Document:

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                                                                 Exhibit 10.16.4

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             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 __, 2001

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                                TABLE OF CONTENTS

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SECTION 1. DEFINED TERMS..........................................................................................2
         1.1      DEFINITIONS.....................................................................................2
                  -----------
         1.2      OTHER DEFINITIONAL PROVISIONS...................................................................3
                  -----------------------------

SECTION 2. PLEDGE; GRANT OF SECURITY INTEREST.....................................................................3

SECTION 3. REPRESENTATIONS AND WARRANTIES.........................................................................4
         3.1      TITLE; NO OTHER LIENS...........................................................................4
                  ---------------------
         3.2      PERFECTED FIRST PRIORITY LIENS..................................................................4
                  ------------------------------
         3.3      CHIEF EXECUTIVE OFFICE..........................................................................4
                  ----------------------

SECTION 4. COVENANTS..............................................................................................4
         4.1      DELIVERY OF INSTRUMENTS, CERTIFICATED SECURITIES AND CHATTEL  PAPER.............................4
                  -------------------------------------------------------------------
         4.2      MAINTENANCE OF PERFECTED SECURITY INTEREST FURTHER DOCUMENTATION................................4
                  ----------------------------------------------------------------
         4.3      CHANGES IN LOCATIONS, NAME, ETC.................................................................5
                  -------------------------------
         4.4      NOTICES.........................................................................................5
                  -------

SECTION 5. REMEDIAL PROVISIONS....................................................................................5
         5.1      PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT..................................................5
                  ----------------------------------------------
         5.2      DEPOSITS; APPLICATION OF PROCEEDS...............................................................6
                  ---------------------------------
         5.3      DIRECTION OF SECURED PARTIES....................................................................6
                  ----------------------------
         5.4      CODE AND OTHER REMEDIES.........................................................................6
                  -----------------------
         5.5      WAIVER; DEFICIENCY..............................................................................7
                  ------------------

SECTION 6. THE COLLATERAL AGENT...................................................................................7
         6.1      COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC.........................................7
                  -------------------------------------------------------
         6.2      DUTY OF COLLATERAL AGENT........................................................................9
                  ------------------------
         6.3      EXECUTION OF FINANCING STATEMENTS...............................................................9
                  ---------------------------------
         6.4      AUTHORITY OF COLLATERAL AGENT...................................................................9
                  -----------------------------
         6.5      RESIGNATION OF COLLATERAL AGENT................................................................10
                  -------------------------------

SECTION 7. MISCELLANEOUS.........................................................................................10
         7.1      AMENDMENTS IN WRITING..........................................................................10
                  ---------------------
         7.2      NOTICES........................................................................................10
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         7.3      NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES............................................10
                  ---------------------------------------------------
         7.4      SUCCESSORS AND ASSIGNS.........................................................................10
                  ----------------------
         7.5      SET-OFF........................................................................................10
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         7.6      COUNTERPARTS...................................................................................11
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         7.7      SEVERABILITY...................................................................................11
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         7.8      SECTION HEADINGS...............................................................................11
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         7.9      INTEGRATION....................................................................................11
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         7.10     GOVERNING LAW..................................................................................12
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         7.11     SUBMISSION TO JURISDICTION; WAIVERS............................................................12
                  -----------------------------------
         7.12     ACKNOWLEDGEMENTS...............................................................................12
                  ----------------
         7.13     RELEASES.......................................................................................12
                  --------

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         7.14     Security Interest Absolute.....................................................................13
         7.15     WAIVER OF JURY TRIAL...........................................................................14
                  --------------------
</Table>

SCHEDULES

Schedule 1        Notice Addresses
Schedule 2        Perfection Matters
Schedule 3        Jurisdictions of Organization and Chief Executive Offices
Schedule 4        Participation Agreements

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                  AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT, dated
as of December __, 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. In connection with the sale-leaseback transaction, the
guarantee and the pledge under the Guarantee and Collateral Agreement (as
defined below) were terminated and the EME parties (as defined below) were
released from their obligations thereunder. 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

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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 __, 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.

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                  "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.

                  (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

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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.

                  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.

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                  (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

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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 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

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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 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;

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                           (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
                  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

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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 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.

                                       9
<Page>

                            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.

                  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

                                       10
<Page>

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.

                  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.

                                       11
<Page>

                  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.

                  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

                                       12
<Page>

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

                                       13
<Page>

                           (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
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.

                                       14
<Page>

                  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.

                                       15
<Page>

                  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:
                                                --------------------------------
                                                Name:
                                                Title:

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:
      ----------------------------------------
      Name:
      Title:

                                       16
<Page>

                                                                   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

                                       17
<Page>

                                                                   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
--------------------------------------------------------------------------------

                                       18
<Page>

                                                                   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

                                       19
<Page>

                                                                   SCHEDULE 4 to
                         AMENDED AND RESTATED GUARANTEE AND COLLATERAL AGREEMENT

1.       The Participation Agreement dated as of December __, 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 the 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 the 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 __, 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; Full Service Lease Corp., 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 the 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 the 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 __, 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; Full Service Lease Corp., 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 the 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 the 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 __, 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; Full Service Lease Corp., 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 the 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 the 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.

                                       20
<Page>

5.       The Participation Agreement dated as of December __, 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; Full Service Lease Corp., 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 the 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 the 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 __, 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; Full Service Lease Corp., 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 the 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 the 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 __, 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; Full Service Lease Corp., 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 the 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 the 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 __, 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; Full Service Lease Corp., 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 the 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 the 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.

                                       21<Page>

                                                                 Exhibit 10.18.2

================================================================================

                 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 __, 2001

                      ------------------------------------

================================================================================

<Page>

                               TABLE OF CONTENTS

                                                                  PAGE
                                                                  ----

ARTICLE I DEFINITIONS...............................................2

  Section 1.1 Defined Terms.........................................2
  Section 1.2 OTHER DEFINITIONAL PROVISIONS.........................7

ARTICLE II AGREEMENT OF COLLATERAL AGENT; CREATION OF ACCOUNTS; GRANT OF
              SECURITY INTERESTS....................................7

  Section 2.1 AGREEMENT OF COLLATERAL AGENT.........................7
  Section 2.2 CREATION OF ACCOUNTS AND SUBACCOUNTS..................7
  Section 2.3 DELIVERY OF REVENUES, ETC. TO COLLATERAL AGENT........9
  Section 2.4 SECURITY INTERESTS IN THE LESSEE ACCOUNTS.............9
  Section 2.5 SECURITIES ACCOUNTS..................................10

ARTICLE III DEPOSITS INTO ACCOUNTS.................................11

  Section 3.1 REVENUE ACCOUNT......................................11
  Section 3.2 RECOVERY EVENT PROCEEDS ACCOUNT......................11
  Section 3.3 RESERVE ACCOUNT......................................11
  Section 3.4 EQUITY ACCOUNT.......................................12
  Section 3.5 DEPOSITS IRREVOCABLE.................................12

ARTICLE IV TRANSFERS FROM ACCOUNTS.................................12

  Section 4.1 REVENUE ACCOUNT......................................12
  Section 4.2 RECOVERY EVENT PROCEEDS ACCOUNT......................14
  Section 4.3 SENIOR RENT PAYMENT ACCOUNT..........................15
  Section 4.4 RESERVE ACCOUNT......................................15
  Section 4.5 PERMITTED INDEBTEDNESS ACCOUNT.......................15
  Section 4.6 EQUITY ACCOUNT.......................................16
  Section 4.7 SUPPLEMENTAL ACCOUNT.................................20
  Section 4.8 SUBORDINATED RENT PAYMENT ACCOUNT....................21
  Section 4.9 SUBORDINATED RESERVE ACCOUNT.........................21
  Section 4.10  SUSPENDED DISTRIBUTIONS ACCOUNT....................22
  Section 4.11  DELIVERY OF REQUEST LETTERS........................22
  Section 4.12  SHORTFALL NOTICES..................................22
  Section 4.13  TRANSFERS FROM ACCOUNTS DURING A DEFAULT PERIOD....22
  Section 4.14  COLLATERAL AGENT'S CALCULATIONS....................24
  Section 4.15  INSUFFICIENT AMOUNTS...............................25

                                       i
<Page>

ARTICLE V INVESTMENT...............................................25

ARTICLE VI COLLATERAL AGENT........................................26

  Section 6.1 RIGHTS, DUTIES, ETC..................................26
  Section 6.2 RESIGNATION OR REMOVAL...............................27

ARTICLE VII DETERMINATIONS.........................................27

ARTICLE VIII MISCELLANEOUS.........................................27

  Section 8.1 INDEMNIFICATION OF COLLATERAL AGENT..................27
  Section 8.2 WAIVER OF RIGHT OF SET-OFF...........................28
  Section 8.3 TERMINATION..........................................28
  Section 8.4 SEVERABILITY.........................................29
  Section 8.5 COUNTERPARTS.........................................29
  Section 8.6 AMENDMENTS...........................................29
  Section 8.7 APPLICABLE LAW.......................................29
  Section 8.8 NOTICES..............................................29
  Section 8.9 BENEFIT OF SECURITY DEPOSIT AGREEMENT................30

                                       ii
<Page>

            AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT, dated as of
December __, 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").

                                    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.

<Page>

            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 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.

                                       2
<Page>

             "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 in accordance with Section 4.6 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 4.6(B)(II).

             "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
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.

                                       3
<Page>

            "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 specified in the Lease Indenture.

             "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 and expenses 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

                                       4
<Page>

capacity for an Owner Lessor, provided 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.

                                       5
<Page>

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

            "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

                                       6
<Page>

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

                                       7
<Page>

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.

            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) the Collateral Agent 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");

                                       8
<Page>

                        (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) 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 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

                                       9
<Page>

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 4.6(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 Bank of New York, in its capacity as "securities
intermediary" as such term is defined in Section 8-102(a)(14) of the New York
UCC (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;

                                       10
<Page>

            (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 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 received by or on behalf of itself. 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

                                       11
<Page>

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 up to $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 delivered to the
Collateral Agent in accordance with the terms of Section 4.6(b) hereof shall
be deposited in the applicable subaccounts of Equity Account the Additional
Reserves Account or the Supplemental Account and all proceeds from a draw
thereon shall be deposited in the applicable subaccounts of Equity Account
the Additional Reserve Account or the Supplemental Account based upon each
Owner Lessor's Percentage of such amount in accordance with the terms of
section 4.7(b).

            SECTION 3.5 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

                                       12
<Page>

      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 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;

                                       13
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            FIFTH, into the Permitted Indebtedness Account, such Owner Lessor's
      Percentage of an amount sufficient to repay in full the Permitted
      Indebtedness then due, as certified in the Request Letter;

            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
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 FIRST, 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:

                                       14
<Page>

            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); and

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

            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 PERMITTED INDEBTEDNESS ACCOUNT. Subject to Section 4.13
hereof, on any date on which any amount of principal or premium of Permitted
Indebtedness is due and payable, 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
and premium 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.

                                       15
<Page>

            SECTION 4.6 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;

                                       16
<Page>

            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;

            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; and

            FIFTH, 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 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.

            (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 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

                                       17
<Page>

            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 in form reasonably
            satisfactory to the Collateral Agent (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 Letter of Credit Accounts pursuant
            to this Section 4.6(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 Accounts (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 subaccount of the Letter of Credit
            Accounts (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 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 such subaccount of the 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, 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

                                       18
<Page>

            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 4.6(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 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.

                                       19
<Page>

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

            SECTION 4.7 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 the
Supplemental Account and the Additional Reserve Account in accordance with
Sections 4.1(b) and 4.6(d).

            (b) On each Monthly Transfer Date and immediately prior to making
the transfers contemplated by Section 4.6, the Collateral Agent shall
transfer all funds on deposit in each subaccount of 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
Revenue Account.

            (d) After giving effect to all transfers contemplated by Section
4.6, 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 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 Period and (b) the
conditions to the payment of Component A of Basic Lease Rent set forth in
Section

                                       20
<Page>

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

            SECTION 4.9 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

                                       21
<Page>

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 4.10 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 4.6(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 4.11 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 4.12 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 4.13 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:

                                       22
<Page>

            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;

            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;

                                       23
<Page>

            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.

            SECTION 4.14 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.

                                       24
<Page>

            SECTION 4.15 INSUFFICIENT AMOUNTS. Except as provided in Sections
4.1(b) and 4.6(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.

                                       25
<Page>

            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 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

                                       26
<Page>

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) 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

                                       27
<Page>

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.

                                       28
<Page>

            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.

            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

                                       29
<Page>

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.

                                       30
<Page>

            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:

                              By:
                                 ------------------------------------
                                 Name:
                                 Title:

                              Address for Notices:

                              18101 Von Karman Avenue
                              Suite 1700
                              Irvine, California 92612-1046

                              THE BANK OF NEW YORK, as Collateral Agent

                              By:
                                 ------------------------------------
                                 Name:
                                 Title:

                              Address for Notices:

                              114 West 47th Street
                              25th Floor
                              New York, New York  10036

                                       31

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