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>
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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
                  -------
         7.3      NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES............................................10
                  ---------------------------------------------------
         7.4      SUCCESSORS AND ASSIGNS.........................................................................10
                  ----------------------
         7.5      SET-OFF........................................................................................10
                  -------
         7.6      COUNTERPARTS...................................................................................11
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         7.7      SEVERABILITY...................................................................................11
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         7.8      SECTION HEADINGS...............................................................................11
                  ----------------
         7.9      INTEGRATION....................................................................................11
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         7.10     GOVERNING LAW..................................................................................12
                  -------------
         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.

                  F. 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,
that 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, is amended and restated as
follows:

                            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

                                                                          SASM&F

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

                 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............................5

ARTICLE II AGREEMENT OF COLLATERAL AGENT; CREATION OF ACCOUNTS; GRANT OF
                     SECURITY INTERESTS.......................................6

   Section 2.1       AGREEMENT OF COLLATERAL AGENT............................6
   Section 2.2       CREATION OF ACCOUNTS AND SUBACCOUNTS.....................6
   Section 2.3       DELIVERY OF REVENUES, ETC. TO COLLATERAL AGENT...........8
   Section 2.4       SECURITY INTERESTS IN THE LESSEE ACCOUNTS................8
   Section 2.5       SECURITIES ACCOUNTS......................................8

ARTICLE III DEPOSITS INTO ACCOUNTS............................................9

   Section 3.1       REVENUE ACCOUNT..........................................9
   Section 3.2       RECOVERY EVENT PROCEEDS ACCOUNT.........................10
   Section 3.3       RESERVE ACCOUNT.........................................10
   Section 3.4       EQUITY ACCOUNT..........................................10
   Section 3.5       DEPOSITS IRREVOCABLE....................................10

ARTICLE IV TRANSFERS FROM ACCOUNTS...........................................11

   Section 4.1       REVENUE ACCOUNT.........................................11
   Section 4.2       RECOVERY EVENT PROCEEDS ACCOUNT.........................12
   Section 4.3       SENIOR RENT PAYMENT ACCOUNT.............................13
   Section 4.4       RESERVE ACCOUNT.........................................13
   Section 4.5       PERMITTED INDEBTEDNESS ACCOUNT..........................13
   Section 4.6       EQUITY ACCOUNT..........................................14
   Section 4.7       SUPPLEMENTAL ACCOUNT....................................16
   Section 4.8       SUBORDINATED RENT PAYMENT ACCOUNT.......................16
   Section 4.9       SUBORDINATED RESERVE ACCOUNT............................17
   Section 4.10      SUSPENDED DISTRIBUTIONS ACCOUNT.........................17
   Section 4.11      DELIVERY OF REQUEST LETTERS.............................17
   Section 4.12      SHORTFALL NOTICES.......................................17
   Section 4.13      TRANSFERS FROM ACCOUNTS DURING A DEFAULT PERIOD.........17
   Section 4.14      COLLATERAL AGENT'S CALCULATIONS.........................19
   Section 4.15      INSUFFICIENT AMOUNTS....................................20

                                       i
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ARTICLE V INVESTMENT.........................................................20

ARTICLE VI COLLATERAL AGENT..................................................21

   Section 6.1       RIGHTS, DUTIES, ETC.....................................21
   Section 6.2       RESIGNATION OR REMOVAL..................................22

ARTICLE VII DETERMINATIONS...................................................22

ARTICLE VIII MISCELLANEOUS...................................................22

   Section 8.1       INDEMNIFICATION OF COLLATERAL AGENT.....................22
   Section 8.2       WAIVER OF RIGHT OF SET-OFF..............................23
   Section 8.3       TERMINATION.............................................23
   Section 8.4       SEVERABILITY............................................24
   Section 8.5       COUNTERPARTS............................................24
   Section 8.6       AMENDMENTS..............................................24
   Section 8.7       APPLICABLE LAW..........................................24
   Section 8.8       NOTICES.................................................24
   Section 8.9       BENEFIT OF SECURITY DEPOSIT AGREEMENT...................24

                                       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.

                  "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.

                                       2
<Page>

                  "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.

                  "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.

                                       3
<Page>

                  "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 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

                                       4
<Page>

of, or requisition of title or use of, the Facility or any part thereof by any
Governmental Authority.

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

                  "RECOVERY EVENT PROCEEDS ACCOUNT" has the meaning specified in
Section 2.2.

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

                  "REQUIRED SECURED PARTIES" has the meaning specified in the
Ownership and Operation Agreement.

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

                  "RESTRICTED 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.

                  "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

                                       5
<Page>

unless the context hereof shall otherwise require. The general provisions of
Appendix A to the Participation Agreements shall apply to terms used in this
Agreement and specifically defined herein. References to applicable Operative
Documents (or other agreements) shall mean Operative Documents (or other
agreements) as such term is defined in the Participation Agreement to which the
relevant Owner Lessor is a party.

                                   ARTICLE II

                         AGREEMENT OF COLLATERAL AGENT;

                CREATION OF ACCOUNTS; GRANT OF SECURITY INTERESTS

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

                  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:

                                       6
<Page>

                  (i) one designated the "Homer City Recovery Event Proceeds
         Account" (the "RECOVERY EVENT PROCEEDS ACCOUNT");

                  (ii) one designated the "Homer City Senior Rent Payment
         Account" (the "SENIOR RENT PAYMENT ACCOUNT");

                  (iii) one designated the "Homer City Subordinated Rent Payment
         Account" (the "SUBORDINATED RENT PAYMENT ACCOUNT");

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

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

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

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

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

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

                  (x) one designated the "Homer City Permitted Indebtedness
         Account" (the "PERMITTED INDEBTEDNESS 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.

                                       7
<Page>

                  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 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 and (ii)
the right to have such amounts applied in accordance with the provisions of this
Security Deposit Agreement.

                  SECTION 2.5 SECURITIES ACCOUNTS. The parties hereto hereby
agree that:

                                       8
<Page>

                  (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;

                  (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 received by or on

                                       9
<Page>

behalf of itself. If, notwithstanding the foregoing, the Facility Lessee
receives any Revenues, 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 Revenues received by the Collateral Agent shall
be deposited into the Revenue Account.

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

                  SECTION 3.3 RESERVE ACCOUNT. The Facility Lessee agrees that
on the Amendment Date there shall be deposited into the Reserve Account the
proceeds from the sale of the Facility received pursuant to the Facility Deeds
and the Bills of Sale, in a total amount of 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. The Facility Lessee agrees that
any Component A Letter of Credit delivered to the Collateral Agent in accordance
with the terms of Section 4.6(b) hereof shall be deposited in the Equity Account
and all proceeds from a draw thereon shall be deposited in the applicable
subaccounts of the Equity Account based upon each Owner Lessor's Percentage of
such amount.

                  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.

                                       10
<Page>

                                   ARTICLE IV

                             TRANSFERS FROM ACCOUNTS

                  SECTION 4.1 REVENUE ACCOUNT.

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

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

                                       11
<Page>

         definition thereof, under such Owner Lessor's Facility Lease for which
         will become due and payable prior to the next Monthly Transfer Date
         together with the amount of all deficiencies, if any, with respect to
         deposits required to be made in the applicable subaccount of the Senior
         Rent Payment Account in all prior months, as certified in the Request
         Letter;

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

                  FIFTH, into the Permitted Indebtedness Account, such Owner
         Lessor's Percentage of an amount 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 or the Suspended Distributions Account, as
available and (ii) if an insufficiency thereupon remains, in the applicable
subaccount of the Equity Account.

                  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.

                                       12
<Page>

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

                  FIRST, to the applicable Owner Lessor under such Facility
         Lease, the amount certified in the Request Letter delivered in
         connection with such Rent Payment Date or Termination Value Payment
         Date to be the amount then due and payable in respect of Senior Rent
         under such Facility Lease (including premium and interest, if any); 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 Section 4.13 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

                                       13
<Page>

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.

                  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, into the applicable
         subaccount of the Supplemental Equity Account, if the conditions to the
         payments of the Component A of Basic Lease Rent set forth in Section
         6.9 of the applicable Participation Agreement (other than clause (a)
         thereof) are not satisfied, in the amount by which the sum of (1) the
         Owner Lessor's Percentage of the balance in the Revenue Account, plus
         (2) the balances in the applicable subaccounts of the Senior Rent
         Payment Account, the Equity Account and the Recovery Event Proceeds
         Account exceeds the sum of all 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 under the applicable
         Facility Lease minus the Owner Lessor Percentage of $1 million, as
         certified in the Request Letter; or

                  SECOND, on each Restricted Payment Date into the applicable
         subaccount of the Subordinated Rent Payment Account, 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, 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;

                  THIRD, on each Restricted Payment Date if the conditions to
         the payment of the Component A of Basic Lease Rent set forth in Section
         6.9 of

                                       14
<Page>

         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

                  FOURTH, on each Restricted Payment Date 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) 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
subaccount of the Equity 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 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 (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 Equity
Account pursuant to this Section 4.6(a) 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 Equity Account (such excess
amount, the "SHORTFALL AMOUNT"), then the Collateral Agent shall draw on the
Component A Letter of Credit in an amount equal to the lesser of the Shortfall
Amount and the undrawn face amount of the Component A Letter of Credit and shall
deposit proceeds of such drawing into such subaccount of the Equity Account (for
application in accordance with the terms of this Security Deposit Agreement). If
pursuant to the terms thereof the Component A Letter of Credit becomes drawable
as a result of the failure of such Component A Letter of Credit to be extended
or failure to provide a replacement letter of credit within 30 days of a
downgrade of the applicable Acceptable Credit Provider, the Collateral

                                       15
<Page>

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
proceeds of such drawing into such 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 SECOND 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 Subordinated Reserve
Account or the Suspended Distributions Account, as available.

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

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

                  SECTION 4.8 SUBORDINATED RENT PAYMENT ACCOUNT. Subject to
Sections 4.13 and 4.1(b) hereof, if the conditions to the payments of the
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.

                                       16
<Page>

                  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 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.

                                       17
<Page>

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

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

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

                  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

                                       18
<Page>

         successors or assigns or to whomsoever may be lawfully entitled to
         receive the same or as a court of competent jurisdiction may direct.

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

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

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

                  THIRD, from the applicable subaccount of the Supplemental
         Account;

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

                  FIFTH; from the applicable subaccount of the Reserve Account;

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

                  SEVENTH, 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

                  EIGHTH, 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

                                       19
<Page>

applicable Owner Lessor delivered to it, as applicable, and the Collateral
Agent shall have no liability to any of the Secured Parties for actions taken in
reliance on such information. All transfers and releases made by the Collateral
Agent pursuant to Section 4.13 shall be (subject to any decree of any court of
competent jurisdiction) final, and the Collateral Agent shall have no duty to
inquire as to the application by any Secured Party of any amounts distributed to
them.

                  SECTION 4.15 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

                                       20
<Page>

release from any such subaccount or any transfer between subaccounts pursuant to
Article IV hereof; and

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

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

                                   ARTICLE VI

                                COLLATERAL AGENT

                  SECTION 6.1 RIGHTS, DUTIES, ETC. The acceptance by the
Collateral Agent of its respective duties hereunder is subject to the following
terms and conditions which the parties to this Agreement hereby 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,

                                       21
<Page>

however, that no such modification or amendment hereof shall affect its duties
unless it shall have given its prior written consent thereto;

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

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

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

                  SECTION 6.2 RESIGNATION OR REMOVAL. The Collateral Agent may
resign or be removed as set forth in Section 6.5 of the Amended and Restated
Guarantee and Collateral Agreement.

                                  ARTICLE VII

                                 DETERMINATIONS

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

                                  ARTICLE VIII

                                  MISCELLANEOUS

                  SECTION 8.1 INDEMNIFICATION OF COLLATERAL AGENT. The Facility
Lessee assumes liability for, and agrees to indemnify, protect, save and keep
harmless each Owner Lessor, each Owner Lessor's Representative, each Owner

                                       22
<Page>

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 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.

                                       23
<Page>

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

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

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

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

                  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.

                                       24
<Page>

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

                                       25
<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

                                       26

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