Exhibit 10.2

EXECUTION COUNTERPART

 

 

SECURITY AGREEMENT

between

EDISON MISSION ENERGY

and

CITICORP NORTH AMERICA, INC.,
as Administrative Agent

Dated as of June 15, 2006

 

 

 

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TABLE OF CONTENTS

 

 

 

Page

Section 1.

 

Definitions

 

1

 

 

 

 

 

Section 2.

 

Representations and Warranties

 

2

 

 

 

 

 

Section 3.

 

The Pledge

 

3

 

 

 

 

 

Section 4.

 

Collateral Accounts; cash proceeds

 

4

 

 

4.01   Collateral Accounts

 

4

 

 

4.02   Investment of Balance in Collateral Accounts

 

6

 

 

 

 

 

Section 5.

 

Further Assurances; Remedies

 

6

 

 

5.01   Delivery and Other Perfection

 

6

 

 

5.02   Other Financing Statements and Liens

 

7

 

 

5.03   Special Provisions Relating to the Pledged Collateral

 

7

 

 

5.04   Credit Agreement Event of Default, Etc

 

8

 

 

5.05   Deficiency

 

10

 

 

5.06   Removals, Etc

 

10

 

 

5.07   Private Sale

 

10

 

 

5.08   Application of Proceeds

 

10

 

 

5.09   Attorney-in-Fact

 

11

 

 

5.10   Perfection

 

11

 

 

5.11   Termination

 

11

 

 

5.12   Further Assurances

 

11

 

 

 

 

 

Section 6.

 

Miscellaneous

 

11

 

 

6.01   Notices

 

11

 

 

6.02   Delay and Waiver

 

12

 

 

6.03   Amendments, Etc

 

12

 

 

6.04   Successors and Assigns

 

12

 

 

6.05   Counterparts

 

12

 

 

6.06   Governing Law; Submission to Jurisdiction

 

12

 

 

6.07   Headings

 

12

 

 

6.08   Agents and Attorneys-in-Fact

 

12

 

 

6.09   Severability

 

12

 

 

 

 

 

Annex 1 — Pledged Interests

 

 

 

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SECURITY AGREEMENT

SECURITY AGREEMENT (this “Agreement”) dated as of June 15, 2006, between EDISON
MISSION ENERGY, a corporation organized under the laws of Delaware (the
“Obligor”), and CITICORP NORTH AMERICA, INC., as administrative agent for the
Lenders and Issuing Lenders under the Credit Agreement referred to below (in
such capacity, together with its successors in such capacity, the
“Administrative Agent”).

The Obligor, the Administrative Agent, the various financial institutions as are
or may become parties thereto (collectively, the “Lenders”), and the Issuing
Lenders have entered into that certain Credit Agreement (as amended,
supplemented, amended and restated or otherwise modified and in effect from time
to time, the “Credit Agreement”) dated as of June 15, 2006. This Agreement is
the Borrower Security Agreement referred to in the Credit Agreement.

The Obligor owns a 100% ownership interest in each of the Collateral Parties on
the date hereof and has, subject to the terms and conditions of this Agreement,
agreed to grant a Lien and security interest in the Pledged Collateral referred
to herein.

NOW, THEREFORE, in consideration of the premises and covenants contained herein
and for other good and valuable consideration, the receipt and the adequacy of
which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.         DEFINITIONS. Capitalized terms not otherwise defined herein
shall have the meanings set forth in, and the interpretations applicable thereto
under, the Credit Agreement. In addition, as used herein:

“Assigned Agreements” has the meaning set forth in Section 3(e).

“Big Four Companies” means Camino Energy Company, a California corporation,
Southern Sierra Energy Company, a California corporation, San Joaquin Energy
Company, a California corporation, and Western Sierra Energy Company, a
California corporation.

“Big Four Revenue” has the meaning set forth in Section 5.03(b).

“Big Four Revenue Account” means the Account, as such term is defined in the
Account Control Agreement dated as of June 15, 2006 between the Obligor, the
Administrative Agent and Citibank, N.A.

“Collateral Accounts” means the Big Four Revenue Account, Default Collateral
Account, Disposition Proceeds Account and the LC Collateral Account.

“Credit Agreement Termination Date” means the date on which all Secured
Obligations, other than contingent liabilities and Secured Obligations which are
unasserted at such date, have been finally paid and satisfied in full and all
Loans and Commitments have been terminated.

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“Default Collateral Account” has the meaning set forth in Section 4.01(a).

“Disposition Proceeds Account” has the meaning set forth in Section 4.01(c).

“EMH” means Edison Mission Holdings Co., a California corporation.

“Indemnitee” has the meaning set forth in Section 5.11(a).

“LC Collateral Account” has the meaning set forth in Section 4.01(b).

“MGE” means Midwest Generation EME, LLC, a Delaware limited liability company.

“Mission del Cielo” means Mission del Cielo, Inc., a Delaware corporation.

“Permitted Investments” means (a) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in each
case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or from Moody’s; (c) investments in certificates of
deposit, banker’s acceptances and time deposits maturing within 180 days from
the date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of any
commercial bank organized under the laws of the United States of America or any
State thereof which has a combined capital and surplus and undivided profits of
not less than $500,000,000; and (d) fully collateralized repurchase agreements
with a term of not more than thirty (30) days for securities described in clause
(a) above and entered into with a financial institution satisfying the criteria
described in clause (c) above.

“Pledged Collateral” has the meaning set forth in Section 3.

“Pledged Interests” has the meaning set forth in Section 3(a).

“Secured Obligations” means all Obligations of the Obligor under the Loan
Documents.

“Stock Collateral” has the meaning set forth in Section 3(c).

SECTION 2.         REPRESENTATIONS AND WARRANTIES. The Obligor represents and
warrants to the Administrative Agent and the other Lenders that as of the date
hereof:

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(a)  The Obligor is the sole beneficial owner of the Pledged Collateral in which
it purports to grant security interests pursuant to Section 3 and no Lien exists
upon such Pledged Collateral, except for the pledges and security interests in
favor of the Administrative Agent for the benefit of the Lenders created or
provided for herein, which pledges and security interests constitute a first
priority perfected pledge and security interest in and to all of such Pledged
Collateral as provided in Section 3.

(b)  The Pledged Interests evidenced by the certificates identified under the
name of the Obligor in Annex 1 are duly authorized, validly existing, fully paid
and non-assessable and none of the Pledged Interests is subject to any
contractual restriction or any restriction under the certificate of
incorporation or certificate of formation of each Collateral Party (except for
any restriction contained herein).

(c)  The Pledged Interests evidenced by the certificates identified under the
name of the Obligor in Annex 1 constitute all the membership interests, shares
or other ownership interests of any class or character of each Collateral Party,
in each case, beneficially owned by the Obligor on the date hereof (whether or
not registered in the name of the Obligor), and Annex 1 correctly identifies, as
at the date hereof, the membership interests and shares constituting the Pledged
Interests and the respective issuer, certificate numbers, class and amounts of
such shares.

SECTION 3.         THE PLEDGE. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
Secured Obligations, the Obligor hereby pledges and grants to the Administrative
Agent, for the benefit of the Lenders, a security interest in all of the
Obligor’s right, title and interest in the following property, whether now owned
by the Obligor or hereafter acquired and whether now existing or hereafter
coming into existence (all being collectively referred to herein as “Pledged
Collateral”):

(a)  the shares in the Westside Entities, EMH, Mission del Cielo and the
membership interests in MGE identified in Annex 1 or other ownership interests
of whatever class or character in these companies, now or hereafter owned by the
Obligor, in each case together with the certificates (if any) evidencing the
same (collectively, the “Pledged Interests”);

(b)  all membership interests, stock, securities, moneys or property
representing a dividend on any of the Pledged Interests, or representing a
distribution or return of capital upon or in respect of the Pledged Interests,
or resulting from a split-up, revision, reclassification or any change of the
Pledged Interests or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or otherwise
in respect of, the Pledged Interests;

(c)  in the event of any consolidation or merger involving the Collateral
Parties in which a Collateral Party is not the surviving entity, all ownership
interests of any class or character of the successor entity formed by or
resulting from such consolidation or merger (the Pledged Interests together with
all other certificates of membership interests, shares, securities, properties
or moneys as may from time to time be pledged hereunder pursuant to
clause (a) or (b) above and this clause (c) being herein collectively referred
to as the “Stock Collateral”);

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(d)  the Collateral Accounts and all amounts, Permitted Investments and other
property (including securities, financial assets, investment property, security
entitlements and instruments, as applicable) at any time deposited in or
credited thereto and all security entitlements with respect thereto, including,
without limitation, the Big Four Revenue; and

(e)  all proceeds of and to any of the property of the Obligor described in the
preceding clauses of this Section 3 (including all causes of action, claims and
warranties now or hereafter held by the Obligor in respect of any of the items
listed above) and, to the extent related to any property described in said
clauses or such proceeds, all books, correspondence, credit files, records,
invoices and other papers.

SECTION 4.         COLLATERAL ACCOUNTS; CASH PROCEEDS.

4.01         Collateral Accounts.

(a)  The Administrative Agent will cause to be established at a banking
institution to be selected by the Administrative Agent a cash collateral account
(the “Default Collateral Account”), into which there shall be deposited from
time to time upon the occurrence and during the continuance of an Event of
Default the cash proceeds of any of the Pledged Collateral required to be
delivered to the Administrative Agent pursuant hereto. The balance from time to
time in the Default Collateral Account shall constitute part of the Pledged
Collateral hereunder and shall not constitute payment of the Secured Obligations
until applied as hereinafter provided. Except as expressly provided in the next
sentence, the Administrative Agent shall remit the collected balance standing to
the credit of the Default Collateral Account to or upon the order of the Obligor
as the Obligor shall from time to time instruct. However, at any time following
the occurrence and during the continuance of an Event of Default, the
Administrative Agent may (and, if instructed by the Required Lenders, shall) in
its (or their) discretion apply or cause to be applied (subject to collection)
the balance from time to time standing to the credit of the Default Collateral
Account to the payment of the Secured Obligations in the manner specified in
Section 5.08. The balance from time to time in the Default Collateral Account
shall be subject to withdrawal only as provided herein. In addition to the
foregoing, the Obligor agrees that, at any time after the occurrence and during
the continuance of an Event of Default, if the proceeds of any Pledged
Collateral hereunder shall be received by it, the Obligor shall, upon the
request of the Administrative Agent, as promptly as possible deposit such
proceeds into the Default Collateral Account. Until so deposited, all such
proceeds shall be held in trust by the Obligor for and as the property of the
Administrative Agent and shall not be commingled with any other funds or
property of the Obligor. The Default Collateral Account shall be established in
the name of the Obligor, but under the exclusive dominion and control of the
Administrative Agent.

(b)  The Administrative Agent will cause to be established at a banking
institution to be selected by the Administrative Agent a cash collateral account
(the “LC Collateral Account”), into which there shall be deposited from time to
time amounts required to be deposited to such account pursuant to Section 2.6.13
of the Credit Agreement. The balance from time to time in the LC Collateral
Account shall constitute part of the Pledged Collateral hereunder and shall be
held by the Administrative Agent in the first instance for the LC Exposure under
the Credit Agreement and thereafter for the payment of the Secured Obligations.
The LC Collateral Account shall be established in the name of the Obligor, but
under the exclusive dominion and control of the Administrative Agent.

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(c)  The Administrative Agent will cause to be established at a banking
institution to be selected by the Administrative Agent a cash collateral account
(the “Disposition Proceeds Account”), into which the Obligor shall deposit the
Net Cash Proceeds of Dispositions with respect to the Collateral Parties and the
Subsidiaries of the Collateral Parties in excess of $100,000,000, in the
aggregate, as to which a prepayment of the Loans has not yet been made in
accordance with Section 3.1.2(a) of the Credit Agreement, and the Obligor agrees
that, immediately upon the occurrence of a Current Disposition, which, together
with all prior Dispositions, yields Net Cash Proceeds in excess of $100,000,000,
in the aggregate, it shall as promptly as possible deposit such proceeds into
the Disposition Proceeds Account. Such Net Cash Proceeds shall be held in the
Disposition Proceeds Account pending prepayment of the Loans (and/or Cash
Collateralize LC Exposure) and the termination of the Commitments or the making
of investments, in each case, in accordance with Section 3.1.2(a) of the Credit
Agreement. The balance from time to time in the Disposition Proceeds Account
shall constitute part of the Pledged Collateral hereunder and shall not
constitute payment of the Secured Obligations until applied as hereinafter
provided. Except as expressly provided in the next sentence, the Administrative
Agent shall remit the collected balance standing to the credit of the
Disposition Proceeds Account with respect to any Current Disposition (i) to or
upon the order of the Obligor to make Investments with the Net Cash Proceeds (or
any portion thereof) of such Current Disposition as contemplated by
Section 3.1.2(a) of the Credit Agreement or (ii) to or upon the order of the
Obligor to the extent that the Net Cash Proceeds (or any portion thereof) of
such Current Disposition are not required to be applied to prepayment of the
Loans on the related Mandatory Prepayment Date in accordance with
Section 3.1.2(d) of the Credit Agreement; provided that investment earnings on
Permitted Investments credited to the Disposition Proceeds Account shall be
remitted to or upon the direction of the Obligor at the request of the Obligor.
However, at any time following the occurrence and during the continuance of an
Event of Default, the Administrative Agent may (and, if instructed by the
Required Lenders, shall) in its (or their) discretion apply or cause to be
applied (subject to collection) the balance from time to time standing to the
credit of the Disposition Proceeds Account (including, without limitation,
investment earnings on Permitted Investments) to the payment of the Secured
Obligations in the manner specified in Section 5.08. The balance from time to
time in the Disposition Proceeds Account shall be subject to withdrawal only as
provided herein. The Disposition Proceeds Account shall be established in the
name of the Obligor, but under the exclusive dominion and control of the
Administrative Agent.

(d)  The Obligor shall establish the Big Four Revenue Account into which cash
and Permitted Investments received from the Big Four Companies shall be
deposited or credited pursuant to Section 5.03(b). Except as expressly provided
in the next sentence, the Administrative Agent shall remit the collected balance
standing to the credit of the Big Four Revenue Account to or upon the order of
the Obligor as the Obligor shall from time to time instruct. However, at any
time following the occurrence and during the continuance of an Event of Default,
the Administrative Agent may (and, if instructed by the Required Lenders, shall)
in its (or their) discretion apply or cause to be applied (subject to
collection) the balance from time to time standing to the credit of the Big Four
Revenue Account to the payment of the Secured Obligations in the manner
specified in Section 5.08. The balance from time to time in the Big Four Revenue
Account shall be subject to withdrawal only as provided herein. In addition to
the foregoing, the Obligor agrees that, at any time after the occurrence and
during the continuance of an Event of Default, if the any amounts required to be
deposited into the Big Four Revenue Account hereunder shall be received by it,
the Obligor shall, upon the request of the Administrative Agent, as promptly as
possible deposit such proceeds into the Big Four Revenue Account. Until so
deposited, all such proceeds shall be held in trust by the Obligor for and as
the property of the Administrative Agent and shall not be commingled with any
other funds or property of the Obligor. The Big Four Revenue Account shall be
established in the name of the Obligor, but under the exclusive dominion and
control of the Administrative Agent.

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(e)  Each Collateral Account shall be a “securities account” (as defined in
Section 8-501(a) of the UCC) and, to the extent that credit balances not
constituting “financial assets” (as defined in Section 8-102(a)(9) of the UCC)
are credited thereto, a “deposit account” (as defined in Section 9-102(a)(29) of
the UCC).

4.02         Investment of Balance in Collateral Accounts. The cash balance
standing to the credit of the Collateral Accounts shall be invested from time to
time in such Permitted Investments as the Obligor (or, after the occurrence and
during the continuance of an Event of Default, the Administrative Agent) shall
determine, which Permitted Investments shall be credited to the Collateral
Accounts); provided that at any time after the occurrence and during the
continuance of an Event of Default, the Administrative Agent may (and, if
instructed by the Required Lenders, shall) in its (or their) discretion at any
time and from time to time elect to liquidate any such Permitted Investments and
to apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 5.08.

SECTION 5.         FURTHER ASSURANCES; REMEDIES. In furtherance of the grant of
the pledge and security interest pursuant to Section 3, the Obligor hereby
agrees until the Credit Agreement Termination Date, with the Administrative
Agent and each of the other Lenders as follows:

5.01         Delivery and Other Perfection. The Obligor shall:

(a)  if any of the membership interests, shares, securities, moneys or property
required to be pledged by the Obligor under clauses (a), (b), and  (c) of
Section 3 are received by the Obligor, forthwith either (x) transfer and deliver
to the Administrative Agent such membership interests, shares of stock or
securities so received by the Obligor (together with the certificates for any
such membership interests, shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by the Administrative Agent, pursuant to the terms of
this Agreement, as part of the Pledged Collateral or (y) take such other action
as the Administrative Agent shall reasonably request, at the direction of the
Required Lenders, to duly record the Lien created hereunder in such stock,
securities, moneys or property in said clauses (a), (b) and (c);

(b)  give, execute, deliver, file and/or record any financing statement, notice,
instrument, document, agreement or other papers that may be necessary or
reasonably requested by the Administrative Agent, at the direction of the
Required Lenders, to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Administrative Agent, at any time
following the occurrence and continuance of an Event of Default, to exercise and
enforce its rights hereunder with respect to such pledge and security interest,
causing any or all of the Pledged Collateral to be transferred of record into
the name of the Administrative Agent or its nominee (and the Administrative
Agent agrees that if any Pledged Collateral is transferred into its name or the
name of its nominee, the Administrative Agent will thereafter promptly give to
the Obligor copies of any notices and communications received by it with respect
to the Pledged Collateral pledged by the Obligor hereunder);

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(c)  keep full and accurate books and records relating to the Pledged
Collateral, and stamp or otherwise mark such books and records in order to
reflect the security interests granted by this Agreement; and

(d)  permit representatives or agents of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Pledged Collateral, and,
upon the occurrence and during the continuation of an Event of Default, permit
representatives or agents of the Administrative Agent to be present at the
Obligor’s place of business to receive copies of all communications and
remittances relating to the Pledged Collateral, and forward copies of any
notices or communications received by the Obligor with respect to the Pledged
Collateral, all in such manner as the Administrative Agent may require.

5.02         Other Financing Statements and Liens.

(a)  The Obligor shall not create, incur, assume or suffer to exist any Lien
upon the Pledged Collateral at any time, except for the pledges and security
interests in favor of the Administrative Agent for the benefit of the Lenders
created pursuant hereto or provided for herein, which pledges and security
interests constitute a first priority perfected pledge and security interest in
and to all of the Pledged Collateral.

(b)  Without the prior written consent of the Administrative Agent (at the
direction of the Required Lenders), the Obligor shall not file or suffer to be
on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Pledged Collateral in which the Administrative Agent is not named as the sole
secured party for the benefit of the Lenders or (ii) cause or permit any Person,
other than the Administrative Agent to have “control” (as such term is defined
in Section 9-104 of the UCC) of any existing Collateral Account.

5.03         Special Provisions Relating to the Pledged Collateral.

(a)   Stock Collateral.

(i)  The Obligor will cause the Stock Collateral to constitute at all times all
ownership interests of any class or character of the Collateral Parties then
outstanding.

(ii)  So long as no Event of Default shall have occurred and be continuing, the
Obligor shall have the right to exercise all voting, consensual and other powers
of ownership pertaining to the Stock Collateral for all purposes not
inconsistent with the terms of this Agreement, any other Loan Document or any
other instrument or agreement referred to herein; provided that the Obligor
agrees that it will not vote the Stock Collateral in any manner that is
inconsistent with the terms of this Agreement or any other Loan Document; and
the Administrative Agent, at the direction of the Required Lenders, shall
execute and deliver to the Obligor or cause to be executed and delivered to the
Obligor all such proxies, powers of attorney, dividend and other orders, and all
such instruments, without recourse, as the Obligor may reasonably request for
the purpose of enabling the Obligor to exercise the rights and powers that it is
entitled to exercise pursuant to this Section 5.03(a)(ii).

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(iii)  If any Event of Default shall have occurred, then so long as such Event
of Default shall continue, and whether or not the Administrative Agent or any
Lender exercises any available right to declare any of the Secured Obligations
due and payable or seeks or pursues any other relief or remedy available to it
under applicable law or under this Agreement, any Loan Document or any other
agreement relating to the Secured Obligations, all dividends and other
distributions on the Stock Collateral shall be paid directly to the
Administrative Agent and retained by it in the Collateral Account as part of the
Pledged Collateral, subject to the terms of this Agreement, and, if the
Administrative Agent shall so request in writing, the Obligor agrees to execute
and deliver to the Administrative Agent appropriate additional dividend,
distribution and other orders and documents to that end, provided that if such
Event of Default is cured, any such dividend or distribution theretofore paid to
the Administrative Agent shall, upon request of the Obligor (except to the
extent theretofore applied to the Secured Obligations), be returned by the
Administrative Agent to the Obligor.

(iv)  All Stock Collateral in which the Obligor shall hereafter grant a security
interest pursuant to Section 3 shall be duly authorized, validly existing, fully
paid and non-assessable and none of the Stock Collateral, including the Stock
Collateral evidenced by the certificates identified under the name of the
Obligor in Annex 1, shall be subject to any contractual restriction (except for
any such restriction contained herein).

(b)  Big Four Revenue Account. The Obligor shall provide irrevocable written 
instructions (copies of which shall be provided to the Administrative Agent) to
each of the Big Four Companies to deliver to the Big Four Revenue Account any
cash or Permitted Investments distributed, paid or otherwise transferred to the
Obligor (the “Big Four Revenue”).

5.04         Credit Agreement Event of Default, Etc. Upon the occurrence and
during the continuance of an Event of Default:

(a)  the Obligor shall, at the request of the Administrative Agent assemble the
Pledged Collateral owned by it at such place or places, reasonably convenient to
both the Administrative Agent and the Obligor, designated in its request;

(b)  the Administrative Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Pledged Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, any of the Pledged Collateral;

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(c)  the Administrative Agent shall have all of the rights and remedies with
respect to the Pledged Collateral of a secured party under the UCC (whether or
not the UCC is in effect in the jurisdiction where the rights and remedies are
asserted) and such additional rights and remedies to which a secured party is
entitled under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, and the right, to the maximum extent
permitted by law, to exercise all voting, consensual and other powers of
ownership pertaining to the Pledged Collateral as if the Administrative Agent
were the sole and absolute owner thereof (and the Obligor agrees to take all
such action as may be appropriate to give effect to such right);

(d)  the Administrative Agent may, at the direction of the Required Lenders, in
its name or in the name of the Obligor or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account of or
in exchange for any of the Pledged Collateral, but shall be under no obligation
to do so; and

(e)  the Administrative Agent may, with respect to the Pledged Collateral or any
part thereof that shall then be or shall thereafter come into the possession,
custody or control of the Administrative Agent, any other Lender or any of their
respective agents, upon ten (10) Business Days’ prior written notice to the
Obligor of the time and place, sell, lease, assign or otherwise dispose of all
or any part of such Pledged Collateral, at such place or places as the
Administrative Agent deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk or liability), at public or
private sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except as provided above and
such notice as is required above or by applicable statute that cannot be
waived), and upon such other terms as the Administrative Agent, at the direction
of the Required Lenders, may reasonably deem commercially reasonable, and the
Administrative Agent or any other Lender or anyone else may be the purchaser,
lessee, assignee or recipient of any or all of the Pledged Collateral so
disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption (statutory
or otherwise), of the Obligor, any such demand, notice and right or equity being
hereby expressly waived and released. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the sale may
be so adjourned.

The proceeds of each collection, sale or other disposition under this
Section 5.04 shall be applied in accordance with Section 5.08 hereto.

The Obligor recognizes that, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and applicable state securities laws, the
Administrative Agent may be compelled, with respect to any sale of all or any
part of the Pledged Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Pledged Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Obligor acknowledges that any such private sales may be at prices and on terms
less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions. The parties hereto agree that any such
private sale shall be made in a commercially reasonable manner and that the
Administrative Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for public sale.

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5.05         Deficiency. If the proceeds of sale, collection or other
realization of or upon the Pledged Collateral pursuant to Section 5.04 are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Obligor shall remain liable for any
deficiency to the extent the Obligor is obligated under this Agreement.

5.06         Removals, Etc. Without at least thirty (30) days’ prior written
notice to the Administrative Agent, the Obligor shall not (a) maintain any of
its books and records with respect to the Pledged Collateral at any office at
any place other than at the address indicated beneath its signature hereto or
(b) change its corporate name, or the name under which it does business, from
the name shown on the signature pages hereto.

5.07         Private Sale. The Administrative Agent and the other Lenders  shall
incur no liability as a result of the sale of the Pledged Collateral, or any
part thereof, at any private sale pursuant to Section 5.04 conducted in a
commercially reasonable manner. The Obligor hereby waives any claims against the
Administrative Agent or any other Lender arising by reason of the fact that the
price at which the Pledged Collateral may have been sold at such a private sale
was less than the price that might have been obtained at a public sale or was
less than the aggregate amount of the Secured Obligations, even if the
Administrative Agent accepts the first offer received and does not offer the
Pledged Collateral to more than one offeree.

5.08         Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Pledged Collateral pursuant hereto, and any other cash at the
time held by the Administrative Agent under Section 4 or this Section 5, shall
be applied by the Administrative Agent:

First, to the payment of the costs and expenses of such collection, sale or
other realization, including reasonable out-of-pocket costs and expenses of the
Administrative Agent and the fees and expenses of its agents and counsel, and
all expenses incurred and advances made by the Administrative Agent in
connection therewith;

Next, to the payment in full of the Secured Obligations, in each case equally
and ratably in accordance with the respective amounts thereof then due and
owing; and

Finally, to the payment to the Obligor, or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining.

As used in this Section 5, “proceeds” of Pledged Collateral means cash,
securities and other property realized in respect of, and distributions in kind
of, Pledged Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Obligors or any issuer of or obligor on
any of the Pledged Collateral.

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5.09         Attorney-in-Fact. Without limiting any rights or powers granted by
this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default, the Administrative Agent is hereby appointed the
attorney-in-fact of the Obligor for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments that the
Administrative Agent may, at the direction of the Required Lenders, deem
necessary or advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Administrative Agent shall be
entitled under this Section 5 to make collections in respect of the Pledged
Collateral, the Administrative Agent shall have the right and power to receive,
endorse and collect all checks made payable to the order of the Obligor
representing any dividend, payment or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same.

5.10         Perfection. Prior to or concurrently with the execution and
delivery of this Agreement, the Obligor shall deliver to the Administrative
Agent (a) all certificates identified in Annex 1, accompanied by undated stock
powers duly executed in blank, (b) a UCC-1 financing statement, for filing in
each jurisdiction requested by the Administrative Agent, at the direction of the
Required Lenders, naming the Obligor as debtor and the Administrative Agent as
secured party and (c) such documents as are necessary to grant the
Administrative Agent control of the Big Four Revenue Account (including an
account control agreement).

5.11         Termination. When the Credit Agreement Termination Date shall have
occurred, this Agreement shall terminate, and the Administrative Agent shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Pledged Collateral and money received in respect thereof, to or on the order of
the Obligor. Upon the request, and at the expense of the Obligor, the
Administrative Agent shall execute and deliver but without any recourse,
warranty or representation whatsoever all such documentation necessary to
release the pledge created pursuant to this Agreement.

5.12         Further Assurances. The Obligor agrees that, from time to time upon
the written request of the Administrative Agent, the Obligor will execute and
deliver such further documents and do such other acts and things as the
Administrative Agent, at the direction of the Required Lenders, may reasonably
request in order fully to effect the purposes of this Agreement.

SECTION 6.         MISCELLANEOUS.

6.01         Notices. All notices, requests and other communications provided
for herein shall be given or made in writing in the manner set forth in
Section 10.2 of the Credit Agreement. Unless otherwise changed in accordance
with the Credit Agreement by the respective parties hereto, all notices,
requests and other communications to each party hereto shall be sent to the
address for notices of such party set forth on the signature pages hereto.

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6.02         Delay and Waiver. No failure to exercise, no course of dealing with
respect to the exercise of, and no delay in exercising, any right, power or
remedy arising under this Agreement will impair any such right, power or remedy
or operate as a waiver hereof. No single or partial exercise of any such right,
power or remedy will preclude any other or future exercise thereof or the
exercise of any other right, power or remedy. The remedies herein are cumulative
and are not exclusive of any remedies provided by law.

6.03         Amendments, Etc. The terms of this Agreement may be waived, altered
or amended only by an instrument in writing duly executed by the Obligor and the
Administrative Agent (with the consent of the Required Lenders in accordance
with the Credit Agreement). Any such amendment or waiver shall be binding upon
the Administrative Agent and each other Lender, each holder of any of the
Secured Obligations and the Obligor.

6.04         Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Obligor,
the Administrative Agent, each of the other Lenders and each holder of any of
the Secured Obligations (provided, that the Obligor shall not assign or transfer
its rights hereunder without the prior written consent of the Administrative
Agent).

6.05         Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an
original, but all such counterparts together will constitute but one and the
same instrument.

6.06         Governing Law; Submission to Jurisdiction. The internal law of the
State of New York will govern and be used to construe this Agreement without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required thereby.

6.07         Headings. Section headings herein have been inserted for
convenience of reference only, are not to be considered a part of this Agreement
and will in no way modify or restrict any of the terms or provisions hereof.

6.08         Agents and Attorneys-in-Fact. The Administrative Agent may employ
agents and attorneys-in-fact in connection herewith and shall not be responsible
or liable for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.

6.09         Severability. If any provision of this Agreement is invalid,
illegal or unenforceable in any respect or in any jurisdiction, the validity,
legality and enforceability of such provision in all other respects and of all
remaining provisions, and of such provision in all other jurisdictions, will not
in any way be affected or impaired thereby.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed and delivered as of the day and year first above written.

 

 

 

 

EDISON MISSION ENERGY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/Steven D. Eisenberg

 

 

 

 

 

 

Name:    Steven D. Eisenberg

 

 

 

 

 

 

Title:      Vice President and Associate

 

 

 

 

 

 

               General Counsel

 

 

 

 

 

 

 

 

 

 

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

18101 Von Karman Avenue

 

 

 

 

Suite 1700

 

 

 

 

Irvine, CA 92612

 

 

 

 

Attention: General Counsel

 

 

 

 

Telecopier No.: (949) 752-1420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CITICORP NORTH AMERICA, INC.,

 

 

 

 

not in its individual capacity but solely as

 

 

 

 

Administrative Agent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Nietzsche Rodricks

 

 

 

 

 

 

Name:    Nietzsche Rodricks

 

 

 

 

 

 

Title:      Vice President

 

 

 

 

 

 

 

 

 

 

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

2 Penns Way

 

 

 

 

New Castle, DE 19720

 

 

 

 

Attention: Lisa Rodriguez

 

 

 

 

Telecopier No: (212) 994-0961

 

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ANNEX 1
to Security Agreement

PLEDGED INTERESTS

 

Issuer

 

Certificate No.

 

Registered Owner

 

Number of Units

 

Silverado Energy Company

 

1

 

Edison Mission Energy

 

100

 

 

 

 

 

 

 

 

 

Viejo Energy Company

 

1

 

Edison Mission Energy

 

100

 

 

 

 

 

 

 

 

 

Anacapa Energy Company

 

1

 

Edison Mission Energy

 

100

 

 

 

 

 

 

 

 

 

Del Mar Energy Company

 

1

 

Edison Mission Energy

 

100

 

 

 

 

 

 

 

 

 

Edison Mission Holdings Co.

 

2

 

Edison Mission Energy

 

100

 

 

 

 

 

 

 

 

 

Midwest Generation EME, LLC

 

1

 

Edison Mission Energy

 

100

 

 

 

 

 

 

 

 

 

Mission del Cielo, Inc.

 

1

 

Edison Mission Energy

 

100

 

 

 

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