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Intercompany Loan Subordination Agreement

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Sectors: Utilities
Governing Law: New York, View New York State Laws
Effective Date: March 18, 1999
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Exhibit 10.60.3


INTERCOMPANY LOAN SUBORDINATION AGREEMENT (this "AGREEMENT"), dated as of March 18, 1999, among (i) EDISON MISSION HOLDINGS CO., a California corporation ("EME HOLDINGS"), (ii) EDISON MISSION FINANCE CO., a California corporation ("EDISON MISSION FINANCE"), (iii) HOMER CITY PROPERTY HOLDINGS, INC., a California corporation ("HOMER CITY HOLDINGS"), (iv) CHESTNUT RIDGE ENERGY CO., a California corporation ("CHESTNUT RIDGE"), (v) MISSION ENERGY WESTSIDE, INC., a California corporation ("MEW"), (vi) EME HOMER CITY GENERATION L.P., a Pennsylvania limited partnership ("EME HOMER CITY"; and, together with EME Holdings, Edison Mission Finance, Homer City Holdings, Chestnut Ridge and MEW, the "LOAN PARTIES"), and (vii) 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. EME Holdings has entered into a Credit Agreement, dated as of March 18, 1999 (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), with certain financial institutions (collectively, the "LENDERS") and Citicorp USA, Inc., as administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT").


B. Pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans (as defined below) to EME Holdings upon the terms and subject to the conditions set forth therein.


C. EME Holdings will use the proceeds of the Loans under the Credit Agreement to make valuable transfers to one or more of the other Loan Parties in connection with the acquisition by EME Homer City of the Homer City Electric Generating Station and certain facilities and other assets associated therewith and ancillary thereto (the "GENERATING STATION"), certain capital expenditures related to the Generating Station and general working capital purposes.


D. Under the Credit Agreement, EME Holdings is permitted to incur certain indebtedness for the purpose of refinancing the Loans and other indebtedness of EME Holdings, the Loan Parties are permitted to incur certain indebtedness in the form of reimbursement obligations relating to letters of credit, surety bonds and performance bonds used by the Loan Parties in the ordinary course of their business, EME Holdings is permitted to incur certain indebtedness in the form of reimbursement obligations relating to Debt Service Reserve Letters of Credit, EME Holdings is permitted to incur certain additional indebtedness and EME Holdings is permitted to incur certain indebtedness under Interest Rate Hedging Transactions entered into with respect to the Loans.


E. Pursuant to the Collateral Agency and Intercreditor Agreement, dated as of March 18, 1999 (as amended, supplemented or otherwise modified from time to time, the "COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT"), among the Loan Parties, the Administrative


Agent, the Collateral Agent and certain other parties, the Collateral Agent has agreed to serve as a common collateral agent for all Secured Parties.


F. EME Holdings is a member of an affiliated group of companies that includes each other Loan Party. EME Holdings and the other Loan Parties are engaged in related businesses, and each Loan Party will derive substantial direct and indirect benefit from the making of the Loans and the incurrence of any Refinancing Indebtedness or Additional Indebtedness.


G. Edison Mission Finance has entered into a Subordinated Loan Agreement, dated as of March 18, 1999 (the "HOLDINGS LOAN AGREEMENT"), with EME Holdings, pursuant to which EME Holdings has agreed to make loans ("HOLDINGS LOANS") to Edison Mission Finance from time to time with the proceeds of the terms and subject to the conditions contained in the Holdings Loan Agreement.


H. EME Homer City has entered into the Subordinated Loan Agreement, dated as of March 18, 1999 (the "FINANCE LOAN AGREEMENT"), with Edison Mission Finance, pursuant to which Edison Mission Finance has agreed to make loans ("FINANCE LOANS") to EME Homer City from time to time with the proceeds of the Holdings Loans on the terms and subject to the conditions contained in the Finance Loan Agreement.


I. EME Homer City has entered into the Subordinated Revolving Loan Agreement, dated as of March 18, 1999 (the "REVOLVING LOAN AGREEMENT"), with Edison Mission Finance, pursuant to which Edison Mission Finance has agreed to make loans ("REVOLVING LOANS") to EME Homer City from time to time on the terms and subject to the conditions contained in the Revolving Loan Agreement.


J. The parties hereto would like to subordinate the Holdings Loans, the Finance Loans, the Revolving Loans and all other obligations of the Loan Parties with respect to Intercompany Loans to the Obligations of the Loan Parties under the Loans and all other Senior Debt.


K. It is a condition precedent to the obligations of the Lenders to make their respective Loans to EME Holdings under the Credit Agreement that the Loan Parties shall have executed and delivered this Agreement to the Collateral Agent for the benefit of the Secured Parties.


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 as follows:


ARTICLE 1
DEFINITIONS, PRINCIPALS OF CONSTRUCTION


Section 1.1 Definitions.


(a) Unless otherwise expressly provided herein, capitalized terms used but not defined in this Agreement shall have the meanings given to such terms in the Collateral Agency and Intercreditor Agreement.


(b) Other Defined Terms. The following terms, when used herein, shall have the following meanings:


"Intercompany Borrower" shall mean any indebtedness by any Loan Party in its capacity as borrower under any Intercompany Loan Agreement.


"Intercompany Loans" shall mean any indebtedness by any Loan Party relating to an Intercompany Loan Agreement.


"Intercompany Loan Agreement" shall means the Holdings Loan Agreement, the Finance Loan Agreement, the Revolving Loan Agreement and any other loan agreement to be entered into from time to time by an Intercompany Borrower and a Subordinated Party.


"Proceeding" shall have the meaning given to such term in Section 3.2.


"Senior Claims" shall have the meaning given to such term in Section 2.1(a).


"Subordinated Claims" shall have the meaning given to such term in Section 2.1(a).


"Subordinated Notes" shall have the meaning given to such term in Section 2.1(c).


"Subordinated Party" shall mean any Loan Party in its capacity as lender under an Intercompany Loan Agreement.


"Section 1.2 Principles of Construction. Unless otherwise expressly provided herein, the principles of construction set forth in the Collateral Agency and Intercreditor Agreement shall apply to this Agreement.


ARTICLE II
SUBORDINATION PROVISIONS


Section 2.1 Subordination of Intercompany Loans. Until all Obligations shall have been indefeasibly paid in full and all Commitments shall have been terminated:


(a)(i) all principal of, premium, if any, interest and any other amounts owing on any Intercompany Loan made by any Loan Party, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred or created ("SUBORDINATED CLAIMS") shall be subordinate to the prior payment of and junior in right of payment to all principal of, premium, if any, and interest (including default interest and interest accruing after the initiation of any Proceeding whether or not allowed as a claim in such a Proceeding) owing in respect of Senior Debt and all other Obligations owed by the Loan Parties to the Secured Parties (collectively, "SENIOR CLAIMS");


(b) no Loan Party shall, directly or indirectly, make any payment of principal or interest on account of, or transfer any collateral for any part of, any Subordinated Claims; provided, however, that the Loan Parties may make regularly scheduled payments of interest and principal on account of Subordinated Claims so long as at such time Restricted Payments are permitted to be made pursuant to the terms of Senior Debt:


(c) the Subordinated Parties shall not demand, sue for or accept any payment or collateral in respect of any Subordinated Claims, or take any other action to enforce their rights or exercise any remedies in respect of any Subordinated Claims (whether upon the occurrence or during the continuation of an event of default under the related Intercompany Loan Agreement or an event of default under any promissory notes evidencing Subordinated Claims (collectively, "SUBORDINATED NOTES") or otherwise), or cancel, set-off or otherwise discharge any part of any Subordinated Claims; and


(d) no Intercompany Borrower or Subordinated Party shall otherwise take any action prejudicial to or inconsistent with the priority position of the Secured Parties over the Subordinated Parties created by this Section 2.1.


Section 2.2 Reliance. All Senior Claims shall conclusively be deemed to have been created, contracted or incurred in reliance on the subordination provisions contained in this Agreement and all dealings between Loan Parties and each of the holders of Senior Claims shall be deemed to have been consummated in reliance upon the subordination provisions contained herein.


Section 2.3 Other Holders. The subordination provisions set forth in this Agreement shall be binding upon transferees or assignees of the Subordinated Parties and upon each other holder of Subordinated Claims and shall inure to the benefit of transferees or assignees of the Secured Parties and every other holder of Senior Claims.


ARTICLE III
WRONGFUL COLLECTIONS


Section 3.1 Turnover. Should any payment on account of, or any collateral for any part of, any Subordinated Claims be received by the Subordinated Parties in violation of this Agreement, such payment or collateral shall be delivered forthwith to the Collateral Agent for application in accordance with the Security Deposit Agreement and the other Security


Documents. The Collateral Agent is irrevocably authorized to supply any required endorsement or assignment which may have been omitted. Until so delivered, any such payment or collateral shall be held by the Subordinated Parties in trust for the Secured Parties and shall not be commingled with other funds or property of the Subordinated Parties.


Section 3.2 Survival of Obligation. The obligation of the Subordinated Parties to deliver to the Collateral Agent any payment or collateral received in connection with any Subordinated Claims, set forth in Section 3.1, shall survive and shall not be in any way affected by the result of any (a) insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to any Intercompany Borrower, its property or its creditors as such, (b) proceeding for any liquidation, dissolution or other winding-up of any Intercompany Borrower, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings, (c) assignment for the benefit of creditors, (d) other marshalling of t
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