) Confirmation, satisfactory to MECI that the Banking Base Case is
consistent with the audited financial statements for IVPC4 referred to
in paragraph (c) above
(e) Agreement on the form of the documents attached as Schedules hereto:
(i) The Parties acknowledge that Schedule I (Definitions and
Interpretation), III (Quotaholders Agreement) (except as set out
in (iii) below), IV (Consulting Services Agreement), V (Form of
Notarial Deed), VIII (Subordinated Loan Agreements), IX (Note
and assignment thereof) are in agreed form and that Schedules II
(Equity Base Case) (except as set out of 1.3 (f) below), and VII
(Garrad Hassan Wind Report) are substantially in agreed form.
(ii) MECI acknowledges appropriate delivery of the documents in
Schedule VI (Financial Statements).
(iii) UPC acknowledges that agreement on the budget attached as
Exhibit C to the Quotaholders Agreement, is subject to MECI's
sole discretion (acting reasonably).
<PAGE>
(f) Conformation, satisfactory to MECI, that the fee arrangements between
IVPC4 and the Senior Lenders are adequately reflected in the Equity
Base Case under the line item referred to as "Front End Fees".
2. PURCHASE AND SALE, CLOSING AND PURCHASE PAYMENT.
2.1 Subject to Sections 1.2 and 1.3 above, MECI hereby agrees to purchase from
UPC, and UPC hereby agrees to sell to MECI, 100% of the legal and
beneficial interest in the capital of IEBV5 (the "Interest") in accordance
with the provisions of this Agreement.
2.2 Following satisfaction of the last of the conditions precedent in Section
1.3 above, the transfer of the Interest shall be perfected by way of a duly
executed Notarial Deed and MECI and UPC shall cause IEBV5 and IEBV4,
respectively, to execute the Quotaholders Agreement.
2.3 The purchase payment for the Interest shall be Italian lire Ninety Billion,
Three Hundred Million (ITL 90,300,000,000), ("Purchase Payment") and shall
be paid and adjusted in accordance with the following provisions:
(a) Initial Payment.
Following execution of the Notarial Deed then, subject to the terms of the
Permit Side Letter, MECI shall pay UPC an amount equal to 90% of the
Purchase Payment multiplied by the ratio (calculated in MWs) which each
Stage so ready for funding bears to the Project (the "Initial Payment"), as
follows:
(i) not later than noon on the Business Day preceding the date on which
IVPC4 is ready to submit the first Borrower's Drawdown Certificate
under the Credit Agreement in respect of a Stage, MECI shall wire on
behalf of IEBV4 the following amounts (each of them an "Equity
Portion") to the Disbursement Account for the purpose of satisfying
IEBV4's obligation under the Credit Agreement to fund its portion of
Equity for that Stage:
ITL 8,532,000,000 for Stage A (or that lower amount, sufficient to
complete the equity funding of the portion pertaining to IEBV4, which
UPC shall direct in writing to MECI)
ITL 18,021,500,000 for Stage B
ITL 3,178,000,000 for Stage C
ITL 3,290,500,000 for Stage D
It is expressly agreed and understood by the Parties that in the
event the Credit Agreement is amended to reflect a change in the MWs
for Stage C and/or Stage D, then the amounts set forth above for the
Equity Portion for Stages C and D (and the corresponding Remaining
Portions and Final
<PAGE>
Payments (both defined below)) shall be adjusted to reflect the MWs
actually financed pursuant to the Credit Agreement.
(ii) Within three (3) Business Days following receipt of written
confirmation from IVPC4 that the amounts included in the first
Borrower's Drawdown Certificate for the relevant Stage have been duly
received by IVPC4, MECI shall deposit an amount equal to the
difference between the relevant Initial Payment and the relevant
Equity Portion (the "Remaining Portion") in the UPC Account.
(iii) if, for any reason, a drawdown does not occur within two (2) Business
Days of a Drawdown Date as specified in the relevant first Borrower's
Drawdown Certificate, then UPC shall promptly reimburse to MECI any
amounts paid by it pursuant to paragraph (i) above in respect of the
relevant Stage.
(b) Final Payment.
(i) Within three (3) Business Days of IVPC4 advising MECI of the final
outcome of the Regearing Test, MECI may conduct a re-run of the
Equity Base Case adjusted to take into account the following:
(A) the actual starting dates of the commencement of sale of
electricity from the turbines;
(B) the actual start dates of the CIP6/92 incentive periods and the
projected end dates of such periods;
(C) the actual megawatts constructed and accepted under the
Construction Contract;
(D) any reduction in equity cashflows available to MECI resulting
from the application by the Agent of Clause 18.2 of the Credit
Agreement;
(E) the actual timing of MECI's payments pursuant to Clauses 2.3
(a)(i) and (ii) above;
(F) any amounts paid or payable by IVPC4 in connection with the
provisions of Article 12 of Resolution No. 13/99 of the
Authority for the Electricity and Gas plus any increase in
revenues provided under CIP6 as compensation for any such
amounts and any decrease in costs of interconnection resulting
from the implementation of the above Article 12; and
(G) the projected timing of the making of the Final Payment (as
defined below) by MECI to UPC, and the projected amount that
results from the adjustments made pursuant to these subsections
(A) through (G) inclusive (for the avoidance of doubt, this may
result from an iterative calculation).
<PAGE>
(ii) Within three (3) Business Days from the completion of the above re-
runs, MECI shall present to UPC the results of its re-run of the
Equity Base Case (along with an explanation of its application of the
adjustments specified in subparagraphs (A) through (G) inclusive
above), with a view to agreeing with UPC a revised Equity Base Case
(the "Revised Equity Base Case"). Should the Parties fail to reach
agreement, the Parties shall defer the final determination of the
Revised Equity Base Case (other than in respect of the assumptions
under subparagraph (i) (B) above which will be regulated as set forth
below) to KPMG, which shall render its decision within ten (10)
Business Days.
(iii) Should the Revised Equity Base Case show an IRR lower than that
specified in Section 1.2(c) above, then the remaining 10% of the
Purchase Payment shall be reduced to an amount necessary to restore
the IRR to the level specified in Section 1.2(c), down to zero if
necessary (the "Reduction"). MECI shall pay UPC the full remaining
10% of the Purchase Payment, less any Reduction (the "Final
Payment"), within five (5) Business Days from the final determination
of the Revised Equity Base Case.
(iv) In the event that UPC and MECI have different CIP6/92 end date
projections pursuant to subsection (i) (B) above, then the Final
Payment will initially be calculated using MECI's CIP6/92 end dates.
Any difference between the Final Payment amount calculated using
UPC's end date assumptions and the Final Payment amount using MECI's
end date assumptions will be withheld by MECI pending official
confirmation of such end dates. If such confirmation is not given
within two (2) years of the calculation date, then such amount will
no longer be payable to UPC. If such confirmation is provided within
two (2) years of the calculation date, then the relevant amount,
compounded at 15.71% per annum, shall be released to UPC within five
(5) Business Days of such confirmation.
2.4 Put and Call
If the drawdown for Stages A and B does not occur within thirty (30) days
of submittal of the first Borrower's Drawdown Certificate for those Stages,
then MECI shall have the option to put the Interest to UPC for an amount
equivalent to the payments which MECI has made pursuant to Sections 2.3(a)
and 4.0. If MECI does not make the payments under Sections 2.3(a)(i) and
2.3(a)(ii) for Stages A and B, UPC shall have the option to call the
Interest from MECI for an amount equivalent to the payments which MECI has
made pursuant to Sections 2.3(a)(i) and 2.3(a)(ii) and 4.0.
2.5 Late Payments
Any payment due under this Section 2.0 which is late shall accrue interest
until paid at the rate of EURIBOR + 4% per annum. Any undisputed amounts,
or uncontested portions of disputed amounts, shall be paid by the relevant
Party in
<PAGE>
accordance with the provisions hereof.
3. EQUITY BASE CASE
3.1 The Parties have agreed on an equity base case for the Project (the "Equity
Base Case"), attached hereto as Schedule II which is the Banking Base Case
with the following assumptions:
(a) wind forecast equal to Hassan Report (attached hereto as Schedule VII)
at Financial Close at a 50% probability of exceedance;
(b) period of any Franchigia not deducted from net power production; and
(c) the timing of the making of the Purchase Payment as specified in
Section 2 above.
Following the application of the above assumptions and limited to the
three-year period ending on 31 December 2002, the Equity Base Case shall
also assume that the Total Operation Cost of IVPC4 shall not exceed the
following amounts:
ITL 349,300,000 during the year 2000;
ITL 2,570,500,000 during the year 2001; and
ITL 8,145,600,000 during the year 2002.
4. FUNDING OF SUBORDINATED DEBT FOR IVPC4
Concurrently with the wiring of funds under subparagraph 2.3 (a) (i) above
for each Stage, MECI shall procure, pursuant to the terms of the
subordinated loan agreement in the form attached hereto as Schedule VIII
(the "IEBV5 Subordinated Loan Agreement") that IEBV5 extends a subordinated
loan to IVPC4 for up to 50% of the equity contribution required to be
contributed to IVPC4 with respect to such Stage under the Senior Loan. For
the avoidance of doubt, the Equity Portion for each Stage paid by MECI
under this agreement shall be those amounts lent by IEBV4 to IVPC4 for such
Stage pursuant to the IEBV4 Subordinated Loan Agreement.
The Parties expressly agree that either UPC or MECI may propose alternative
arrangements with respect to the subordinated loans documented in their
respective subordinated loan agreements and, provided that such proposed
arrangements comply with the terms of the Finance Documents (including the
obtaining of consents, if any, required thereunder), UPC or MECI may
implement said alternative arrangements with the consent of the other
Party, which consent shall not be unreasonably withheld or delayed.
5. NOTE PAYABLE TO PARENT
Simultaneously with the purchase of the Interest and as part of the
consideration paid therefor, UPC shall assign to MECI the promissory note
dated 1 March 2000 (the "Note") in the principal amount of USD 2,013,339.
The agreed form
<PAGE>
of both the Note and the assignment thereof being attached hereto as
Schedule IX.
6. CERTAIN OTHER MATTERS.
6.1 Development Costs
(a) Up to Financial Close
UPC has been solely responsible for funding all development expenses
for the Project through Financial Close, which (together with interest
at the rate of EURIBOR plus four percent (4%)) shall be reimbursed
from the initial draw of the Senior Loan. To the extent reasonable
development expenses have been incurred by other UPC Affiliates, such
costs, duly certified by a director of the relevant Affiliate, will be
similarly reimbursed at Financial Close.
(b) Following Financial Close
Reasonable development expenses shall be paid out of the proceeds of
the Senior Loan based on actual budget (not to exceed the Banking Base
Case budget for such expenses).
6.2 AIP Termination Payment
IVPC4 and IVPC Puglia S.r.l. (a company now merged into IVPC4) previously
entered into two Associazione in Partecipazione ("AIP Agreements") with an
Affiliate of UPC, IVPC Energy 3 B.V. ("IEBV3"). In order to facilitate
financing of the Projects IVPC4 and IEBV3 have terminated the AIP
Agreements effective 30 November 1999 (the "AIP Termination Agreements").
The AIP Termination Agreements stipulate that all rights of IEBV3 pursuant
to the AIP Agreements are terminated in exchange for IVPC4 making a payment
to IEBV3 of ITL 2.94 billion. Said AIP termination payment shall be made
not earlier than the First Drawdown, provided the Credit Agreement allows
for such payment.
6.3 Construction Support
MECI shall not have any obligation to provide any credit support with
respect to construction of the Project, including for cost overruns.
6.4 Construction Contingency Distribution
(a) Subject to Section 6.8.2, any Contingent Payments available for
distribution shall be allocated and distributed for the benefit of UPC
solely, and neither IEBV5 nor MECI shall be entitled to any portion
thereof (except for any amounts equal to 50% of any operating cash
flows used by IVPC4 to fund any capital costs or the Debt Reserve
Account in respect of the release of any Security Interest in the land
of
<PAGE>
the Project sites, which amounts shall be retained by IEBV5 or MECI),
provided, however, that there shall be no distribution of a Contingent
Payment in an amount equivalent to:
(i) that claimed by any third party against IVPC4 alleging that the
Turnkey Construction Contract was awarded in breach of any
European Community Directive concerning public or utilities
procurement or applicable legislation implementing the same in
Italy for so long as such claim is outstanding; and
(ii) any claims by any third party against IVPC4 in connection with
payments due under the Interconnection Agreements entered into
or to be entered into by IVPC4, for so long as such claims are
outstanding,
(each such retained amount a "Retained Contingency Amount").
For the avoidance of doubt, any Retained Contingency Amount shall be
distributable immediately following satisfaction or termination of the
above referenced claim(s).
(b) Any EU Grants awarded to IVPC4 after the date of this Agreement and
not included in the Banking Base Case shall be for the benefit of the
UPC solely, and neither IEBV5 nor MECI shall be entitled to any
portion thereof.
6.5 Management Responsibility
Following Financial Close, UPC, through its Affiliates, will maintain
management control of the Project, and as such will have responsibility for
the ordinary activities during the construction, post-construction and
operational phases of the Project. UPC's Affiliates will act as
construction manager and operations and maintenance manager for the Project
in accordance with: (i) the management and O&M contracts agreed with the
Senior Lender, and (ii) the budget approved by IVPC4. UPC shall cause
Manager to issue quarterly O&M reports for the benefit of MECI.
6.6 Retained Ownership
(a) UPC and MECI acknowledge that the Quotaholders Agreement attached
hereto as Schedule III contains language governing the disposition of
the quotas of IVPC4, which language reflects the Parties' intent to
restrict subsequent sales of the quotas of IVPC4. UPC and MECI hereby
agree to be bound (and to cause each of their affected lower tier
companies to be similarly bound) by the terms of the Quotaholders
Agreement governing disposition of the quotas of IVPC4 as if each of
them individually were a signatory to the Quotaholders Agreement.
(b) without limiting the generality of the undertaking under paragraph (a)
above, UPC and MECI agree as follows:
<PAGE>
(i) neither UPC nor MECI shall dispose of the whole or any part of
their ownership in IVPC4, whether held directly or indirectly,
until 1 September 2004 (the period of time from the effective
date of this Agreement to 1 September 2004 is hereafter referred
to as the "Hold Period");
(ii) following the Hold Period, each of UPC and MECI grants to the
other Party a right of first refusal (to be exercised, to the
maximum extent possible, on the same terms as set out in Clause
8(b)(ii) of the Quotaholders Agreement) in respect of any
contemplated disposal of all or part of the capital of any
Affiliate holding a direct or indirect participation in the
Capital of IVPC4. For the avoidance of doubt, both UPC and MECI
agree that any of their Affiliates holding at any time a direct
or indirect participation in the capital of IVPC4 shall be
maintained as a special purpose company which shall hold the
quotas of IVPC4 as its sole asset.
(c) UPC shall not dispose of any ownership interest in the management and
service companies until after the Project shall have produced the
first 1,500 GWH. After the end of such period, if UPC and FIP together
fail to retain at least a 51% ownership interest in each of the
management and service companies, then, upon MECI's request, UPC shall
use its IVPC4 board votes to terminate the agreements with such
companies.
6.7 FCPA Compliance
Each of UPC and MECI shall cause IEBV4, IEBV5, IVPC4 and each of the other
UPC Affiliates involved in the Project to comply with applicable
provisions of the Foreign Corrupt Practices Act, 15 U.S.C., Section 78a,
78dd-1, 78dd-2, 78ff (the "FCPA").
6.8 Adjustments of Contingent Payments
6.8.1 If any of the payments and/or allocations provided for under Section 6.4
above is not permitted under Applicable Law, such payments and/or
allocations shall not be made and each of MECI and UPC will work together
in good faith (and take action to cause IVPC4) to structure payments and
distributions from IVPC4 to themselves, and if necessary make payments
between themselves regardless of how distributions and/or payments from
IVPC4 are made, so that the Parties will accomplish the business purpose
of the allocations and/or payments described in this Agreement. Any such
payments and/or allocations among IVPC4, UPC and MECI will (a) comply with
all Applicable Laws, (b) be structured in a manner which achieves the
business purposes described herein in the most mutually tax efficient
manner for IVPC4, MECI and UPC, (c) be made on an after-tax basis for the
Person making such payment, and (d) not require either MECI or UPC to pay
the other party more cash than such Person has remaining after deducting
all taxes actually incurred due to the receipt of such funds (directly or
indirectly) from IVPC4.
<PAGE>
6.8.2 Any funds received by MECI and/or IEBV5 which represent distributions
of the Contingent Payments referenced in Section 6.4 above may be held
by MECI and/or IEBV5 until the model re-run subsequent to the
Regearing Test, provided that such funds are put into an interest
earning account and the interest earned on such funds shall be for the
benefit of UPC. If as of the date of such model re-run, any third
party has not validly challenged the award of EU Grants to IVPC4, then
MECI and/or IEBV5, as the case may be, shall immediately release said
funds to UPC (plus any interest earned on such amounts). If prior to
the Regearing Test, any third party has validly challenged the award
of EU Grants to IVPC4, then MECI shall be entitled to retain, for as
long as any such challenge is pending, a portion of the Contingent
Payment which is otherwise reasonably necessary to compensate it for
the potential shortfall in cash flows (calculated on a net present
value basis using a 15.71% discount rate, hereinafter called the "NPV
Basis") which it would otherwise be entitled to receive pursuant to
the terms of this Agreement had said challenge not been brought. Upon
final resolution of said challenge (including final appeal by IVPC4 to
the highest authority with jurisdiction over the matter), MECI shall
pay to UPC: (i) the Contingent Payment amounts withheld (plus accrued
interest) in the event that IVPC4 is successful, or (ii) such lesser
amount (plus accrued interest), down to zero, as is required to help
restore the cash flows (NPV Basis) which MECI would have otherwise
received had such challenge to the award of EU Grants to IVPC4 not
been successful.
6.9 UNDERTAKINGS
6.9.1 UPC shall cause IVPC4 to comply in all material respects with the
provisions of Article 15 of Legislative Decree No. 79 of 16 March
1999. For the avoidance of doubt, MECI shall provide all reasonably
practical assistance (excluding the payment of money) to enable UPC to
comply with its obligation.
6.9.2 UPC undertakes, at its cost and expense (including payments from
Contingent Payments distributable to it), to cause IVPC4 to comply, as
appropriate, with Applicable Law relating to height limits and
environmental impact assessments with respect to those Projects for
which the application for the building permits has been filed after 14
March 1999. For the avoidance of doubt, MECI shall provide all
reasonably practical assistance (excluding the payment of money) to
enable UPC to comply with its obligation.
7. REPRESENTATIONS AND WARRANTIES
7.1 UPC
UPC makes the following representations and warranties as of the date
of this Agreement:
(a) Organization. UPC (i) is duly constituted, validly existing and
in good standing under the laws of the Netherlands Antilles, (ii)
is duly qualified, authorized to do business and in good standing
in each jurisdiction where the character of its properties or the
nature of its activities makes such qualification necessary, and
(iii) has all requisite corporate power and
<PAGE>
authority (1) to carry on its business as now being conducted and
as proposed to be conducted by it, (2) to own or hold under lease
and operate the property it purports to own or hold under lease,
(3) to execute, deliver and perform each Transaction Document to
which it is a party, and (4) to take all action as may be
necessary to consummate the transactions contemplated thereunder.
(b) Authorization; No Conflict. UPC has duly authorized, executed and
delivered each Transaction Document to which it is a party, and
UPC's execution and delivery thereof, UPC's consummation of the
transactions contemplated thereby, and UPC's compliance with the
terms thereof do not and will not (i) contravene UPC's charter
documents or any Applicable Law binding on UPC or any of UPC's
properties, (ii) contravene or result in any breach of or
constitute any default under, or result in or require the
creation of any lien upon any of UPC's property under any
agreement or instrument to which UPC is a party or by which UPC
or any of UPC's properties may be bound or affected, and (iii)
require the consent or approval of any Person which has not
already been obtained.
(c) Enforceability. This Agreement and each Transaction Document to
which UPC is a party is a legal, valid and binding obligation of
UPC enforceable against UPC in accordance with its terms, except
to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors' rights and
subject to general equitable principles.
(d) With respect to IEBV5:
(i) Organization. IEBV5 (A) is a corporation duly constituted,
validly existing and in good standing under the laws of The
Netherlands, (B) is duly qualified, authorized to do
business and in good standing in each jurisdiction where
the character of its properties or the nature of its
activities makes such qualification necessary, and (C) has
all requisite corporate power and authority (1) to carry on
its business as now being conducted and as proposed to be
conducted by it, (2) to own or hold under lease and operate
the property it purports to own or hold under lease, (3) to
execute, deliver and perform each Transaction Document to
which it is or will become a party, and (4) to take all
action as may be necessary to consummate the transactions
contemplated thereunder.
(ii) Capitalization. The authorized capital stock of IEBV5
consists of 200 shares of common stock, no par value, of
which 46 shares are issued and outstanding. All such issued
and outstanding shares are validly issued, fully paid and
nonassessable and are legally and beneficially owned by UPC
free and clear of any Security Interest. No interest in
IEBV5 is subject to any option,
<PAGE>
warrant, right to call or commitment of any kind or
character. No convertible bonds, warrants, options or other
rights have been issued or are outstanding, which may give
right to any Person to subscribe or purchase any part of
the Interest or cause new shares to be issued, nor have any
resolutions been taken or contracts been entered into which
may result in the creation of any of the above rights.
(iii) Authorization; No Conflict. IEBV5 has duly authorized,
executed and delivered each Transaction Document to which
it is a party, and the execution and delivery thereof and
the consummation of the transactions contemplated thereby
and the compliance with the terms thereof do not and will
not (A) contravene its respective charter documents or any
Applicable Law binding on it or its respective properties,
(B) contravene or result in any breach of or constitute any
default under, or result in or require the creation of any
lien (other than permitted liens) upon any of its
respective properties under any agreement or instrument to
which it is a party or by which it or any of its properties
may be bound or affected, and (C) require the consent or
approval of any Person which has not already been obtained.
(iv) Financial Statements. The IEBV5 Financial Statements and
all the accounting books and records required by Applicable
Law have been prepared in compliance with Applicable Law
and Applicable GAAP, are true and complete, and accurately
reflect the economic and financial condition of IEBV5 as of
the dates they were prepared. There are no liabilities not
reflected in the IEBV5 Financial Statements which should
have been reflected in accordance with Applicable GAAP.
Since 31 December 1999, no events or changes have occurred
which have or could materially adversely affect the
condition (financial or otherwise) of IEBV5 as reflected in
the IEBV5 Financial Statements.
(v) Employees. IEBV5 has no employees. To the best of UPC's
knowledge, there are no persons who can claim to be
employed in any form or manner by IEBV5. To the best of
UPC's knowledge, there are no past or present consultants
of IEBV5 who could claim the existence of an employment
relationship with IEBV5.
(vi) Taxes. IEBV5 has complied with all applicable tax, social
security and compulsory insurance laws and regulations in
force from time to time including all direct and indirect
taxes and VAT, or similar charges in any way arising in
connection with tax returns, transactions or acts have been
regularly paid or reserved; all tax or similar declarations
have been properly and timely filed. To the best of UPC's
knowledge, there are no pending or announced proceedings or
assessments against IEBV5, nor any other claims by the tax
or social security authorities with respect to the
activities which IEBV5 conducts nor are there any
<PAGE>
circumstances which could give rise to such claims. All
amounts reserved in the IEBV5 Financial Statements for
current and deferred tax and social security liabilities
are adequate for the payment of all taxes, duties or
similar charges, fines and interest for which IEBV5 may be
held liable for any reason whatsoever.
(vii) Business. As of the date hereof, IEBV5 has no material
liabilities except: (i) ownership of the quotas of IVPC4,
(ii) the Note (iii) obligations to Executive Management
Trust arising under the Management Agreement dated as of
28 July 1998, (iv) those liabilities identified in the
IEBV5 Financial Statements, and (v) de-minimus Dutch
taxes.
(viii) Neither UPC nor any of its owners/partners have made or
caused to be made, any elections by or for IVPC4 or
agreements between the quotaholders of IVPC4, other than
the Entity Classification Election - From 8832 (filed for
IVPC4 on 16 February 1997), for the allocation of income,
(loss), deductions, investment interest, credits, taxes,
distributions and debt between the quotaholders of IVPC4
for U.S. Tax purposes.
(e) With respect to IVPC4:
(i) Organization. IVPC4 (A) is a corporation duly constituted,
validly existing and in good standing under the laws of
Italy, (B) is duly qualified, authorized to do business
and in good standing in each jurisdiction where the
character of its properties or the nature of its
activities makes such qualification necessary, and (C) has
all requisite corporate power and authority (1) to carry
on its business as now being conducted and as proposed to
be conducted by it, (2) to own or hold under lease and
operate the property it purports to own or hold under
lease, (3) to execute, deliver and perform each
Transaction Document to which it is or will become a
party, and (4) to take all action as may be necessary to
consummate the transactions contemplated thereunder.
(ii) Capitalization. The authorized capital of IVPC4 consists
of 7,520,000 quotas, par value ITL 1,000, of which
7,520,000 quotas are outstanding. All such outstanding
quotas are fully paid and nonassessable and are
beneficially owned 50% each by IEBV4 and IEBV5 free and
clear of any Security Interest. No interest in IVPC4 is
subject to any option, warrant, right to call or
commitment of any kind or character. No convertible bonds,
warrants, options or other rights have been issued or are
outstanding, which may give right to any Person to
subscribe or purchase any part of the quotas of IVPC4 or
cause new quotas to become outstanding, nor have any
resolutions been taken or
<PAGE>
contracts been entered into which may result in the
creation of any of the above rights.
(iii) Financial Statements. The IVPC4 Financial Statements and
all the accounting books and records required by
Applicable Law have been prepared in compliance with
Applicable Law and Applicable GAAP, are true and complete,
and accurately reflect the economic and financial
condition of IVPC4 as of the dates they were prepared.
There are no liabilities not reflected in the IVPC4
Financial Statements which should have been reflected in
accordance with Applicable GAAP. Since 31 December 1999,
no events or changes have occurred which have or could
materially adversely affect the condition (financial or
otherwise) of IVPC4 as reflected in the IVPC4 Financial
Statements.
(iv) Employees. The employees of IVPC4 have been duly
remunerated for all services performed for IVPC4 in
accordance with all Applicable Law and the relevant
employee contracts. All payments due in relation to
severance pay, holidays, insurance, social security
contributions and withholding taxes required by Applicable
Law and the relevant employment contracts have been
regularly effected by IVPC4, or the relevant amounts have
been reserved. The salaries and benefits due to each of
IVPC4's employees and their relevant position of
employment are those which are reflected in the pay
registers of IVPC4. There are no other forms of
remuneration, insurance, pension or severance pay
indemnities, or any agreed items (including fringe
benefits) owed to IVPC4's employees other than those
prescribed by Applicable Law or the employment contracts
with IVPC4. To the best of UPC's knowledge, there are no
persons other than those listed in IVPC4 pay registers who
can claim to be employed in any form or manner by IVPC4.
(v) Taxes. IVPC4 has complied with all Applicable Law
regarding tax, social security and compulsory insurance in
force from time to time including all direct and indirect
taxes and VAT, or similar charges in any way arising in
connection with tax returns, transactions or acts have
been regularly paid or reserved; all tax or similar
declarations have been properly and timely filed. To the
best of UPC's knowledge, there are no pending or announced
proceedings or assessments against IVPC4, nor any other
claims by the tax or social security authorities with
respect to the activities which IVPC4 conducts nor are
there any circumstances which could give rise to such
claims. All amounts reserved in the IVPC4 Financial
Statements for current and deferred tax and social
security liabilities are adequate for the payment of all
taxes, duties or similar charges, fines and interest for
which IVPC4 may be held liable for any reason whatsoever.
<PAGE>
(vi) Environmental/Occupational Safety & Health. There is no
apparent visual evidence of environmental contamination at
or above the surface of the sites on which the Project
shall be located. To UPC's knowledge, there is no
underground environmental contamination at any of the
sites on which the Project shall be located. IVPC4 has
duly complied with all Applicable Laws concerning health
and safety in the workplace, and, to the best of UPC's
knowledge, there are no pending or threatened claims,
proceedings or investigations against IVPC4 in relation
thereto. IVPC4 has obtained, or is in the process of
applying for, all necessary environmental authorizations,
environmental concessions, environmental licenses and
environmental permits required for the construction of the
Project.
(vii) Business. IVPC4 has not conducted any business other than
that related to the development, financing, operation or
maintenance of the Project, and IVPC4 does not own any
interest in any Person.
(f) With respect to certain FCPA related matters:
(i) None of UPC, IVPC4, IEBV5 or IEBV4 is owned or controlled,
in whole or in part, directly or indirectly, by any person
with whom a United States Person or a European Community
and/or European Union Person is prohibited from conducting
business pursuant to applicable United States federal or
state laws and regulations or applicable European
Community or European Union laws or regulations as they
exist on the date of this Agreement.
(ii) UPC, in the performance of its obligations with respect to
the Project, confirms that none of UPC or any of UPC's
Affiliates, directors, officers, employees, or their
respective agents, have violated any laws of Italy, The
Netherlands, the United States or any other country which
prohibit any Person from making any payment of money or
providing anything of value, directly or indirectly to any
government official, political party or candidate for
political office.
(iii) Neither UPC, IVPC4, IEBV4, IEBV5 nor any of its directors,
officers or senior managers have ever been convicted of a
serious criminal offence in Italy, the United States of
America or in any other country. Neither UPC, IVPC4,
IEBV4, IEBV5 nor any of its directors, officers or senior
managers have entered into any agreement relating to the
cessation of illegal activities with any governmental
entity or political subdivision of the United States
government, the Italian government, the Dutch government,
the Netherlands Antilles government or the government of
any other country.
<PAGE>
(iv) UPC is 75% Controlled, indirectly, by Mr. James Houston
and 25% beneficially owned and Controlled, indirectly, by
Mr. and Mrs. Brian Caffyn. All of the shares of UPC
controlled by Mr. James Houston are held free and clear of
any Security Interest. All of the shares of UPC
beneficially owned and Controlled by Mr. and Mrs. Brian
Caffyn are held free and clear of any Security Interest
that would affect their voting rights in such shares.
(g) Litigation. There are no pending or, to the best of UPC's
knowledge, threatened actions or proceedings of any kind,
including actions or proceedings of or before any Governmental
Authority, to which any of UPC or IEBV5 or IVPC4 is a party or is
subject, or by which any of the properties of any of them are
bound that, if adversely determined to or against UPC or IEBV5 or
IVPC4 would have a material adverse effect, nor, to the best of
UPC's knowledge, is there any basis for any such action or
proceeding.
(h) Exactness of the information supplied. To the best of UPC's
knowledge, all data and information supplied by UPC or its
Affiliates or its consultants to MECI or to its employees,
representatives or consultants during the due diligence and the
negotiations preceding the execution of this agreement were
materially complete, correct and accurate (and no material
information was left undisclosed) as of the date the data and/or
information was tendered to MECI and there are no material events
or information which have occurred or become available between
such date and the date of this Agreement which have not been
brought in writing to the attention of MECI.
7.2 MECI
MECI makes the following representations and warranties as of the date
of this Agreement:
(a) Organization. MECI (i) is a corporation duly constituted, validly
existing and in good standing under the laws of The Netherlands,
(ii) is duly qualified, authorized to do business and in good
standing in each jurisdiction where the character of its
properties or the nature of its activities makes such
qualification necessary, and (iii) has all requisite corporate
power and authority (1) to carry on its business as now being
conducted and as proposed to be conducted by it, (2) to own or
hold under lease and operate the property it purports to own or
hold under lease, (3) to execute, deliver and perform each
Transaction Document to which it is a party, (4) to take all
action as may be necessary to consummate the transactions
contemplated thereby.
(b) Authorization; No Conflict. MECI has duly authorized, executed
and delivered each Transaction Document to which it is a party,
and neither MECI's execution and delivery thereof nor MECI's
consummation of the transactions contemplated thereby nor MECI's
compliance with the terms
<PAGE>
thereof does or will contravene MECI's articles or by-laws, or
any Applicable Law binding on MECI, or any of MECI's
properties.
(c) Enforceability. Each Transaction Document to which MECI is a
party is a legal, valid and binding obligation of MECI
enforceable against MECI in accordance with its terms, except
to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors' rights and
subject to general equitable principles.
(d) Litigation. There are no pending or, to the best of MECI's
knowledge, threatened actions or proceedings of any kind,
including actions or proceedings of or before any Governmental
Authority, to which MECI is a party or is subject, or by which
MECI or any of MECI's properties are bound that, if adversely
determined to or against MECI, would have a material adverse
effect, nor, to the best of MECI's knowledge, is there any basis
for any such action or proceeding.
7.3 Indemnity.
(a) Without prejudice to all other rights and remedies, if any, available
to MECI under Applicable Law and pursuant to this Agreement, UPC
hereby agrees to indemnify and hold harmless MECI in respect of any
loss or damage suffered by MECI (whether directly or through IVPC4 or
IEBV5) to the extent such loss or damage arises out of the breach of
the representations and warranties contained in Sections 7.1 (d)(iv),
(vi) and (vii), 7.1.(e)(iii) and (v), and 7.1 (f). For the avoidance
of doubt, MECI shall not be entitled to double payment of damages in
respect of the same event, pursuant to different remedies available
under Applicable Law or this Agreement.
(b) Every time a fact or event occurs from which a right to compensation
pursuant to paragraph (a) may arise, MECI shall give written notice
thereof to UPC within ninety days of the day on which it became aware
of such fact or event. The notice shall contain the relevant
information and the indication of the amount claimed and shall be
issued no later than:
(i) one hundred and twenty days after the expiration, for statutory
limitation, of the claims which may be raised by third Parties,
in case of breach to the representations and warranties under
Sections 7.1 (d) (vi), 7.1 (e) (v) and 7.1 (f);
(ii) 30 June 2003, in respect to claims for which an indemnification
may be sought by MECI pursuant to Sections 7.1 (d) (iv) and 7.1
(e) (iii).
(iii) 1 March 2001, in respect to claims for which an indemnification
may be sought by MECI pursuant to Sections 7.1(d)(vii).
(c) Upon receipt of the notice under paragraph (b), MECI and UPC will meet
promptly to resolve amicably any dispute relating to the request from
MECI for an indemnity pursuant to paragraph (a). If the Parties do not
reach an agreement
<PAGE>
within thirty days of the request of MECI (or within a further period
of thirty days in case of mutually agreed extension of the above term)
the claim of MECI may be submitted to arbitration pursuant to
paragraph 9.10.
8. CONFIDENTIALITY AND PUBLICITY
MECI shall keep and ensure that each of its officers, directors,
agents, employees and advisers shall keep the UPC Information (as
defined below) in strictest confidence, and UPC shall keep and ensure
that each of its officers, directors, agents, employees and advisers
shall keep the MECI Information (as defined below) in strictest
confidence, in each case for use only in connection with the Project.
For this purpose, (i) "UPC Information" means the wind data (including
the Hassan Report), financial information concerning UPC and its
Affiliates, and any other documents or information delivered to MECI
in connection with MECI's due diligence and continuing ownership of
IVPC4, and "MECI Information" means financial information concerning
MECI and its Affiliates (including IEBV5), (ii) the Transaction
Documents are both UPC Information and MECI Information, and (iii) any
other information disclosed by one party (or their Affiliates) to the
other in writing and marked as 'Confidential', or disclosed orally but
promptly identified in writing as 'Confidential' shall be confidential
information of the disclosing party following receipt of such written
identification. Except as required by law, neither party shall issue
any statement or communication to the public regarding the
transactions contemplated hereunder without the prior written consent
of the other party.
The confidentiality obligations under Section 8 shall not apply to the
following information: (i) information which is or becomes part of the
public domain other than as a result of a breach of this Agreement;
(ii) information which was known to the receiving party (other than
through a breach of this Agreement) before being disclosed to the
receiving party by the disclosing party; and (iii) information which
is required to be disclosed pursuant to Applicable Law (provided that
the disclosing party shall seek to minimise such disclosure).
Notwithstanding the above, disclosure of relevant confidential
information may be made to any Person (including the Parties): (i)
proposing to purchase an interest in the Project, or (ii) who is a
potential financing source for the Project or (iii) who is an advisor,
Affiliate or employee of any of the above Persons, provided in each
case that the party wishing to disclose such confidential information
receives the prior written consent of the other party to this
Agreement (such consent not to be unreasonably withheld or delayed)
and the Person enters into a confidentiality agreement with terms
comparable to those specified herein.
9. MISCELLANEOUS
9.1 Notices and Payments.
Notices. All notices or other communications required or permitted to
be given hereunder shall be in writing, shall be addressed as provided
below and shall be
<PAGE>
considered as properly given (i) if delivered in person, (ii) if sent
by overnight delivery service (including Federal Express, ETA, Emery,
Purolator, DHL, Air Borne and other similar overnight delivery
services), (iii) if overnight delivery services are not readily
available, if mailed by first class mail, postage prepaid, registered
or certified with return receipt requested or (iv) if sent by telecopy
with a confirming copy sent by courier or first class mail as provided
in clauses (ii) and (iii). Notice so given shall be effective upon
initial receipt by the addressee; provided, however, that if any
notice is tendered to an addressee and the delivery thereof is refused
by such addressee, such notice shall be effective upon such tender.
For the purposes of notice, the addresses of the Parties shall be as
set forth below; provided, however, that any party shall have the
right to change its address for notice hereunder to any other location
by giving of thirty (30) days' prior written notice to the other party
in the manner set forth above. The initial addresses of the Parties
hereto are as follows:
(1) MECI: Landsdown House
Berkeley Square
London W1X 5DH
Attention: General Counsel
Fax: +44 171 312 4041
(2) UPC: UPC International Partnership CV II
c/o Rennie and Company
1750-1500 West Georgia Street
Vancouver, B.C.
Canada V6G 2Z6
Attention: David Rennie
Peter A. Gish, Esq.
Fax: + 1 (604) 681-5803
Payments. All payments required or permitted hereunder shall be made
in lawful currency of the Italian Republic to one or more accounts
designated by the receiving party pursuant to a notice delivered to
the other party in the manner set forth above.
9.2 Waivers.
Any Party's failure at any time to require strict performance by the
other Party of any of the provisions hereof shall not waive or
diminish the first Party's right thereafter to demand strict
compliance therewith or with any other provision. None of the
conditions or provisions of this Agreement shall be held to have been
waived by any act or knowledge of a Party, its agents or employees,
but only by an instrument in writing signed by an officer of such
Party and delivered to the other Party.
9.3 Survival and Termination of Agreement.
All covenants, agreements, representations and warranties made herein
and in the certificates and other documents delivered pursuant hereto
shall continue in
<PAGE>
full force and effect so long as any of the rights or obligations
remain unsatisfied, whereupon this Agreement shall terminate.
9.4 Successors and Assigns.
No assignment or transfer (by operation of law or otherwise) of this
Agreement by either Party hereto of any of its rights or duties
hereunder may be made without the prior written consent of the other
Party hereto, provided that either Party shall have the right to
assign its rights and obligations hereunder to an Affiliate. All
covenants, promises and agreements by or on behalf of any Party which
are contained in this Agreement shall inure to the benefit of the
successors and assigns of the other Party.
9.5 Severability.
In case any one or more of the provisions contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
9.6 Accounting Terms.
All accounting terms not specifically defined herein shall be
construed and computed in accordance with Applicable GAAP.
9.7 Headings.
Headings in this Agreement are for convenience of reference only and
are not part of the substance hereof.
9.8 Counterparts.
This Agreement may be executed in any number of identical
counterparts, any set of which signed by all the Parties hereto shall
be deemed to constitute a complete, executed original for all
purposes.
9.9 Good Faith.
The Parties hereto shall act in good faith and fair dealing with
respect to the transactions contemplated under this Agreement.
9.10 Arbitration.
(i) Any controversy, claim or dispute between the Parties arising out
of or related to this Agreement or the breach, termination or
invalidity hereof, which cannot be settled amicably by the
Parties, shall be submitted for arbitration in accordance with
the provisions contained herein and in accordance with the
International Chamber of Commerce Arbitration Rules of the
International Chamber of Commerce of Paris as at present in force
("Rules"). Judgement upon the award rendered by the arbitrators
<PAGE>
may be entered in any court having jurisdiction. The
decision of the arbitrators shall be final, and each of the
Parties waives any right to appeal any decision reached by
the arbitrators. The arbitrators shall determine all
questions of fact and law relating to any controversy,
claim or dispute hereunder, including but not limited to
whether or not any such controversy, claim or dispute is
subject to the arbitration provisions contained herein;
(ii) any Party desiring arbitration shall serve on the other
Party and any other applicable Person, in accordance with
the aforesaid Rules, its notice of arbitration
("Arbitration Notice"), accompanied by the name of the
arbitrator selected by the Party serving the Arbitration
Notice. Failing the other Party's acceptance of the
selected arbitrator or the Parties' agreement on a single
mutually acceptable arbitrator, a second arbitrator shall
be chosen by the other Party, and a third arbitrator shall
be chosen by the two arbitrators so selected and act as
presiding arbitrator of the tribunal. If the Party upon
whom the Arbitration Notice is served fails to accept the
first Party's arbitrator, agree with the first Party upon a
single mutually acceptable arbitrator or advise the other
Party of its selection within thirty (30) days after the
receipt of the Arbitration Notice, the second arbitrator
shall be selected by the appointing authority. If the two
arbitrators so chosen cannot agree upon a third arbitrator
within ten (10) days after the appointment of a second
arbitrator, the third arbitrator shall be selected by the
International Chamber of Commerce of Paris (the "ICC"),
which shall be the appointing authority and administering
authority in accordance with the Rules; provided that, the
-------- ----
Parties may strike the names of arbitrators proposed by the
ICC from a first and a second list to select the third
arbitrator, and the ICC shall only select such arbitrator
in its discretion if all those proposed by the ICC on the
two lists are rejected by the Parties. The arbitration
proceedings provided hereunder are hereby declared to be
self-executing, and it shall not be necessary to petition a
court to compel arbitration ;
(iii) all arbitration proceedings shall be held in London,
England. The language to be used in the arbitration
proceedings shall be English;
(iv) a demand for arbitration shall be made within reasonable
time after the claim, dispute or other matter in question
has arisen and in no event shall it be made after the date
when institution of legal or equitable proceedings based on
such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations; and
(v) if either Party to this Agreement is adjudged to have
violated the obligation of acting in good faith imposed by
Section 9.9 hereof, the arbitrators shall consider an award
of consequential and other appropriate damages against the
Party so violating the obligation of acting in good faith.
9.11 Waiver of Jury Trial
<PAGE>
Each Party hereby knowingly, voluntarily, and intentionally
waives any rights they may have to a trial by jury in respect of
any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course or conduct,
course of dealing, statements (whether verbal or written), or
actions of either Party. This provision is a material inducement
for each Party to enter into this Agreement.
9.12 Attorneys' Fees.
In a suit or proceeding brought or instituted by any Party to
this Agreement to enforce or interpret any of the provisions of
this Agreement or on account of any damages sustained by any
Party by reason of the violation of another Party of any of the
terms or provisions of this Agreement, the prevailing Party
shall be entitled to recover reasonable attorneys' fees and
expenses in such amount as shall be fixed by the arbitrators.
9.13 Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of England, with the exception of the transfer of
the Interest, which will be governed by Dutch law.
9.14 Transaction Costs.
Each Party shall be responsible for its own costs and expenses
(including advisors and counsel) resulting from the evaluation,
due diligence and negotiation related to the transaction(s)
contemplated by this Agreement.
9.15. Civil Law Notary Nauta Dutilh
MECI is aware of the fact that Maitre H.P.Ch. van Dijk or any
other civil law notary of Nauta Dutilh, advocates, civil law
notaries and tax advisors or any of their deputies (the "Civil
Law Notary") is working at Nauta Dutilh, being the offices of
the external legal counsel of UPC, IEBV5 (prior to transfer of
the shares), and IEBV4 with respect to the share transfer
contemplated by this Agreement. With reference to Articles 9 and
10 of the Directives with respect to the co-operation between
Civil Law Notaries and Lawyers ("Richtlinnen met betrekking tot
vormen van samenwerking van notarissen onderling met
advocaten"), as concluded on 1 April 1997 by the board of the
Royal Notarial Professional Organization ("Koninklijke Notariele
Beroepsorganisatie"), MECI hereby explicitly agrees to the fact
that UPC, IEBV5 (prior to transfer of the shares), and IEBV4
will be represented by Nauta Dutilh on account of the share
transfers contemplated by the Agreement.
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement in
Switzerland as of the date and year first written above.
MEC INTERNATIONAL B.V. UPC INTERNATIONAL PARTNERSHIP CV II
By: _____________________ By:____________________________
James R. Houston
Managing Director
<PAGE>
SCHEDULE I
SCHEDULE OF DEFINITIONS AND RULES OF INTERPRETATION
Definitions
- -----------
"Affiliate" of a Person (the "First Person") means a Person which directly or
indirectly Controls, or is Controlled by, or is under common Control with, the
First Person, and shall also include any limited partnership of which the First
Person or Affiliate thereof is the general partner of the First Person.
"AIP Agreement" has the meaning set forth in Section 6.2.
"AIP Termination Agreement" has the meaning set forth in Section 6.2.
"Applicable GAAP" means generally accepted accounting principles and practices
as in effect in the applicable jurisdiction from time to time, consistently
applied.
"Applicable Law" means all laws, rules, regulations, ordinances, orders, codes,
judgements, decrees, injunctions, permits and similar forms of decision of any
Governmental Authority having jurisdiction over the matter in question, whether
existing as of the date hereof or hereinafter enacted, including relevant
European Union laws and regulations, which are applicable to the Person in
question.
"Banking Base Case" has the meaning provided in Section 3.1.
"Borrower's Drawdown Certificate" shall have the meaning provided in the Credit
Agreement.
"Business Day" means a day (other than a Saturday or a Sunday) on which banks
and foreign exchange markets are open for business in Rome, Milan, New York,
London and Amsterdam.
"Closing Date" means, for any of the Senior Loan or a Subordinated Loan, the
date on which the agreement pertaining to such loan is executed.
"Construction Loan" means a construction loan under the Senior Loan.
"Contingent Payments" has the meaning provided in the Credit Agreement.
"Consulting Services Agreement" means the consulting services agreement in the
form attached hereto as Schedule IV to be entered into between IVPC Gestione
S.r.l. and Edison Mission Italia S.r.l.
"Contractor" means IWT-Italian Wind Technology S.r.l.
"Control" of a Person means the ownership, directly or indirectly, of more than
fifty percent (50%) of the voting rights for management decision-making purposes
of that Person.
"Conversion Date" means any date on which a portion of any Construction Loan
converts to the relevant Term Loan pursuant to the terms of the Senior Loan, or
if such conversion does not occur, then the date when the affected portion of
the Project is refinanced, sold or otherwise disposed of.
"Costs Side Letter" means the side letter dated 3 March 2000 between the Parties
in respect of granted cost limits.
"Credit Agreement" means the agreement evidencing the Senior Loan, and any
replacement thereto.
"Deeds of Pledge" means the deeds of pledge (scrittura per la costituzione di
pegno) to be executed by IEBV5 and IEBV4, with respect to their quota interests
in IVPC4, in favor of Senior Lender.
"Disbursement Account" means the bank account with National Westminster Bank
plc, Milan Branch, Via Turati 18, 20121 Milan - IVPC4 Disbursement Account No.
20-50247.
<PAGE>
"Equity" has the meaning provided in the Credit Agreement.
"Equity Portion" has the meaning set forth in Section 2.3.
"EU Funds" means amounts awarded and actually delivered to IVPC4 by any Regione
or Regioni of the Italian Republic out of funds provided to such Regione or
Regioni by the European Union.
"Final Payment" has the meaning set forth in Section 2.3.
"Finance Document" has the meaning provided in the Credit Agreement.
"Financial Close" means the Closing Date for the Credit Agreement.
"FIP" means Finance Investment Projects S.r.l.
"Franchigia" means the maximum period with no penalties for which the power
purchaser under the power purchase agreements is allowed to suspend the power
offtake, due to operational and maintenance requirements.
"Governmental Authority" means any federal, national, regional, provincial,
state or local government authority, agency, court or other body, officer or
public entity, including any zoning authority, building inspector, or health or
safety inspector.
"GWH" means gigawatt hour.
"Hassan" means Garrad Hassan and Partners Limited.
"Hassan Report" means the wind data report prepared by Hassan in relation to the
Project attached hereto as Schedule VII.
"Hold Period" has the meaning provided in Section 6.6.
"IEBV4" means IVPC Energy 4 B.V., a company organized under the laws of The
Netherlands.
"IEBV4 Subordinated Loan Agreement" means the loan agreement, attached hereto as
Schedule VIII, substantially identical to the IEBV5 Subordinated Loan Agreement
to be entered into by IEBV4 and IVPC4.
"IEBV5" means IVPC Energy 5 B.V., a company organized under the laws of The
Netherlands.
"IEBV5 Financial Statements" means the unaudited financial statements of IEBV5
as at 31 December 1999, attached hereto as Schedule VI.
"IEBV5 Subordinated Loan Agreement" has the meaning set forth in Section 4.0.
"Initial Payment" has the meaning set forth in Section 2.3.
"Interest" has the meaning provided in Section 2.1.
"IRR" means the internal rate of return on capital for MECI, being the number in
the cell adjacent to the cell marked "IRR" in the Equity Base Case.
"IVPC4 Financial Statements" means the audited financial statements of IVPC4 as
at 31 December 1999, attached hereto as Schedule VI.
"IVPC4 Quotaholders Agreement" means the Agreement to be entered into between
IEBV4 and IEBV5, attached hereto as Schedule III.
"EURIBOR" has the meaning set forth in the Credit Agreement.
"Mediocredito" means Mediocredito Centrale S.p.A. a bank organized under the
laws of the Italian Republic.
"MW" means megawatt.
"Net Cash Flow" means Operating Cash Flow less senior debt service.
"Note" has the meaning set forth in Section 5.0.
"Opened Stage" has the meaning set forth in Section 2.3.
"Permit Side Letter" means the side letter dated 3 March 2000 between the
Parties in respect of permits.
"Person" means any individual, partnership, joint stock company, corporation,
trust, unincorporated association or joint venture, a government or any
department or agency thereof, or any other entity.
<PAGE>
"Project" means all of the Stages, collectively, and includes the Rocca San
Felice Project.
"Purchase Payment" means the amounts referred to in Section 2.3.
"Reduction" has the meaning set forth in Section 2.3.
"Regearing Test" has the meaning ascribed to it in the Credit Agreement.
"Remaining Portion" has the meaning set forth in Section 2.3.
"Retained Contingency Amount" set forth in Section 6.4.
"Revised Equity Base Case" has the meaning provided in Section 2.3.
"Rocca San Felice Project" means the 2.4 MW wind energy project located in the
commune of Rocca San Felice.
"Rules" has the meaning set forth in Section 9.10.
"Senior Lender" means Mediocredito, and includes any successor thereto.
"Senior Loan" means any senior secured non-recourse loan.
"Stage" or "Stages" has the meaning provided in Recital C.
"Subordinated Loans" means the subordinated loans to be extended by IEBV5 and
IEBV4 pursuant to the IEBV4 Subordinated Loan Agreement and the IEBV5
Subordinated Loan Agreement.
"Term Loan" means a term loan under the Senior Loan for any of Stage A, Stage B,
Stage C, and Stage D.
"Transaction Documents" means the Shareholder Interest Purchase Agreement, the
Subordinated Loan Agreements, and the Deeds of Pledge.
"UPC Account" means the bank account with Bank J. Vontobel & Co. Ltd. in the
name of UPC International N.V., with the following wire instructions: Chase
Manhattan Bank, New York, NY, Swift Code CHASUS33, ABA # 021 0000 21, Bank J.
Vontobel & Co. Ltd., Swift Code VONTCHZZ, Account No. 001-1-004298, UPC CV
(Attn: Ms. Martina Wurgler).
"UPC Financial Statements" means the unaudited financial statements of UPC
attached hereto as Schedule VI.
<PAGE>
Interpretation
All capitalised terms not expressly defined in this Agreement shall have the
same meaning as in the Credit Agreement.
All terms defined in this agreement in the singular form shall have comparable
meanings in the plural form and vice versa.
All references to "Lira" or "ITL" shall refer to Italian Lira, or equivalent
amount in one or more foreign currencies.
A reference to an Applicable Law includes any amendment or modification to such
Applicable Law.
A reference to a Person includes such Person's permitted successors and
permitted assigns.
The words "include", "includes" and "including" and words of similar import are
not limiting or exclusive.
A reference in a document to an Article, Section, Exhibit, Schedule, Annex,
Attachment or Appendix is to the Article, Section, Exhibit, Schedule, Annex,
Attachment or Appendix of such document unless otherwise indicated.
In this Agreement, references to Schedules, the Permit Side Letter and the Costs
Side Letter shall be deemed incorporated into this Agreement by reference and
shall be part hereof.
References to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) means such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time.
The words "hereof," herein" and "hereunder" and words of similar import when
used in any document shall refer to such document as a whole and not to any
particular provision of such document.
References to "days" means calendar days, unless the term "Business Days" is
used. References to a time of day means such time in Milan, Italy unless
otherwise specified.
This document is the result of negotiations between, and has been reviewed by
the Parties hereto and their respective counsel. Accordingly, it shall be
deemed to be the product of all Parties thereto, and no ambiguity shall be
construed in favor of or against any party.
A reference in any representation to "the best of UPC's knowledge" shall mean to
the best of UPC's knowledge following appropriate inquiry into the matter in
question.
<PAGE>
SCHEDULE II
EQUITY BASE CASE
<PAGE>
SCHEDULE III
QUOTAHOLDERS AGREEMENT
<PAGE>
SCHEDULE IV
CONSULTING SERVICES AGREEMENT
<PAGE>
SCHEDULE V
FORM OF NOTARIAL DEED
<PAGE>
SCHEDULE VI
UPC FINANCIAL STATEMENTS
IEBV5 FINANCIAL STATEMENTS
IVPC4 FINANCIAL STATEMENTS
<PAGE>
SCHEDULE VII
GARRAD HASSAN WIND REPORT
(to be attached)
<PAGE>
SCHEDULE VIII
SUBORDINATED LOAN AGREEMENTS
(IEBV4 AND IEBV5)
<PAGE>
SCHEDULE IX
AGREED FORM OF NOTE AND ASSIGNMENT THEREOF
<PAGE>
EXHIBIT 18.1
To the Board of Directors of
Edison Mission Energy:
Re: Form 10-Q Report for the quarter ended March 31, 2000.
Gentlemen/Ladies:
This letter is written to meet the requirements of Regulation S-K calling for a
letter from a registrant's independent accountants whenever there has been a
change in accounting principle or practice.
We have been informed that, as of March 31, 2000, Edison Mission Energy (the
Company) has changed its method for accounting for major maintenance costs from
the accrue in advance method of accounting to the expense as incurred method of
accounting. According to the management of the Company, while the accrue in
advance has been widely used by independent power producers as well as certain
other industries, this change was made to conform its policy to the recent
position taken by the staff of the Securities and Exchange Commission (SEC),
whereby the staff has stated that it does not believe the accrue in advance
method of accounting is appropriate.
A complete coordinated set of financial and reporting standards for determining
the preferability of accounting principles among acceptable alternative
principles has not been established by the accounting profession. Thus, we
cannot make an objective determination of whether the change in accounting
described in the preceding paragraph is to a preferable method. However, we have
reviewed the pertinent factors, including those related to financial reporting,
in this particular case on a subjective basis, and our opinion stated below is
based on our determination made in this manner.
We are of the opinion that the Company's change in method of accounting is to an
acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is also preferable under the
circumstances in this particular case. In arriving at this opinion, we have
relied on the business judgment and business planning of your management.
We have not audited the application of this change to the financial statements
of any period subsequent to December 31, 1999. Further, we have not examined and
do not express any opinion with respect to your financial statements for the
three months ended March 31, 2000.
Very truly yours,
Arthur Andersen LLP
<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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 684,156
<SECURITIES> 0
<RECEIVABLES> 256,046
<ALLOWANCES> 1,126
<INVENTORY> 323,442
<CURRENT-ASSETS> 1,299,678
<PP&E> 12,367,928
<DEPRECIATION> 490,309
<TOTAL-ASSETS> 15,633,124
<CURRENT-LIABILITIES> 1,943,435
<BONDS> 7,365,372
348,360
118,054
<COMMON> 64,130
<OTHER-SE> 2,926,149
<TOTAL-LIABILITY-AND-EQUITY> 15,633,124
<SALES> 0
<TOTAL-REVENUES> 701,573
<CGS> 0
<TOTAL-COSTS> 472,242
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181,078
<INCOME-PRETAX> (45,352)
<INCOME-TAX> (15,191)
<INCOME-CONTINUING> (30,161)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 17,690
<NET-INCOME> (12,471)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
