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Exhibit 10.16.4
  Execution Copy    
  

AMENDED
AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT 

made
by 

EME
HOMER CITY GENERATION L.P. 

in
favor of 

THE
BANK OF NEW YORK

as successor to 

UNITED
STATES TRUST COMPANY OF NEW YORK,

as Collateral Agent 

Dated
as of December 7, 2001 

 
 

TABLE OF CONTENTS    
  

	 
	 	 
	 	 
	 	Page

	SECTION 1. DEFINED TERMS	 	1
	 	 	1.1	 	Definitions	 	1
	 	 	1.2	 	Other Definitional Provisions	 	2
	

SECTION 2. PLEDGE; GRANT OF SECURITY INTEREST	
 	

3
	

SECTION 3. REPRESENTATIONS AND WARRANTIES	
 	

3
	 	 	3.1	 	Title; No Other Liens	 	3
	 	 	3.2	 	Perfected First Priority Liens	 	3
	 	 	3.3	 	Chief Executive Office	 	3
	

SECTION 4. COVENANTS	
 	

3
	 	 	4.1	 	Delivery of Instruments, Certificated Securities and Chattel Paper	 	3
	 	 	4.2	 	Maintenance of Perfected Security Interest Further Documentation	 	4
	 	 	4.3	 	Changes in Locations, Name, etc.	 	4
	 	 	4.4	 	Notices	 	4
	

SECTION 5. REMEDIAL PROVISIONS	
 	

4
	 	 	5.1	 	Proceeds to be Turned Over To Collateral Agent	 	4
	 	 	5.2	 	Deposits; Application of Proceeds	 	4
	 	 	5.3	 	Direction of Secured Parties	 	5
	 	 	5.4	 	Code and Other Remedies	 	5
	 	 	5.5	 	Waiver; Deficiency	 	6
	

SECTION 6. THE COLLATERAL AGENT	
 	

6
	 	 	6.1	 	Collateral Agent's Appointment as Attorney-in-Fact, etc.	 	6
	 	 	6.2	 	Duty of Collateral Agent	 	7
	 	 	6.3	 	Execution of Financing Statements	 	7
	 	 	6.4	 	Authority of Collateral Agent	 	7
	 	 	6.5	 	Resignation of Collateral Agent.	 	8
	

SECTION 7. MISCELLANEOUS	
 	

8
	 	 	7.1	 	Amendments in Writing	 	8
	 	 	7.2	 	Notices	 	8
	 	 	7.3	 	No Waiver by Course of Conduct; Cumulative Remedies	 	8
	 	 	7.4	 	Successors and Assigns	 	9
	 	 	7.5	 	Set-Off	 	9
	 	 	7.6	 	Counterparts	 	9
	 	 	7.7	 	Severability	 	9
	 	 	7.8	 	Section Headings	 	10
	 	 	7.9	 	Integration	 	10
	 	 	7.10	 	GOVERNING LAW	 	10
	 	 	7.11	 	Submission To Jurisdiction; Waivers	 	10
	 	 	7.12	 	Acknowledgements	 	10
	 	 	7.13	 	Releases.	 	11
	 	 	7.14	 	Security Interest Absolute.	 	11

	 	 	7.15	 	WAIVER OF JURY TRIAL	 	12

	 
	 	 

	SCHEDULES	 	 
	

Schedule 1	
 	

Notice Addresses
	Schedule 2	 	Perfection Matters
	Schedule 3	 	Jurisdictions of Organization and Chief Executive Offices
	Schedule 4	 	Participation Agreements

        AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT, dated as of December 7, 2001, made by EME HOMER CITY GENERATION L.P., a Pennsylvania limited partnership (the
"Pledgor") in favor of THE BANK OF NEW YORK, as successor to UNITED STATES TRUST COMPANY OF NEW YORK, as collateral agent for the Secured Parties (as
defined below) (in such capacity, the "Collateral Agent"). 

RECITALS

        A.    Contemporaneously
herewith, EME Homer City will enter into a transaction pursuant to the Participation Agreements listed on  Schedule 4 by and among EME Homer City, the Owner Lessor, Wells Fargo Bank Northwest,
National Association, not in its individual capacity but
solely as Owner Manager, the Owner Participant, Homer City Funding LLC, as Lender, the Lease Indenture Trustee, the Security Agent and The Bank of New York, not in its individual capacity but solely
as Bondholder Trustee (as amended, modified and supplemented and in effect from time to time, collectively, the "Participation Agreements") whereby EME
Homer City will sell undivided interests in its generating assets to the Owner Lessors and the Owner Lessors will lease such undivided interests in its generating assets to EME Homer City under the
Facility Leases. 

        B.    In
consideration of the transactions contemplated by the Participation Agreements, the Pledgor will be obligated to pay to the Secured Parties the aggregate amount of all
obligations owed by the Pledgor to the Secured Parties under the Operative Documents related thereto (the "Leveraged Lease Obligations"). 

        C.    In
satisfaction of the requirements of the Secured Parties, the Pledgor desires by this Agreement and the other Security Documents (as defined below) to provide
collateral as security for its obligations under each Participation Agreement and the other Operative Documents related thereto. 

        D.    In
order to simplify administration of such collateral and to provide for the orderly enforcement of their respective rights, the Secured Parties (as defined below) have
appointed the Collateral Agent to serve as their common representative, to be the beneficiary under any pledge intended to benefit the Secured Parties, and to hold the liens created, or to be created,
under the Operative Documents. 

        E.    It
is a condition precedent to the approval by the Secured Parties of the transactions contemplated by the Operative Documents that the Pledgor 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, the Pledgor hereby agrees with the Collateral Agent, for the benefit of the Secured Parties, to amend and restate the Guarantee and
Collateral Agreement, dated as of March 18, 1999 (the "Guarantee and Collateral Agreement"), among Edison Mission Holdings, Co., Edison Mission
Finance Co., Homer City Property Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy Westside, Inc., EME Homer City Generation, L.P. and Edison Mission Energy (the
"EME Parties"), in favor of United States Trust Company of New York, in its entirety and terminate the guarantee and pledge under the Guarantee and
Collateral Agreement and release the EME Parties from their obligations thereunder (except as set forth hereunder with respect to the Pledgor): 

 
 

SECTION 1.    DEFINED TERMS    

        1.1    Definitions.    (a) Unless otherwise defined herein, terms defined in the Participation Agreement and
used herein shall have the meanings given to them in each Participation Agreement. 

        (b)  The
following terms shall have the following meanings: 

        "Agreement": this Amended and Restated Guarantee and Collateral Agreement, as the same may be amended, supplemented or otherwise modified
from time to time. 

        "Certificated Security": the collective reference to (i) any "certificated security" as defined in
Section 8-102(a)(4) 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. 

        "Collateral": as defined in Section 2.

        "Collateral Account": any collateral account established by the Collateral Agent as provided in  Section 5.1.

        "Facility Lease": as defined in each Participation Agreement. 

        "General Intangibles": all "general intangibles" as such term is defined in Section 9-102(a)(42) of the New York UCC
excluding the following: all emissions allowances and credits allocated by the DEP to the extent credited to an account in the Partnership's name prior to termination of the Facility Lease, all
insurance policies, and all contracts, agreements, instruments and indentures in any form, and portions thereof, to which the Pledgor is a party or under which the Pledgor has any right, title or
interest or to which the Pledgor or any property of the Pledgor is subject, as the same may from time to time be amended, supplemented or otherwise modified. 

        "Lease Event of Default": as defined in each Participation Agreement. 

        "Lease Indenture Trustee": as defined in each Participation Agreement. 

        "Leveraged Lease Obligations": as defined in the recitals. 

        "Lease Subordination Agreement": the Lease Subordination Agreement, dated as of December 7, 2001, among the Owner Lessors, the
Owner Participant and the Lease Indenture Trustee. 

        "Majority in Interest of Owner Lessors": the holders of at least 51% of all Undivided Interests (as defined in any Participation
Agreement) still subject to a Facility Lease. 

        "New York UCC": the Uniform Commercial Code as from time to time in effect in the State of New York. 

        "Person": any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental
agency or other entity, whether acting in an individual, fiduciary or other capacity. 

        "Pledgor": as defined in the preamble.

        "Proceeds": all "proceeds" as such term is defined in Section 9-102(a)(64) of the New York UCC. 

        "Secured Parties": the Collateral Agent, the Owner Lessors and the Owner Participant. 

        "Securities Act": the Securities Act of 1933, as amended. 

        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 Operative Document or other agreement shall be deemed to refer to such Operative 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. 

2

 

        (d)  Each
reference in this Agreement to a Person shall be deemed to include such Person's successors and assigns. 

        (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.    PLEDGE; GRANT OF SECURITY INTEREST    

        The
Pledgor hereby pledges and grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in all of the General Intangibles now owned or at any time
hereafter acquired by the Pledgor or in which the Pledgor now has or at any time in the future may acquire any right, title or interest together with all Proceeds thereof (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 the Leveraged Lease Obligations. 

 
 

SECTION 3.    REPRESENTATIONS AND WARRANTIES    

        The
Pledgor hereby represents and warrants, with respect to itself and its Collateral, to the Collateral Agent and each Secured Party that: 

        3.1    Title; No Other Liens.    Except for the security interest granted to the Collateral Agent pursuant to this
Agreement, the Pledgor owns each item of the Collateral free and clear of any and all Liens or claims of others except as are permitted by the Operative Documents. 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 Operative Documents. 

        3.2    Perfected First Priority Liens.    The security interests granted pursuant to this Agreement upon completion of
the filings and other actions specified on Schedule 2 (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 the Leveraged Lease Obligations to the extent that a security interest may be perfected by
filing and/or the other actions specified on Schedule 2, and (b) are prior to all other Liens on the Collateral in existence on the date
hereof except for Liens permitted by the Operative Documents and which have priority over the Liens on the Collateral by operation of law. 

        3.3    Chief Executive Office.    On the date hereof, the Pledgor's jurisdiction of organization and the location of
the Pledgor's chief executive office or sole place of business are specified on Schedule 3. 

 
 

SECTION 4.    COVENANTS    

        The
Pledgor covenants and agrees with the Collateral Agent and the Secured Parties that, from and after the date of this Agreement until the Leveraged Lease Obligations shall have been
paid in full: 

        4.1    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. 

3

 

        4.2    Maintenance of Perfected Security Interest Further Documentation.    (a) The Pledgor 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 3.2 and shall defend such security interest against the claims and demands of all Persons whomsoever. 

        (b)  The
Pledgor 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 the Pledgor, the Pledgor 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) taking any actions necessary to enable the Collateral Agent to obtain "control" (within the meaning
of the applicable Uniform Commercial Code) with respect thereto. 

        4.3    Changes in Locations, Name, etc.    The Pledgor will not, except upon 30 days' prior written notice to
the Collateral Agent and delivery to the Collateral Agent of 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: 

	(i)
	change
its jurisdiction of organization or the location of its chief executive office or sole place of business from that referred to in  Section 3.3; or

	(ii)
	change
its name, identity or corporate structure to such an extent that any financing statement flied by the Collateral Agent in connection with this
Agreement would become misleading. 

        4.4    Notices.    The Pledgor will advise the Collateral Agent promptly, in reasonable detail, of: 

        (a)  any
Lien (other than security interests created hereby or Liens permitted under the Operative 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. 

 
 

SECTION 5.    REMEDIAL PROVISIONS    

        5.1    Proceeds to be Turned Over To Collateral Agent.    If a Lease Event of Default shall occur and be continuing,
all Proceeds received by the Pledgor consisting of cash, checks and other near-cash items shall be held by the Pledgor in trust for the Collateral Agent, segregated from other funds of the
Pledgor, and shall, forthwith upon receipt by the Pledgor, be turned over to the Collateral Agent in the exact form received by the Pledgor (duly indorsed by the Pledgor 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 the Pledgor in trust for the Collateral Agent and the Secured Parties) shall continue to be held as collateral security for all the Leveraged
Lease Obligations and shall not constitute payment thereof until applied as provided in Section 5.2.

        5.2    Deposits; Application of Proceeds.    Upon the creation of any Collateral Account, the Collateral Agent shall
also establish 8 subaccounts of such Collateral Account, one subaccount with 

4

 

respect to each Facility Lease and the other Operative Documents related thereto. All deposits into the Collateral Account shall be credited to each subaccount based upon such Owner Lessor's
Percentage of such deposited amount. If a Lease 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 the applicable subaccount of any Collateral Account in payment of the Leveraged Lease Obligations in accordance with the applicable Participation Agreement and the other
applicable Operative Documents, and any part of such funds which the Collateral Agent elects not so to apply
and deems not required as collateral security for any Leveraged Lease Obligations shall be paid over from time to time by the Collateral Agent to the Pledgor or to whomsoever may be lawfully entitled
to receive the same. Any balance of such Proceeds in a subaccount remaining after applicable Leveraged Lease Obligations shall have been paid in full shall be paid over to the Pledgor or to whomsoever
may be lawfully entitled to receive the same. It is acknowledged and agreed that sums on deposit in any subaccount of the Collateral Account shall be held for the benefit of the applicable Owner
Lessor (as collateral for the Leveraged Lease Obligations under the applicable Facility Lease and the applicable Operative Documents and shall not constitute collateral for, and shall not be applied
to the repayment of, any obligations of the Facility Lessee owing to any other Owner Lessor under any other Facility Lease (or other applicable Operative Documents). 

        5.3    Direction of Secured Parties.    The Majority in Interest of Owner Lessors shall be entitled to give and
refrain from giving consents and directions to the Collateral Agent on behalf of all the Secured Parties (and all Secured Parties shall be bound by such action). 

        5.4    Code and Other Remedies.    Subject to Article XIV of each Participation Agreement, if a Lease 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 applicable Leveraged Lease 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 the Pledgor 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 the Pledgor, which right or equity is hereby waived and released. The Pledgor 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 the
Pledgor's premises or elsewhere. The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Section 5.4, 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) and after crediting such proceeds to the subaccounts
of the Collateral Account in accordance with Section 5.2, to the payment in whole or in part of the applicable Leveraged Lease 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 9-615(a)(3) of the New York UCC, need the Collateral Agent account for 

5

 

the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor 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. 

        5.5    Waiver; Deficiency.    The Pledgor waives and agrees not to assert any rights or privileges which it may
acquire under Section 9-112 of the New York UCC. 

 
 

SECTION 6.    THE COLLATERAL AGENT    

        6.1    Collateral Agent's Appointment as Attorney-in-Fact, etc.    (a) The Pledgor
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 the Pledgor and in the name of the Pledgor 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, the Pledgor hereby gives the Collateral Agent the power and right, on behalf of the Pledgor, without notice to or assent by the Pledgor, to do any or all of the following: 

	(i)
	in
the name of the Pledgor 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 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 Collateral whenever payable;

	(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 5.3 or  5.4, 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 the Pledgor 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 the Pledgor'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 

6

 

therein
and to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. 

        Anything
in this Section 6.1(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 6.1(a) unless a Lease Event of Default shall have occurred and be continuing. 

        (b)  If
a Lease Event of Default shall have occurred and be continuing, if the Pledgor 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 6.1, 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 Leveraged Lease Obligations under the Participation Agreement and the other Operative Documents, from the date of payment by the Collateral Agent to the date reimbursed by the
Pledgor, shall be payable by the Pledgor to the Collateral Agent on demand. 

        (d)  The
Pledgor 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. 

        6.2    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 the Pledgor 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 Agents 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 the Pledgor 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. 

        6.3    Execution of Financing Statements.    Pursuant to Section 9-402 of the New York UCC and any
other applicable law, the Pledgor 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 the Pledgor 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. 

        6.4    Authority of Collateral Agent.    The Pledgor 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 Operative Documents and by such other agreements with respect 

7

 

thereto as may exist from time to time among them, but, as between the Collateral Agent and the Pledgor, 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 the Pledgor shall not be under any obligation, or entitlement, to make any inquiry respecting such authority. 

        6.5    Resignation of Collateral Agent.    The Collateral Agent may resign at any time by giving ninety
(90) days prior written notice thereof to the Pledgor and the Owner Lessors; provided that such resignation may not in any event take effect
until a successor Collateral Agent accepts an appointment as set forth in this Section 6.5. Upon any such notice of resignation, the Pledgor and
the Owner Lessors shall have the right, upon ten (10) days prior written notice to the Pledgor and the Owner Lessors, to appoint a successor Collateral Agent. Collateral Agent may be removed at
any time with or without cause, by an instrument in writing delivered to Collateral Agent by the Pledgor and the Owner Lessors pursuant to the terms of this Agreement. Upon the acceptance of any
appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and
duties of the retiring or removed Collateral Agent (and the retiring or removed Collateral Agent shall reasonably cooperate in the transferring of such rights, powers and privileges to such successor
Collateral Agent) and the retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement. If no successor Collateral Agent shall have been so appointed
and shall have accepted such appointment within sixty (60) days after the retiring or removed Collateral Agent s giving of notice of resignation, then, upon five (5) days prior written
notice to the Secured Parties and the Pledgor, the retiring or
removed Collateral Agent may, on behalf of the Secured Parties, appoint a successor Collateral Agent. Any successor Collateral Agent shall be a bank, a banking cooperative or trust company organized
under the laws of the United States of America or of any State thereof, or any Affiliate of such bank, having a combined capital and surplus of at least $100,000,000. After any retiring Collateral
Agent s resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral
Agent under this Agreement and the other Operative Documents. 

 
 

SECTION 7.    MISCELLANEOUS    

        7.1    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 Participation Agreement. 

        7.2    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. 

        7.3    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 7.1), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Lease 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

 

        7.4    Successors and Assigns.    (a) This Agreement shall be binding upon the successors and assigns of the
Pledgor and shall inure to the benefit of the Collateral Agent and the Secured Parties and their successors and assigns; provided that the Pledgor may
not assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent. 

        (b)  In
order to secure the Lessor Notes of each Owner Lessor, such Owner Lessor will assign and grant a first priority security interest in favor of its applicable Lease
Indenture Trustee in and to all of such Owner Lessor's right, title and interest in, to and under this Agreement (other than to the extent relating to Excepted Payments and the rights to enforce and
collect the same). The Facility Lessee hereby consents to such assignment and to the creation of such Lien and security interest and acknowledges receipt of copies of the Lease Indenture, it being
understood that such consent shall not affect any requirement or the absence of any requirement for any consent of the Facility Lessee under any other circumstances. Unless and until the Collateral
Agent shall have received written notice from the Lease Indenture Trustee that the Lien of the applicable Lease Indenture has been fully discharged, the applicable Lease Indenture Trustee shall have
the right to exercise the rights of such Owner Lessor under this Agreement (other than with respect to Excepted Payments and the rights to enforce and collect the same) to the extent set forth in and
subject in each case to the exceptions set forth in the applicable Lease Indenture. 

        7.5    Set-Off.    The Pledgor hereby irrevocably authorizes the Collateral Agent and each Secured Party
at any time and from time to time (i) upon the occurrence of a Lease Event of Default of the kind described in clauses (a), (b), (g) and (h) of Article XVI of the Facility
Lease or (ii) upon the occurrence and continuance beyond the applicable grace period, if any, of any other Lease Event of Default and with the consent of the Secured Parties, without notice to
the Pledgor, any such notice being expressly waived by the Pledgor, 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 the Pledgor, 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 the Pledgor 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 the Pledgor, in any currency, whether arising hereunder, under the Participation Agreement, any other Operative 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 the Pledgor 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 7.5 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. 

        7.6    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. 

        7.7    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. 

9

 

        7.8    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. 

        7.9    Integration.    The Security Documents represent the agreement of the Pledgors, 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. 

        7.10    GOVERNING LAW.    THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK. 

        7.11    Submission To Jurisdiction; Waivers.    The Pledgor (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 Operative 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 the Pledgor at its address referred to in Section 7.2 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 sue in any other
jurisdiction; and 

        (e)  waives,
to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special,
exemplary, punitive or consequential damages. 

        7.12    Acknowledgements.    The Pledgor 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 the Pledgor arising out of or in connection with any Security
Documents, and the relationship between the Pledgor, 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 Pledgor
and the Secured Parties. 

10

 

        7.13    Releases.    (a) At such time as the Obligations shall have been paid in full, 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 the Pledgor
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 Pledgors. At the request and sole expense
of the Pledgor following any such termination, the Collateral Agent shall deliver to the Pledgor any Collateral held by the Collateral Agent hereunder, and execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such termination. 

        (b)  If
any of the Collateral shall be sold, transferred or otherwise disposed of by the Pledgor in a transaction permitted by the Participation Agreement, then the
Collateral Agent, at the request and reasonable and sole expense of the Pledgor, shall execute and deliver to the Pledgor all releases or other documents reasonably necessary or desirable for the
release of the Liens created hereby on such Collateral. 

        7.14    Security Interest Absolute.    

        (a)  The
obligations of the Pledgor under this Agreement are independent of the Obligations and a separate action or actions may be brought and prosecuted against the Pledgor
to enforce this Agreement, irrespective of whether any action is brought against another pledgor or any guarantor of the Obligations or whether another pledgor or any guarantor of the Obligations is
joined in any such action or actions. All rights of the Owner Lessor and the pledge, hypothecation and security interest hereunder, and all obligations of the Pledgor hereunder, shall be absolute and
unconditional, to the extent permitted by Requirements of Law, irrespective of: 

	(i)
	any
lack of validity or enforceability of any Operative Document or any other agreement or instrument relating thereto;

	(ii)
	any
change in the time, manner or place of payment of or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from any Operative Document, including, without limitation, any increase in the Obligations resulting from the extension of additional credit to the Pledgor;

	(iii)
	any
taking, exchange, release or non-perfection of any other collateral, or any taking, release or amendment or waiver of, or consent to
departure from any guaranty, for all or any of the Obligations;

	(iv)
	any
manner of application of the Collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any
other collateral for all or any of the Obligations;

	(v)
	any
change, restructuring or termination of the structure or existence of the Pledgor; or

	(vi)
	any
other circumstances which might otherwise constitute a defense available to, or a discharge of, the Pledgor or a third party grantor of a security
interest. 

        The
Pledgor hereby waives, to the maximum extent permitted by law (i) all rights under any law limiting remedies, including recovery of a deficiency, under an obligation secured
by a mortgage or deed of trust on real property if the real property is sold under a power of sale contained in the mortgage, and all defenses based on any loss whether as a result of any such sale or
otherwise, of Pledgor's right to recover any amount, whether by right of subrogation or otherwise; (ii) all rights under any law to require the Owner Lessor to pursue the Pledgor, or any other
Person, any security which Owner Lessor may hold, or any other remedy before proceeding against the Pledgor; (iii) all rights of reimbursement
or subrogation, all rights to enforce any remedy that the Owner Lessor may have against the Pledgor, and all rights to participate in any security held by the Owner Lessor until the Obligations have
been paid and performed in full; (iv) all rights to require the Owner Lessor to 

11

 

give any notices of any kind, including, without limitation, notices of nonpayment, nonperformance, protest, dishonor, default, delinquency or acceleration, or to make any presentments, demands or
protests, except as set forth herein or expressly provided in the Participation Agreement; (v) all rights to assert the bankruptcy or insolvency of the Pledgor as a defense hereunder or as the
basis for rescission hereof; (vi) all rights under any law purporting to reduce the Pledgor's obligations hereunder if the Obligations are reduced; (vii) all defenses based on the
disability or lack of authority of the Pledgor or any Person, the repudiation of the Operative Documents by the Pledgor or any Person, the failure by the Owner Lessor to enforce any claim against the
Pledgor, or the unenforceability in whole or in part of any Operative Documents; (viii) all suretyship and guarantor's defenses generally; (ix) all rights to insist upon, plead or in any
manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets, redemption or similar law, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the performance by the Pledgor of its obligations under, or the enforcement by the Owner Lessor of, this Agreement; (x) any
requirement on the part of the Owner Lessor to mitigate the damages resulting from any default; and (xi) except as otherwise specifically set forth herein, all rights of notice and hearing of
any kind prior to the exercise of rights by the Owner Lessor upon the occurrence and during the continuation of a Lease Event of Default to repossess with judicial process or to replevy, attach or
levy upon the Collateral. To the extent permitted by law, the Pledgor waives the posting of any bond otherwise required of the Owner Lessor in connection with any judicial process or proceeding to
obtain possession of, replevy, attach, or levy upon the Collateral, to enforce any judgment or other security for the Obligations, to enforce any judgment or other court order entered in favor of
Owner Lessor, or to enforce by specific performance, temporary restraining order, preliminary or permanent injunction, this Agreement or any other agreement or document between the Pledgor and the
Owner Lessor. The Pledgor further agrees that upon the occurrence and during the continuation of a Lease Event of Default, the Collateral Agent may elect to nonjudicially or judicially foreclose
against any real or personal property security it holds for the Obligations or any part thereof, or to exercise any other remedy against the Pledgor, any security or any guarantor, even if the effect
of that action is to deprive the Pledgor of the right to collect reimbursement for any sums paid by the Pledgor to the Collateral Agent. 

        7.15    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 OPERATIVE DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 

12

 

        IN
WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. 

	 	 	 	 	EME HOMER CITY GENERATION L.P.,
	

 	
 	

 	
 	

By:	
 	

MISSION ENERGY WESTSIDE, INC.,

its General Partner
	

 	
 	

 	
 	

By:	
 	

/s/  STEVEN D. EISENBERG      
 Name: Steven D. Eisenberg

Title: Vice President
	

Acknowledged and Agreed as of the date hereof:

THE BANK OF NEW YORK, as successor to UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent	
 	

 	
 	

 
	

By:	
 	

/s/  CHRISTOPHER GRELL      
 Name: Christopher Grell

Title: Authorized Signer

	
 	

 	
 	

 

13

SCHEDULE 1 to
 Amended and Restated Guarantee and Collateral Agreement

 
 

NOTICE ADDRESSES    

EME
HOMER CITY GENERATION L.P. 

18101
Von Karman Avenue

Suite 1700

Irvine, CA 92612-1046

Attention: Treasurer

Telephone: 949-752-5588

Facsimile: 949-752-5624 

SCHEDULE
2 to
 Amended and Restated Guarantee and Collateral Agreement

 
 

FILINGS AND OTHER ACTIONS
  REQUIRED TO PERFECT SECURITY INTERESTS    

Uniform Commercial Code Filings  

	Pledgor
 
	 	UCC Filing Offices

	EME Homer City Generation L.P.	 	California Secretary of State Pennsylvania Secretary of State Indiana County, PA

SCHEDULE
3 to
 Amended and Restated Guarantee and Collateral Agreement

 
 

LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE    

	Pledgor
 
	 	Jurisdiction
	 	Location

	EME Homer City Generation L.P.	 	PA	 	18101 Von Karman Avenue

Suite 1700

Irvine, California 92612-1046

SCHEDULE
4 to
 Amended and Restated Guarantee and Collateral Agreement

	1.
	The
Participation Agreement dated as of December 7, 2001 by and among EME Homer City Generation, L.P., a Pennsylvania limited partnership, as Facility Lessee; Homer City OL1, a
Delaware limited liability company, as Owner Lessor; Wells Fargo Bank Northwest, National Association, both in its individual capacity and solely as Owner Manager; General Electric Capital
Corporation, a Delaware corporation, as Owner Participant; Homer City Funding LLC, a Delaware limited liability company, as Lender; The Bank of New York (as successor to United States Trust Company of
New York), both in its individual capacity and solely as Lease Indenture Trustee; The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and
solely as Security Agent; and The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and solely as Bondholder Trustee.

	2.
	The
Participation Agreement dated as of December 7, 2001 by and among EME Homer City Generation, L.P., a Pennsylvania limited partnership, as Facility Lessee; Homer City OL2, a
Delaware limited liability company, as Owner Lessor; Wells Fargo Bank Northwest, National Association, both in its individual capacity and solely as Owner Manager; General Electric Capital
Corporation, a Delaware corporation, as Owner Participant; Homer City Funding LLC, a Delaware limited liability company, as Lender; The Bank of New York (as successor to United States Trust Company of
New York), both in its individual capacity and solely as Lease Indenture Trustee; The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and
solely as Security Agent; and The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and solely as Bondholder Trustee.

	3.
	The
Participation Agreement dated as of December 7, 2001 by and among EME Homer City Generation, L.P., a Pennsylvania limited partnership, as Facility Lessee; Homer City OL3, a
Delaware limited liability company, as Owner Lessor; Wells Fargo Bank Northwest, National Association, both in its individual capacity and solely as Owner Manager; General Electric Capital
Corporation, a Delaware corporation, as Owner Participant; Homer City Funding LLC, a Delaware limited liability company, as Lender; The Bank of New York (as successor to United States Trust Company of
New York), both in its individual capacity and solely as Lease Indenture Trustee; The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and
solely as Security Agent; and The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and solely as Bondholder Trustee.

	4.
	The
Participation Agreement dated as of December 7, 2001 by and among EME Homer City Generation, L.P., a Pennsylvania limited partnership, as Facility Lessee; Homer City OL4, a
Delaware limited liability company, as Owner Lessor; Wells Fargo Bank Northwest, National Association, both in its individual capacity and solely as Owner Manager; General Electric Capital
Corporation, a Delaware corporation, as Owner Participant; Homer City Funding LLC, a Delaware limited liability company, as Lender; The Bank of New York (as successor to United States Trust Company of
New York), both in its individual capacity and solely as Lease Indenture Trustee; The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and
solely as Security
Agent; and The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and solely as Bondholder Trustee.

	5.
	The
Participation Agreement dated as of December 7, 2001 by and among EME Homer City Generation, L.P., a Pennsylvania limited partnership, as Facility Lessee; Homer City OL5, a
Delaware limited liability company, as Owner Lessor; Wells Fargo Bank Northwest, National Association, both in its individual capacity and solely as Owner Manager; General Electric Capital
Corporation, a Delaware corporation, as Owner Participant; Homer City Funding LLC, a Delaware limited liability company, as Lender; The Bank of New York (as successor to United States Trust 

Company
of New York), both in its individual capacity and solely as Lease Indenture Trustee; The Bank of New York (as successor to United States Trust Company of New York), both in its individual
capacity and solely as Security Agent; and The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and solely as Bondholder Trustee. 

	6.
	The
Participation Agreement dated as of December 7, 2001 by and among EME Homer City Generation, L.P., a Pennsylvania limited partnership, as Facility Lessee; Homer City OL6, a
Delaware limited liability company, as Owner Lessor; Wells Fargo Bank Northwest, National Association, both in its individual capacity and solely as Owner Manager; General Electric Capital
Corporation, a Delaware corporation, as Owner Participant; Homer City Funding LLC, a Delaware limited liability company, as Lender; The Bank of New York (as successor to United States Trust Company of
New York), both in its individual capacity and solely as Lease Indenture Trustee; The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and
solely as Security Agent; and The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and solely as Bondholder Trustee.

	7.
	The
Participation Agreement dated as of December 7, 2001 by and among EME Homer City Generation, L.P., a Pennsylvania limited partnership, as Facility Lessee; Homer City OL7, a
Delaware limited liability company, as Owner Lessor; Wells Fargo Bank Northwest, National Association, both in its individual capacity and solely as Owner Manager; General Electric Capital
Corporation, a Delaware corporation, as Owner Participant; Homer City Funding LLC, a Delaware limited liability company, as Lender; The Bank of New York (as successor to United States Trust Company of
New York), both in its individual capacity and solely as Lease Indenture Trustee; The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and
solely as Security Agent; and The Bank of New York (as successor to United States Trust Company of New York), both in its individual capacity and solely as Bondholder Trustee.

	8.
	The
Participation Agreement dated as of December 7, 2001 by and among EME Homer City Generation, L.P., a Pennsylvania limited partnership, as Facility Lessee; Homer City OL8, a
Delaware limited liability company, as Owner Lessor; Wells Fargo Bank Northwest, National Association, both in its individual capacity and solely as Owner Manager; General Electric Capital
Corporation, a Delaware corporation, as Owner Participant; Homer City Funding LLC, a Delaware limited liability company, as Lender; The Bank of New York (as successor to United States Trust Company of
New York), both in its individual capacity and solely as Lease Indenture Trustee; The Bank of New York (as successor to
United States Trust Company of New York), both in its individual capacity and solely as Security Agent; and The Bank of New York (as successor to United States Trust Company of New York), both in its
individual capacity and solely as Bondholder Trustee. 

QuickLinks

Exhibit 10.16.4 Execution Copy

TABLE OF CONTENTS

SECTION 1. DEFINED TERMS

SECTION 2. PLEDGE; GRANT OF SECURITY INTEREST

SECTION 3. REPRESENTATIONS AND WARRANTIES

SECTION 4. COVENANTS

SECTION 5. REMEDIAL PROVISIONS

SECTION 6. THE COLLATERAL AGENT

SECTION 7. MISCELLANEOUS

NOTICE ADDRESSES

FILINGS AND OTHER ACTIONS REQUIRED TO PERFECT SECURITY INTERESTS

LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICEQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.18.2    
  

Execution
Copy 

AMENDED
AND RESTATED SECURITY DEPOSIT AGREEMENT 

between

EME
HOMER CITY GENERATION L.P. 

and 

THE
BANK OF NEW YORK 

as
Collateral Agent 

Dated
as of December 7, 2001 

  

 
 

TABLE OF CONTENTS    
  

	 
	 	 
	 	Page

	ARTICLE I	 	Definitions	 	2
	 	

Section 1.1	
 	
Defined Terms.  The following terms shall have the meanings indicated:	
 	

2
	 	

Section 1.2	
 	
Other Definitional Provisions.	
 	

5
	

ARTICLE II	
 	
Agreement of Collateral Agent; Creation of Accounts; Grant of Security Interests	
 	

5
	 	

Section 2.1	
 	
Agreement of Collateral Agent	
 	

5
	 	

Section 2.2	
 	
Creation of Accounts and Subaccounts.	
 	

6
	 	

Section 2.3	
 	
Delivery of Revenues, etc. to Collateral Agent	
 	

6
	 	

Section 2.4	
 	
Security Interests in the Lessee Accounts	
 	

7
	 	

Section 2.5	
 	
Securities Accounts	
 	

7
	

ARTICLE III	
 	
Deposits into Accounts	
 	

8
	 	

Section 3.1	
 	
Revenue Account	
 	

8
	 	

Section 3.2	
 	
Recovery Event Proceeds Account	
 	

8
	 	

Section 3.3	
 	
Reserve Account	
 	

8
	 	

Section 3.4	
 	
Equity Account, Supplemental Account and Additional Reserve Account	
 	

8
	 	

Section 3.5	
 	
LD Account. The Facility Lessee agrees that there shall be deposited into the LD Account all sums received by or on behalf of the Facility Lessee during the NOx Reserve Period on account of
performance liquidated damages and similar payments pursuant to the SCR Construction Contract.	
 	

8
	 	

Section 3.6	
 	
Deposits Irrevocable.	
 	

9
	

ARTICLE IV	
 	
Transfers from Accounts	
 	

9
	 	

Section 4.1	
 	
Revenue Account.	
 	

9
	 	

Section 4.2	
 	
Recovery Event Proceeds Account.	
 	

10
	 	

Section 4.3	
 	
Senior Rent Payment Account	
 	

11
	 	

Section 4.4	
 	
Reserve Account	
 	

11
	
 	
 	

 	
 	

 

i

 

	 	

Section 4.5	
 	
LD Account; NOx Reserve Account.  During the NOx Reserve Period, subject to Section 4.13 hereof, on each Business Day specified in the Request Letter, the Collateral Agent
shall transfer to the Facility Lessee from the funds on deposit in the applicable subaccount of the LD Account and the NOx Reserve Account respectively, the amount certified in such Request Letter to be the aggregate amount then due and payable in
respect of emission allowances required to be acquired by the Facility Lessee from time to time during such period. The transfers shall be made from the applicable subaccounts of the LD Account and the NOx Reserve Account in the following order of
priority: first, the applicable subaccount of the LD Account and second, the applicable subaccount of the NOx Reserve Account. Subject to Section 4.13, on the first Monthly Transfer Date following the end of the NOx Reserve Period the balance
remaining in each subaccount of the LD Account and the NOx Reserve Account shall be transferred into the Equity Account.	
 	

11
	 	

Section 4.6	
 	
Permitted Indebtedness Account	
 	

11
	 	

Section 4.7	
 	
Equity Account.	
 	

12
	 	

Section 4.8	
 	
Supplemental Account and Additional Reserve Account	
 	

14
	

 	
 	

(b)  On each Monthly Transfer Date and immediately prior to making the transfers contemplated by Section 4.7, the Collateral Agent shall transfer all funds on deposit in each subaccount of the Supplemental Account and the Additional Reserve
Account into the applicable subaccount of the Equity Account.	
 	

15
	

 	
 	

(c)  On the Lien Release Date, all amounts on deposit in the subaccounts of the Additional Reserve Account shall be transferred to the Equity Account.	
 	

15
	

 	
 	

(d)  After giving effect to all transfers contemplated by Section 4.7, on each Restricted Payment Date which occurs during the Additional Reserve Period, from funds on deposit in the applicable subaccount of the Supplemental Account,
the amount certified by the Facility Lessee in the Request Letter delivered in connection with such date the following amounts in the following order of priority:	
 	

15
	

 	
 	
first, on each Restricted Payment Date if (a) such Restricted Payment Date does not occur during a Restricted Payment Blockage Period and (b) the conditions to the payments of Component A of
Basic Lease Rent are satisfied pursuant to Section 6.9 of the applicable Participation Agreement, into the applicable subaccount of the Subordinated Rent Payment Account, an amount payable with respect to the Component A of Basic Lease Rent plus all
Excepted Payments, if any, due and payable under the applicable Facility Lease on the Restricted Payment Date, together with the amount of all deficiencies, if any, with respect to all payments required in all prior months, as certified in the
Request Letter;	
 	

15
	
 	
 	

 	
 	

 

ii

 

	

 	
 	
second, on each Restricted Payment Date if (a) such Restricted Payment Date does not occur during a Restricted Payment Blockage Period and (b) the conditions to the payment of Component A of
Basic Lease Rent set forth in Section 6.9 of the applicable Participation Agreement are satisfied, into the applicable subaccount of the Subordinated Reserve Account, an amount equal to the difference, if positive, between the Reserve
Requirement under the applicable Facility Lease and the sum of the balances on deposit in the applicable subaccounts of the Reserve Account and the Subordinated Reserve  Account; and	
 	

15
	

 	
 	
third, on each Restricted Payment Date if (a) such Restricted Payment Date does not occur during a Restricted Payment Blockage Period and (b) the conditions to the payment of Component A of
Basic Lease Rent set forth in Section 6.9 of the applicable Participation Agreement are satisfied, the balance remaining in the applicable subaccount of the Equity Account, either into the applicable subaccount of the Distributions Account for
the making of Restricted Payments if the conditions to making these payments as set forth in Section 6.10 of the applicable Participation Agreement are satisfied or into the applicable subaccount of the Suspended Distributions Account if such
conditions in Section 6.10 of the applicable Participation Agreement are not satisfied.	
 	

15
	 	

Section 4.9	
 	
Subordinated Rent Payment Account	
 	

15
	 	

Section 4.10	
 	
Subordinated Reserve Account	
 	

16
	 	

Section 4.11	
 	
Suspended Distributions Account	
 	

16
	 	

Section 4.12	
 	
Delivery of Request Letters	
 	

16
	 	

Section 4.13	
 	
Shortfall Notices	
 	

16
	 	

Section 4.14	
 	
Transfers from Accounts During a Default Period.	
 	

16
	 	

Section 4.15	
 	
Collateral Agent's Calculations	
 	

18
	 	

Section 4.16	
 	
Insufficient Amounts	
 	

18
	

ARTICLE V	
 	
Investment	
 	

18
	

ARTICLE VI	
 	
Collateral Agent	
 	

18
	 	

Section 6.1	
 	
Rights, Duties, etc.	
 	

18
	 	

Section 6.2	
 	
Resignation or Removal	
 	

19
	

ARTICLE VII	
 	
Determinations	
 	

19
	
 	
 	

 	
 	

 

iii

 

	

ARTICLE VIII	
 	
Miscellaneous	
 	

19
	 	

Section 8.1	
 	
Indemnification of Collateral Agent	
 	

19
	 	

Section 8.2	
 	
Waiver of Right of Set-Off	
 	

20
	 	

Section 8.3	
 	
Termination	
 	

20
	 	

Section 8.4	
 	
Severability	
 	

20
	 	

Section 8.5	
 	
Counterparts	
 	

20
	 	

Section 8.6	
 	
Amendments	
 	

20
	 	

Section 8.7	
 	
APPLICABLE LAW	
 	

20
	 	

Section 8.8	
 	
Notices	
 	

21
	 	

Section 8.9	
 	
Benefit of Scurity Deposit Agreement	
 	

21

iv

        AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT, dated as of December 7, 2001 (this "Agreement"), between EME HOMER CITY GENERATION
L.P., a Pennsylvania limited partnership ("EME Homer City" or the "Facility Lessee"), and THE BANK OF
NEW YORK, as collateral agent for the Secured Parties (as defined below) (in such capacity, the "Collateral Agent") and THE BANK OF NEW YORK, in its
capacity as a "securities intermediary" as defined in Section 8-102 of the New York UCC (in such capacity, the "Securities Intermediary") 

RECITALS

        A.    Contemporaneously
herewith, EME Homer City will enter into a transaction pursuant to the Participation Agreements listed on  Schedule 1, each by and among EME Homer City, the applicable Owner Lessor, Wells Fargo Bank
Northwest, National Association, not in its
individual capacity but solely as Owner Manager, the Owner Participant, Homer City Funding LLC, as Lender, the Lease Indenture Trustee, the Security Agent and The Bank of New York, not in its
individual capacity but solely as Bondholder Trustee (as amended, modified and supplemented and in effect from time to time, collectively, the "Participation
Agreements") whereby EME Homer City will sell undivided interests in its generating assets to the Owner Lessors and the Owner Lessors will lease such undivided interests in its
generating assets to EME Homer City under the Facility Leases. 

        B.    In
consideration of the transactions contemplated by the Participation Agreements, EME Homer City will be obligated to pay to the Secured Parties the aggregate amount of
all obligations owed by EME Homer City to the Secured Parties under the Operative Documents (the "Leveraged Lease Obligations"). 

        C.    In
satisfaction of the requirements of the Secured Parties, the Facility Lessee desires by this Agreement to provide interests in certain Accounts as security for EME
Homer City's obligations under the Participation Agreements and the other Operative Documents. 

        D.    In
order to simplify administration of such Accounts and to provide for the orderly enforcement of their respective rights, the Secured Parties have appointed the
Collateral Agent to serve as their common representative, to be the beneficiary under any security interest intended to benefit the Secured Parties, and to hold the liens created, or to be created,
under the Operative Documents. 

        E.    The
parties hereto desire by this Agreement (as defined above) to provide for the receipt of Revenues and the application thereof to the payment of Operating Expenses (as
defined below) and Leveraged Lease Obligations and for other purposes as described herein. 

        F.    Pursuant
to the Ownership and Operation Agreement, dated as of December    , 2001 (as amended, supplemented or otherwise modified from time to time, the
"Ownership and Operation Agreement"), among the Collateral Agent and the Secured Parties, the Collateral Agent has agreed to serve as a common
collateral agent for all Secured Parties. 

        G.    It
is a condition precedent to the approval by the Secured Parties of the transactions contemplated by the Operative Documents that the Facility Lessee shall have
executed and delivered this Agreement to the Collateral Agent for the benefit of the Secured Parties. 

        H.    The
parties hereto desire to amend and restate the Security Deposit Agreement, among Edison Mission Holdings Co., Edison Mission Finance Co., Homer City Property
Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy Westside, Inc., EME Homer City Generation L.P. and United States Trust Company of New York, as Collateral Agent, dated
March 18, 1999 in its entirety and release the liens granted therein as provided herein. 

 

        NOW,
THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, each of the parties hereto hereby
agrees that the Security Deposit Agreement, dated March 18, 1999 is hereby amended and restated as follows: 

 
 

ARTICLE I
  Definitions    
  

        Section 1.1    Defined Terms.    The following terms shall have the meanings indicated: 

        "Accounts" means all accounts established pursuant to Section 2.2 of this
Agreement. 

        "Additional Reserve Account" has the meaning specified in Section 2.2. 

        "Additional Reserve Period" means the period from and including the Additional Reserve Trigger Date to but excluding the Lien Release
Date. 

        "Additional Reserve Trigger Date" means the first Restricted Payment Date on which the conditions set forth in
Section 6.9(c)(i) of the Participation Agreement are not satisfied. 

        "Amendment Date" means the date the Operative Documents are executed. 

        "Authorized Representative" means those of officers and employees of the Facility Lessee whose signatures and incumbency shall have been
certified by the Facility Lessee to the Collateral Agent and each Owner Lessor's Representative. 

        "Collateral Agent" has the meaning specified in the Preamble. 

        "Component A Letter of Credit" means a letter of credit that may be delivered to the Collateral Agent at the election of a Owner Lessor in
total or partial satisfaction of the amount on deposit in the applicable subaccount of the Equity Account, the Supplemental Equity Account and the Additional Reserve Account in accordance with
Section 4.7 hereof. 

        "Default Period" means the period commencing on the date the Collateral Agent receives a written notice from the Facility Lessee or any of
the Secured Parties stating that a Lease Default or a Lease Event of Default has occurred and is continuing under any of the Facility Leases. Such notice shall be deemed to have been delivered if a
voluntary petition of Bankruptcy has been filed under Title 11 of the United States Code (or any similar action has been taken under the laws of any other jurisdiction) with respect to the Facility
Lessee. 

        "Depositary" means Bank of America NT&SA. 

        "EME Homer City" has the meaning specified in the Preamble. 

        "Entitlement Order" means "entitlement order" as defined in Article 8 of the New York UCC. 

        "Equity Account" has the meaning specified in Section 2.2. 

        "Facility Lessee Provided Letter of credit" has the meaning provided in  Section 4.7(b)(ii). 

        "LD Account" has the meaning specified in Section 2.2.  

        "Letter of Credit Account" has the meaning specified in Section 4.7(b)(i). 

        "Lien Release Date" means the date on which all amounts payable in respect of the Lessor Notes have been paid in full and the Lien of the
Lease Indenture has been released in accordance with the terms thereof. 

        "Limitation Period" means each period (a) commencing on a first Restricted Payment Date on which the condition contained in
Section 6.9(c)(i) of the applicable Participation Agreement is not satisfied and which immediately succeeds a Restricted Payment Date on which such condition was 

2

 

satisfied and (b) ending on the first subsequent Restricted Payment Date on which the condition contained in Section 6.9(c)(i) of the applicable Participation Agreement is
satisfied. 

        "Monthly Transfer Date" means the last Business Day of each month. 

        "Moody's" means Moody's Investors Service, Inc. 

        "New York UCC" means the Uniform Commercial Code as from time to time in effect in the State of New York. 

        "Notice of Action" has the meaning for so long as the Lessor Notes are outstanding and the Lien of the Lease Indenture has not been
discharged specified in the Lease Indenture; provided that after the Liens of the Indenture Trustee have been discharged and the Lease Indenture has been terminated, the
applicable Owner Participant, during any Event of Default and upon the exercise of remedies pursuant to Section 17.1 of the Facility Lease, the applicable Owner Participant may deliver a
"Notice of Action" to the Collateral Agent directing the Collateral Agent to take action pursuant to Section 4.13(b). 

        "NOx Reserve Account" has the meaning specified in Section 2.2. 

        "NOx Reserve Period" means the period commencing on the first Monthly Transfer Date after September 30, 2003 and ending on the
first Monthly Transfer Date when the Homer City Generating Station Units 1,2 and 3 selective catalytic reduction (SCR) systems become Operational. 

        "NOx Reserve Requirement" means the amount equal to the expenditures incurred by the Facility Lessee for acquisition of emission
allowances actually used (other than pursuant to the Permitted Trading Activities) during the prior fiscal year multiplied by three. 

        "Obligations" means all obligations and liabilities of the Facility Lessee which may arise under or in connection with the Operative
Documents or any other Transaction Document whether on account of Rent payment obligations, reimbursement obligations, the unpaid principal of and interest on Permitted Indebtedness, 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 the Facility Lessee
pursuant to the terms of any Transaction Document). 

        "Operating Account" has the meaning specified in Section 2.2. 

        "Operating Expenses" means, in respect of any period, all cash amounts paid by the Facility Lessee in the conduct of its business during
such period, including premiums for insurance policies, fuel supply and transportation costs, utilities, costs of maintaining, renewing and amending Governmental Approvals, franchise, licensing,
property, real estate and income taxes, sales and excise taxes, general and administrative expenses, employee salaries, wages and other employment-related costs, business management and administrative
services fees and other fees, expenses and capital expenditures necessary for the continued operation and maintenance of the Facility and the conduct of business of EME Homer City. 

        "Operative Documents" has the meaning specified in each of the Participation Agreements. 

        "Organic Document" means, with respect to any Person that is a corporation, its certificate of incorporation, its by-laws and
all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock, and, with respect to any Person that is a limited partnership, its
certificate of limited partnership and partnership agreement. 

        "Owner Lessor's Representative" means each Person designated as serving as indenture trustee, collateral agent, lenders' representative or
in any similar capacity for an Owner Lessor, provided 

3

 

however, that for as long as the Lessor Notes of such Owner Lessor are outstanding, this term shall refer to the Security Agent. 

        "Payment Dates" means Rent Payment Dates and Permitted Indebtedness Payment Dates. 

        "Permitted Indebtedness Account" has the meaning set forth in Section 2.2 hereof. 

        "Permitted Indebtedness Payment Date" means, with respect to any Permitted Indebtedness, any date on which amounts are payable on such
Permitted Indebtedness. 

        "Pledged Accounts" means, collectively, the Revenue Account, the Senior Rent Payment Account, the Recovery Event Proceeds Account and the
Equity Account. 

        "Proceeds" has the meaning specified in the New York UCC. 

        "Recovery Event" means any settlement of or payment of $5,000,000 or more in respect of (a) any property or casualty insurance
claim relating to the Facility or any part thereof or (b) any seizure, condemnation, confiscation or taking of, or requisition of title or use of, the Facility or any part thereof by any
Governmental Authority. 

        "Recovery Event Proceeds" means proceeds received in respect of a Recovery Event (regardless of whether the amount thereof is less than
$5,000,000). 

        "Recovery Event Proceeds Account" has the meaning specified in Section 2.2. 

        "Request Letter" means each letter from time to time delivered by an Authorized Representative of the Facility Lessee or by the Facility
Lessee to the Collateral Agent requesting the transfer and/or release of funds from one or more Accounts or subaccounts, as applicable to or on behalf of the Facility
Lessee in accordance with the terms of this Security Deposit Agreement, each such letter to be in such form acceptable to the Collateral Agent. 

        "Required Secured Parties" has the meaning specified in the Ownership and Operation Agreement. 

        "Restoration" means the replacement or restoration of the Facility or any part thereof in respect of which the Facility Lessee or any of
the Owner Lessors have received Recovery Event Proceeds. 

        "Restricted Payment Blockage Date" means any date on which the Facility Lessee would not be permitted to make a Component A Payment
pursuant to Section 6.9 of the applicable Participation Agreement (other than as a result of the failure to satisfy the condition set forth in Section 6.9(a) of the applicable
Participation Agreement). 

        "Restricted Payment Blockage Period" means each Limitation Period, provided that in no event shall any such period exceed eighteen months. 

        "Restricted Payments" has the meaning specified in each of the Participation Agreements. 

        "Revenue Account" has the meaning specified in Section 2.2. 

        "S&P" means Standard & Poor's Rating Group. 

        "Secured Parties" means the Collateral Agent and the Owner Lessors. 

        "Securities Intermediary" has the meaning specified in Section 2.5. 

        "Senior Rent Reserve Amount" means, on any date with respect to an applicable Facility Lease, the sum of the aggregate amount of Senior
Rent due and unpaid on that date under such Facility Lease and the lesser of (i) the amount of the second succeeding payment of Senior Rent (other than of the type specified in
clause (b) of the definition thereof) under such Facility Lease and 

4

 

(ii) the aggregate of all amounts transferred into the applicable subaccount of the Equity Account pursuant to Section 4.1(a) during Limitation Periods (and regardless of whether any
such amounts thereafter remain on deposit in such applicable subaccount of the Equity Account). 

        "Special Reserve Balance" means, with respect to the calculation of the Modified Senior Rent Service Coverage Ratio for any period, the
sum of (a) the amount on deposit (or, in the case of the projected Modified Senior Rent Service Coverage Ratio, projected to be on deposit) in the applicable subaccount of the Supplemental
Account on the last day of such period, (b) the amount deposited (or, in the case of the projected Modified Senior Rent Service Coverage Ratio, projected to be deposited) into the applicable
subaccount of the Equity Account during the Limitation Period in which the last day of such calculation period occurs but only to the extent such amount remains (or is projected to remain) on deposit
in the applicable subaccount of the Equity Account on the last day of such calculation period, (c) the amount deposited (or, in the case of the projected Modified Senior Rent Service Coverage
Ratio, projected to be deposited) into the applicable subaccount of the Additional Reserve Account during the Limitation Period in which the last day of such calculation period occurs but only to the
extent such amount remains (or is projected to remain) on deposit in the applicable subaccount of the Additional Reserve Account on the last day of such calculation period, (d) the amount on
deposit (or, in the case of the projected Modified Senior Rent Service Coverage Ratio, projected to be on deposit) in the applicable subaccount of the Subordinated Rent Payment Account on the last day
of such period and (e) the amount on deposit (or, in the case of the projected Modified Senior Rent Service Coverage Ratio, projected to be on deposit) in the applicable subaccount of the
Subordinated Reserve Account on the last day of such period. 

        "Transaction Documents" means the Operative Documents and each indenture, loan agreement, underwriting agreement, security purchase
agreement or other document entered into in connection with any Permitted Indebtedness. 

        Section 1.2    Other Definitional Provisions.    

        (a)  Unless
otherwise defined in Section 1.1 hereof, each capitalized term used in this Agreement and not otherwise
defined herein shall have the respective meaning set forth in Appendix A to the Participation Agreements unless the context hereof shall otherwise require. The general provisions of
Appendix A to the Participation Agreements shall apply to terms used in this Agreement and specifically defined herein. References to applicable Operative Documents (or other agreements) shall
mean Operative Documents (or other agreements) as such term is defined in the Participation Agreement to which the relevant Owner Lessor is a party. 

 
 

ARTICLE II
  Agreement of Collateral Agent;
  Creation of Accounts; Grant of Security Interests    
  

        Section 2.1    Agreement of Collateral Agent.    The Collateral Agent agrees to accept all cash, cash
equivalents, instruments, investments and other securities to be delivered to or held by the Collateral Agent pursuant to the terms of this Agreement, and, from such cash, cash equivalents,
instruments, investments and other securities, to make the releases and transfers contemplated by this Agreement as and when required in accordance with the terms hereof. The Collateral Agent shall
hold and safeguard the Accounts (other than the Operating Account and the cash, cash equivalents, instruments, investments and other securities on deposit therein) during the term of this Agreement in
accordance with the provisions hereof. The Collateral Agent shall treat the cash, cash equivalents, instruments, investments and other securities in each Pledged Account as pledged by the Facility
Lessee to the Secured Parties, to be held by the Collateral Agent, as agent of the Secured Parties, in trust in accordance with the provisions hereof. 

5

 

        Section 2.2    Creation of Accounts and Subaccounts.    

        (a)  On
or prior to the Amendment Date, (i) the Collateral Agent shall establish in the corporate trust department of The Bank of New York, a special, segregated and
irrevocable trust account designated the "Homer City Revenue Account" (the "Revenue Account") and (ii) EME Homer City shall establish with the
Depositary a special and segregated account designated the "Homer City Operating Account" (the "Operating Account"). 

        (b)  On
or prior to the Amendment Date, the Collateral Agent shall establish in the corporate trust department of The Bank of New York, special, segregated and irrevocable
trust accounts as follows: 

          (i)  one
designated the "Homer City Recovery Event Proceeds Account" (the "Recovery Event Proceeds Account"); 

        (ii)  one
designated the "Homer City Senior Rent Payment Account" (the "Senior Rent Payment Account"); 

        (iii)  one
designated the "Homer City Subordinated Rent Payment Account" (the "Subordinated Rent Payment Account"); 

        (iv)  one
designated the "Homer City Reserve Account" (the "Reserve Account"); 

        (v)  one
designated the "Homer City Equity Account" (the "Equity Account"); 

        (vi)  one
designated the "Homer City Supplemental Equity Account" (the "Supplemental Account"); 

      (vii)  one
designated the "Homer City Suspended Distributions Account" (the "Suspended Distributions Account"); 

      (viii)  one
designated the "Homer City Subordinated Reserve Account" (the "Subordinated Reserve Account"); 

        (ix)  one
designated the "Homer City Distributions Account" (the "Distributions Account"); 

        (x)  one
designated the "Homer City Permitted Indebtedness Account" (the "Permitted Indebtedness Account"); and 

        (xi)  one
designated the "Homer City Additional Debt Service Reserve Account" (the "Additional Reserve Account"). 

        (c)  On
or prior to September 30, 2002, the Collateral Agent shall establish in the corporate trust department of The Bank of New York special, segregated and
irrevocable trust accounts as follows: 

          (i)  one
designated the "Homer City Liquidated Damages Account" (the "LD Account"); 

        (ii)  one
designated the "Homer City NOx Reserve Account" (the "NOx Reserve Account"). 

        (d)  Each
of the Accounts (other than the Revenue Account, the Operating Account and the Permitted Indebtedness Account) shall be subdivided into eight subaccounts, one
subaccount for each Facility Lease. The Collateral Agent shall maintain separate records for each subaccount. Amounts deposited into or debited from such Accounts shall be deposited or debited from
the applicable subaccount as provided herein. 

        Section 2.3    Delivery of Revenues, etc. to Collateral Agent.    The Facility Lessee shall cause all Revenues
and Recovery Event Proceeds and all cash, cash equivalents, instruments, investments and 

6

 

other securities in its possession (excluding amounts received by the Facility Lessee as transfers from the Operating Account or the Distributions Account in accordance with this Agreement) to be
delivered immediately to the Collateral Agent for deposit into the Accounts pursuant to Article III. All such Revenues, cash, cash equivalents, instruments, investments and other securities at
any time on deposit in the Accounts shall be held in the exclusive custody of the Collateral Agent for the purposes and on the terms set forth in this Agreement. 

        Section 2.4    Security Interests in the Lessee Accounts.    In order to secure the payment of the Obligations,
and the performance and observance by the Facility Lessee of all of its covenants, agreements and obligations to the Secured Parties under the Transaction Documents, the Facility Lessee hereby pledges
and assigns to the Collateral Agent, and hereby grants in favor of the Collateral Agent for the ratable benefit of the Secured Parties, a security interest in all of the Facility Lessee's right, title
and interest, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence, in, to and under (i) all Revenues, (ii) the Revenue Account, the Senior
Rent Payment Account, the Recovery Event Proceeds Account, the Equity Account and all cash, cash equivalents, instruments, investments and other securities on deposit therein, (iii) all
security entitlements with respect to any and/or all of the foregoing and all Proceeds of the foregoing. All Accounts (other than the Operating Account) and all cash, cash equivalents, instruments,
investments and other securities on deposit therein and security entitlements with respect thereto shall, subject to the provisions of this Agreement, be subject to the exclusive dominion and control
of the Collateral Agent, and the Collateral Agent shall have the sole and exclusive right to withdraw or order a transfer of funds from such Accounts, and the Facility Lessee hereby irrevocably
appoints the Collateral Agent as its true and lawful attorney, with full power of substitution, for the purpose of making any such withdrawal or ordering any such transfer of funds from any such
Account, which appointment is coupled with an interest and is irrevocable. The Facility Lessee shall not have any rights or powers with respect to any amounts in any of the Accounts (other than the
Operating Account) or any part thereof except (i) as provided in the Investments section of this Security Deposit Agreement, (ii) the right to have such amounts applied in accordance
with the provisions of this Security Deposit Agreement, and (iii) the right described in Section 4.7(b)(ii). 

        Section 2.5    Securities Accounts.    The parties hereto hereby agree that: 

        (a)  the
Accounts (other than the Operating Account) shall be treated as "securities accounts" as such term is defined in Section 8-501 of the New York
UCC; 

        (b)  The
Securities Intermediary shall, subject to the terms of this Agreement, treat the Facility Lessee as the person entitled to exercise the rights that comprise any
financial assets credited to the Accounts; 

        (c)  all
property delivered to the Securities Intermediary, pursuant to the terms of this Agreement, will be promptly credited to the appropriate Account; 

        (d)  all
securities or other property underlying any financial assets credited to such Accounts shall be registered in the name of the Securities Intermediary, indorsed to
the Securities Intermediary or in blank and in no case will any financial asset credited to any Account be registered in the name of the Facility Lessee, payable to the order of the Facility Lessee or
specially indorsed to the Facility Lessee except to the extent the forgoing have been specially indorsed to the Securities Intermediary or in blank; 

        (e)  each
item of property (whether investment property, financial asset, security, instrument or cash) credited to such Accounts shall be treated as a "financial asset"
within the meaning of Section 8-102(a)(9) of the New York UCC; and 

        (f)    if
at any time the Securities Intermediary shall receive an Entitlement Order issued by the Collateral Agent and relating to any of the Pledged Accounts, the Securities
Intermediary shall 

7

 

comply with such entitlement order without further consent by the Facility Lessee or any other person. In the event the Facility Lessee, if permitted to give any Entitlement Order with respect to any
Pledged Account and such order conflicts with or contradicts an Entitlement Order issued by the Collateral Agent, the Securities Intermediary shall always follow the Entitlement Orders issued by the
Collateral Agent. 

 
 

ARTICLE III
  Deposits into Accounts    
  

        Section 3.1    Revenue Account.    The Facility Lessee agrees that there shall be deposited into the Revenue
Account all Revenues and all proceeds of Permitted Indebtedness (including proceeds received pursuant to the SocGen Instrument) received by or on behalf of itself and any proceeds of liquidated
damages or settlement proceeds arising out of contractual claims related to the Facility. If, notwithstanding the foregoing, the Facility Lessee receives any Revenues or proceeds of Permitted
Indebtedness, it shall immediately deliver such Revenues in the exact form received (duly indorsed, if appropriate, in a manner satisfactory to the Collateral Agent) to the Collateral Agent for
deposit into the Revenue Account. The Collateral Agent shall have the right to receive all Revenues directly from the Persons owing the same. All Revenue and proceeds of Permitted Indebtedness
received by the Collateral Agent shall be deposited into the Revenue Account. 

        Section 3.2    Recovery Event Proceeds Account.    The Facility Lessee agrees that there shall be deposited
into the Recovery Event Proceeds Account all Recovery Event Proceeds provided, that if the aggregate amount of Recovery Event Proceeds with respect to a
Recovery Event is less than $5 million, such proceeds shall be transferred to the Revenue Account if requested pursuant to a Request Letter. If, notwithstanding the foregoing, the Facility
Lessee shall receive any such proceeds, it shall immediately deliver such proceeds in the exact form received (duly endorsed, if appropriate, in a manner satisfactory to the Collateral Agent) to the
Collateral Agent for deposit into the Recovery Event Proceeds Account. The Collateral Agent shall have the right to receive all such proceeds directly from the Persons owing the same. All such
proceeds received by or on behalf of the Collateral Agent shall be deposited into the Recovery Event Proceeds Account. Amounts deposited into the Recovery Event Proceeds Account shall be credited to
each subaccount thereof based upon each Owner Lessor's Percentage of such deposited amounts. 

        Section 3.3    Reserve Account.    The Facility Lessee agrees that on the Amendment Date there shall be
deposited into the Reserve Account the proceeds from the sale of the Facility received pursuant to the Facility Deeds and the Bills of Sale, in a total amount of $[134]
million. Such amount shall be credited to each subaccount of the Reserve Account based upon each Owner Lessor's Percentage of such deposited amount. No additional amounts shall be deposited into the
Reserve Account. 

        Section 3.4    Equity Account, Supplemental Account and Additional Reserve Account.    The Facility Lessee
agrees that any Component A Letter of Credit or Facility Lessee Provided Letter of Credit (in each case with respect to the applicable Facility Lease) delivered to the Collateral Agent in accordance
with the terms of Section 4.7(b) hereof shall be deposited in the applicable subaccounts of the Equity Account, the Additional Reserve Account or the Supplemental Account and all proceeds from
a draw thereon shall be deposited in the applicable subaccounts of the Equity Account, the Additional Reserve Account or the Supplemental Account. 

        Section 3.5    LD Account.    The Facility Lessee agrees that there shall be deposited into the LD Account all
sums received by or on behalf of the Facility Lessee during the NOx Reserve Period on account of performance liquidated damages and similar payments pursuant to the SCR Construction Contract. 

8

 

        Section 3.6    Deposits Irrevocable.    Any deposit made into the Accounts hereunder shall be irrevocable and
all cash, cash equivalents, instruments, investments and other securities on deposit shall be held in trust by the Collateral Agent, and applied solely as provided herein. 

 
 

ARTICLE IV
  Transfers from Accounts    
  

        Section 4.1    Revenue Account.    

        (a)  Subject
to Section 4.13, on each Monthly Transfer Date the Collateral Agent shall transfer with respect to each Owner Lessor, such Owner Lessor's Percentage of
the funds on deposit in the Revenue Account in the following amounts in the following order of priority: 

        first, to the Operating Account, the amount certified in such Request Letter to be such Owner Lessor's Percentage of the excess, if any,
of the aggregate amount of Operating Expenses then due and payable or projected to become due and payable in the next succeeding month over the balance then on deposit in the Operating Account;  provided that if the Annual Budget in effect for such Fiscal Year of the Facility Lessee was determined in accordance with Section 5.14(b) or
5.14(c) of any Participation Agreement, then the amount withdrawn from the Operating Account on any Monthly Transfer Date during such Fiscal Year shall not exceed the amount set forth in such Annual
Budget for the immediately succeeding calendar month unless agreed to by the Majority in Interest of the Owner Lessors except with respect to fuel and emission allowance costs which shall not be
subject to the consent or approval of the Owner Lessors; 

        second, to the Collateral Agent, the applicable Owner Lessor's Owner Manager, the Lease Indenture Trustee, the Security Agent and the
Bondholder Trustee, the amount certified in the Request Letter delivered in connection with such Monthly Transfer Date to be the sum of the unpaid fees, indemnities, costs and expenses then due and
payable to such Persons in respect of their respective services in such capacities; provided that in the case of the Collateral Agent and the Bondholder
Trustee, such amount shall be such Owner Lessor's Percentage of the sum of the unpaid fees, indemnities, costs and expenses of the Collateral Agent and the Bondholder Trustee; 

        third, into the applicable subaccount of the Senior Rent Payment Account, an amount equal to (a) 1/6th of the
aggregate amount (except with respect to the first Rent Payment Date following the Closing Date, 1/3rd of the aggregate amount) which is payable on or within six months following such
Monthly Transfer Date on account of Senior Rent (other than of the type specified in clause (b) of the definition thereof) under such Owner Lessor's Facility Lease and (b) the aggregate
amount of all Senior Rent of the type specified in clause (b) of the definition thereof, under such Owner Lessor's Facility Lease for which will become due and payable prior to the next Monthly
Transfer Date together with the amount of all deficiencies, if any, with respect to deposits required to be made in the applicable subaccount of the Senior Rent Payment Account in all prior months, as
certified in the Request Letter; 

        fourth, subject to Section 4.13 hereof and to Section 6.9 of the Participation Agreement, if applicable, and to the
Operative Documents applicable to the Persons entitled thereto, an amount equal to all other Supplemental Rent (other than Excepted Payments) under the applicable Facility Lease then due and payable
to such Persons as certified in the Request Letter; 

        fifth, into the Permitted Indebtedness Account, such Owner Lessor's Percentage of an amount equal to 1/6th of the amounts
due and payable in respect of Permitted Indebtedness on or within six months following such Monthly Transfer Date (including all unpaid fees, 

9

 

indemnities, costs and expenses then due and payable with respect to such Permitted Indebtedness), as certified in the Request Letter; provided that, in the case of the SocGen Instrument,
(A) in the event that no Early Termination Date (as defined in the SocGen Instrument) has occurred, there shall also be deposited into the Permitted Indebtedness Account 1/6th of
the amount (the "Additional Amount") required to be paid in accordance with the SocGen Instrument on or within six months following such Monthly
Transfer Date in excess of the amount relating to the SocGen Instrument referred to in this clause fifth above; and (B) in the event that an
Early Termination Date (as so defined) has occurred, there shall be deposited into the Permitted Indebtedness Account on such Monthly Transfer Date the full amount due under the SocGen Instrument
(including unpaid fees, indemnities, costs and expenses then due and payable with respect to the SocGen Instrument); 

        sixth, into the applicable subaccount of the Equity Account, such Owner Lessor's Percentage of the balance remaining in the Revenue
Account. 

        (b)  If,
on any Monthly Transfer Date, such Owner Lessor's Percentage of the funds on deposit in the Revenue Account are insufficient to make in full any transfer required
pursuant to clause first, second, third, fourth or fifth of Section 4.1(a), the Collateral Agent
shall make such transfer with funds then on deposit (in the following order of priority) (i) in the applicable subaccount of each of the Supplemental Account, the Subordinated Reserve Account
(funds shall be transferred from the Subordinated Reserve Account only with respect to clause first, second, third and  fourth), the Subordinated Rent
Payment Account, the Suspended Distributions Account, the Additional Reserve Account (funds shall be transferred from the
Additional Reserve Account only with respect to clause first, second and third), the Equity Account
(funds shall be transferred from the Equity Account only with respect to clause second and third) or the
Reserve Account (funds shall be transferred from the Reserve Account only with respect to clause second and  third), as available. 

        Section 4.2    Recovery Event Proceeds Account.    

        (a)  Except
as otherwise provided in Section 4.2(b) and subject to Section 4.13, on each Monthly Transfer Date occurring after a Recovery Event and until
Restoration with respect thereto is completed, the Collateral Agent shall transfer to the Facility Lessee, from the funds on deposit in each subaccount of the Recovery Event Proceeds Account, such
Owner Lessor's Percentage of the amount certified in the Request Letter delivered in connection with such Monthly Transfer Date to be the aggregate amount then due and payable in respect of such
Restoration. 

        (b)  Subject
to Section 4.13, on any Rent Payment Date or Termination Value Payment Date on which Rent or Termination Value under a Facility Lease is required to be
paid with any Recovery Event Proceeds, the Collateral Agent shall transfer, from the funds on deposit in the applicable subaccount of the Recovery Event Proceeds Account, the following amounts in the
following order of priority: 

        first, to the applicable Owner Lessor under such Facility Lease, the amount certified in the Request Letter delivered in connection with
such Rent Payment Date or Termination Value Payment Date to be the amount then due and payable in respect of Senior Rent under such Facility Lease (including premium and interest, if any); 

        second, into the Permitted Indebtedness Account, the amount sufficient to pay in full the Permitted Indebtedness outstanding; and 

        third, to the applicable Owner Lessor, the amount certified in such Request Letter to be the amount of the Component A of Basic Lease Rent
or the Component A of Termination Value then due and payable under such Facility Lease. 

10

 

        Section 4.3    Senior Rent Payment Account.    Subject to Section 4.13 hereof, on any Rent Payment Date
for a Facility Lease, the Collateral Agent shall transfer from funds on deposit in the applicable subaccount of the Senior Rent Payment Account to the Security Agent on behalf of the applicable Owner
Lessor, the amount certified by the Facility Lessee in the Request Letter delivered in connection with such Rent Payment Date to be payable with respect to the Senior Rent and all Supplemental Rent
(other than Excepted Payments) under such Facility Lease on such date. 

        Section 4.4    Reserve Account.    Subject to Sections 4.13 and 4.1(b) hereof and so long as no Lease Event of
Default (other than a Rent Default Event) then exists, on any Rent Payment Date for a Facility Lease, the Collateral Agent shall transfer to the applicable Owner Lessor from funds on deposit in the
applicable subaccount of the Reserve Account the amount certified by the Facility Lessee to be equal to the difference, if positive, between the amounts payable with respect to the Component A of
Basic Lease Rent under such Facility Lease on such Rent Payment Date and the amounts that would be available under Section 4.8, if any (and whether or not the conditions have been met under
Section 6.9 of the applicable Participation Agreement), after giving effect to any transfers (with respect to such subaccount) to be made on such date pursuant to Section 4.1 hereof for
use in making payments with respect to the Component A of Basic Lease Rent in accordance with the applicable Operative Documents. 

        Section 4.5    LD Account; NOx Reserve Account.    During the NOx Reserve Period, subject to
Section 4.13 hereof, on each Business Day specified in the Request Letter, the Collateral Agent shall transfer to the
Facility Lessee from the funds on deposit in the applicable subaccount of the LD Account and the NOx Reserve Account respectively, the amount certified in such Request Letter to be the aggregate
amount then due and payable in respect of emission allowances required to be acquired by the Facility Lessee from time to time during such period. The transfers shall be made from the applicable
subaccounts of the LD Account and the NOx Reserve Account in the following order of priority: first, the applicable subaccount of the LD Account and second, the applicable subaccount of the NOx
Reserve Account. Subject to Section 4.13, on the first Monthly Transfer Date following the end of the NOx Reserve Period the balance remaining in each subaccount of the LD Account and the NOx
Reserve Account shall be transferred into the Equity Account. 

        Section 4.6    Permitted Indebtedness Account.    (a) Subject to Section 4.13 hereof, on any
date on which any payment is due and payable in respect of Permitted Indebtedness, after giving effect to all transfers to be made on such date pursuant to Section 4.1, the Collateral Agent
shall transfer to the Persons that provide each class of Permitted Indebtedness, from the funds on deposit in the Permitted Indebtedness Account, the aggregate amount of principal, premium, fees,
indemnities, costs and expenses then due and payable to the Persons that provide each such class of Permitted Indebtedness, as certified in the Request Letters delivered in connection with such
Monthly Transfer Date. 

        (b)  Subject
to Section 4.13 hereof, on any date on which an Additional Amount is required to be paid under the SocGen Instrument, after giving effect to all transfers
to be made on such date pursuant to Section 4.1, the Collateral Agent shall transfer to the counterparty under the SocGen Instrument, from the funds on deposit in the Permitted Indebtedness
Account, the amount required to be deposited on such date, as certified in the Request Letter delivered in connection with such deposit; provided
however, that no funds shall be transferred on such date for making of a deposit under the SocGen Instrument unless after giving effect to such transfer there are sufficient
funds remaining to make in full transfers required pursuant to clause third of Section 4.7 hereof, as certified in the Request Letter. If on any
Rent Payment Date on which an Additional Amount is required to be paid under the SocGen Instrument the conditions set forth in the proviso immediately above are not satisfied, then an amount equal to
the sum of deposits made into the Permitted Indebtedness Account since the immediately preceding Rent Payment Date pursuant to clause fifth
(A) of Section 4.1(a) hereof in respect of Additional Amount shall be transferred from the Permitted Indebtedness Account into the Equity Account following the payment pursuant to
clause (a) of this Section 4.6. 

11

  

        Section 4.7    Equity Account.    

        (a)  Subject
to Section 4.13, on the date specified below the Collateral Agent shall transfer, from the funds on deposit in each subaccount of the Equity Account, the
amount certified by the Facility Lessee in the Request Letter delivered in connection with such date the following amounts in the following order of priority: 

        first, after giving effect to all transfers made pursuant to Section 4.1 hereof, on each Monthly Transfer Date either
(a) which is also a Restricted Payment Blockage Date occurring prior to the Additional Reserve Period or (b) which occurs during the Additional Reserve Period, into the applicable
subaccount of the Supplemental Account, the amount, if any, by which the sum of the balance in the applicable subaccount of the Senior Rent Payment Account and the balance in the applicable subaccount
of the Equity Account (immediately prior to giving effect to the transfer contemplated by this clause first) exceeds the applicable Senior Rent Reserve
Amount; 

        second, on each Monthly Transfer Date either (a) which is also a Restricted Payment Blockage Date occurring prior to the Additional
Reserve Period or (b) which occurs during the Additional Reserve Period, into the applicable subaccount of the Additional Reserve Account the amount by which the sum of (1) the Owner
Lessor's Percentage of the balance in the Revenue Account and (2) the balances in the applicable subaccounts of the Senior Rent Payment Account, the Equity Account (immediately prior to giving
effect to the transfer contemplated by this clause second) and the Recovery Event Proceeds Account exceeds the sum of all the Basic Lease Rent and
Supplemental Lease Rent due and unpaid on that date and the average of the next two aggregate payments of the Basic Lease Rent, in each case, under the applicable Facility Lease minus the Owner
Lessor's Percentage of $1 million, as certified in the Request Letter; 

        third, on each Restricted Payment Date which does not occur during the Additional Reserve Period if the conditions to the payments of the
Component A of Basic Lease Rent are satisfied pursuant to Section 6.9 of the applicable Participation Agreement, into the applicable subaccount of the Subordinated Rent Payment Account, an
amount payable with respect to the Component A of Basic Lease Rent plus all Excepted Payments, if any, due and payable under the applicable Facility Lease on the Restricted Payment Date, together with
the amount of all deficiencies, if any, with respect to all payments required in all prior months, as certified in the Request Letter; provided that on
each Restricted Payment Date that is not a Rent Payment Date if the SocGen Instrument is not in effect through the following two Restricted Payment Dates than the Collateral Agent shall deposit
1/2 of the
amount of Component A of Basic Lease Rent due and payable on the Rent Payment Date following such Restricted Payment Date; 

        fourth, on each Restricted Payment Date which does not occur during the Additional Reserve Period if the conditions to the payment of the
Component A of Basic Lease Rent set forth in Section 6.9 of the applicable Participation Agreement are satisfied, into the applicable subaccount of the Subordinated Reserve Account, an amount
equal to the difference, if positive, between the Reserve Requirement under the applicable Facility Lease and the sum of the balances on deposit in the applicable subaccounts of the Reserve Account
and the Subordinated Reserve Account; 

        fifth, on each Restricted Payment Date which occurs during the NOx Reserve Period which is not also the Additional Reserve Period if the
conditions to the payment of the Component A of Basic Lease Rent set forth in Section 6.9 of the applicable Participation Agreement are satisfied, the balance remaining in the applicable
subaccount of the Equity 

12

 

Account into the applicable subaccount of the NOx Reserve Account the amount equal to such Owner Lessor's Percentage of the NOx Reserve Requirement; 

        sixth, on each Restricted Payment Date which does not occur during the Additional Reserve Period if the conditions to the payment of the
Component A of Basic Lease Rent set forth in Section 6.9 of the applicable Participation Agreement are satisfied, the balance remaining in the applicable subaccount of the Equity Account,
either into the Distributions Account or any other account designated by the Facility Lessee for the making of Restricted Payments if the conditions to making these payments as set forth in
Section 6.10 of the applicable Participation Agreement are satisfied or into the applicable subaccount of the Suspended Distributions Account if such conditions in Section 6.10 of the
applicable Participation Agreement are not satisfied; and 

        seventh, on each Monthly Transfer Date either (a) which is not a Restricted Payment Blockage Date occurring prior to the Additional
Reserve Period and (b) which does not occur during the Additional Reserve Period, into the applicable subaccount of the Supplemental Account the amount by which the sum of (1) the Owner
Lessor's Percentage of the balance in the Revenue Account and (2) the balances in the applicable subaccounts of the Senior Rent Payment Account, the Equity Account and the Recovery Event
Proceeds Account exceeds the sum of all the Basic Lease Rent and Supplemental Lease Rent due and unpaid on that date and the average of the next two aggregate payments of the Basic Lease Rent, in each
case, under the applicable Facility Lease minus the Owner Lessor's Percentage of $1 million, as certified in the Request Letter. 

        (b)  The
amount withdrawn from the applicable subaccounts of the Equity Account, the Supplemental Account or the Additional Reserve Account shall be in the manner and
priority provided herein: 

          (i)  First,
upon the occurrence and during the continuance of a Rent Default Event under a Facility Lease, the applicable Owner Lessor may from time to time request and the
Collateral Agent shall transfer from the applicable subaccounts (in the following order of priority) of the Supplemental Account, the Equity Account and the Additional Reserve Account (the "Letter of
Credit Accounts") to such Owner Lessor, to the extent then on deposit in such subaccount, an amount equal to the Component A of Basic Lease Rent under such Facility Lease then past due (the
"Overdue Rent"); provided, that (i) as a condition to such transfer, such Owner Lessor shall
cause to be delivered to the Collateral Agent a standby letter of credit with respect to such Facility Lease in form reasonably satisfactory to the parties hereto (the
"Component A Letter of Credit") issued in favor of the Collateral Agent by an Acceptable Credit Provider for the account of a party other than
Homer City or any of the Owner Lessors in the face amount equal the amount requested to be withdrawn, provided,  further, that any transfer of funds from
such subaccount of the relevant Letter of Credit Accounts pursuant to this Section 4.7(b) shall not be
deemed to constitute any payment of Rent. If at any time after the delivery of a Component A Letter of Credit the amount the Collateral Agent is then directed to transfer from such subaccount of the
Equity Account pursuant to the terms of this Agreement exceeds cash then on deposit in such subaccount of the Letter of Credit Account (such excess amount, the "Shortfall
Amount"), then the Collateral Agent shall draw on the Component A Letter of Credit in an amount equal to the lesser of the Shortfall Amount and the undrawn face amount of the
Component A Letter of Credit and shall deposit the proceeds of such drawing into the applicable subaccounts of the relevant Letter of Credit Account (for application in accordance with the terms of
this Security Deposit Agreement). If pursuant to the terms thereof the Component A Letter of Credit becomes drawable as a result of the failure of such Component A Letter of Credit to be extended or
failure to provide a replacement letter of credit within 30 days of a downgrade 

13

 

of the applicable Acceptable Credit Provider, the Collateral Agent shall draw on the Component A Letter of Credit in an amount equal to the undrawn face amount of the Component A Letter of Credit and
shall deposit the proceeds of such drawing into the applicable subaccount of the relevant Letter of Credit Accounts (for application in accordance with the terms of this Security Deposit Agreement). 

        (ii)  Second,
so long as no Lease Event of Default has occurred and is continuing and distributions are not blocked pursuant to Section 6.10 (b)(ii) or
(iii) of each Participation Agreement, the Facility Lessee may from time to time request and the Collateral Agent shall transfer from the applicable subaccount of the Equity Account to the
Facility Lessee, to the extent cash is then on deposit in such subaccount, an amount equal to the funds specified in such request; provided, that
(i) as a condition to such transfer, the Facility Lessee shall cause to be delivered to the Collateral Agent a standby letter of credit in form reasonably satisfactory to the Collateral Agent
(the "Facility Lessee Provided Letter of Credit") issued in favor of the Collateral Agent by an Acceptable Credit Provider for the account of a party
other than the Facility Lessee or any of the Owner Lessors in the face amount equal to the amount requested to be withdrawn. If at any time after the delivery of a Facility Lessee Provided Letter of
Credit the amount the Collateral Agent is then directed to transfer from such subaccount of the Equity Account pursuant to the terms of this Security Deposit Agreement exceeds cash then on deposit in
such subaccount of the Equity Account, as applicable (such excess amount, the "Facility Lessee Provided Shortfall Amount"), then the Collateral Agent
shall draw on the Facility Lessee Provided Letter of Credit in an amount equal to the lesser of the Facility Lessee Provided Shortfall Amount and the undrawn face amount of the Facility Lessee
Provided Letter of Credit and shall deposit the proceeds of such drawing into such subaccount of the Equity Account, as required (for application in accordance with the terms of this Security Deposit
Agreement). If pursuant to the terms thereof the Facility Lessee Provided Letter of Credit becomes drawable as a result of the failure of such Facility Lessee Provided Letter of Credit to be extended
or failure to provide a replacement letter of credit within 30 days of a downgrade of the applicable Acceptable Credit Provider, the Collateral Agent shall draw on the Facility
Lessee Provided Letter of Credit in an amount equal to the undrawn face amount of the Facility Lessee Provided Letter of Credit and shall deposit the proceeds of such drawing into such applicable
subaccount of the Equity Account or in such applicable subaccount of the Equity Account (for application in accordance with the terms of this Security Deposit Agreement). 

        (c)  In
addition, the Collateral Agent shall make transfers from the funds on deposit in each subaccount of the Equity Account in accordance with Sections 4.1(b) and 4.13(b). 

        (d)  If,
on any Restricted Payment Date the funds on deposit in the applicable subaccount of the Equity Account are insufficient to make in full any transfer required
pursuant to clause third of Section 4.7(a) and the conditions to the payments of Component A of Basic Rent are satisfied pursuant to
Section 6.9 of the applicable Participation Agreement, the Collateral Agent shall transfer into the applicable subaccount of the Subordinated Rent Account the amount of such shortfall after
giving effect to any transfer pursuant to Section 4.4 from funds then on deposit (in the following order of priority) in the applicable subaccount of each of the Supplement Account, the
Subordinated Reserve Account or the Suspended Distributions Account, as available. 

        (f)    The
Reserve Requirement may be satisfied by Qualifying Credit Support. 

        Section 4.8    Supplemental Account and Additional Reserve Account.    (a) Subject to Sections 4.13 and
4.1(b) hereof, on each Monthly Transfer Date or Restricted Payment Date as applicable, the Collateral Agent shall make transfers from the funds on deposit in the applicable subaccount of each of 

14

 

the Supplemental Account and the Additional Reserve Account in accordance with Sections 4.1(b) and 4.7(d). 

        (b)  On
each Monthly Transfer Date and immediately prior to making the transfers contemplated by Section 4.7, the Collateral Agent shall transfer all funds on deposit
in each subaccount of the Supplemental Account and the Additional Reserve Account into the applicable subaccount of the Equity Account. 

        (c)  On
the Lien Release Date, all amounts on deposit in the subaccounts of the Additional Reserve Account shall be transferred to the Equity Account. 

        (d)  After
giving effect to all transfers contemplated by Section 4.7, on each Restricted Payment Date which occurs during the Additional Reserve Period, from funds on
deposit in the applicable subaccount
of the Supplemental Account, the amount certified by the Facility Lessee in the Request Letter delivered in connection with such date the following amounts in the following order of priority: 

        first, on each Restricted Payment Date if (a) such Restricted Payment Date does not occur during a Restricted Payment Blockage
Period and (b) the conditions to the payments of Component A of Basic Lease Rent are satisfied pursuant to Section 6.9 of the applicable Participation Agreement, into the applicable
subaccount of the Subordinated Rent Payment Account, an amount payable with respect to the Component A of Basic Lease Rent plus all Excepted Payments, if any, due and payable under the applicable
Facility Lease on the Restricted Payment Date, together with the amount of all deficiencies, if any, with respect to all payments required in all prior months, as certified in the Request Letter; 

        second, on each Restricted Payment Date if (a) such Restricted Payment Date does not occur during a Restricted Payment Blockage
Period and (b) the conditions to the payment of Component A of Basic Lease Rent set forth in Section 6.9 of the applicable Participation Agreement are satisfied, into the applicable
subaccount of the Subordinated Reserve Account, an amount equal to the difference, if positive, between the Reserve Requirement under the applicable Facility Lease and the sum of the balances on
deposit in the applicable subaccounts of the Reserve Account and the Subordinated Reserve Account; and 

        third, on each Restricted Payment Date if (a) such Restricted Payment Date does not occur during a Restricted Payment Blockage
Period and (b) the conditions to the payment of Component A of Basic Lease Rent set forth in Section 6.9 of the applicable Participation Agreement are satisfied, the balance remaining in
the applicable subaccount of the Equity Account, either into the applicable subaccount of the Distributions Account for the making of Restricted Payments if the conditions to making these payments as
set forth in Section 6.10 of the applicable Participation Agreement are satisfied or into the applicable subaccount of the Suspended Distributions Account if such conditions in
Section 6.10 of the applicable Participation Agreement are not satisfied. 

        Section 4.9    Subordinated Rent Payment Account.    Subject to Sections 4.13 and 4.1(b) hereof, if the
conditions to the payments of Component A Portion of the Basic Lease Rent are satisfied pursuant to Section 6.9 of the applicable Participation Agreement, on each Restricted Payment Date under
such Participation Agreement, after giving effect to all transfers to be made on such date pursuant hereto, the Collateral Agent shall transfer to the applicable Owner Lessor, from funds on deposit in
the applicable subaccount of the Subordinated Rent Payment Account, the amount certified by the Facility Lessee in the Request Letter delivered in connection with such payment to be (i) payable
with respect to the Component A of the Basic Lease Rent and all Excepted Payments under the applicable Facility Lease and (ii) available for use in making such payments on account of the
Component A of Basic 

15

 

Lease Rent and Excepted Payments in accordance with the terms of the applicable Operative Documents. 

        Section 4.10    Subordinated Reserve Account.    Subject to Sections 4.13 and 4.1(b) hereof and so long
as no Lease Event of Default (other than a Rent Default Event) then exists on each Restricted Payment Date under such Participation Agreement, following a distribution in accordance with the terms of
Sections 4.8 and 4.4 hereof, if any (and whether or not the conditions have been met under Section 6.9 of the applicable Participation Agreement), the Collateral Agent shall transfer to
the applicable Owner Lessor, from funds on deposit in the applicable subaccount of the Subordinated Reserve Account, the amount certified by the Facility Lessee in the Request Letter delivered in
connection with such Restricted Payment Date to be equal to the difference, if positive, between the aggregate amount of the Component A of Basic Lease Rent and Excepted Payments under the
applicable Facility Lease due and the aggregate amount of payments, if any, made on such Restricted Payment Date pursuant to Sections 4.8 and 4.4 hereof. 

        Section 4.11    Suspended Distributions Account.    Subject to Section 4.13 hereof, on each Monthly
Transfer Date or Restricted Payment Date (as applicable), the Collateral Agent shall make transfers from the funds on deposit in the applicable subaccount of the Suspended Distributions Account in
accordance with Sections 4.1(b) and 4.7(d). Following the end of the Lease Term of the applicable Facility Lease and the payment in full of all Rent, Termination Value and other amounts due and
owing from the Facility Lessee under such Facility Lease and the other Operative Documents, the Collateral Agent shall transfer, all the funds on deposit in the applicable subaccount of the Suspended
Distributions Account to the Facility Lessee. 

        Section 4.12    Delivery of Request Letters.    Each Request Letter to be delivered by the Facility Lessee
pursuant to this Article IV shall be delivered to the Collateral Agent not later than one day prior to the date that the Collateral Agent is required to make any transfer specified therein. At
the time the Facility Lessee delivers to the Collateral Agent any Request Letter or other written communication relating to any Account or subaccount of the Accounts, the Facility Lessee shall deliver
a copy thereof to each Owner Lessor and its applicable Lease Indenture Trustee, Owner Participant and such Owner Lessor's Representative. 

        Section 4.13    Shortfall Notices.    Not later than the Business Day preceding each date on which any transfer
is to be made pursuant to this Article IV, the Collateral Agent shall notify the applicable Owner Lessor and its applicable Owner Participant if the amounts requested to be transferred on such
date in the Request Letter delivered in connection therewith exceed the funds available in the applicable subaccounts of the relevant Accounts. 

        Section 4.14    Transfers from Accounts During a Default Period.    

        (a)  During
a Default Period under a Facility Lease, the Facility Lessee shall be entitled to issue Request Letters and otherwise direct the transfer of funds from the
applicable Accounts or subaccounts of the Accounts pursuant to the other provisions of this Article IV until the Collateral Agent receives a Notice of Action directing that action be taken
pursuant to Section 4.13(b). 

        (b)  At
any time after the Collateral Agent receives a Notice of Action specifying that action be taken pursuant to this Section 4.13(b), the Collateral Agent shall
transfer (from the Accounts or applicable subaccounts in the order set forth in Section 4.13(c)) the following amounts in the following order of priority: 

        first, to the Collateral Agent, the amount certified by the Collateral Agent to be the sum of the unpaid fees, indemnities, costs and
expenses then due and payable for its services in such capacity; 

16

 

        second, pro rata to (i) the applicable Owner Lessor, the amount certified by such Owner Lessor to be the aggregate amount
(including premium and interest, if any) then due and payable in respect of Senior Rent and Supplemental Lease Rent (other than Excepted Payments) under the applicable Operative Documents and
(ii) to extent that the applicable Owner Lessor's Percentage of amounts then on deposit in the Permitted Indebtedness Account are insufficient to pay such amounts, to any Person who has
provided Permitted Indebtedness in the aggregate amount of the applicable Owner Lessor's Percentage of such Permitted Indebtedness (including premium and interest, if any) then due and payable; 

        third, to the applicable Owner Lessor, the amount certified by such Owner Lessor to be the aggregate amount of the Component A of Basic
Lease Rent, Component A of Termination Value and all other fees and indemnities in respect thereof then due and payable in respect of such Component A of Basic Lease Rent or Component A of Termination
Value under the applicable Facility Lease; 

        fourth, pro rata, to the Persons entitled thereto, an amount equal to all other Supplemental Rent under the applicable Facility Lease then
due and payable to such Persons and all other sums due and owing by the Facility Lessee to such Persons under any of the applicable Operative Documents (as certified in writing by such Persons); and 

        fifth, any surplus then remaining after the termination of the applicable Facility Lease in accordance with its terms and the satisfaction
of all rents and fees thereunder, shall be paid to the Facility Lessee or its successors or assigns or to whomsoever may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct. 

        (c)  The
amounts to be distributed pursuant to Section 4.13(b) with respect to any Facility Lease shall be debited from the subaccounts in the following order of
priority: 

        first, from the applicable subaccount of the Suspended Distributions Account; 

        second, from the applicable subaccount of the Subordinated Reserve Account; 

        third, from the applicable subaccount of the Supplemental Account; 

        fourth, from the applicable subaccount of the Subordinated Rent Payment Account; 

        fifth; from the applicable subaccount of the Reserve Account; 

        sixth, from the applicable subaccount of the Additional Reserve Account; 

        seventh, from the applicable subaccount of the Equity Account; 

        eighth, from the applicable subaccount of the Senior Rent Payment Account; 

        ninth, solely with respect to amounts distributed pursuant to clauses first through  fourth of Section 4.13(b) above,
up to an amount equal to the amount then on deposit therein, from the applicable subaccount of the Recovery
Event Proceeds Account; and 

        tenth, solely with respect to amounts distributed pursuant to clauses first through  fourth of Section 4.13(b) above,
up to an amount equal to such Owner Lessor's Percentage of the amount then on deposit therein, from the Revenue
Account. 

It
is understood and agreed that no amount on deposit in any other subaccount of any of the Accounts (nor, except as provided in clauses seventh and eighth above, amounts on deposit in the Revenue
Account or the applicable subaccount of the Recovery Event Proceeds Account) shall be available for distributions to be made pursuant to Section 4.13(b) with respect to such Facility Lease and
the applicable Operative Documents. 

17

 

        Section 4.15    Collateral Agent's Calculations.    In making the determinations and allocations required by
Section 4.13, the Collateral Agent may rely upon information specified in any Request Letter and any certificate of the applicable Owner Lessor delivered to it, as applicable, and the
Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on such information. All transfers and releases made by the Collateral Agent pursuant to
Section 4.13 shall be (subject to any decree of any court of competent jurisdiction) final, and the Collateral Agent shall have no duty to inquire as to the application by any Secured Party of
any amounts distributed to them. 

        Section 4.16    Insufficient Amounts.    Except as provided in Sections 4.1(b) and 4.7(d) hereof, to the extent
the applicable Owner Lessor Percentage of the amounts on deposit in any Account (or, if the Account has subaccounts, in the applicable subaccount) are insufficient to fully satisfy any transfer
requirement from such Account (or, if the Account has subaccounts, the applicable subaccount) under this Article IV, such transfer shall be made to the extent of the amounts on deposit in such
Account (or, if the Account has subaccounts, the applicable subaccount). In addition, if (i) any transfer requirements from any Account (or, if the Account has subaccounts, the applicable
subaccount) in this Article IV share the same level of priority and (ii) the funds equal to the applicable Owner Lessor Percentage of the funds in such Account (or, if the Account has
subaccounts, the funds in the applicable subaccount) are insufficient to satisfy in full all such transfer requirements which share such level of priority, such transfers shall be made on a pro rata
basis to the extent of the amounts on deposit in such Account (or, if the Account has subaccounts, the funds in the applicable subaccount). 

 
 

ARTICLE V
  Investment    
  

        Cash held by the Collateral Agent in the Accounts shall not be invested or reinvested except as provided below: 

        (a)  cash
held in the Accounts or applicable subaccounts shall be invested and reinvested in Permitted Investments by the Collateral Agent who shall make such Permitted
Investments (i) except during a Default Period, at the written direction of the Facility Lessee and (ii) during a Lease Default or Lease Event of Default under a Facility Lease, in
Permitted Investments selected by the Collateral Agent unless specific investment instructions are given to the Collateral Agent by the applicable Owner Lessor and in such case, to the extent of
amounts credited to applicable subaccounts; 

        (b)  the
Collateral Agent shall sell or liquidate all or any designated part of the Permitted Investments held in any Account to the extent credited to any subaccount at any
time the proceeds thereof are required to make a release from any such subaccount or any transfer between subaccounts pursuant to Article IV hereof; and 

        (c)  all
such Permitted Investments, the interest thereon, and the net proceeds of the sale, liquidation or payment thereof, shall be held in the appropriate Account and
credited to the applicable subaccounts for the same purposes as the cash used to purchase such Permitted Investments. 

        The
Collateral Agent shall take such action as may be necessary to perfect the security interest created by this Agreement in all Permitted Investments held in any Pledged Account. 

 
 

ARTICLE VI
  Collateral Agent    
  

        Section 6.1    Rights, Duties, etc.    The acceptance by the Collateral Agent of its respective duties
hereunder is subject to the following terms and conditions which the parties to this Agreement hereby 

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agree shall govern and control with respect to the rights, duties, liabilities and immunities of the Collateral Agent: 

        (a)  it
shall not be responsible or liable in any manner whatever for soliciting any funds or for the sufficiency, correctness, genuineness or validity of any funds or
securities deposited with or held by it; 

        (b)  it
shall be protected in acting or refraining from acting upon any written notice, certificate, instruction, request or other paper or document, as to the due execution
thereof and the validity and effectiveness of the provisions thereof and as to the truth of any information therein contained, which it in good faith believes to be genuine; 

        (c)  it
shall not be liable for any error of judgment or for any act done or step taken or omitted except in the case of its gross negligence, willful misconduct or bad
faith; 

        (d)  it
may consult with and obtain advice from counsel of its own choice in the event of any dispute or question as to the construction of any provision hereof; 

        (e)  it
shall have no duties hereunder, except those which are expressly set forth herein and in any modification or amendment hereof; provided, however, that no such
modification or amendment hereof shall affect its duties unless it shall have given its prior written consent thereto; 

        (f)    it
may execute or perform any duties hereunder either directly or through administrative agents or attorneys selected with reasonable care; 

        (g)  it
may engage or be interested in any financial or other transactions with any party hereto and may act on, or as depositary, collateral agent or administrative agent
for, any committee or body of holders of obligations of such Persons as freely as if it were not Collateral Agent hereunder; and 

        (h)  it
shall not be obligated to take any action which in its reasonable judgment would involve it in expense or liability unless it has been furnished with reasonable
indemnity. 

        Section 6.2    Resignation or Removal.    The Collateral Agent may resign or be removed as set forth in
Section 6.5 of the Amended and Restated Guarantee and Collateral Agreement. 

 
 

ARTICLE VII
  Determinations    
  

        In the event of any dispute as to any amount to be distributed or paid by the Collateral Agent from the Accounts (or subaccounts), the Collateral Agent is
authorized and directed to retain in its possession without liability to anyone all or any part of the amounts then on deposit in the Accounts or subaccounts, until such dispute shall have been
settled by mutual agreement of the disputing parties or by a final order, decree or judgment of a Federal or State court of competent jurisdiction located in the State of New York (with respect to
disputes in connection with amounts on deposit in the Accounts or subaccounts), and time for an appeal has expired and no appeal has been perfected, but the Collateral Agent shall be under no duty
whatsoever to institute or defend any such proceedings. 

 
 

ARTICLE VIII
  Miscellaneous    
  

        Section 8.1    Indemnification of Collateral Agent.    The Facility Lessee assumes liability for, and agrees to
indemnify, protect, save and keep harmless each Owner Lessor, each Owner Lessor's Representative, each Owner Participant, the Security Agent and the Collateral Agent and their respective successors,
assigns, agents and servants from and against, any and all claims, liabilities, obligations, losses, damages, taxes, penalties, costs and expenses (including reasonable attorneys' fees) 

19

 

that may be imposed on, incurred by, or asserted against, at any time, such Owner Lessor, such Owner Lessor's Representative, such Owner Participant, the Security Agent or the Collateral Agent and in
any way relating to or arising out of the execution and delivery of this Agreement, the establishment of the Accounts and subaccounts, the acceptance of deposits, the purchase or sale of Permitted
Investments, the retention of cash and Permitted Investments or the proceeds thereof and any payment, transfer or other application of cash or Permitted Investments in accordance with the provisions
of this Agreement, or as may arise by reason of any act, omission or error of the Collateral Agent made in good faith in the conduct of its duties; except that the Facility Lessee shall not be
required to indemnify, protect, save and keep harmless the Collateral Agent or any Owner Lessor, against its own gross negligence or willful misconduct. The indemnities contained in this
Section 8.1 shall survive the termination of this Agreement. 

        Section 8.2    Waiver of Right of Set-Off.    The Collateral Agent waives, with respect to all of
its existing and future claims against the Facility Lessee, all existing and future rights of set-off and banker's liens against the Accounts and subaccounts and all items (and proceeds
thereof) that come into its possession in connection with the Accounts. 

        Section 8.3    Termination.    The provisions of Articles III and IV with respect to the applicable Accounts or
subaccounts shall terminate on the date on which the applicable Facility Lease shall terminate in accordance with its terms and the Obligations under the applicable Transaction Documents shall have
been paid in full. Promptly after such termination, the applicable Owner Lessor shall notify the Collateral Agent of such termination and the Collateral Agent hereby agrees that at the time of such
termination (x) the Owner Lessor's Percentage of amounts or Permitted Investments in the Accounts or amounts and Permitted Investments in the applicable subaccounts, as applicable, shall be
liquidated as soon as commercially prudent, (y) a reconciliation shall be made of the distributions made from the applicable Accounts or subaccounts and any necessary adjustments to the
balances of such applicable Accounts or subaccounts as a result of such reconciliation shall be made and (z) the applicable portion of Owner Lessor's Percentage of the moneys in the applicable
Accounts, subject to the other Transaction Documents, or subaccounts (after giving effect to such liquidation and such adjustments) shall, subject to other Transaction Documents, be distributed to the
Facility Lessee or as it may direct. 

        Section 8.4    Severability.    If any one or more of the covenants or agreements provided in this Agreement on
the part of the parties hereto to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreement shall be deemed and construed to be severable
from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. 

        Section 8.5    Counterparts.    This Agreement may be executed in several counterparts, each of which shall be
an original and all of which shall constitute one and the same instrument. 

        Section 8.6    Amendments.    The provisions of this Agreement and other Transaction Documents may be amended,
modified or waived if such amendment, modification or waiver is in writing and is entered into in accordance with the provisions of the Participation Agreement. 

        Section 8.7    APPLICABLE LAW.    THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK REGARDLESS OF ANY OTHER PROVISION IN ANY OTHER AGREEMENT, FOR PURPOSES OF THE NEW YORK UCC, NEW YORK SHALL BE DEEMED TO BE THE SECURITIES
INTERMEDIARY'S JURISDICTION AND THE ACCOUNTS (AS WELL AS THE SECURITIES ENTITLEMENTS RELATED THERETO) SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 

20

 

        Section 8.8    Notices.    Except as otherwise specifically provided herein, all notices, consents, directions,
approvals, instructions, requests and other communications required or permitted by the terms hereof to be given to any Person shall be in writing and shall be deemed to have been duly given or made
when delivered if delivered by hand or courier or when received if sent by mail or telecopy, in each case addressed to the party to which such notice is required or permitted to be given or made
hereunder set forth below its signature hereto, or such other address as may be specified from time to time by such party in a notice to the other parties hereto. 

        Section 8.9    Benefit of Security Deposit Agreement    

        (a)  This
Security Deposit Agreement shall inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns, and no
other Person shall be entitled to any of the benefits of this Security Deposit Agreement. 

        (b)  Notwithstanding
the foregoing, in order to secure the Lessor Notes of each Owner Lessor, such Owner Lessor will assign and grant a first priority security interest in
favor of its applicable Lease Indenture Trustee in and to all of such Owner Lessor's right, title and interest in, to and under this Security Deposit Agreement (other than to the extent relating to
Excepted Payments and the rights to enforce and collect the same). The Facility Lessee hereby consents to such assignment and to the creation of such Lien and security interest and acknowledges
receipt of copies of the Lease Indenture, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent of the Facility Lessee under any
other circumstances. Unless and until the Collateral Agent shall have received written notice from the Lease Indenture Trustee that the Lien of the applicable Lease Indenture has been fully
discharged, the applicable Security Agent shall have the right (i) to directly receive for application in accordance with the terms of the applicable Lease Indenture all amounts payable or
otherwise distributable under this Agreement to the applicable Owner Lessor (other than in respect of the Excepted Payments) and (ii) to exercise the rights of such
Owner Lessor under this Security Deposit Agreement (other than with respect to Excepted Payments and the rights to enforce and collect the same) to the extent set forth in and subject to the
exceptions set forth in the applicable Lease Indenture. 

21

 

        IN
WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. 

	 	 	EME HOMER CITY GENERATION L.P.
	

 	
 	

By:	

MISSION ENERGY WESTSIDE, INC., its General Partner
	

 	
 	

By:	

/s/  STEVEN D. EISENBERG      
 Name: Steven D. Eisneberg

Title: Vice President
	

 	
 	

Address for Notices:
	

 	
 	

18101 Von Karman Avenue

Suite 1700

Irvine, California 92612-1046
	

 	
 	

THE BANK OF NEW YORK, as Collateral Agent
	

 	
 	

By:	

/s/  CHRISTOPHER J. GRELL      
 Name: Christopher J. Grell

Title: Authorized Signer
	

 	
 	

THE BANK OF NEW YORK, as Securities Intermediary
	

 	
 	

By:	

/s/  CHRISTOPHER J. GRELL      
 Name: Christopher J. Grell

Title: Authorized Signer
	

 	
 	

Address for Notices:
	

 	
 	

114 West 47th Street

25th Floor

New York, New York 10036

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QuickLinks

Exhibit 10.18.2

TABLE OF CONTENTS

ARTICLE I Definitions

ARTICLE II Agreement of Collateral Agent; Creation of Accounts; Grant of Security Interests

ARTICLE III Deposits into Accounts

ARTICLE IV Transfers from Accounts

ARTICLE V Investment

ARTICLE VI Collateral Agent

ARTICLE VII Determinations

ARTICLE VIII Miscellaneous

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