Exhibit 10.56
EXECUTION COPY
GUARANTEE AND COLLATERAL AGREEMENT
made by
EDISON MISSION HOLDINGS CO.,
EDISON MISSION FINANCE CO.,
▇▇▇▇▇ CITY PROPERTY HOLDINGS, INC.,
CHESTNUT RIDGE ENERGY CO.,
MISSION ENERGY WESTSIDE, INC.,
EME HOMER CITY GENERATION L.P.
and
EDISON MISSION ENERGY
in favor of
UNITED STATES TRUST COMPANY OF NEW YORK,
as Collateral Agent
Dated as of March 18, 1999
TABLE OF CONTENTS
Page
SECTION 1. DEFINED TERMS.............................................................................. 2
1.1 Definitions.................................................................................... 2
1.2 Other Definitional Provisions.................................................................. 7
SECTION 2. GUARANTEE.......................................................................... 8
2.1 Guarantee...................................................................................... 8
2.2 Right of Contribution.......................................................................... 9
2.3 No Subrogation................................................................................. 9
2.4 Amendments, etc. with respect to the Borrower Obligations...................................... 9
2.5 Guarantee Absolute and Unconditional........................................................... 10
2.6 Reinstatement.................................................................................. 11
2.7 Payments....................................................................................... 11
SECTION 3. GRANT OF SECURITY INTEREST................................................................. 11
SECTION 4. REPRESENTATIONS AND WARRANTIES............................................................. 12
4.1 Title; No Other Liens.......................................................................... 12
4.2 Perfected First Priority Liens................................................................. 12
4.3 Chief Executive Office......................................................................... 12
4.4 Inventory and Equipment........................................................................ 13
4.5 Investment Property............................................................................ 13
4.6 Receivables.................................................................................... 13
4.7 Contracts...................................................................................... 13
SECTION 5. COVENANTS.................................................................................. 14
5.1 Delivery of Instruments, Certificated Securities and Chattel Paper............................. 14
5.2 Maintenance of Perfected Security Interest; Further Documentation.............................. 14
5.3 Changes in Locations, Name, etc................................................................ 15
5.4 Notices........................................................................................ 15
5.5 Investment Property............................................................................ 15
SECTION 6. REMEDIAL PROVISIONS........................................................................ 16
6.1 Certain Matters Relating to Receivables........................................................ 16
6.2 Communications with Obligors; Grantors Remain Liable........................................... 17
6.3 Investment Property............................................................................ 17
6.4 Proceeds to be Turned Over To Collateral Agent................................................. 18
6.5 Application of Proceeds........................................................................ 19
6.6 Code and Other Remedies........................................................................ 19
6.7 Pledged Stock and Pledged Interests............................................................ 20
6.8 Waiver; Deficiency............................................................................. 20
SECTION 7. THE COLLATERAL AGENT....................................................................... 20
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Page
7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc......................................... 20
7.2 Duty of Collateral Agent........................................................................ 22
7.3 Execution of Financing Statements............................................................... 23
7.4 Authority of Collateral Agent................................................................... 23
SECTION 8. MISCELLANEOUS............................................................................... 23
8.1 Amendments in Writing........................................................................... 23
8.2 Notices......................................................................................... 23
8.3 No Waiver by Course of Conduct; Cumulative Remedies............................................. 23
8.4 Enforcement Expenses; Indemnification........................................................... 24
8.5 Successors and Assigns.......................................................................... 24
8.6 Set-Off......................................................................................... 24
8.7 Counterparts.................................................................................... 25
8.8 Severability.................................................................................... 25
8.9 Section Headings................................................................................ 25
8.10 Integration.................................................................................... 25
8.11 GOVERNING LAW.................................................................................. 25
8.12 Submission To Jurisdiction; Waivers............................................................ 26
8.13 Acknowledgements............................................................................... 26
8.14 Releases....................................................................................... 27
8.15 WAIVER OF JURY TRIAL........................................................................... 27
SCHEDULES
Schedule 1 Notice Addresses
Schedule 2 Investment Property
Schedule 3 Perfection Matters
Schedule 4 Jurisdictions of Organization and Chief Executive Offices
Schedule 5 Inventory and Equipment Locations
Schedule 6 Certain Contracts
ii
GUARANTEE AND COLLATERAL AGREEMENT, dated as of March 18, 1999, made
by (i) EDISON MISSION HOLDINGS CO., a California corporation (the "Borrower"),
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(ii) EDISON MISSION FINANCE CO., a California corporation ("Edison Mission
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Finance"), (iii) ▇▇▇▇▇ CITY PROPERTY HOLDINGS, INC., a California corporation
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("▇▇▇▇▇ City Holdings"), (iv) CHESTNUT RIDGE ENERGY CO., a California
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corporation ("Chestnut Ridge"), (v) MISSION ENERGY WESTSIDE, INC., a California
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corporation ("MEW"), (vi) EME HOMER CITY GENERATION L.P., a Pennsylvania limited
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partnership ("EME Homer City") and (vii) EDISON MISSION ENERGY, a California
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corporation ("Edison Mission Energy"; and, together with the Borrower, Edison
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Mission Finance, ▇▇▇▇▇ City Holdings, Chestnut Ridge, MEW and EME Homer City,
the "Grantors") in favor of UNITED STATES TRUST COMPANY OF NEW YORK, as
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collateral agent for the Secured Parties (as defined below) (in such capacity,
the "Collateral Agent").
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RECITALS
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A. The Borrower has entered into a Credit Agreement, dated as of
March 18, 1999 (as the same may be amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), with certain financial institutions
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(collectively, the "Lenders") and Citicorp USA, Inc., as administrative agent
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for the Lenders (in such capacity, the "Administrative Agent").
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B. Pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans (as defined below) to the Borrower upon the terms and
subject to the conditions set forth therein.
C. The Borrower will use the proceeds of the Loans under the Credit
Agreement to make valuable transfers to one or more of the other Grantors in
connection with the acquisition of the ▇▇▇▇▇ City Electric Generating Station
and certain facilities and other assets associated therewith and ancillary
thereto (the "Generating Station"), certain capital expenditures related to the
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Generating Station and general working capital purposes.
D. Under Section 8.2.1(e) of the Credit Agreement, the Borrower is
permitted to incur certain indebtedness for the purpose of refinancing the Loans
and other indebtedness of the Borrower ("Refinancing Indebtedness"); under
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Section 8.2.1(d)(i) of the Credit Agreement, the Loan Parties are permitted to
incur certain indebtedness in the form of reimbursement obligations relating to
letters of credit, surety bonds and performance bonds used by the Loan Parties
in the ordinary course of their business ("Ordinary Course Letter of Credit
--------------------------------
Indebtedness"); under Section 8.2.1(d)(ii) of the Credit Agreement, the
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Borrower is permitted to incur certain indebtedness in the form of reimbursement
obligations relating to Debt Service Reserve Letters of Credit (as defined
below) ("DSR Letter of Credit Indebtedness"); under Section 8.2.1(c) of the
---------------------------------
Credit Agreement, the Borrower is permitted to incur certain additional
indebtedness ("Additional Indebtedness"); and, under Section 8.2.1(b) of the
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Credit Agreement, the Borrower is permitted to incur certain indebtedness under
Interest Rate Hedging Transactions entered into with respect to the Loans ("Swap
----
Indebtedness").
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E. In satisfaction of the requirements of the Lenders and the Persons
providing any Refinancing Indebtedness, Ordinary Course Letter of Credit
Indebtedness, DSR Letter of Credit Indebtedness, Additional Indebtedness or Swap
Indebtedness, the Grantors desire by this Agreement and the other Security
Documents (as defined below) to provide a common pool of collateral as security
for their obligations under the Credit Agreement and the other Financing
Documents (as defined below).
F. In order to simplify administration of such collateral and to
provide for the orderly enforcement of their respective rights, the
Administrative Agent, the Lenders and the other Secured Parties (as defined
below) have appointed the Collateral Agent to serve as their common
representative, to be the beneficiary under any guarantee intended to benefit
the Secured Parties, and to hold the liens created, or to be created, under the
Financing Documents.
G. Pursuant to the Collateral Agency and Intercreditor Agreement,
dated as of March 18, 1999 (as amended, supplemented or otherwise modified from
time to time, the "Collateral Agency and Intercreditor Agreement"), among the
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Borrower, the Administrative Agent, the Collateral Agent and certain other
parties, the Collateral Agent has agreed to serve as a common collateral agent
for all Secured Parties.
H. The Borrower is a member of an affiliated group of companies that
includes each other Grantor. The Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and indirect
benefit from the making of the Loans and the incurrence of any Refinancing
Indebtedness, Ordinary Course Letter of Credit Indebtedness, DSR Letter of
Credit Indebtedness, Additional Indebtedness or Swap Indebtedness.
I. It is a condition precedent to the obligation of the Lenders to
make their respective Loans to the Borrower under the Credit Agreement that the
Grantors shall have executed and delivered this Agreement to the Collateral
Agent for the benefit of the Secured Parties.
NOW, THEREFORE, in consideration of the premises, each Grantor hereby
agrees with the Collateral Agent, for the benefit of the Secured Parties, as
follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
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in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms are used herein as defined in the
New York UCC: Accounts, Chattel Paper, Documents, Equipment, Instruments and
Inventory.
(b) The following terms shall have the following meanings:
"Additional Indebtedness": as defined in the recitals.
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"Administrative Agent": as defined in the recitals.
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"Agreement": this Guarantee and Collateral Agreement, as the same may
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be amended, supplemented or otherwise modified from time to time.
"Borrower": as defined in the preamble.
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"Borrower Obligations": the collective reference to (a) the unpaid
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principal of and interest on the Loans, (b) the unpaid principal of and
interest on the Refinancing Indebtedness, if any, (c) the unpaid principal
of and interest on the Ordinary Letter of Credit Indebtedness, if any, (d)
the unpaid principal of and interest on the DSR Letter of Credit
Indebtedness, if any, (e) the unpaid principal of and interest on the
Additional Indebtedness, if any, (f) the unpaid amount of the Swap
Indebtedness, if any, and (g) all other obligations and liabilities of the
Borrower (including interest accruing at the then applicable rate or rates
provided in the Financing Documents after the maturity of the Loans,
Refinancing Indebtedness, Ordinary Course Letter of Credit Indebtedness,
DSR Letter of Credit Indebtedness, Additional Indebtedness and/or Swap
Indebtedness, as applicable, and interest accruing at the then applicable
rate or rates provided in the Financing Documents after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not
a claim for post-filing or post-petition interest is allowed in such
proceeding) to the Secured Parties, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, any Financing
Document or any other document made, delivered or given in connection with
any of the foregoing, in each case whether on account of principal,
interest, reimbursement obligations, guarantee obligations, fees,
indemnities, costs, expenses or otherwise (including all fees and
disbursements of counsel to the Collateral Agent or to the Secured Parties
that are required to be paid by the Borrower pursuant to the terms of any
Financing Document).
"Capital Stock": any and all shares, interests, participations or
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other equivalents(however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options to purchase any of
the foregoing.
"Certificated Security": the collective reference to (i) any
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"certificated security" as defined in Section 8-102 of the New York UCC and
(ii) all limited liability company certificates, partnership interest
certificates and certificated options therefor that may be issued or
granted by any Issuer.
"Chestnut Ridge": as defined in the preamble.
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"Collateral": as defined in Section 3.
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"Collateral Account": any collateral account established by the
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Collateral Agent as provided in Section 6.1 or 6.4.
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"Collateral Agency and Intercreditor Agreement": as defined in the
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recitals.
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"Collateral Agent": as defined in the preamble.
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"Commitments": as defined in the Credit Agreement.
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"Contracts": the contracts and agreements listed in Schedule 6, as
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the same may be amended, supplemented or otherwise modified from time to
time, including (i) all rights of any Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights of
any Grantor to damages arising thereunder and (iii) all rights of any
Grantor to perform and to exercise all remedies thereunder.
"Credit Agreement": as defined in the preamble.
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"Debt Service Reserve Letter of Credit": as defined in the Security
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Deposit Agreement.
"DSR Letter of Credit Indebtedness": as defined in the recitals.
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"Deposit Account": as defined in the Uniform Commercial Code of any
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applicable jurisdiction and, in any event, including any demand, time,
savings, passbook or like account maintained with a depositary institution.
"Edison Mission Energy": as defined in the preamble.
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"Edison Mission Finance": as defined in the preamble.
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"EME Homer City": as defined in the preamble.
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"Event of Default": as defined in the Credit Agreement and any other
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Financing Document.
"Financing Documents": the Loan Documents and each indenture, loan
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agreement, underwriting agreement, security purchase agreement or other
document entered into in connection with any Senior Debt.
"General Intangibles": all "general intangibles" as such term is
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defined in Section 9-106 of the New York UCC and, in any event, including
with respect to any Grantor, all contracts, agreements, instruments and
indentures in any form, and portions thereof, to which such Grantor is a
party or under which such Grantor has any right, title or interest or to
which such Grantor or any property of such Grantor is subject, as the same
may
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from time to time be amended, supplemented or otherwise modified, including
(i) all rights of such Grantor to receive moneys due and to become due to
it thereunder or in connection therewith, (ii) all rights of such Grantor
to damages arising thereunder and (iii) all rights of such Grantor to
perform and to exercise all remedies thereunder, in each case to the extent
the grant by such Grantor of a security interest pursuant to this Agreement
in its right, title and interest in such contract, agreement, instrument or
indenture is not prohibited by such contract, agreement, instrument or
indenture without the consent of any other party thereto, would not give
any other party to such contract, agreement, instrument or indenture the
right to terminate its obligations thereunder, or is permitted with consent
if all necessary consents to such grant of a security interest have been
obtained from the other parties thereto (it being understood that the
foregoing shall not be deemed to obligate such Grantor to obtain such
consents); provided, that the foregoing limitation shall not affect, limit,
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restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Receivable or any money or other amounts
due or to become due under any such contract, agreement, instrument or
indenture to the extent provided in Section 9-318(4) of the New York UCC.
"Grantors": as defined in the preamble.
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"Guarantor Obligations": with respect to any Guarantor, all
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obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Financing Document to which
such Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including all fees and disbursements of counsel to the
Collateral Agent and to the Secured Parties that are required to be paid by
such Guarantor pursuant to the terms of any Financing Document).
"Guarantors": the collective reference to each Grantor other than the
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Borrower and Edison Mission Energy.
"▇▇▇▇▇ City Holdings": as defined in the preamble.
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"Intercompany Loan Subordination Agreement": the Intercompany Loan
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Subordination Agreement, dated as of March 18, 1999, among the Loan Parties
and the Collateral Agent.
"Intercompany Note": any promissory note or other evidence of loans
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made by any Grantor to the Borrower or any of its Subsidiaries.
"Investment Property": the collective reference to (i) all
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"investment property" as such term is defined in Section 9-115 of the New
York UCC and (ii) whether or not constituting "investment property" as so
defined, all Pledged Stock, all Pledged Interests and all Pledged Notes.
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"Issuers": the collective reference to each issuer of any Investment
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Property.
"Loans": as defined in the Credit Agreement.
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"MEW": as defined in the preamble.
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"Mortgage and Security Agreement": the Open-End Mortgage, Security
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Agreement and Assignment of Rents, dated as of March 18, 1999, among the
Grantors and the Collateral Agent, as the same may be amended, supplemented
or otherwise modified from time to time.
"New York UCC": the Uniform Commercial Code as from time to time in
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effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower
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Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Ordinary Course Letter of Credit Indebtedness": as defined in the
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recitals.
"Person": any natural person, corporation, partnership, limited
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liability company, firm, association, trust, government, governmental
agency or other entity, whether acting in an individual, fiduciary or other
capacity.
"Pledged Interests": the partnership interests listed on Schedule 2,
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together with all certificates, options or rights of any nature whatsoever
that may be issued or granted to any Grantor in respect of such partnership
interests.
"Pledged Notes": all promissory notes listed on Schedule 2, all
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Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business).
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
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together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-
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306(1) of the New York UCC and, in any event, shall include all dividends
or other income from the Investment Property, collections thereon or
distributions or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or for
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services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including any Account).
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"Refinancing Indebtedness": as defined in the recitals.
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"Required Secured Parties": as defined in the Collateral Agency and
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Intercreditor Agreement.
"Secured Parties": the Collateral Agent, the Administrative Agent,
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the Lenders, each Person that provides any Refinancing Indebtedness,
Ordinary Course Letter of Credit Indebtedness, DSR Letter of Credit
Indebtedness, Additional Indebtedness or Swap Indebtedness and each Person
that serves as indenture trustee, collateral agent, lenders' representative
or in any similar capacity for Persons that provide any Senior Debt.
"Securities Act": the Securities Act of 1933, as amended.
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"Security Deposit Agreement": the Security Deposit Agreement, dated
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as of March 18, 1999, among the Loan Parties and the Collateral Agent.
"Security Documents": (a) this Agreement, the Mortgage and
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Security Agreement, the Security Deposit Agreement, the Intercompany Loan
Subordination Agreement and the Collateral Agency and Intercreditor
Agreement and (b) the EME Credit Support Guarantee and any other agreement
or instrument hereafter entered into by the Borrower or any other Person
which guarantees or secures payment of any Senior Debt.
"Senior Debt": the Loans, any Refinancing Indebtedness, any Ordinary
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Course Letter of Credit Indebtedness, any DSR Letter of Credit Indebtedness, any
Additional Indebtedness and any Swap Indebtedness.
"Swap Indebtedness": as defined in the recitals.
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1.2 Other Definitional Provisions. (a) The words "hereof", "herein"
-----------------------------
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section, schedule, appendix and exhibit references are to this
Agreement unless otherwise specified.
(b) Each reference in this Agreement to a Financing Document or other
agreement shall be deemed to refer to such Financing Document or other agreement
as the same may be amended, supplemented or otherwise modified from time to
time.
(c) Any term defined by reference to an agreement, instrument or
other document shall have the meaning so assigned to it whether or not such
agreement, instrument or document is in effect.
(d) Each reference in this Agreement to a Person shall be deemed to
include such Person's successors and assigns.
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(e) Each reference in this Agreement to a Requirement of Law shall be
deemed to refer to such Requirement of Law as the same may be amended,
supplemented or otherwise modified from time to time.
(f) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
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severally, unconditionally and irrevocably, guarantees to the Collateral Agent,
for the benefit of the Secured Parties, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything in any Financing Document to the contrary
notwithstanding, the maximum liability of each Guarantor under the Financing
Documents shall in no event exceed the amount which can be guaranteed by such
Guarantor under applicable federal and state laws relating to the insolvency of
debtors (after giving effect to the right of contribution established in Section
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2.2).
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(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
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affecting the rights and remedies of the Collateral Agent or any Secured Party
hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
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force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee contained in this Section 2 shall have been
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satisfied by payment in full and the Commitments shall have been terminated.
(e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Collateral Agent
or any Secured Party from the Borrower, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any set-
off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Borrower Obligations or any payment
received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the Borrower Obligations are paid in
full and the Commitments are terminated.
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2.2 Right of Contribution. Each Guarantor hereby agrees that to the
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extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
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this Section 2.2 shall in no respect limit the obligations and liabilities of
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any Guarantor to the Collateral Agent and the Secured Parties, and each
Guarantor shall remain liable to the Collateral Agent and the Secured Parties
for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
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Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Collateral Agent or any Secured Party, no Guarantor shall be entitled to be
subrogated to any of the rights of the Collateral Agent or any Secured Party
against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Collateral Agent or any Secured Party
for the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Collateral Agent and the Secured Parties by the
Borrower on account of the Borrower Obligations are paid in full and the
Commitments are terminated. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the Borrower
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Collateral Agent and the Secured Parties, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Collateral Agent in the exact form received by
such Guarantor (duly indorsed by such Guarantor to the Collateral Agent, if
required), to be applied against the Borrower Obligations, whether matured or
unmatured, in such order as the Collateral Agent may determine.
2.4 Amendments, etc. with respect to the Borrower Obligations. Each
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Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Collateral Agent or any Secured Party may be rescinded
by the Collateral Agent or such Secured Party and any of the Borrower
Obligations continued, and the Borrower Obligations, or the liability of any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Collateral Agent or any
Secured Party, and the Financing Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Collateral Agent may deem advisable from
time to time, and any collateral security, guarantee or right of offset at any
time held by the Collateral Agent or any Secured Party for the payment of the
Borrower Obligations may be sold, exchanged, waived, surrendered or released.
Neither the Collateral Agent nor any Secured Party shall have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Borrower Obligations or for the guarantee contained in this Section 2 or
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any property subject thereto.
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2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
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and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Collateral Agent
or any Secured Party upon the guarantee contained in this Section 2 or
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acceptance of the guarantee contained in this Section 2; the Borrower
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Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon the guarantee contained in this Section 2; and all dealings between the
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Borrower and any of the Guarantors, on the one hand, and the Collateral Agent
and the Secured Parties, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee
contained in this Section 2. Each Guarantor waives diligence, presentment,
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protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or any of the Guarantors with respect to the Borrower Obligations.
Each Guarantor understands and agrees that the guarantee contained in this
Section 2 shall be construed as a continuing, absolute and unconditional
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guarantee of payment without regard to (a) the validity or enforceability of any
Financing Document, any of the Borrower Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Collateral Agent or any Secured Party, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against the Collateral Agent or any Secured Party,
or (c) any other circumstance whatsoever (with or without notice to or knowledge
of the Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Borrower
Obligations, or of such Guarantor under the guarantee contained in this Section
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2, in bankruptcy or in any other instance. When making any demand hereunder or
-
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Collateral Agent or any Secured Party may, but shall be under no obligation to,
make a similar demand on or otherwise pursue such rights and remedies as it may
have against the Borrower, any other Guarantor or any other Person or against
any collateral security or guarantee for the Borrower Obligations or any right
of offset with respect thereto, and any failure by the Collateral Agent or any
Secured Party to make any such demand, to pursue such other rights or remedies
or to collect any payments from the Borrower, any other Guarantor or any other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Collateral Agent or any
Secured Party against any Guarantor. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
------------- ---------
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Collateral Agent or any Secured
Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any
11
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
--------
hereunder will be paid to the Collateral Agent without set-off or counterclaim
in Dollars at the office of the Collateral Agent for deposit in the "▇▇▇▇▇ City
Revenue Account", account no. ▇▇▇▇▇▇▇▇, or to such other place as the Collateral
Agent may specify in writing.
SECTION 3. GRANT OF SECURITY INTEREST
(a) Each Grantor (other than Edison Mission Energy) hereby pledges
and grants to the Collateral Agent, for the benefit of the Secured Parties, a
security interest in all of the following property now owned or at any time
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
----------
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor's Obligations:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Deposit Accounts;
(v) all Documents;
(vi) all Equipment;
(vii) all General Intangibles;
(viii) all Instruments;
(ix) all Inventory;
(x) all Investment Property;
(xi) all other property not otherwise described above;
(xii) all books and records pertaining to the Collateral; and
12
(xiii) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
(b) Edison Mission Energy hereby pledges and grants to the Collateral
Agent, for the benefit of the Secured Parties, a security interest in all shares
of Capital Stock of the Borrower, as collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) by the Borrower of all Borrower Obligations.
SECTION 4. REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants, with respect to itself
and its Collateral, to the Collateral Agent and each Secured Party that:
4.1 Title; No Other Liens. Except for the security interest granted
---------------------
to the Collateral Agent pursuant to this Agreement and the other Liens permitted
to exist on the Collateral by the Financing Documents, such Grantor owns each
item of the Collateral free and clear of any and all Liens or claims of others.
No financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of the Collateral Agent pursuant to this Agreement or as are
permitted by the Financing Documents.
4.2 Perfected First Priority Liens. The security interests granted
------------------------------
pursuant to this Agreement upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
----------
referred to on said Schedule, have been delivered to the Collateral Agent in
--------
completed and duly executed form) will (a) constitute valid and enforceable
perfected security interests in all of the Collateral in favor of the Collateral
Agent as collateral security for such Grantor's Obligations to the extent that a
security interest may be perfected by filing and/or the other actions specified
on Schedule 3, and (b) are prior to all other Liens on the Collateral in
----------
existence on the date hereof except for Liens permitted by the Financing
Documents and which have priority over the Liens on the Collateral by operation
of law.
4.3 Chief Executive Office. On the date hereof, such Grantor's
----------------------
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.
----------
4.4 Inventory and Equipment. On the date hereof, the Inventory and
-----------------------
the Equipment (other than mobile goods) are kept at the locations listed on
Schedule 5.
----------
4.5 Investment Property. (a) The shares of Pledged Stock pledged by
-------------------
such Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor.
13
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) The Pledged Interests pledged by such Grantor hereunder
constitute all the issued and outstanding partnership or other equity interests
owned by such Grantor.
(d) All the Pledged Interests pledged by such Grantor have been duly
and validly issued.
(e) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Investment Property pledged by it hereunder, free
of any and all Liens or options in favor of, or claims of, any other Person,
except the security interest created by this Agreement.
4.6 Receivables. (a) No amount payable to such Grantor under or in
-----------
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Collateral Agent.
(b) Except as otherwise disclosed on Schedule 6, none of the obligors
----------
on any Receivables is a Governmental Authority.
4.7 Contracts. (a) No consent of any party (other than such
---------
Grantor) to any Contract is required, or purports to be required, in connection
with the execution, delivery and performance of this Agreement.
(b) Neither such Grantor nor (to the best of such Grantor's
knowledge) any of the other parties to the Contracts to which such Grantor is a
party is in default in the performance or observance of any of the terms thereof
in any manner that, in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(c) The right, title and interest of such Grantor in, to and under
the Contracts are not subject to any defenses, offsets, counterclaims or claims
that, in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(d) No amount payable to such Grantor under or in connection with any
Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Collateral Agent.
(e) Except as otherwise disclosed on Schedule 6, none of the parties
----------
to any Contract is a Governmental Authority.
14
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Collateral Agent and the
Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full and the Commitments shall have
terminated:
5.1 Delivery of Instruments, Certificated Securities and Chattel
------------------------------------------------------------
Paper. If any amount payable under or in connection with any of the Collateral
-----
shall be or become evidenced by any Instrument, Certificated Security or Chattel
Paper, such Instrument, Certificated Security or Chattel Paper shall be
immediately delivered to the Collateral Agent, duly indorsed in a manner
satisfactory to the Collateral Agent, to be held as Collateral pursuant to this
Agreement.
5.2 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) Such Grantor shall take any and all actions that may be
-------------
necessary or, in the reasonable discretion of the Collateral Agent, prudent to
maintain the security interest created by this Agreement as a perfected security
interest having at least the priority described in Section 4.2 and shall defend
-----------
such security interest against the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Collateral Agent and the Secured
Parties from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection therewith as the
Collateral Agent may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of
the Collateral Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Collateral Agent
may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including (i) filing any financing or continuation statements under the Uniform
Commercial Code (or other similar laws) in effect in any jurisdiction with
respect to the security interests created hereby and (ii) in the case of
Investment Property, Deposit Accounts and any other relevant Collateral, taking
any actions necessary to enable the Collateral Agent to obtain "control" (within
the meaning of the applicable Uniform Commercial Code) with respect thereto.
5.3 Changes in Locations, Name, etc. Such Grantor will not, except
-------------------------------
upon 30 days' prior written notice to the Collateral Agent and delivery to the
Collateral Agent of (a) all additional executed financing statements and other
documents reasonably requested by the Collateral Agent to maintain the validity,
perfection and priority of the security interests provided for herein and (b) if
applicable, a written supplement to Schedule 5 showing any additional location
----------
at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5 (other than temporary transfers of
----------
immaterial amounts of
15
Inventory and Equipment for periods not exceeding three months for the
limited purpose of repair in the ordinary course of business);
(ii) change its jurisdiction of organization or the location of its
chief executive office or sole place of business from that referred to in
Section 4.3; or
-----------
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Collateral Agent in
connection with this Agreement would become misleading.
5.4 Notices. Such Grantor will advise the Collateral Agent promptly,
-------
in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Financing Documents) on any of the Collateral which could
reasonably be expected to have a material adverse effect on the ability of the
Collateral Agent to exercise any of its remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.5 Investment Property. (a) If such Grantor shall become entitled
-------------------
to receive or shall receive any certificate (including any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock in any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock or Pledged Interests, as
the case may be, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Collateral Agent and the Secured Parties, hold the same
in trust for the Collateral Agent and the Secured Parties and deliver the same
forthwith to the Collateral Agent in the exact form received, duly indorsed by
such Grantor to the Collateral Agent, if required, together with an undated
stock power or power of transfer, as the case may be, covering such certificate
duly executed in blank by such Grantor and with, if the Collateral Agent so
requests, signature guaranteed, to be held by the Collateral Agent, subject to
the terms hereof, as additional collateral security for the Obligations. Any
sums paid upon or in respect of the Investment Property upon the liquidation or
dissolution of any Issuer shall be paid over to the Collateral Agent to be held
by it hereunder as additional collateral security for the Obligations, and in
case any distribution of capital shall be made on or in respect of the
Investment Property or any property shall be distributed upon or with respect to
the Investment Property pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Collateral Agent, be delivered to the Collateral Agent
to be held by it hereunder as additional collateral security for the
Obligations. If any sums of money or property so paid or distributed in respect
of the Investment Property shall
16
be received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Collateral Agent, hold such money or property in trust
for the Secured Parties, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Collateral Agent, such
Grantor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock, partnership interests or other equity securities of
any nature or to issue any other securities convertible into or granting the
right to purchase or exchange for any stock or other equity securities of any
nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Investment Property or
Proceeds thereof, except pursuant to a transaction expressly permitted by the
Credit Agreement, (iii) create, incur or permit to exist any Lien or option in
favor of, or any claim of any Person with respect to, any of the Investment
Property or Proceeds thereof, or any interest therein, except for the security
interests created by this Agreement or (iv) enter into any agreement or
undertaking restricting the right or ability of such Grantor or the Collateral
Agent to sell, assign or transfer any of the Investment Property or Proceeds
thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Investment Property issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 5.7(a) with
--------------
respect to the Investment Property issued by it and (iii) the terms of Sections
--------
6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions
------ --- ------- --------
that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the
-------------- ---
Investment Property issued by it.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The Collateral
---------------------------------------
Agent hereby authorizes each Grantor to collect such Grantor's Receivables and
the Collateral Agent may curtail or terminate said authority at any time after
the occurrence and during the continuance of an Event of Default. If required
by the Collateral Agent at any time after the occurrence and during the
continuance of an Event of Default, any payments of Receivables, when collected
by any Grantor, (i) shall be forthwith (and, in any event, within two Business
Days) deposited by such Grantor in the exact form received, duly indorsed by
such Grantor to the Collateral Agent if required, in a Collateral Account
maintained under the sole dominion and control of the Collateral Agent, subject
to withdrawal by the Collateral Agent only as provided in Section 6.5, and (ii)
until so turned over, shall be held by such Grantor in trust for the Collateral
Agent, segregated from other funds of such Grantor. Each such deposit of
Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
(b) At the Collateral Agent's request, at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
deliver to the Collateral Agent all
17
original and other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Receivables.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The
----------------------------------------------------
Collateral Agent in its own name or in the name of others may at any time after
the occurrence and during the continuance of an Event of Default communicate
with obligors under the Receivables and parties to the Contracts to verify with
them to the Collateral Agent's satisfaction the existence, amount and terms of
any Receivables or Contracts.
(b) Upon the request of the Collateral Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables and parties to the Contracts that the
Receivables and the Contracts have been assigned to the Collateral Agent for the
ratable benefit of the Secured Parties and that payments in respect thereof
shall be made directly to the Collateral Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Receivables and Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Collateral Agent nor any Secured Party shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Agreement or the
receipt by the Collateral Agent or any Secured Party of any payment relating
thereto, nor shall the Collateral Agent or any Secured Party be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
6.3 Investment Property. (a) Unless an Event of Default shall have
-------------------
occurred and be continuing and the Collateral Agent shall have given notice to
the relevant Grantor of the Collateral Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
--------------
to receive all cash dividends paid in respect of the Pledged Stock, all cash
distributions paid in respect of the Pledged Interests and all payments made in
respect of the Pledged Notes, in each case paid in the normal course of business
of the relevant Issuer and consistent with past practice, to the extent
permitted in the Credit Agreement (and the Indenture, if any Securities have
been issued), and to exercise all voting and corporate rights with respect to
the Investment Property; provided, however, that no vote shall be cast or
-------- -------
corporate right exercised or other action taken which, in the Collateral Agent's
reasonable judgment, would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of any Financing Document.
(b) If an Event of Default shall occur and be continuing and the
Collateral Agent shall give notice of its intent to exercise such rights to the
relevant Grantor or Grantors, (i) the
18
Collateral Agent shall have the right to receive any and all cash dividends,
distributions, payments or other Proceeds paid in respect of the Investment
Property and make application thereof to the Obligations in such order as the
Collateral Agent may determine, and (ii) any or all of the Investment Property
shall be registered in the name of the Collateral Agent or its nominee, and the
Collateral Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Investment Property at any meeting
of shareholders or partners of the relevant Issuer or Issuers or otherwise and
(y) any and all rights of conversion, exchange and subscription and any other
rights, privileges or options pertaining to such Investment Property as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Investment Property upon the
merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate or partnership structure of any Issuer, or upon the
exercise by any Grantor or the Collateral Agent of any right, privilege or
option pertaining to such Investment Property, and in connection therewith, the
right to deposit and deliver any and all of the Investment Property with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Collateral Agent may determine), all without
liability except to account for property actually received by it, but the
Collateral Agent shall have no duty to any Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing.
6.4 Proceeds to be Turned Over To Collateral Agent. In addition to
----------------------------------------------
the rights of the Collateral Agent specified in Section 6.1 with respect to
-----------
payments of Receivables, if an Event of Default shall occur and be continuing,
all Proceeds received by any Grantor consisting of cash, checks and other near-
cash items shall be held by such Grantor in trust for the Collateral Agent,
segregated from other funds of such Grantor, and shall, forthwith upon receipt
by such Grantor, be turned over to the Collateral Agent in the exact form
received by such Grantor (duly indorsed by such Grantor to the Collateral Agent,
if required). All Proceeds received by the Collateral Agent hereunder shall be
held by the Collateral Agent in a Collateral Account maintained under its sole
dominion and control. All Proceeds while held by the Collateral Agent in a
Collateral Account (or by such Grantor in trust for the Collateral Agent and the
Secured Parties) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 6.5.
-----------
6.5 Application of Proceeds. If an Event of Default shall have
-----------------------
occurred and be continuing, at any time thereafter at the Collateral Agent's
election, the Collateral Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Obligations in accordance with the
Collateral Agency and Intercreditor Agreement, and any part of such funds which
the Collateral Agent elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the
Collateral Agent to the Borrower or to whomsoever may be lawfully entitled to
receive the same. Any balance of such Proceeds remaining after the Obligations
shall have been paid in full and the Commitments shall have terminated shall be
paid over to the Borrower or to whomsoever may be lawfully entitled to receive
the same.
19
6.6 Code and Other Remedies. If an Event of Default shall occur and
-----------------------
be continuing, the Collateral Agent, on behalf of the Secured Parties, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the New York UCC or any other applicable law. Without limiting the generality
of the foregoing, the Collateral Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Collateral Agent or any Secured
Party or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Collateral Agent or any Secured
Party shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released.
Each Grantor further agrees, at the Collateral Agent's request, to assemble the
Collateral and make it available to the Collateral Agent at places which the
Collateral Agent shall reasonably select, whether at such Grantor's premises or
elsewhere. The Collateral Agent shall apply the net proceeds of any action
taken by it pursuant to this Section 6.6, after deducting all reasonable costs
-----------
and expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Collateral Agent and the Secured Parties
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Collateral Agent may elect, and only after such application and
after the payment by the Collateral Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the New
York UCC, need the Collateral Agent account for the surplus, if any, to any
Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Collateral Agent or any
Secured Party arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
6.7 Pledged Stock and Pledged Interests. (a) Each Grantor
-----------------------------------
recognizes that the Collateral Agent may be compelled to resort to one or more
private sales of the Pledged Stock or Pledged Interest to a restricted group of
purchasers which will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to the
distribution or resale thereof. Each Grantor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner. The Collateral Agent shall be under no
20
obligation to delay a sale of any of the Pledged Stock or Pledged Interest, as
the case may be, for the period of time necessary to permit the Issuer thereof
to register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(b) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock or Pledged Interest, as the case may be,
pursuant to this Section 6.7 valid and binding and in compliance with any and
-----------
all other applicable Requirements of Law. Each Grantor further agrees that a
breach of any of the covenants contained in this Section 6.7 will cause
-----------
irreparable injury to the Collateral Agent and the Secured Parties, that the
Collateral Agent and the Secured Parties have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 6.7 shall be specifically enforceable against such
-----------
Grantor, and such Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Financing Documents.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert
------------------
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the reasonable fees and disbursements of any attorneys employed
by the Collateral Agent or any Secured Party to collect such deficiency.
SECTION 7. THE COLLATERAL AGENT
7.1 Collateral Agent's Appointment as Attorney-in-Fact, etc. (a)
--------------------------------------------------------
Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of such Grantor and in the name of such Grantor or in its own
name, for the purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Collateral Agent the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any or all of the
following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or Contract or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Receivable or Contract or
with respect to any other Collateral whenever payable;
21
(ii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iii) execute, in connection with any sale provided for in Section
-------
6.6 or 6.7, any indorsements, assignments or other instruments of
--- ---
conveyance or transfer with respect to the Collateral; and
(iv) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (2) ask or demand for, collect, and receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (3) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (5) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (6) settle, compromise
or adjust any such suit, action or proceeding and, in connection therewith,
give such discharges or releases as the Collateral Agent may deem
appropriate; and (7) generally, sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Collateral Agent were the absolute owner
thereof for all purposes, and do, at the Collateral Agent's option and such
Grantor's expense, at any time, or from time to time, all acts and things
which the Collateral Agent deems necessary to protect, preserve or realize
upon the Collateral and the Collateral Agent's and the Secured Parties'
security interests therein and to effect the intent of this Agreement, all
as fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
--------------
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 7.1(a) unless an Event of Default shall
--------------
have occurred and be continuing.
(b) If an Event of Default shall have occurred and be continuing, if
any Grantor fails to perform or comply with any of its agreements contained
herein, the Collateral Agent, at its option, but without any obligation so to
do, may perform or comply, or otherwise cause performance or compliance, with
such agreement.
(c) The expenses of the Collateral Agent incurred in connection with
actions undertaken as provided in this Section 7.1, together with interest
-----------
thereon at a rate per annum equal to the highest rate per annum at which
interest would then be payable on any category of past due Base Rate Loans under
the Credit Agreement, from the date of payment by the Collateral Agent to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Collateral Agent on demand.
22
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Collateral Agent. The Collateral Agent's sole duty with
------------------------
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise, shall
be to deal with it with the same degree of care as the Collateral Agent deals
with similar property for its own account. Neither the Collateral Agent, any
Secured Party nor any of their respective officers, directors, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Collateral Agent
and the Secured Parties hereunder are solely to protect the Collateral Agent's
and the Secured Parties' interests in the Collateral and shall not impose any
duty upon the Collateral Agent or any Secured Party to exercise any such powers.
The Collateral Agent and the Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents shall
be responsible to any Grantor for any act or failure to act hereunder, except
for (i) their own gross negligence or willful misconduct or (ii) breach of their
obligations under this Agreement.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the New York UCC and any other applicable law, each Grantor authorizes the
Collateral Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Collateral
Agent determines appropriate to perfect the security interests of the Collateral
Agent under this Agreement. A photographic or other reproduction of this
Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording in any jurisdiction.
7.4 Authority of Collateral Agent. Each Grantor and each Secured
-----------------------------
Party by accepting the benefits of this Agreement acknowledges that the rights
and responsibilities of the Collateral Agent under this Agreement with respect
to any action taken by the Collateral Agent or the exercise or non-exercise by
the Collateral Agent of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Collateral Agent and the Secured Parties, be
governed by the Financing Documents and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Grantors, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Secured Parties with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
23
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except in
writing and in accordance with the Collateral Agency and Intercreditor
Agreement.
8.2 Notices. All notices and other communications to any party
-------
hereto shall be in writing or by facsimile and addressed, delivered or
transmitted to such party at its address or facsimile number set forth on
Schedule 1 or at such other address or facsimile number as may be designated by
such party in a notice to the other parties.
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
---------------------------------------------------
Collateral Agent nor any Secured Party shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
-----------
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Collateral Agent or any Secured Party, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Collateral Agent or any Secured Party of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Collateral Agent or such Secured Party would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
-------------------------------------
agrees to pay or reimburse each Secured Party and the Collateral Agent for all
its costs and expenses incurred in collecting against such Guarantor under the
guarantee contained in Section 2 or otherwise enforcing or preserving any rights
---------
under the Loan Documents to which such Guarantor is a party, including, without
limitation, the fees and disbursements of counsel to each Secured Party and of
counsel to the Collateral Agent.
(b) Each Guarantor agrees to pay, and to save the Collateral Agent
and the Secured Parties harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) Each Guarantor agrees to pay, and to save the Collateral Agent
and the Secured Parties harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement to the
extent the Borrower would be required to do so pursuant to Section 11.4 of the
Credit Agreement.
24
(d) The agreements in this Section 8.4 shall survive repayment of the
-----------
Obligations and all other amounts payable under the Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of each Grantor and shall inure to the benefit of the
Collateral Agent and the Secured Parties and their successors and assigns;
provided that no Grantor may assign, transfer or delegate any of its rights or
--------
obligations under this Agreement without the prior written consent of the
Collateral Agent.
8.6 Set-Off. Each Grantor hereby irrevocably authorizes the
-------
Collateral Agent and each Secured Party at any time and from time to time (i)
upon the occurrence of an Event of Default of the kind described in clauses (a)
or (b) of Section 9.1.6 of the Credit Agreement, (ii) upon the occurrence of any
Default of the kind described in clauses (c) or (d) of Section 9.1.6 of the
Credit Agreement with respect to the Borrower, or (iii) upon the occurrence and
continuance beyond the applicable grace period, if any, of any other Event of
Default and with the consent of the Required Secured Parties, without notice to
such Grantor or any other Grantor, any such notice being expressly waived by
each Grantor, to set-off and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Collateral Agent or such Secured Party to or for the credit
or the account of such Grantor, or any part thereof in such amounts as the
Collateral Agent or such Secured Party may elect, against and on account of the
obligations and liabilities of such Grantor to the Collateral Agent or such
Secured Party hereunder and claims of every nature and description of the
Collateral Agent or such Secured Party against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Financing
Document or otherwise, as the Collateral Agent or such Secured Party may elect,
whether or not the Collateral Agent or any Secured Party has made any demand for
payment and although such obligations, liabilities and claims may be contingent
or unmatured. The Collateral Agent and each Secured Party shall notify such
Grantor promptly of any such set-off and the application made by the Collateral
Agent or such Secured Party of the proceeds thereof, provided that the failure
--------
to give such notice shall not affect the validity of such set-off and
application. The rights of the Collateral Agent and each Secured Party under
this Section 8.6 are in addition to other rights and remedies (including,
-----------
without limitation, other rights of set-off) which the Collateral Agent or such
Secured Party may have.
8.7 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.8 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
25
8.9 Section Headings. The Section headings used in this Agreement
----------------
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
8.10 Integration. The Security Documents represent the agreement of
-----------
the Grantors, the Collateral Agent and the Secured Parties with respect to the
subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Collateral Agent or any Secured Party
relative to subject matter hereof and thereof not expressly set forth or
referred to in the Security Documents. The Security Documents supersede any and
all prior agreements and understandings, oral or written, relative or with
respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Collateral Agent or any Secured Party
relative to the subject matter hereof not expressly set forth or referred to
herein or in the other Security Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor (and, with
-----------------------------------
respect to paragraph (e) below only, the Collateral Agent and each of the
Secured Parties) hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to the Loan Documents to which it is a party, or for
recognition and enforcement of any judgment in respect thereof, to the non-
exclusive general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address
-----------
of which the Collateral Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to ▇▇▇ in any other jurisdiction; and
26
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of the Security Documents to which it is a party;
(b) neither the Collateral Agent nor any Secured Party has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with any Security Documents, and the relationship between the
Grantors, on the one hand, and the Collateral Agent and Secured Parties, on
the other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created by any Security Document or otherwise
exists by virtue of the transactions contemplated hereby among the Secured
Parties or among the Grantors and the Secured Parties.
8.14 Releases. (a) At such time as the Obligations shall have been
--------
paid in full and the Commitments shall have been terminated, the Collateral
shall automatically be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Collateral Agent and each Grantor hereunder shall terminate,
all without delivery of any instrument or performance of any act by any party,
and all rights to the Collateral shall revert to the Grantors. At the request
and sole expense of any Grantor following any such termination, the Collateral
Agent shall deliver to such Grantor any Collateral held by the Collateral Agent
hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement
(and the Indenture, if any Securities have been issued), then the Collateral
Agent, at the request and reasonable and sole expense of such Grantor, shall
execute and deliver to such Grantor all releases or other documents reasonably
necessary or desirable for the release of the Liens created hereby on such
Collateral. At the request and reasonable and sole expense of the Borrower, a
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Guarantor shall be sold, transferred or otherwise
disposed of in a transaction permitted by the Credit Agreement (and the
Indenture, if any Securities have been issued); provided that the Borrower shall
--------
have delivered to the Collateral Agent, at least ten Business Days prior to the
date of the proposed release, a written request for release identifying the
relevant Guarantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by the Borrower stating that such transaction is
in compliance with the Loan Documents.
27
8.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
--------------------
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
EDISON MISSION HOLDINGS CO., Borrower
By:
-----------------------------------
Name:
Title:
EDISON MISSION FINANCE CO., Guarantor
By:
-----------------------------------
Name:
Title:
▇▇▇▇▇ CITY PROPERTY HOLDINGS, INC.,
Guarantor
By:
-----------------------------------
Name:
Title:
CHESTNUT RIDGE ENERGY CO., Guarantor
By:
-----------------------------------
Name:
Title:
MISSION ENERGY WESTSIDE, INC., Guarantor
By: ____________________________________
Name:
Title:
EME HOMER CITY GENERATION L.P.,
Guarantor
By: Mission Energy Westside, Inc., its
General Partner
By:_____________________________________
Name:
Title:
EDISON MISSION ENERGY, Grantor
By: ____________________________________
Name:
Title:
Acknowledged and Agreed as of the
date hereof:
UNITES STATES TRUST COMPANY OF NEW YORK, as Collateral Agent
By: _____________________________
Name:
Title
Schedule 1
----------
NOTICE ADDRESSES
Schedule 2
----------
DESCRIPTION OF INVESTMENT PROPERTY
Pledged Stock:
Issuer Class of Stock Stock Certificate No. No. of Shares
Pledged Interests:
Issuer Class of Stock Certificate No. Amount of
Interest
Pledged Notes:
Issuer Payee Date Principal
Amount
Schedule 3
----------
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
-------------------------------
[List each office where a financing statement is to be filed]
Actions with respect to Pledged Stock*
-------------------------------------
*If the interest of a Grantor in Pledged Stock appears on the books of
a financial intermediary, a control agreement as described in Section 8-106 of
the New York UCC will be required.
Schedule 4
----------
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Grantor Location
------- --------
Schedule 5
----------
LOCATION OF INVENTORY AND EQUIPMENT
Grantor Locations
------- ---------
Schedule 6
----------
CERTAIN CONTRACTS