EX-2.1 PURCHASE AGREEMENT

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Exhibit 2.1

PURCHASE AGREEMENT

DATED JULY 29, 2004

BY AND AMONG

EDISON MISSION ENERGY,

IPM EAGLE LLP,

INTERNATIONAL POWER PLC,

MITSUI & CO., LTD.

AND THE OTHER SELLERS ON THE SIGNATURE PAGE HERETO

TABLE OF CONTENTS

				Page
ARTICLE I. BASIC TRANSACTIONS				2
1.1		Sale and Purchase of the Shares and Owner Notes		2
1.2		Assignments Among Sellers		2
1.3		Excluded Items		2
1.4		Confidentiality Agreements		3
1.5		Assignment of Rights and Obligations to Purchaser Designees		3
ARTICLE II. PURCHASE PRICES, PAYMENTS AND ADJUSTMENTS				5
2.1		Purchase Price		5
2.2		Allocations		6
2.3		Payment		6
2.4		Project Partial Termination Purchase Price Adjustment		7
2.5		Other Purchase Price Adjustments		7
ARTICLE III. CLOSING				9
3.1		Time and Place of Closing		9
3.2		Payments At and After the Second Closing		10
3.3		Postponement of Closing Dates		10
3.4		Documents to Be Delivered by the Sellers		10
3.5		Documents to Be Delivered by the Purchaser Parties		12
3.6		Use of Escrow		12
3.7		Support and Services; Transition Arrangements		13
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SELLERS				13
4.1		Organization and Good Standing		14
4.2		Authority and Enforceability		14
4.3		No Breach or Conflict		14
4.4		Consents		15
4.5		Ownership Interests		15
4.6		Owner Notes		16
4.7		Financial Information		16
4.8		No Undisclosed Liabilities		17
4.9		Absence of Certain Developments		17
4.10		Title to Properties		17
4.11		Major Contracts		17
4.12		Intellectual Property		18
4.13		Taxes		19
4.14		Licenses		20
4.15		Compliance with Law		20
4.16		Environmental Matters		20
4.17		Independent Engineer Reports		20
4.18		Sufficient Assets		21
4.19		Litigation		21
4.20		Labor Matters		21
4.21		Employee Benefits		21

 

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4.22		Insurance		22
4.23		Warranties concerning the Projects—General		23
4.24		Warranties concerning the Projects—Specific		23
4.25		No Insolvency		24
4.26		Financial Advisors		25
4.27		Limitation of Representations and Warranties		25
4.28		Other Provisions Relating to Representations and Warranties		25
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER PARTIES				26
5.1		Organization and Good Standing		26
5.2		Authorization of Agreement		26
5.3		No Breach or Conflict		26
5.4		Consents		27
5.5		Litigation		27
5.6		Investment Intention		27
5.7		Financial Capability		28
5.8		No Knowledge of Breach		28
5.9		Qualified for Licenses		28
5.10		Purchaser Designees		28
5.11		Financial Advisors		29
5.12		CBK		29
5.13		Limitation of Representations and Warranties		29
5.14		Other Provisions Relating to Representations and Warranties		29
ARTICLE VI. COVENANTS				29
6.1		Access to Information and Employees		29
6.2		Purchaser Diligence Obligations		30
6.3		Operating Covenants		30
6.4		Efforts to Close		32
6.5		Applications		33
6.6		Post-Closing Cooperation		33
6.7		Confidentiality		33
6.8		Public Announcements		34
6.9		Use of Name		34
6.10		Directors' and Officers' Indemnification		34
6.11		Further Assurances		35
6.12		Purchaser Parent Guarantee		35
6.13		Lease for Elwy House at Deeside		36
6.14		Guarantees and Credit Support by EME		36
6.15		Guarantees and Credit Support by Acquired Companies		37
6.16		Liquidation of Mission Hydro Partnership		37
6.17		Miscellaneous Assets		37
6.18		Political Risk Insurance		37
6.19		Preemption Notices		38
6.20		Updating		38
6.21		Employee Matters		38
6.22		Disposition of Excluded Items		41
6.23		Foreign Implementing Agreements		41
6.24		Cancellation of Insurance		41

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6.25		IT Transition		42
6.26		IPR Shareholder Circular		42
6.27		IPR Shareholders Meeting(s)		43
6.28		Conflicting Proposals		44
6.29		Fees and Expenses		44
6.30		Use of Proceeds		44
6.31		Substitute Insurance		44
6.32		No Negotiation		44
6.33		Financing Cooperation		44
6.34		Certain Environmental Matters		45
6.35		Special Purpose Accounts		47
ARTICLE VII. TAX MATTERS				47
7.1		Responsibility for Filing Tax Returns		47
7.2		Section 338 Election		48
7.3		Internal Restructurings		49
7.4		Payment of Taxes		49
7.5		Refunds and Tax Benefits		49
7.6		Cooperation on Tax Matters		50
7.7		Tax-Sharing Agreements and Other Elections		51
7.8		Certain Taxes and Fees		53
7.9		Purchaser Tax Acts		53
ARTICLE VIII. CONDITIONS TO CLOSING				53
8.1		Conditions Precedent to Obligations of Each Party		53
8.2		Other Conditions Precedent to Obligations of the Purchaser Parties		55
8.3		Other Conditions Precedent to Obligations of the Sellers		57
8.4		Conditions Precedent to Obligations of Each Party Relating to the Second Closing		57
8.5		Waiver of Conditions		57
ARTICLE IX. TERMINATION				57
9.1		Termination of Agreement		57
9.2		Effect of Termination		58
9.3		Partial Termination		58
ARTICLE X. DEFINITIONS				59
10.1		Certain Definitions		59
10.2		Usage		74
ARTICLE XI. INDEMNIFICATION				74
11.1		Survival		74
11.2		Exclusive Remedy		75
11.3		Indemnification Coverage		75
11.4		Procedures		78
11.5		Tax Indemnification		79
11.6		Indemnity Payments Treated as Adjustment to the Aggregate Purchase Price		81

 

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ARTICLE XII. MISCELLANEOUS				81
12.1		Construction; Conflicts		81
12.2		Expenses		82
12.3		Incorporation of Exhibits and Schedules		82
12.4		Binding Effect; Assignment		82
12.5		No Right of Set-Off		82
12.6		Time of Essence		82
12.7		Entire Agreement; Amendments and Waivers		83
12.8		Governing Law		83
12.9		Consent to Jurisdiction and Service of Process		83
12.10		Expert Determination		84
12.11		Table of Contents and Headings		84
12.12		Notices		84
12.13		Severability		85
12.14		Enforcement		85
12.15		Counterparts; Signature Page Delivery		85
12.16		Currency		85

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INDEX TO SCHEDULES AND ANNEXES

Schedule/Annex		Name		Tab
Schedule A-1		Sellers and Shares		1
Schedule A-2		Projects and Project-Specific Acquired Companies		2
Schedule 1.1		Owner Notes/Project Notes		3
Schedule 1.3		Excluded Items		4
Schedule 1.3(b)		Payment Obligation		4
Schedule 2.1		Project Allocation Schedule		5
Schedule 2.2		Allocation		6
Schedule 2.5		Project Operating Companies, Overhead and Excluded Acquired Companies		7
Schedule 3.4(b)		Resignations of Directors		8
Schedule 3.7		Support Companies		9
Schedule 4		EME Disclosure Schedule		10
Schedule 6.14		EME Guarantees and Credit Support		11
Schedule 6.17		Intercompany Loans		12
Schedule 6.21		Employee Benefit Plans		13
Schedule 6.25		IT Transition Procedures		14
Schedule 7.2		Section 338 Election		15
Schedule 7.5(a)		Tax Refunds		16
Schedule 7.6(c)		Critical Tax Employees		17
Schedule 7.7(a)		Certain Tax-Sharing Arrangements		18
Schedule 7.7(c)		Joint Elections Under Section 171A of the UK TCGA		19
Schedule 7.7(d)		Joint Elections Under Section 179A of the UK TCGA		20
Schedule 8.1(b)		Governmental Conditions		21
Schedule 8.2(d)		Third-Party Conditions of the Purchaser Parties		22
Schedule 8.2(j)		Netherlands Charter Amendments		23
Schedule 8.3(d)		Third-Party Conditions of the Sellers		24
Schedule 10.1-K		Knowledge of EME		25
Schedule 10.1-K2		Knowledge of the Purchaser		26
Schedule 10.1-P		Preemptive Rights		27
Schedule 10.1-R		Related Agreements		28

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PURCHASE AGREEMENT

        This PURCHASE AGREEMENT (including the Exhibits and Schedules hereto, this " Agreement ") is made as of July 29, 2004 (the " Effective Date "), by and among:

        (1)   Edison Mission Energy, a Delaware corporation (" EME "), for itself and as agent on behalf of each of the other entities identified in Schedule A-1 as "Sellers," both in connection with the sale of the Shares and the sale of the Owner Notes (as defined in Section 1.1(b) );

        (2)   Mission Energy Holdings International, Inc., a Delaware corporation (" MEHI "), with respect to the Shares and Owner Notes owned by it;

        (3)   EME UK International LLC, a Delaware corporation (" EMEUKI "), with respect to the Shares and Owner Notes owned by it;

        (4)   EME Southwest Power Corporation, a Delaware corporation (" EMESWP "), with respect to the Shares owned by it;

        (5)   Other companies listed as "Project Sellers" on Schedule A-1 or Schedule 1.1 (each a " Project Seller ");

        (6)   Edison Mission Project Company, a Delaware corporation (" EMP " and, together with EME (in its capacity as a seller of Shares), MEHI, EMEUKI, the Project Sellers who hold Project Shares and EMESWP, the " Share Sellers "; the Owner Note Sellers and the Share Sellers collectively are referred to in this Agreement as the " Sellers " or the " Seller Parties" );

        (7)   IPM Eagle LLP, a limited liability partnership incorporated under the UK Limited Liability Partnerships Act 2000, with its registered office at Senator House, 85 Queen Victoria Street, London EC4V 4DP, United Kingdom (the " Purchaser ");

        (8)   International Power plc, a company incorporated under the Laws of England and Wales, with its registered office at Senator House, 85 Queen Victoria Street, London EC4V 4DP, United Kingdom (" IPR "); and

        (9)   Mitsui & Co., Ltd., a company incorporated in Japan, with its registered office at 2-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo, Japan (" Mitsui " and, together with IPR, the " Purchaser Parents "; the Purchaser and the Purchaser Parents collectively are referred to in this Agreement as the " Purchaser Parties ").

WITNESSETH:

        WHEREAS, EME is the direct or indirect parent of each of the other Sellers, and each other Seller is a direct or indirect Wholly Owned Subsidiary of EME;

        WHEREAS, the Sellers collectively own all of the issued and outstanding shares of MEC International B.V., a Netherlands company having its registered office at De Lairessestraat 111-115, 1075 HH, Amsterdam, The Netherlands (" MEC BV "), and of Rapid Energy, as well as the Project Shares, which are listed opposite their respective names on Schedule A-1 under the columns titled "MEC BV Ownership", "Rapid Energy Ownership" and "Project Shares" (collectively, the " Shares "), and are entitled to the benefit of the Owner Notes (as that term is defined in Section 1.1(b) below);

        WHEREAS, MEC BV currently owns, and as of the First Closing will own, direct or indirect equity interests in the power generating companies or projects listed on Schedule A-2 (each, a " Project ," and collectively, the " Projects ");

        WHEREAS, the Purchaser Parents collectively own (directly and indirectly) one hundred percent (100%) of the equity interests in the Purchaser;

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        WHEREAS, the Sellers desire to sell and to cause to be sold to the Purchaser, and the Purchaser desires to purchase from the Sellers, the Shares and the benefit of the Owner Notes; and

        WHEREAS, capitalized terms used in this Agreement have the meanings given them in Article X of this Agreement.

        NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I.
BASIC TRANSACTIONS

        1.1     Sale and Purchase of the Shares and Owner Notes.     Upon the terms and subject to the conditions contained in this Agreement, on the Closing Date the Share Sellers, severally, will, and EME will and will cause each of the other Owner Note Sellers to, sell, assign, transfer, convey and deliver to the Purchaser, acting on its own behalf or as agent for one or more Purchaser Designees, and the Purchaser agrees (as principal for itself and as agent for any Purchaser Designees) that it will purchase from EME and the other Sellers: #

        (a)   The Shares; and

        (b)   All promissory notes and other obligations, if any, representing money borrowed by, or an installment obligation of, an Acquired Company (i) in the case of the Separately Sold Projects, to EME or its parents or Subsidiaries (other than the Project-Specific Acquired Companies included in the Separately Sold Projects (the " Project Notes "), unless and to the extent that the Purchaser notifies EME, at least ten (10) Business Days prior to the Closing Date, that it has decided that such Project Notes will not be transferred with the Project Shares as part of the Separately Sold Projects, and (ii) otherwise, to EME or its parents or Subsidiaries other than Acquired Companies that are not included in the Separately Sold Projects (including the Project Notes, the " Owner Notes "), including the obligations set forth on Schedule 1.1 , to the extent that such notes or other obligations are not otherwise paid, retired, canceled, contributed to the capital of or otherwise transferred to MEC BV or any of its Wholly Owned Subsidiaries or Rapid Energy prior to the Closing Date.

        1.2     Assignments Among Sellers.     This Agreement shall not constitute an agreement to assign any asset or to assume any liability between or among any Sellers.

        1.3     Excluded Items.     

        (a)   Notwithstanding anything in Article I to the contrary, the companies and assets set forth on Schedule 1.3 and any and all Liabilities related thereto (together, the " Excluded Items ") are excluded from this Agreement and from the Contemplated Transactions and shall not be acquired by the Purchaser under this Agreement. Accordingly, and in accordance with Section 6.22 , the Sellers will sell, transfer or otherwise dispose of, or will procure the sale, transfer or disposal of, the Excluded Items prior to the First Closing so that none of the Acquired Companies shall have any direct or indirect ownership interest in, or any other Liability (whether actual or contingent and including any Liability for Tax) for or in relation to, the Excluded Items as of the First Closing, except for such Liabilities for which EME shall indemnify the Purchaser Parties in accordance with clauses (ii) and (vi) of Section 11.3(a ) and with Section 11.5(a ) for any failure to comply with the foregoing.

        (b)   Without limiting the provisions of Section 1.3(a) or Section 6.22 , the Parties acknowledge that EME has entered into a separate agreement with a third party to sell the Excluded Contact Companies (the " Contact Sale Transaction "). In order to facilitate the execution of the Contact Sale Transaction

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separately from the Contemplated Transactions, EME shall cause the transfer of the Excluded Contact Companies to a Wholly Owned Subsidiary of MEHI in exchange for a payment obligation (the " Contact Transfer Payment Obligation ") from MEHI to the seller of the Excluded Contact Companies. The Contact Transfer Payment Obligation shall conform to the terms of the payment obligation described in Schedule 1.3(b) (a " Payment Obligation" ), mutatis mutandis . Such transfer (the " Contact-MEHI Transfer ") will occur in advance of both the First Closing hereunder and consummation of the Contact Sale Transaction. The principal amount of the Contact Transfer Payment Obligation will be equal to $750,000,000, and the Contact Transfer Payment Obligation will in any event be due and payable, at the option of the holder, upon the Second Closing or any other sale of MEC BV.

        1.4     Confidentiality Agreements.     On the Closing Date, EME shall designate the Purchaser Parties and any applicable Purchaser Designees as intended third party beneficiaries under the confidentiality agreements entered into between EME and certain third party prospective bidders in connection with the Auction Process (collectively, the " Auction Confidentiality Agreements ") insofar as the Auction Confidentiality Agreements pertain to (a) any Review Material (as defined in such Auction Confidentiality Agreements) or other confidential or proprietary information of, involving or otherwise related to the Acquired Companies, Projects, Owner Notes or EME Guarantees or any of the Purchaser Parties or any Purchaser Designees, (b) any employees of any Acquired Company, or (c) any covenants, agreements or indemnities set forth in such Auction Confidentiality Agreements involving or otherwise related to, any Acquired Company, Project, Owner Notes or EME Guarantees, or any transaction or potential transaction pertaining thereto and covered by such Auction Confidentiality Agreements. Promptly after the Effective Date, but in no event later than five (5) Business Days thereafter, EME shall require that each other Person who is a party to an Auction Confidentiality Agreement shall promptly return to EME or destroy any Review Material, and all written or recorded copies thereof and written material, memoranda, notes, copies, excerpts and other writings or recordings whatsoever based upon, containing or otherwise reflecting any Review Material, subject to the terms of the applicable Auction Confidentiality Agreement, save that the provisions of this Section 1.4 shall not apply to any information concerning any Excluded Item, including the Excluded Contact Companies, or information concerning Valley Power (insofar as Review Material with respect to it has been provided to the proposed purchaser of the Excluded Contact Companies) or information concerning any Subsidiary of EME that is not an Acquired Company. EME shall not waive or modify any provisions of any Auction Confidentiality Agreement that relate to any Review Material pertaining to any of the Acquired Companies or the Projects and shall use Commercially Reasonable Efforts to enforce the Auction Confidentiality Agreements with respect to such Review Material.

        1.5     Assignment of Rights and Obligations to Purchaser Designees.     For purposes of this Agreement, the term " Purchaser Designee " shall refer to any Subsidiary of any Purchaser Party and any constituent partner, joint venturer or participant in any Purchaser Party (if such Purchaser Party is a partnership, joint venture, consortium or other association or organization) or Subsidiary thereof to whom any of the Purchaser's rights and obligations hereunder are assigned in compliance with the requirements of this Section 1.5 . Notwithstanding any contrary provisions contained herein, the Parties agree that, at any time after the Effective Date, the Purchaser, in its sole discretion, may assign any or all of its rights and obligations arising under this Agreement or any Related Agreement to one or more Purchaser Designees, provided that no such assignment shall relieve any Purchaser Party of any Liability to any Seller or its Affiliates hereunder or under any Related Agreement, and provided further that the following shall apply:

        (a)   The Purchaser shall provide EME with prompt written notice of any such assignment.

        (b)   No such assignment shall be effected if the making of the assignment will result in the inability or reduced ability of any Seller, Acquired Company or Purchaser Party to obtain any consent or authorization in connection with the Contemplated Transactions or will create economic

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detriment to any Seller or its Affiliates arising from the consummation of the Contemplated Transactions.

        (c)   Each Purchaser Designee shall irrevocably appoint the Purchaser as an authorized representative and agent authorized to act for, to bind and to receive notices and payments on behalf of such Purchaser Designee in all matters arising from or related to this Agreement, any Related Agreements or the Contemplated Transactions.

        (d)   Irrespective of any such assignment or the identity of the party or parties executing any Related Agreements:

        (i)    The Purchaser shall remain liable to the EME Guarantee Parties and relevant third parties with respect to any EME Guarantees which are not released prior to the Closing Date in the manner and to the extent described in Section 6.14 , and the Purchaser shall remain liable to the Sellers and their Affiliates with respect to any other covenant, obligation or liability to any Seller or its Affiliates hereunder or under any Related Agreement that is transferred to, or undertaken by, a Purchaser Designee, including the payment of all sums due to any Seller or its Affiliates hereunder or under any Related Agreement, it being understood that all such covenants, obligations and liabilities shall constitute the direct and primary obligation of the Purchaser to the Sellers and their Affiliates (and to third parties in the case of the EME Guarantees and, subject to Section 6.14 , to the issuers of pertinent letters of credit); and

        (ii)   Without limiting the generality of the foregoing, if and to the extent that the application of any principle of Law could construe the retention by the Purchaser of the direct and primary obligation to perform any and all obligations, liabilities or covenants assigned to or assumed or undertaken by a Purchaser Designee to be a guaranty by the Purchaser of the Purchaser Designee's performance, then the Purchaser hereby irrevocably, absolutely and unconditionally guarantees to each Seller and each of its Affiliates the full, prompt and faithful performance by such Purchaser Designee of all covenants and obligations to be performed by such Purchaser Designee under this Agreement and any Related Agreement assigned to or entered into by such Purchaser Designee.

        (e)   The Purchaser further hereby agrees that a separate Action or Actions may be brought and prosecuted against it for any covenant, obligation or liability assigned to or undertaken by a Purchaser Designee for which the Purchaser remains liable under Section 1.5(d) , whether Action is brought against the pertinent Purchaser Designee or whether such Purchaser Designee is joined in any such Action or Actions (the Purchaser hereby waiving any right to require any Seller or any Affiliate thereof to proceed against any Purchaser Designee).

        (f)    The Purchaser hereby authorizes each Seller and each of its Affiliates, without notice and without affecting the Purchaser's liability hereunder, from time to time to (i) renew, compromise, extend, accelerate or otherwise change the terms of any obligation of any Purchaser Designee hereunder or under any Related Agreement, (ii) take and hold security for the obligations of any such Purchaser Designee and exchange, enforce, waive and release any such security, and (iii) apply such security and direct the order or manner of sale thereof as such Seller or Affiliate, as the case may be, in its sole discretion may determine, in the case of each of clauses (i) and (ii) subject to obtaining the prior written agreement of the relevant Purchaser Designee.

        (g)   Each Purchaser Party hereby further waives:

        (i)    Any defense that may arise by reason of the incapacity or lack of authority of any Purchaser Designee;

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        (ii)   Any defense based upon any Law which provides that the obligations of a surety must be neither larger in amount nor in other respects more burdensome than those of the principal;

        (iii)  Any duty on the part of any Seller or any Affiliate thereof to disclose to any Purchaser Party any facts that any Seller or any Affiliate thereof may now or hereafter know about any Purchaser Designee;

        (iv)  Any right to subrogation, reimbursement, exoneration or contribution or any other rights that would result in any Purchaser Party being deemed a creditor of any Purchaser Designee under any Bankruptcy Law or any other Law, in each case arising from the existence or performance of obligations of any Purchaser Designee hereunder or under any Related Agreement; and

        (v)   Any and all defenses any Purchaser Party may have by reason of any election of remedies by any Seller or any Affiliate thereof, as well as diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of any Purchaser Designee, protest, notice and all demands, and each Purchaser Party covenants that its guarantee of the obligations of any Purchaser Designee hereunder or under any Related Agreement shall not be discharged except by complete performance by such Purchaser Designee of its obligations under this Agreement and the Related Agreements.

ARTICLE II.
PURCHASE PRICES, PAYMENTS AND ADJUSTMENTS

        2.1     Purchase Price.     The purchase price to be paid for the Shares and the Owner Notes shall include the assumption of the EME Guarantees and issuance of replacement letters of credit referred to in Section 6.14 and otherwise (i) for the Project Shares and the Project Notes, shall be a United States Dollar amount for each Separately Sold Project equal to the applicable United States Dollar purchase price listed on Schedule 2.1 (the " Project Allocation Schedule ") opposite the name of each Separately Sold Project (each a " Project Purchase Price " and, as the same may be adjusted from time to time pursuant to the provisions of this Agreement adjusting a Separately Sold Project Price, including this Section 2.1 , Section 2.4 , Section 2.5 , Section 3.2 , or Section 8.1(c) , the " Separately Sold Project Price "), and (ii) for the other Shares and Owner Notes, shall be a United States Dollar amount equal to (x) the sum of all Project Purchase Prices (including Separately Sold Projects), and (y) an amount equal to the principal of and any accrued but unpaid interest on the Contact Transfer Payment Obligation (together with the Project Purchase Prices, the "Aggregate Purchase Price" ), as the same may be adjusted from time to time pursuant to the provisions of this Agreement adjusting such Aggregate Purchase Price (or its component Project Purchase Prices), including this Section 2.1 , Section 2.4 , Section 2.5 , Section 3.2 , or Section 8.1(c) ( "Net Aggregate Purchase Price" ). Without prejudice to Section 7.8(a) , each Purchase Price shall be calculated and paid without reduction or offset for any transfer, documentary, sales, value-added, goods and services, use, stamp, registration or other similar Taxes, or for any Taxes required by Law to be withheld, deducted from, or paid with respect to, such Purchase Price. The Sellers and the Purchaser agree that each Project Purchase Price set forth on the Project Allocation Schedule is a fair market value allocation of the unadjusted Purchase Price in relation to the pertinent Project and to this end further agree if, by reason of any Project Partial Termination Event pursuant to Section 9.3 , any of the Projects listed on the Project Allocation Schedule shall no longer be subject to acquisition under this Agreement, then the Aggregate Purchase Price for all purposes (including Section 2.3 ) shall be automatically reduced in accordance with Section 2.4 , and the Project Purchase Prices for the Projects that remain subject to acquisition under this Agreement shall remain in full force and effect (but subject to adjustment as specified in this Agreement).

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        2.2     Allocations.     EME, on behalf of itself and the other Sellers, and the Purchaser, on behalf of itself and any Purchaser Designees, have agreed that the portion of the Aggregate Purchase Price allocable to the Contact Transfer Payment Obligation is equal to the principal of and accrued interest, if any, thereon and that the remainder of the unadjusted Aggregate Purchase Price is allocable among the Shares and the Owner Notes as set forth in Schedule 2.2 (the " Allocation "), provided that in the case of the Separately Sold Projects, the Allocation shows only an allocation among the Project Notes and Project Shares of each Project in the aggregate and not among the Project Shares or the Project Notes, as the case may be. Following the Effective Date and prior to the First Closing, EME and the Purchaser shall utilize Commercially Reasonable Efforts to agree upon and amend the Allocation to further allocate the amounts set forth in the Allocation among the various Project Shares and Project Notes, if any, included in each Separately Sold Project. Each of the Sellers on the one hand and each of the Purchaser and any Purchaser Designees on the other shall (A) be bound by the Allocation for all purposes, including for determining any Taxes; (B) prepare and file, and cause its Affiliates to prepare and file, all Tax Returns on a basis consistent with the Allocation; and (C) take no position, and cause its Affiliates to take no position, inconsistent with the Allocation on any applicable Tax Return or in any proceedings before any Tax Authority, or otherwise, subject in any such case to any adjustment to the Allocation under this Section 2.2 . In the event the Allocation is audited or disputed by any Tax Authority, or otherwise, the Party receiving notice thereof shall promptly notify the other Parties hereto. Each of the Sellers and the Purchaser, on behalf of itself and any Purchaser Designees, acknowledge and confirm that the Allocation was determined at arm's length based on fair market values and the willingness of EME and the Purchaser to proceed with the Contemplated Transactions on the basis set out in this Agreement even if not all the Projects are included in the transactions consummated hereunder as described in Section 2.1 . If an unadjusted Purchase Price is adjusted, whether pursuant to Section 2.5 or otherwise, then the Allocation will be amended as follows, it being understood that any adjustment to a Separately Sold Project Price shall be reflected in a corresponding adjustment to the Aggregate Purchase Price:

        (a)   if the adjustment occurs because any Owner Notes are paid, retired, canceled or contributed to the capital of, or otherwise transferred to, MEC BV or any of its Wholly Owned Subsidiaries or Rapid Energy prior to the Closing Date, then any amounts allocated to such Owner Notes in the Allocation shall be reduced by the amount paid, retired, canceled, transferred or contributed (as the case may be) in respect thereof and the amount allocable to the Shares correspondingly increased;

        (b)   if the adjustment occurs for any other reason, then the amounts shown in the Allocation in respect of the Shares shall be increased or reduced (as the case may be) by (in aggregate) an amount equal to the adjustment to the unadjusted Purchase Price, such increase or reduction to be apportioned between the different categories of Shares shown in the Allocation by reference to the proportion which the amount allocated to a category of Shares in the Allocation bears to the total amount allocated to all of the Shares in the Allocation (in each case prior to the operation of this Section 2.2(b) ); and

        (c)   the Project Purchase Price to which any such adjustment relates shall be correspondingly increased or decreased.

For the avoidance of doubt, any adjustment to an unadjusted Purchase Price pursuant to Section 2.5(a)(iii) arising from the amount of Net Operating Capital on the Closing Date shall not require or result in any change in a Project Purchase Price allocation.

        2.3     Payment.     At the First Closing, the Separately Sold Project Price for each Separately Sold Project will be paid by delivery from the Purchaser (or a Purchaser Designee) to MEC BV, acting on behalf of the Project Sellers, of a Payment Obligation issued to the applicable Project Seller in the principal amount of the Separately Sold Project Price. At the Second Closing, the Purchaser will (or

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will cause any applicable Purchaser Designee to) pay the Net Aggregate Purchase Price to EME (for itself and on behalf of the other Sellers) in accordance with Section 3.2 . The Sellers hereby irrevocably authorize EME to receive any amount due to them under this Section 2.3 and the receipt of any such amount in the account referred to in the preceding sentence shall be a good, valid and effectual discharge for the Purchaser in respect of such amount and the Purchaser shall have no obligation relating to the distribution of any such payment to or among the Sellers.

        2.4     Project Partial Termination Purchase Price Adjustment.     If this Agreement is partially terminated pursuant to Section 9.3 with respect to any Project prior to the Closing Date, then the Aggregate Purchase Price payable pursuant to Section 2.3 shall be automatically reduced in an amount equal to the Project Purchase Price for each such Project set forth on the Project Allocation Schedule (including any other adjustments related thereto).

        2.5     Other Purchase Price Adjustments.     

        (a)   In addition to the adjustments provided for in Section 2.4 and elsewhere in this Agreement, the Aggregate Purchase Price shall be subject to adjustment as follows:

        (i)    The Aggregate Purchase Price will be decreased by the greater of (A) an amount equal to ninety percent (90%) of the sum of the Estimated Project Distributions for all of the Projects (other than any Projects in respect of which there has occurred a Project Partial Termination Event) for the period from (and including) January 2004 and ending at the conclusion of the month immediately prior to the month in which the Closing Date falls, and (B) the aggregate of all (x) Distributions of money, financial obligations or tangible assets made, directly or indirectly, on or after January 1, 2004 and ending on the Closing Date, plus (y) if and only if such Distributions are less than the percentage of Estimated Project Distributions specified in clause (A) above, such additional Distributions (but only, together with actual Distributions, up to such percentage) included in such Estimated Project Distributions for the months in question that EME demonstrates to Purchaser's reasonable satisfaction have been temporarily delayed and will be paid within three (3) months following the Closing Date, provided that for purposes of this Section 2.5(a)(i) , Distributions shall be limited to those made (including those temporarily delayed) by (1) any of the entities identified on Schedule 2.5 (each a " Project Operating Company "), to (2) EME or a Subsidiary of EME that is not a Project Operating Company, and provided further that there shall be excluded (I) any Distribution in respect of which substantially concurrently there is repaid to the Project Operating Company, by set-off or otherwise, an advance of money previously made by the Project Operating Company and any interest thereon (including the Distribution of any receivable arising from such an advance), provided that this exclusion (I) shall only apply to the extent the amount repaid is equal to the amount of such Distribution, and (II) any Distribution within clause (ii), (iii) or (v) of the definition of Permitted Transfers, it being understood that for purposes of making calculations under this Section 2.5(a)(i) , the amount of any Distribution shall be reduced by withholding Taxes, if any, imposed upon the payment or receipt thereof;

        (ii)   The Aggregate Purchase Price will be increased by the 2004 general and administrative overhead expenses set forth in Section 2.5(a)(ii) of Schedule 2.5 allocated to all the Project Operating Companies that are Acquired Companies, multiplied by a fraction, the numerator of which shall be the number of days between and including January 1, 2004 and the Closing Date and the denominator of which shall be 366; and

        (iii)  The Aggregate Purchase Price will be increased or decreased, as the case may be, by the sum of the Net Operating Capital, as of the Closing Date, of all Acquired Companies that are not either (x) Project Operating Companies or (y) listed on Schedule 2.5 as Excluded Acquired Companies, provided that under no circumstances shall the Aggregate Purchase Price be increased by an amount in excess of $75,000,000 by reason of the operation of this clause (iii) of

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Section 2.5(a) . The term " Net Operating Capital " shall mean cash and cash equivalents, including restricted cash that provides credit support described in Section 6.14(c) , plus (subject to Section 2.5(g) ) current accounts receivable (but excluding prepayments for which the Purchaser would not get the benefit) of any Acquired Company other than a Project Operating Company from Persons other than Seller Parent or a Subsidiary thereof or a Project Operating Company, minus current accounts payable, accrued liabilities and provisions (including in respect of interest) of such Acquired Company to Persons other than Seller Parent or a Subsidiary thereof that is not Project Operating Company, but excluding therefrom (A) any Taxes (which are governed by Article VII and Section 11.5 ) and (B) the Owner Notes. Net Operating Capital shall be based solely upon the internal records of, and valuation and accounting methods customarily used by, the Sellers, absent manifest error.

        (b)   No less than ten (10) nor more than twenty (20) Business Days before the Closing, EME shall deliver to the Purchaser a certificate executed on EME's behalf by a responsible officer setting forth EME's good faith estimate, in reasonable detail, of the aggregate amount of any adjustments to the unadjusted Aggregate Purchase Price arising under this Section 2.5 (the " Estimated Aggregate Adjustment Amount "), and, for purposes of payments to be made at the Second Closing, the Aggregate Purchase Price shall be adjusted by one hundred percent (100%) of the Estimated Aggregate Adjustment Amount. Such certificate shall also include a calculation of the portion of the Estimated Aggregate Adjustment Amount that is also fairly allocable to each Separately Sold Project Price, employing the principles set forth above to the Project Specific Acquired Companies that comprise each Separately Sold Project mutatis mutandis , and each Separately Sold Project Price shall likewise be adjusted by one hundred percent (100%) of such allocated amount.

        (c)   As soon as reasonably practicable after the Closing Date (and in no event later than the day which is ten (10) Business Days following expiration of four (4) months after the Closing Date (such day the " Expiry Date ") or earlier than the day which is ten (10) Business Days following expiration of three (3) months after the Closing Date), the Purchaser shall provide a certificate to EME, and EME may provide a certificate to the Purchaser, executed on the delivering Party's behalf by a responsible officer, indicating whether or not the delivering Party agrees that the actual adjustment required to be made to the unadjusted Aggregate Purchase Price under this Section 2.5 is equal to the Estimated Aggregate Adjustment Amount or that the Party has proposed modifications to EME's original Estimated Aggregate Adjustment Amount.

        (d)   If the Purchaser and EME notify their agreement that the actual adjustment required to be made to the unadjusted Aggregate Purchase Price arising under this Section 2.5 is equal to the Estimated Aggregate Adjustment Amount, or if EME and the Purchaser fail to give any notification under Section 2.5(c) on or prior to the Expiry Date, then the Estimated Aggregate Adjustment Amount (and the portion thereof that is also allocable to the Separately Sold Project Price) shall be final and binding on the Parties as the actual amount of any adjustment required to be made to the unadjusted Aggregate Purchase Price (and to the Separately Sold Project Price) under this Section 2.5 .

        (e)   If the Purchaser notifies EME, or EME notifies the Purchaser, on or prior to the Expiry Date that it believes that the actual adjustment required to be made to the unadjusted Aggregate Purchase Price under this Section 2.5 is not equal to the Estimated Aggregate Adjustment Amount, or EME claims amounts under Section 2.5(h), then (A) such Party shall also provide the other with its proposed adjustments to the Estimated Aggregate Adjustment Amount, together with an explanation of such adjustments, and (B) Purchaser and EME shall attempt to resolve any disagreement regarding the actual amount of any adjustments required to be made to the unadjusted Aggregate Purchase Price under this Section 2.5 within thirty (30) days after the delivery of the pertinent certificate or certificates under Section 2.5(c) and, if they fail to do so, then either the Purchaser or EME may refer the matters in dispute concerning such adjustments to an Expert to be determined in accordance with Section 12.10 . The actual aggregate adjustment required to be made to the unadjusted Aggregate Purchase Price

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under this Section 2.5 as agreed between the Purchaser and the Seller or as determined by the Expert (the " Final Aggregate Adjustment Amount ") shall be final and binding on the Parties (including any portion thereof that is also allocable to the Separately Sold Project Price).

        (f)    The difference between the Final Aggregate Adjustment Amount and the Estimated Aggregate Adjustment Amount (together with interest on such amount at a rate of 2.5 percent above the base rate from time to time of NatWest Bank plc (accrued daily and compounded monthly) for the period from the Closing Date to the date of payment) will be paid (1) by EME (for itself and on behalf of the other Sellers) to the Purchaser if the Aggregate Purchase Price payable at Closing would have been less than the actual amount paid at that time in respect of the Aggregate Purchase Price had the Estimated Aggregate Adjustment Amount been equal to the Final Aggregate Adjustment Amount, or (2) by the Purchaser to EME (for itself and on behalf of each of the other Sellers) if the Aggregate Purchase Price payable at Closing would have been higher than the actual amount paid at that time in respect of the Aggregate Purchase Price had the Estimated Aggregate Adjustment Amount been equal to the Final Aggregate Adjustment Amount, in either case within five (5) Business Days following agreement or determination of the Final Aggregate Adjustment Amount.

        (g)   The Purchaser may, by notice in writing to EME given at the same time as the certificate referred to in Section 2.5(c) , require that an amount equal to any current account receivable of an Acquired Company that is not a Project Operating Company as of Closing which such Acquired Company has been unable to collect in the period prior to the Expiry Date be disregarded for the purposes of calculating Net Operating Capital provided that the Purchaser shall arrange for the assignment to EME (as principal and as agent for the other Sellers) of any such receivable and the assignee shall be free to collect the same.

        (h)   Notwithstanding anything to the contrary in this Section 2.5 , the Parties agree that if (i) any amounts were excluded from the Estimated Aggregate Adjustment Amount as of the Closing Date, pursuant to Section 2.5(a)(i) , due to EME's failure to demonstrate to Purchaser's reasonable satisfaction that Distributions in such amounts had been temporarily delayed and would have been paid within three (3) months following the Closing Date, (ii) the amount calculated in Section 2.5(a)(i)(A) exceeds the amount calculated in Section 2.5(a)(i)(B) and (iii) during such three (3) month period following the Closing Date, Distributions were received by Purchaser or any Subsidiary thereof that is not a Project Operating Company (replacing the term "EME" with the term "Purchaser" in the definition of "Distribution" in Article X , mutatis mutandis ), then an amount equal to 100 percent (100%) of any such Distributions received by Purchaser or any of such Subsidiaries up to the amount of such excess referred to in clause (ii) above (together with interest on such amount at a rate of 2.5 percent (2.5%) above the base rate from time to time of NatWest Bank plc (accrued daily and compounded monthly) for the period from the Closing Date to the date of payment) will be paid by the Purchaser to EME (for itself and on behalf of each of the other Sellers) pursuant to the other provisions of this Section 2.5 .

ARTICLE III.
CLOSING

        3.1     Time and Place of Closing.     Subject to the provisions of Section 3.3 below, the First Closing will take place at the offices of Munger, Tolles & Olson LLP, counsel to EME, located at 355 S. Grand Avenue, 35th Floor, Los Angeles, California at 9:00 a.m. on the tenth (10th) Business Day after the MTC Satisfaction Date, but in no event later than the Outside Date (or at such other time, date or place or places as may be agreed in writing between EME and the Purchaser or at such other date and time as EME may designate pursuant to Section 3.3 ), provided that on that Business Day each of the conditions contained in Section 8.1 , Section 8.2 and Section 8.3 have been and continue to be satisfied or waived to the extent necessary to enable the First Closing to occur, and the Second Closing shall occur on the same Business Day and at the same place immediately following the First Closing.

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        3.2     Payments At and After the Second Closing.     Subject to the terms and conditions of this Agreement, the Parties agree that payment of the Net Aggregate Purchase Price, the Contact Transfer Payment Obligation and the Payment Obligations for the Separately Sold Projects shall occur in the following manner and sequence.

        (a)   At the Second Closing, the Purchaser will (or will cause any applicable Purchaser Designee to) pay the Net Aggregate Purchase Price, less the portion of the Net Aggregate Purchase Price allocable to the Contact Transfer Payment Obligation, which shall be paid in accordance with Section 3.2(c) below, to EME (for itself and on behalf of the other Sellers) by wire transfer of United States Dollars in immediately available funds into such account in New York City, New York or Delaware as EME shall direct in a written notice received by the Purchaser at least five (5) Business Days prior to the Closing Date.

        (b)   In order to permit all Payment Obligations (including the Contact Transfer Payment Obligation) to remain subject to prompt payment upon presentation despite the proceedings to occur at the Closing, EME shall cooperate with the Purchaser to cause MEC BV and the Project Sellers to open a bank account at least five (5) Business Days prior to the Closing Date at a bank designated by the Purchaser, into which payments in satisfaction of the Payment Obligations may be made promptly following the Closing, should the holders of the Payment Obligations present the same for payment.

        (c)   Prior to the Closing Date, in satisfaction of the Net Aggregate Purchase Price outstanding after making the payment described in Section 3.2(a) , MEHI shall direct the Purchaser to pay on MEHI's behalf the principal and accrued interest on the Contact Transfer Payment Obligation, subject to the holder or holders of such Contact Transfer Payment Obligation presenting the Contact Transfer Payment Obligation for payment, in accordance with the terms of this paragraph. At the Second Closing, MEHI shall be relieved of all further obligations under the Contact Transfer Payment Obligation by (i) the holder of such obligation delivering to MEHI its irrevocable agreement and commitment, in form and substance reasonably satisfactory to MEHI, to look solely to the Purchaser or the applicable Purchaser Designee for satisfaction of the Contact Transfer Payment Obligation upon its presentation, and to relieve MEHI from further obligations thereunder, as though the Purchaser or the applicable Purchaser Designee were substituted for MEHI as the obligor thereon, and (ii) the Purchaser or the applicable Purchaser Designee delivering to MEHI and the holder of the Contact Transfer Payment Obligation its irrevocable and unconditional agreement and commitment, in form and substance reasonably acceptable to EME, to accept the obligations of the Contact Transfer Payment Obligation and to permit presentment of same to, and demand for payment upon, the Purchaser or the applicable Purchaser Designee, in lieu of MEHI. The Purchaser or the applicable Purchaser Designee shall then be relieved of any further obligations with regard to the payment of the Net Aggregate Purchase Price, and MEHI shall then be relieved of any further obligations with regard to the payment of the Contact Transfer Payment Obligation.

        3.3     Postponement of Closing Dates.     Notwithstanding the provisions of Section 3.1 to the contrary, EME or the Purchaser shall have the right, upon five (5) Business Days' prior notice to the other, to postpone the First Closing on one or more occasions to a date specified in such notice, but not beyond the Outside Date (the period of any such postponement being referred to as the " Postponement Period "), if the notifying party reasonably believes that such postponement will avoid one or more Partial Termination Events from occurring.

        3.4     Documents to Be Delivered by the Sellers.     At the applicable Closing, the Sellers will deliver, or cause to be delivered, to Purchaser or any applicable Purchaser Designee, as the case may be, the following:

        (a)   where applicable, certificates or other evidence representing the Shares being sold, transferred and assigned at such Closing duly endorsed in blank (or accompanied by duly executed transfer powers);

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        (b)   written resignations of the members of each of the board of directors, management committee or equivalent managing body of the Acquired Companies that are the subject of such Closing, whose names are set forth on Schedule 3.4(b) ;

        (c)   without prejudice to any rights under Article XI , a certificate of the Sellers in a form satisfactory to the Purchaser acting reasonably, executed on the Sellers' behalf by a duly authorized representative, representing and warranting to the Purchaser that as of the Closing Date, the conditions set forth in Section 8.2(a) ( Representations and Warranties of the Sellers ) and Section 8.2(b) ( Performance of Obligations of the Sellers ) have been and remain satisfied or waived, it being agreed that the effect of such certificate shall be that upon its delivery the representations and warranties of the Sellers contained in this Agreement shall be deemed made as of the Closing Date, with references in such representations and warranties to the Effective Date being deemed to be to the Closing Date;

        (d)   each of the Related Agreements duly executed by EME and any other applicable Seller that relate to such Closing;

        (e)   evidence of cancellation of the Project Notes or of the other Owner Notes, as the case may be, or endorsements and delivery or duly executed assignments thereof;

        (f)    evidence of any releases of any of the guarantees applicable to Acquired Companies that are the subject of such Closing provided by any AC Guarantee Party, if obtained, pursuant to Section 6.15 ;

        (g)   Foreign Implementing Agreements, if applicable;

        (h)   the unconditional and irrevocable agreement and commitment of the holder of the Contact Transfer Payment Obligation referred to in Section 3.2 ;

        (i)    at the First Closing, evidence (in a form satisfactory to the Purchaser acting reasonably) that the share register for FHH (Guernsey) Limited contains appropriate entries reflecting the purchase of the Project Shares of FHH (Guernsey) Limited by the applicable Purchaser Designee;

        (j)    at the First Closing, evidence (in a form satisfactory to the Purchaser acting reasonably) of notarial deeds having been executed in accordance with Applicable Law to reflect the purchase of the Project Shares of each of MEC Indonesia B.V., MEC Java B.V. MEC Indo Coal B.V. and Beheer-en Beleggingsmaatschappij Jydeno B.V. by the applicable Purchaser Designee;

        (k)   at the First Closing, evidence (in a form satisfactory to the Purchaser acting reasonably) of notarial deeds having been executed in accordance with Applicable Law to reflect the purchase of the Project Shares of EME del Caribe Holding GmbH by the applicable Purchaser Designee;

        (l)    evidence (in form satisfactory to the Purchaser acting reasonably) of the satisfaction of all Third-Party Conditions, subject to the second sentence of Section 8.2(d) ;

        (m)  at the Second Closing, evidence (in a form satisfactory to the Purchaser acting reasonably) of notarial deeds having been executed in accordance with Applicable Law to reflect the purchase of the Shares of MEC BV; and

        (n)   such other duly executed instruments of transfer, assignment or assumption and such other documents as may be reasonably requested by the Purchaser to evidence the proper consummation of the Closing, not less than five (5) Business Days before the Closing Date, in connection with the sale, transfer and assumption of the Shares, Owner Notes, EME Guarantees and letters of credit to be sold, transferred or assumed (as the case may be) at such Closing pursuant to this Agreement.

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        3.5     Documents to Be Delivered by the Purchaser Parties.     At the applicable Closing, the Purchaser (and, in the case of Section 3.5(c) , the Purchaser Parties) will deliver or will procure that any applicable Purchaser Designee delivers to EME (or, as specified in Section 3.5(a) , MEC BV) the following:

        (a)   in the case of the First Closing, duly executed Payment Obligations issued to the Project Sellers and delivered to MEC BV, acting on behalf of the Project Sellers, in each case in an amount equal to the applicable Separately Sold Project Price, and in the case of the Second Closing, United States Dollars in an amount equal to the Aggregate Purchase Price paid via wire transfer of immediately available funds in accordance in Section 2.3 ;

        (b)   without prejudice to any rights under Article XI , a certificate of the Purchaser in a form satisfactory to EME acting reasonably, executed on the Purchaser's behalf by one of its officers, representing and warranting to EME that, as of the Closing Date, the conditions set forth in Section 8.3(a) ( Representations and Warranties of the Purchaser Parties ) and Section 8.3(b) ( Performance of Obligations of the Purchaser Parties ) have been and remain satisfied or waived, it being agreed that the effect of such certificate shall be that upon its delivery the representations and warranties of the Purchaser Parties contained in this Agreement shall be deemed made as of the Closing Date;

        (c)   each of the Related Agreements duly executed by each Purchaser Party and any applicable Purchaser Designee that relate to such Closing;

        (d)   evidence of any releases of EME Guarantees and substitutions of credit support, in each case if obtained, pursuant to Section 6.14 ;

        (e)   Foreign Implementing Agreements, if applicable;

        (f)    the unconditional and irrevocable commitment of the Purchaser or the applicable Purchaser Designee referred to in Section 3.2 ; and

        (g)   such other duly executed instruments of transfer, assignment or assumption and such other documents as may be reasonably requested by EME to evidence the proper consummation of the Closing, not less than five (5) Business Days before the Closing Date, in connection with the sale, transfer and assumption of the Shares, Owner Notes, EME Guarantees and substituted credit support pursuant to Section 6.14 to be sold, transferred or assumed (as the case may be) at such Closing pursuant to this Agreement.

        3.6     Use of Escrow.     The Parties acknowledge that it may facilitate their objectives hereunder to consummate the Contemplated Transactions to occur at a Closing through an escrow. In such escrow, the Parties may agree to have certain of the Acquired Companies and related assets purchased, sold and released from the escrow with the allocable portion of the Aggregate Purchase Price applicable thereto before the Project Shares or the Shares of MEC BV and Rapid Energy are sold or otherwise to accomplish in an orderly and more precise manner certain aspects of the Contemplated Transactions before completing others. If EME and the Purchaser agree to any such escrow arrangements, then the Parties shall (i) execute joint escrow instructions and any agreements necessary to implement the Contemplated Transactions or to satisfy any relevant Laws with respect thereto, (ii) jointly designate an escrow agent and (iii) deposit a fully executed copy of this Agreement with the escrow agent together with such joint escrow instructions and implementation agreements. In the event of any conflict between this Agreement, on the one hand, and the joint escrow instructions or any such implementation agreements, on the other hand, then this Agreement shall prevail unless it is separately amended in accordance with the provisions hereof or unless any such joint escrow instructions or implementation agreement expressly provides that it shall prevail in the event of a conflict with this Agreement. If a Closing is to be consummated through the escrow agent, then the Parties shall deliver to the escrow agent, upon the opening of escrow, the funds and the instruments of sale, assignment, conveyance and assumption as are called for to be delivered by them at the Closing, and the escrow

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agent shall thereafter deliver and distribute such funds and instruments out of escrow, make such recordations, and engage in such other actions and activities as are set forth in the joint escrow instructions. Unless otherwise expressly specified in the escrow instructions or such implementing agreements, for purposes of this Agreement, all conditions to such Closing shall be deemed satisfied or waived as of the opening of such escrow, the transactions to occur in escrow shall be effective as provided in the joint escrow instructions, and time periods from and after the Closing Date shall be measured as of the date such escrow is opened. The Seller Parties, on the one hand, and the Purchaser Parties, on the other hand, agree to consider in good faith making Commercially Reasonable Efforts with respect to joint actions (including the opening of an escrow pursuant to this Section 3.6 ) and potential amendments to this Agreement proposed by each other that achieve and facilitate the achievement of the objectives of this Agreement, provided that , in each Party's sole discretion, such actions or amendments do not impose or risk imposing additional burdens on such Party or its Affiliates or create any material delay or risk to consummating the Contemplated Transactions, and provided further that a Party's effectuation of such Commercially Reasonable Efforts or entry into any amendment proposed by another Party shall be subject to the first Party's prior written consent, which may be withheld in its discretion.

        3.7     Support and Services; Transition Arrangements.     The support companies identified on Schedule 3.7 (the " Support Companies ") have traditionally provided indirect overhead and management services (including operating, financial, accounting, tax, administrative, legal, agency, government relations and technical services) (collectively, the " Support Services ") to certain Project-Specific Acquired Companies of more than one of the Projects. If a Project becomes subject to a Project Partial Termination Event in accordance with the terms of Section 9.3 such that the ownership of any such Project will be separated from the ownership of the applicable Support Company, then EME may, in connection therewith, request that Purchaser provide, or cause the applicable Support Companies to provide, and the Purchaser may, in connection therewith, request that EME provide or cause the applicable Support Company to provide those Support Services that have been historically provided to the Project-Specific Acquired Companies in the manner previously provided and utilizing such Retained Employees, Ex-Pat Employees and other employees as are employed by the Support Company and such Support Services will be provided by such Support Companies on commercially reasonable terms and conditions, including duration, scope and cost (taking into account the historical intercompany cost charged by the applicable Support Company in the Ordinary Course of Business prior to the Effective Date). In the event of any such request, the Parties will work cooperatively to document the terms and conditions of the provision of such Support Services as soon as is reasonably practicable. For the purposes of this Agreement relating to the Project known as "First Hydro" or the Project known as "Spanish Hydro" (A) all of the assets and undertaking comprising the in-country support office at Deeside and the regional office in London (as referred to on page 19 of the Confidential Information Memorandum), and any staff located at either of those offices, shall be deemed to relate exclusively to the Project known as "First Hydro" and (B) all of the assets and undertaking comprising the in-country support office at Barcelona (as referred to on page 19 of the Confidential Information Memorandum), and any staff located there, shall be deemed to relate exclusively to the Project known as "Spanish Hydro".

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS

        Each representation and warranty contained in this Article IV is qualified by the matters listed with respect to such representation and warranty in the corresponding numbered sections of Schedule 4 (the " EME Disclosure Schedule "). Except for the matters listed in a specific numbered section of the EME Disclosure Schedule relating to a particular numbered Section of this Article IV , which shall not be qualified by any other material (other than material expressly cross-referenced) contained in the EME

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Disclosure Schedule, each of EME, jointly with the other Sellers, and the other Sellers, severally, hereby represent and warrant to the Purchaser Parties, as of the Effective Date, that:

        4.1     Organization and Good Standing.     

        (a)   The EME Disclosure Schedule contains a complete and accurate list of the jurisdiction of incorporation or organization of each of the Sellers. Each Seller is an entity duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has the requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now conducted, to comply with its obligations hereunder and to perform its part in the Contemplated Transactions.

        (b)   The EME Disclosure Schedule contains a complete and accurate list of the jurisdiction of incorporation or organization of each Acquired Company. Each Acquired Company is an entity duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has the requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now conducted. Each Acquired Company is duly qualified to do business as a foreign entity and is in good standing under the laws of each jurisdiction in which either the ownership or use of the properties or assets owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where failure to be so qualified would not have a Material Adverse Effect.

        4.2     Authority and Enforceability.     The execution and delivery by the Sellers of this Agreement and the Related Agreements and the performance and consummation by the Sellers of the Contemplated Transactions have been duly authorized by all necessary corporate or similar action on the part of the Sellers. This Agreement has been, and, as of the Closing, each of the Related Agreements will have been duly executed and delivered by the Sellers and, assuming due execution and delivery by all other parties to this Agreement and each such Related Agreement, as applicable, this Agreement constitutes, and each of the Related Agreements when duly executed and delivered will constitute, a valid and binding obligation of the Sellers, enforceable against the Sellers in accordance with its and their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, preference, moratorium or other similar Laws now or hereafter in effect relating to creditors' rights generally and that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding may be brought.

        4.3     No Breach or Conflict.     Subject to the provisions of Sections 4.4(a) and 4.4(b) regarding consents from private parties and Governmental Authorities, and except (i) for the regulatory or licensing Laws applicable to the Acquired Companies and (ii) compliance with the requirements of applicable merger control, antitrust, competition, foreign ownership or investment or similar Laws applicable to the Acquired Companies (collectively, the " Merger Control Laws "), such regulatory and licensing Laws and Merger Control Laws as are identified in Section 4.3 of the EME Disclosure Schedule, the execution and delivery by the Sellers of this Agreement and the Related Agreements and the performance and consummation of the Contemplated Transactions by the Sellers does not and will not:

        (a)   violate any provision of the Governing Documents of any Seller or Acquired Company;

        (b)   violate or result in a breach of or default (with or without notice or lapse of time or both), under (i) any Major Contract to which any Seller or any Acquired Company is a party or to which any such entity or any of its properties or assets may be bound, or (ii) any other Contracts, except in the case of this clause (ii) as would not reasonably be expected to have, directly or indirectly, individually or in the aggregate, a Material Adverse Effect;

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        (c)   violate any Law or Order of any Governmental Authority applicable to any Seller or any Acquired Company;

        (d)   result in the imposition or creation of any Lien upon or with respect to any of the properties or assets owned or used by the Acquired Companies; or

        (e)   result in the cancellation, modification, revocation or suspension of any License.

        4.4     Consents.     

        (a)   The execution and delivery by the Sellers of this Agreement and the Related Agreements and the performance and consummation by the Sellers of the Contemplated Transactions do not require any authorization, consent or approval of any non-governmental third party, or will result in any such non-governmental third party having the right to terminate any Major Contract, except where the failure to obtain such authorization, consent or approval, or waiver of termination rights, from such non-governmental third party, individually or in the aggregate with other such failures, would not have a Material Adverse Effect.

        (b)   Except for compliance with the Merger Control Laws, the execution and delivery by the Sellers of this Agreement and the Related Agreements to which any of them are a party and the performance and consummation by the Sellers of the Contemplated Transactions do not require any authorization, consent, approval, certification, license or order of, or any filing with, any court or Governmental Authority except where failure to obtain the same, individually or in the aggregate with other such failures, would not have a Material Adverse Effect.

        (c)    Schedule 8.3(d) contains a complete and accurate list of all of the consents, authorizations, waivers or approvals (other than any Governmental Conditions) necessary to enable the Sellers to consummate the Contemplated Transactions except any such item waived in accordance with Section 8.5 .

        4.5     Ownership Interests.     

        (a)   Each Seller is the sole record and beneficial owner and holder of the Shares listed opposite such entity's name on Schedule A-1 and owns those Shares free and clear of all Liens. Except for this Agreement, there are no agreements (including without limitation any options, warrants or convertible securities) relating to (i) the issuance of any of the Shares or any other shares of capital stock of MEC BV, Rapid Energy or any Acquired Company or (ii) the sale or transfer of any of the Shares or any other shares of capital stock of MEC BV or Rapid Energy or any other shares of capital stock of any Acquired Company held by a Seller or other Acquired Company.

        (b)   The EME Disclosure Schedule contains a complete and accurate description of and a diagram (the " Structure Chart ") showing the (i) ownership structure (including the percentage of ownership held by EME or its Subsidiaries) that existed as of December 31, 2003 and (ii) the ownership structure (including the identity of and percentage of ownership held by each member, partner, stockholder or other owner) that will exist as of the Closing Date for each Acquired Company in each case subject to the exercise of any Preemptive Rights, and any non-economic variances that are immaterial to the economic value of the Acquired Companies or are necessary for the consummation of the Contemplated Transactions. The ownership interests of each Acquired Company that are set forth on the EME Disclosure Schedule as being owned by a Seller or another Acquired Company are or as of the Closing Date will be owned of record and beneficially by a Seller or an Acquired Holding Company free and clear of all Liens. All of the outstanding capital stock or other ownership interests of each Acquired Company held by a Subsidiary of EME have been or will be as of the Closing Date duly authorized and validly issued.

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        (c)   Upon consummation of the Contemplated Transactions at the Closing, the Sellers will deliver to the Purchaser and the Purchaser Designees one hundred percent (100%) of EME's direct or indirect ownership in the Projects.

        4.6     Owner Notes.     

        (a)   The Owner Notes identified in Schedule 1.1 comprise all of the promissory notes and other obligations representing money borrowed by, or an installment obligation of, an Acquired Company to Seller Parent or its Subsidiaries (other than Acquired Companies), subject however to the last clause of Section 1.1(b) .

        (b)   Each Owner Note Seller is the sole record and beneficial owner and holder of the Owner Notes listed opposite such entity's name on Schedule 1.1 and owns or will own upon the Closing those Owner Notes free and clear of all Liens.

        (c)   Each of the Owner Notes has been duly authorized and validly issued and is in full force and effect and none of the Owner Note Sellers and no issuer of an Owner Note is in default under any of the Owner Notes.

        (d)   Each Owner Note represents a valid obligation of the issuer thereof, enforceable in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) is subject to general principles of equity.

        (e)   Accurate, complete and correct copies of the Owner Notes have been made available to the Purchaser and none of the terms of the Owner Notes have been amended since being made available.

        4.7     Financial Information.     

        (a)   The Sellers have delivered to the Purchaser audited consolidated balance sheets of MEC BV as of the last day of each of the two (2) financial years ended on December 31, 2003 (the " Balance Sheet Date ") and the audited consolidated statements of income, cash flows and stockholders' equity of MEC BV for each of the three (3) financial years ended on December 31, 2003 together with the notes thereto (collectively, the " BV Financial Statements ") and the report thereon of PricewaterhouseCoopers LLP, independent certified public accountants. Such BV Financial Statements fairly present the financial condition and the results of operations and cash flows of MEC BV and its Subsidiaries on a consolidated basis as at the respective dates and for the periods referred to in such BV Financial Statements, all in accordance with US GAAP applied consistently through the referenced periods.

        (b)   Set forth in the EME Disclosure Schedule is a complete and accurate list of the most recent audited financial statements for each of the Project Operating Companies identified in Schedule 2.5 . All such financial statements (" Project Financial Statements ") have been made available to the Purchaser by posting to Intralinks or otherwise. Each of the Project Financial Statements for a Project Operating Company fairly present the financial condition and the results of operations and cash flows of the Project Operating Company to which it relates as at the respective dates and for the periods referred to in such Project Financial Statements, all in accordance with US GAAP or Local GAAP, as stated therein, applied consistently through the referenced periods.

        (c)   Set forth in the EME Disclosure Schedule is a list of certain financial schedules that have been posted to Intralinks for certain Acquired Holding Companies that are not Project Operating Companies (each, an " Acquired Company Financial Schedule "), which Acquired Company Financial Schedules represent the unconsolidated financial position and results of operations as of April 30, 2004. The Acquired Company Financial Schedules for such Acquired Holding Companies were derived from and are materially in accordance with the internal books and records of such Acquired Holding Companies.

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        4.8     No Undisclosed Liabilities.     No Acquired Company has any Liabilities of any type, whether accrued, contingent or otherwise and whether or not required to be reflected or reserved against on a balance sheet prepared in accordance with US GAAP except for Liabilities:

        (a)   properly provided for in the BV Financial Statements, the Project Financial Statements and the Acquired Company Financial Schedules, respectively, or in the notes thereto (collectively, the " Financial Information "); or

        (b)   that were incurred after the Balance Sheet Date in the Ordinary Course of Business or which are not material; or to the extent incurred after the Effective Date, without breach or default under Section 6.3 .

        4.9     Absence of Certain Developments.     Since the Balance Sheet Date, each Acquired Company has been operated in the Ordinary Course of Business and no Acquired Company has taken any action of a type that if taken after the Effective Date would be prohibited by Section 6.3 , and there has occurred no event, circumstance, change or development that, individually or in the aggregate with any other events, circumstances, changes or developments, has resulted in a Material Adverse Effect.

        4.10     Title to Properties.     Except for Permitted Exceptions and Liens granted in the Ordinary Course of Business to project financiers and lenders, the Acquired Companies, including to the Knowledge of EME, the Non-Controlled Acquired Companies, have good and defensible title, or valid and effective leasehold, license, easement, contractual or statutory rights in the case of leased or licensed or other property, to all material tangible personal and material real property owned or used by them in the conduct of their businesses, in each case free and clear of any Liens.

        4.11     Major Contracts.     

        (a)   No Acquired Company is currently bound by a Contract of the type described in clauses (i) through (ix) below (together with the Governing Documents of each Acquired Company, as currently in effect and the collective bargaining agreements referred to in Section 4.20(a) , the " Major Contracts "), unless such Contract has been posted to Intralinks:

        (i)    any Contract relating to the issuance, sale or transfer of any capital stock, ownership interests or other securities of any Acquired Company that are owned, directly or indirectly, by a Seller;

        (ii)   any Contract between a Seller or one or more of its Affiliates (other than an Acquired Company), on the one hand, and an Acquired Company, on the other hand, that is not terminable by an Acquired Company upon less than 60 days' notice without penalty (the " Affiliate Contracts ");

        (iii)  any Contract that involves annual expenditures or receipts of any Acquired Company or under which any Acquired Company has assumed or incurred, or agreed to assume or incur, any Liability (whether actual or contingent), in each case in excess of $5,000,000 (or its equivalent as of the Effective Date in foreign currency if such Contract is denominated in foreign currency);

        (iv)  except for the Owner Notes, any Contract by which any Acquired Company has indebtedness for borrowed money outstanding in excess of, or has guaranteed or is otherwise contingently liable for the indebtedness of others in excess of, $5,000,000 (or its equivalent as of the Effective Date in foreign currency), or any Contract by which any Person is indebted to any Acquired Company for an amount in excess of $5,000,000 (or its equivalent as of the Effective Date in foreign currency), in each case including any material documents directly related to any such indebtedness;

        (v)   any lease or license under which any Acquired Company is the lessor or lessee of real or personal property, which lease involves an annual base rental in excess of $5,000,000 (or its

17

 

equivalent as of the Effective Date in foreign currency if payment obligations under such lease are denominated in foreign currency);

        (vi)  any Operating Contract providing for the payment by or to any Acquired Company in excess of $5,000,000 per year (or its equivalent as of the Effective Date in foreign currency if such Operating Contract is denominated in foreign currency);

        (vii) any Contract that is not terminable without penalty providing for the employment or compensation of any current employee, officer, manager or director of any Acquired Company that involves annual salary and cash bonus in excess of $250,000 (or its equivalent as of the Effective Date in foreign currency if such Contract is denominated in foreign currency);

        (viii) any interest rate swap, electricity or other hedging instrument or other similar derivative of any type with respect to which any Acquired Company has any liability which (i) has a notional amount in excess of $5,000,000 (or its equivalent as of the Effective Date in foreign currency if such instrument or derivative is denominated in foreign currency) or (ii) has a term extending for a period longer than two (2) years after the Effective Date; and

        (ix)  any Contract which would prevent or restrict any Acquired Company conducting its business in the Ordinary Course of Business.

        (b)   The Sellers have made available to the Purchaser, by posting to Intralinks or otherwise, accurate, complete and correct copies of all Major Contracts, and no Major Contract has been amended since being made available to the Purchaser. In circumstances where a Major Contract which has been posted to Intralinks is in unexecuted form, the Sellers hereby represent and warrant to the Purchaser Parties that the executed form of that Major Contract is in the same form as that posted to Intralinks.

        (c)   All of the Major Contracts (other than the Financing Agreements) to which any Seller or Controlled Acquired Company is a party and, to the Knowledge of EME, all of the Major Contracts (other than the Financing Agreements) to which any Non-Controlled Acquired Company is a party, are in full force and effect and none of the Sellers or Acquired Companies and, to the Knowledge of EME, no other Person is in material default under any Major Contract (other than the Financing Agreements) unless, in the case of a default of a Seller or an Acquired Company, such default has been excused or waived (and, to the extent such waiver is temporary, listed on the EME Disclosure Schedule). All of the Financing Agreements are in full force and effect and no event of default (or an event that with the giving of notice or the passage of time would become an event of default under the terms of any Financing Agreement) has occurred unless such event of default (or event) has been excused or waived (and, to the extent such waiver is temporary, listed on the EME Disclosure Schedule).

        4.12     Intellectual Property.     

        (a)   With respect to each Intellectual Property Asset, one or more of the Acquired Companies is either (i) the owner of all material right, title and interest in and to such Intellectual Property Asset, free and clear of any Liens, or (ii) has the right to use the same without material payment to a third party.

        (b)   (i) None of the Intellectual Property Assets, nor the conduct of the business of any of the Controlled Acquired Companies nor, to the Knowledge of EME, any of the Non-Controlled Acquired Companies, infringes upon or misappropriates the rights of any other Person nor, to the Knowledge of EME, is infringed upon or misappropriated by any other Person or its property.

        (ii)   No Seller has received any claim, any cease and desist or equivalent letter or any other notice of any allegation that any of the Intellectual Property Assets or the business of any of the Controlled Acquired Companies nor, to the Knowledge of EME, any of the Non-Acquired

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Companies infringes upon, misappropriates or otherwise violates the intellectual property of any third parties.

        (iii)  To the Knowledge of EME, there has been no unauthorized use by, unauthorized disclosure to or by or infringement, misappropriation or other violation of any of the Intellectual Property Assets by any third party or any current or former officer, employee, independent contractor, consultant or any other agent of any Acquired Company.

        (iv)  None of the Intellectual Property Assets is subject to any Actions, claims or demands of any third party and no Action, whether judicial, administrative or otherwise, has been instituted or is pending or, to the Knowledge of EME, threatened that challenges or affects the rights of any Controlled Acquired Company or, to the Knowledge of EME, any Non-Controlled Acquired Company.

        (v)   No Controlled Acquired Company nor, to the Knowledge of EME, any Non-Controlled Acquired Company has received any written opinions of counsel relating to infringement, invalidity or unenforceability of any Intellectual Property Assets.

        4.13     Taxes.     

        (a)   To the Knowledge of EME, (i) all Tax Returns that were required to be filed on or before the Effective Date by or on behalf of the Acquired Companies have been filed, (ii) all such Tax Returns were correct and complete in all material respects when filed, (iii) all Taxes shown to be due and payable on such Tax Returns have been paid, and (iv) there are no Liens for Taxes (other than Taxes not yet due and payable or Taxes that are being contested in good faith for which adequate reserves have been established) upon any of the assets of any of the Acquired Companies.

        (b)   To the Knowledge of EME, there is no dispute, claim, audit or other proceeding concerning any Tax liability of any of the Acquired Companies that is pending or has been threatened by any Tax Authority in writing, which dispute or claim, audit or proceeding would reasonably be expected to result in Taxes.

        (c)   To the Knowledge of EME, no Acquired Company is or has been within the five years prior to the Effective Date a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

        (d)   To the Knowledge of EME, no Acquired Company which has entered into a section 171A election listed in Schedule 7.7(c) has or will have any liability to Tax in circumstances where it is not entitled to receive the consideration in respect of the disposal to which the election relates.

        (e)   The following statements relating to Tax reliefs, credits, losses, allowances or other Tax benefits set out in the Confidential Information Memorandum are true and correct in all material respects:

        (i)    the statements concerning UK and Australian Tax benefits arising from the financing and ownership structure put in place in 1997, which appear on page 23 of the Confidential Information Memorandum;

        (ii)   the statements concerning the Project known as "CBK" being entitled to an Income Tax exemption and a local business Tax exemption, which appear on CBK—9 Confidential Information Memorandum;

        (iii)  the statements concerning the Project known as "EcoEléctrica" being entitled to an Industrial Tax Exemption, which appear on EcoEléctrica—8 Confidential Information Memorandum;

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        (iv)  the statements concerning the Project known as "IVPC4" being entitled to an incentive credit amounting to approximately €12,000,000 at December 31, 2003, which appear on Italian Wind—9 Confidential Information Memorandum;

        (v)   the statements concerning the Project known as "Tri Energy" having been granted a promotion certificate which grants an eight (8) year Income Tax holiday, which appear on Tri Energy—7 Confidential Information Memorandum;

        (vi)  the statements concerning EME Asia having been granted awards which entitle it to a low Tax rate, which appear on Paiton—10 Confidential Information Memorandum;

        (vii) CBK Power Company is entitled to the CBK VAT Credits, subject to Section 11.5(aa) ; and

        (viii) ISAB has fully complied with the terms of its 10 year corporation tax holiday ending October 2003.

        (f)    Gippsland Power Pty. Ltd. and Mission Energy Development Australia Pty. Ltd., combined, have tax losses of AU$180,000,000 as of December 31, 2003. The available fraction in respect of those losses transferred or to be transferred to a head company for purposes of section 707-310 of the Australian Income Tax Assessment Act 1997 upon formation of a multiple entry consolidated group or consolidated group is in the range of 0.96 to 1. Edison Mission Australia Ltd., Mission Energy Ventures Australia Pty Ltd., Latrobe Power Pty. Ltd., Traralgon Power Pty. Ltd., Loy Yang Holdings Pty. Ltd. and Edison Mission Energy Holdings Pty. Ltd. combined, have tax losses of A$200,000,000 as of December 31, 2003. The available fraction in respect to those losses transferred or to be transferred to a head company for purposes of section 707-310 of the Australian Income Tax Assessment Act 1997 upon formation of a multiple entry consolidated group or consolidated group is not less than one.

        4.14     Licenses.     Each Acquired Company possesses and is in compliance with all Licenses necessary for its operation in the manner presently operated, other than those Licenses the absence of which or noncompliance with which would not have a Material Adverse Effect. No Controlled Acquired Company and, to the Knowledge of EME, no Non-Controlled Acquired Company has received a currently effective notice indicating that any such License will be revoked or will not be renewed or will only be renewed on terms which would restrict or prevent the holder thereof conducting its material operations in the Ordinary Course of Business.

        4.15     Compliance with Law.     Except for the matters that are the subject of Sections 4.12 , 4.13 , 4.14 , 4.16 , 4.19 , 4.20 and 4.21 , which are controlled by such Sections without duplication in this Section 4.15 , each Acquired Company is and at all times since January 1, 2000, has been in compliance in all respects with all pertinent Laws, Orders and Licenses, other than violations as would not, individually or in the aggregate, have a Material Adverse Effect.

        4.16     Environmental Matters.     

        (a)   Each Controlled Acquired Company and, to the Knowledge of EME, each Non-Controlled Acquired Company has complied with all Environmental Laws, other than violations as would not, individually or in the aggregate, have a Material Adverse Effect.

        (b)   To the Knowledge of EME, there are no circumstances involving any Acquired Company that are reasonably expected to result in a violation of any Environmental Law that would give rise to any Liabilities, costs or restrictions on the ownership, use or transfer of any property of the Acquired Companies that would have a Material Adverse Effect.

        4.17     Independent Engineer Reports.     EME has reviewed the reports listed in the EME Disclosure Schedule of engineers retained by EME to assist bidders in the Auction Process in their respective evaluations of the Projects (collectively, the " Independent Engineer Reports "). To the Knowledge of

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EME, such Independent Engineer Reports do not contain misstatements of fact that are material to an understanding of any Project or to the Projects as a whole.

        4.18     Sufficient Assets.     The assets and properties that are owned, leased, licensed or otherwise used pursuant to Contract or other right by each Acquired Company comprise all the assets and properties held for use in or necessary for the conduct of the operations of the Project Operating Companies as currently operated.

        4.19     Litigation.     

        (a)   Except for (i) non-material claims incidental to the business of each Acquired Company (including non-material Actions for negligence, workers' compensation claims, so-called "slip and fall" claims and the like) or (ii) inspections and reviews customarily made by any Governmental Authority of such Acquired Company, the adverse outcome of which would not (whether alone or in aggregate) have a Material Adverse Effect, there are no Actions pending against any Acquired Company or, to the Knowledge of EME, threatened against or affecting any Acquired Company or Project, at Law or in equity, or before or by any Governmental Authority an adverse outcome of which would have a Material Adverse Effect.

        (b)   There are no Actions pending, or to the Knowledge of EME, threatened against or affecting a Seller or an Acquired Company which, if decided adversely, would have a Material Adverse Effect.

        (c)   The descriptions of asserted or threatened Actions included in Section 4.19 of the EME Disclosure Schedule include all material information necessary to permit the Purchaser to understand the nature of such Actions and contain no material misstatements of fact in respect thereof.

        4.20     Labor Matters.     

        (a)   Except for agreements included on Intralinks in connection with the Auction or as set forth in Section 4.20 of the EME Disclosure Schedule, no Acquired Company is a party to any labor or collective bargaining agreement, and there are no labor or collective bargaining agreements that pertain to employees of any Acquired Company.

        (b)   There are no pending or, to the Knowledge of EME, threatened strikes, work stoppages, slowdowns or lockouts against any Acquired Company and no pending material unfair labor practice charges, grievances or complaints filed or, to the Knowledge of EME, threatened to be filed with any Governmental Authority based on the employment or termination by any Acquired Company of any individual which would have a Material Adverse Effect.

        (c)   Notwithstanding any provision of Section 4.20(a) or 4.20(b) to the contrary, with respect to the Non-Controlled Acquired Companies, all of the representations and warranties made in Section 4.20(a) and 4.20(b) are and will be made only to the Knowledge of EME.

        4.21     Employee Benefits.     

        (a)    Section 4.21 of the EME Disclosure Schedule lists each written plan, fund, agreement, arrangement or program providing medical, hospital care, dental, sickness, accident, disability or life insurance, pension, retirement savings, deferred compensation, severance, incentive compensation, or bonus:

        (i)    that any Controlled Acquired Company maintains or sponsors;

        (ii)   to which any Controlled Acquired Company contributes or is or may be required to contribute; or

        (iii)  in which any Controlled Acquired Company participates or its future participation has been announced;

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and which (in each case) currently apply to any current or former employees, officers, directors or consultants of any Acquired Company with respect to their employment by the Acquired Company other than any social security or similar arrangements or programs maintained by a Governmental Authority (the " Benefit Plans "). The EME Disclosure Schedule contains a summary of any material underfunding of any Benefit Plan to the extent such funding is required by Applicable Law or the terms of such Benefit Plan.

        (b)   Each Benefit Plan is in compliance with the provisions of the Laws of each jurisdiction in which such Benefit Plan is maintained, to the extent those Laws are applicable to such Benefit Plan, except where the failure to comply will not have a Material Adverse Effect.

        (c)   All contributions to, and payments from, each Benefit Plan which have been required to be made in accordance with the terms of such Benefit Plan, and, where applicable, the Laws of the jurisdiction in which such Benefit Plan is maintained, have been timely made in all material respects or shall be made in all material respects by the Closing Date.

        (d)   All reports, returns and similar documents, if any, with respect to any Benefit Plan required to be filed with any Governmental Authority or distributed to any Benefit Plan participant have been duly and timely filed or distributed or will be filed or distributed by the Closing Date, other than as would not have, individually or in the aggregate, a Material Adverse Effect.

        (e)   Each Benefit Plan has been administered in all material respects at all times in accordance with its material terms. There are no pending investigations by any Governmental Authority involving any Benefit Plan, and there are no pending claims (except for claims for benefits payable in the normal operations of such Benefit Plan) or Actions against any Benefit Plan asserting any rights or claims to benefits under such Benefit Plan, in each case which if decided adversely would have a Material Adverse Effect.

        (f)    The consummation of the Contemplated Transactions will not by itself create or otherwise result in any material Liability with respect to any Benefit Plan and, other than with respect to Benefit Plans maintained by EME and its Affiliates after the Closing Date, will not prevent the Retained Employees from continuing to participate in the Benefit Plans.

        4.22     Insurance.     

        (a)   Except for documents included on Intralinks, the EME Disclosure Schedule contains a current list of (i) all material unexpired policies of insurance required to be taken out under the Financing Agreements and (ii) all other material unexpired policies of insurance, in either case, exclusively covering the assets or business activities of any Acquired Company or, to the Knowledge of EME, any Non-Controlled Acquired Company (collectively, the " Applicable Policies ").

        (b)   No Seller or Acquired Company has since January 1, 2003 received any refusal of coverage or any written notice with respect to any Applicable Policy that a defense will be afforded with reservation of rights, or any written notice of cancellation, with respect to any Applicable Policy or any other written indication that any Applicable Policy is no longer in full force or effect or that the issuer of any Applicable Policy is not willing or able to perform its obligations thereunder, or that the issuer of any Applicable Policy disputes or intends to dispute the validity of any Applicable Policy except for coverages the absence of which could not have a Material Adverse Effect or which are the result of general industry or underwriter practices not related to unique characteristics of the Seller or Acquired Company.

        (c)   Each Seller and Acquired Company has paid all premiums due, and has otherwise performed all of its respective obligations, under each Applicable Policy except where its failure to do so could not have a Material Adverse Effect.

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        (d)   Each of the Applicable Policies is valid and enforceable and, to the Knowledge of EME, is not void or voidable.

        (e)   Other than in accordance with a Financing Agreement, the proceeds under the Applicable Policies have not been assigned, mortgaged or charged in favor of a third party.

        (f)    There are no current claims outstanding under any of the Applicable Policies in excess of $1,000,000.

        4.23     Warranties concerning the Projects—General.     

        (a)     No Outstanding Equity Obligations.     To the extent that any Financing Agreement required an Acquired Company to subscribe for shares or other ownership interests, make capital contributions or make subordinated or similar loans to a Project Operating Company which would be treated as equity or capital for purposes of such Financing Agreement, all such requirements, whether fixed or contingent, have been performed in full.

        (b)     Project Distribution Restrictions.     Subject to Applicable Law, no Project Operating Company is currently subject to distribution lock-ups or restrictions upon its ability to declare dividends or make any other form of Distribution except such restrictions as are inherent to ranking of Distributions in the cash flow cascade documented in the relevant Financing Agreements and which are applicable even in the absence of any event of default or potential event of default, failure to achieve a specified cover ratio or other event which, under the terms of the Financing Agreements, triggers additional restriction. No Distributions previously made by any Project Operating Company will be subject to clawback or recovery as a result of events existing as of the Effective Date.

        (c)     O&M Fees.     No Project Operating Company has any obligation, subsisting or contingent, to pay any operating and maintenance or technical service fees to any EME Affiliate which is not another Acquired Company.

        (d)     No Obligations in relation to Previous Disposals.     Other than as contained in any Major Contract or as set forth in Section 4.23(d) of the EME Disclosure Schedule, no Acquired Company has any liability for or has given any representation or warranty, or assumed any similar indemnity obligation or liability with respect thereto, in relation to any disposal by it or any of its Affiliates prior to the Effective Date of any material asset to any Person other than an Acquired Company, in each case which is still operative.

        4.24     Warranties concerning the Projects—Specific.     

        (a)     First Hydro.     The £400,000,000 Acquisition Facility dated 18 December 1995 between First Hydro Holdings, the Facility Agent and the Loan Banks as defined therein has been fully and finally discharged and no liabilities are outstanding thereunder.

        (b)     Doga.     Doga Enerji has not entered into any agreement or arrangement with any Governmental Authority, including the Ministry of Energy and Natural Resources, the Energy Market Regulatory Authority and Türkiye Elektrik Ticaret ve Taahhüt A.S., which will result in a material reduction of the tariffs payable under the Implementation Agreement between Doga Enerji and the Ministry of Energy and Natural Resources dated September 29, 1995.

        (c)     ISAB.     

        (i)    ISAB Energy S.r.l. currently holds an exemption from any obligation to provide electricity to the national transmission system imposed by Article 11 of Legislative Decree no. 79 (known as the "Bersani Decree") as applied to the operations of ISAB Energy S.r.l.

        (ii)   The start date for the Convenzione Definitiva is April 1, 2000, and the end date is March 31, 2020.

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        (d)     Spanish Hydro.     The specific economic options adopted pursuant to the special regime applicable to each plant operated by or under the control of Ibérica de Energias S.L. (" Ibérica ") and Electro Metalurgica del Ebro S.L. (" EMESL ") set forth in the EME Disclosure Schedule are valid and enforceable.

        (e)     CBK.     All works designed, constructed or refurbished by CBK Power Company Limited pursuant to the BROT Agreement dated 6 November 1998 are in all material respects in conformance with the requirements of the BROT Agreement and of all Applicable Law.

        (f)     Paiton.     No Acquired Company has any legally enforceable or binding financial obligation in relation to the future development of the Paiton site currently under discussion and which is known as "Paiton 3."

        (g)     EcoEléctrica.     To the Knowledge of EME, all material correspondence since March 2000 between EcoEléctrica and PREPA relating to PREPA claims under the PPA between EcoEléctrica and PREPA dated March 10, 1995 has been posted to Intralinks, except correspondence or other documents exchanged in support of confidential settlement communications or attorney-client privileged material.

        (h)     Loy Yang B.     In relation to any leakage of contaminated water from the Ash Pond (as defined in the Infrastructure Services Agreement relating to Loy Yang B) no Acquired Company has done or failed to do any act of which it has received notification by the Loy Yang A partners which would prevent the Loy Yang B Joint Venturers from being indemnified by the Horizon Energy Partnership (or any entity which has assumed the obligations of such party under the agreements referred to below), or would reduce the amount indemnified by the Horizon Energy Partnership (or any entity which has assumed the obligations of such party under the agreements referred to below), under the terms of and pursuant to or in accordance with the Infrastructure Services Agreement dated 29 March 1997 between Edison Mission Energy Australia Limited (" EMEAL ") and Loy Yang Power Limited, or the Loy Yang Complex Agreement dated 29 March 1997 between EMEAL, the State Electricity Commission of Victoria and Loy Yang Power Limited.

        (i)     IVPC4.     To the Knowledge of EME, no Acquired Company has received any currently operative notice from, or is or has been engaged in discussions with, any applicable Governmental Authority in which the revocation of the tariffs, terms and conditions set out under the Resolution of April 29, 1992, No. 6 of "Comitato Interministeriale dei Prezzi" as subsequently modified (" CIP6 ") has been threatened or raised.

        (j)     Valley Power.     There has been no claim made under the EME Support Deed dated 1 November 2002 given to the National Australia Bank Limited and National Australia Trustees Limited in respect of Valley Power Pty Limited and no action has been taken (or to the Knowledge of EME has been threatened or is proposed to be taken) by any Acquired Company which could lead to such a claim being made.

        4.25     No Insolvency.     

        (a)   There has not been, with respect to any of the Acquired Companies (i) any decree, judgment or order by a court of competent jurisdiction entered adjudging any Acquired Company as bankrupt or insolvent, or ordering relief against any of the Acquired Companies in response to the commencement of an involuntary bankruptcy case, or approving as properly filed a petition seeking reorganization or liquidation of any of the Acquired Companies under any Bankruptcy Law or (ii) any decree, judgment or order of a court of competent jurisdiction entered with respect to the appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of any Acquired Company, or of the property of any Acquired Company, or for the winding up or liquidation of the affairs of any Acquired Company.

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        (b)   No Acquired Company has (i) instituted a voluntary bankruptcy proceeding, (ii) consented to the filing of a bankruptcy proceeding against it, (iii) filed a petition or answer or consent seeking reorganization or liquidation under any Bankruptcy Law or similar statute or consented to the filing of any such petition, (iv) consented to the appointment of a custodian, receiver, liquidator, trustee or assignee in bankruptcy or insolvency of it or any of its assets or property (v) made a general assignment for the benefit of creditors, (vi) admitted in writing its inability to pay its debts generally as they become due, (vii) within the meaning of any Bankruptcy Law, become insolvent or failed generally to pay its debts as they become due, or (viii) taken any corporate or other action in furtherance of or to facilitate, conditionally or otherwise, any of the foregoing.

        4.26     Financial Advisors.     No broker, finder or investment banker will be entitled to any brokerage, finder's or other fee or commission from any Purchaser Party or from any Acquired Company, in connection with this Agreement or the Contemplated Transactions based upon any agreements, arrangements or commitments, written or oral, made by or on behalf of any Seller.

        4.27     Limitation of Representations and Warranties.     EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV , NEITHER EME NOR ANY SELLER IS MAKING ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, CONCERNING THE SHARES, OWNER NOTES, EME GUARANTEES, THE BUSINESS, ASSETS OR LIABILITIES OF ANY ACQUIRED COMPANY, THE CONTEMPLATED TRANSACTIONS, OR ANY OTHER MATTER. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE PURCHASER PARTIES ACKNOWLEDGE THAT NEITHER EME NOR ANY SELLER HAS MADE, AND EME AND THE SELLERS HEREBY EXPRESSLY DISCLAIM AND NEGATE, AND THE PURCHASER PARTIES HEREBY EXPRESSLY WAIVE, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO, AND THE PURCHASER PARTIES HEREBY EXPRESSLY WAIVE AND RELINQUISH ANY AND ALL RIGHTS, CLAIMS AND CAUSES OF ACTION AGAINST EME, THE SELLERS AND THEIR RESPECTIVE AFFILIATES AND REPRESENTATIVES (INCLUDING EMPLOYEES) IN CONNECTION WITH, THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) HERETOFORE FURNISHED TO THE PURCHASER PARTIES OR ITS AFFILIATES OR REPRESENTATIVES BY OR ON BEHALF OF EME OR ANY SELLER. NEITHER EME NOR ANY SELLER IS MAKING ANY REPRESENTATION OR WARRANTY TO THE PURCHASER PARTIES WITH RESPECT TO (A) THE INFORMATION INCLUDED ON INTRALINKS, EXCEPT AS EXPLICITLY SET FORTH HEREIN, (B) ANY FINANCIAL PROJECTIONS OR FORECASTS RELATING TO THE BUSINESS, ASSETS OR LIABILITIES OF ANY ACQUIRED COMPANY, OR (C) ANY OTHER FORWARD LOOKING STATEMENTS INCLUDING THOSE RELATING TO THE BUSINESS, ASSETS OR LIABILITIES OF ANY ACQUIRED COMPANY. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, REPRESENTATIONS, WARRANTIES AND COVENANTS CONTAINED HEREIN MADE BY OR ON BEHALF OF A PARTY ARE MADE SOLELY AND EXCLUSIVELY BY OR ON BEHALF OF SUCH PARTY AND NOT BY OR ON BEHALF OF SUCH PARTY'S REPRESENTATIVES (INCLUDING EMPLOYEES) OR ANY OTHER PERSON.

        4.28     Other Provisions Relating to Representations and Warranties.     

        (a)   Subject to Article XI hereof, the Sellers and EME (as principal for itself and as agent for the Owner Note Sellers) acknowledge that the Purchaser Parties may rely on the representations and warranties set out in Sections 4.1 to 4.26 in warranting to any subsequent buyer of all or any of the Shares or of all or any part of the assets or undertaking of an Acquired Company (including a Project).

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        (b)   To the extent they relate to Non-Controlled Acquired Companies, the representations and warranties in Sections 4.7(b) (insofar as that Section relates to the Projects known as "Derwent," "Paiton" or "Tri Energy"), 4.8 , 4.9 , 4.11 , 4.12(a) , 4.14 , 4.15 , 4.18 , 4.21 , 4.22 , 4.23 , 4.24(b) and 4.24(f) are and will be made only to the Knowledge of EME.

        (c)   The Sellers and EME (as principal for itself and as agent for the Owner Note Sellers) undertake not to make any claim against an Acquired Company or any director, officer or employee of any Acquired Company which it may have in respect of a misrepresentation, inaccuracy or omission in or from information or advice provided by an Acquired Company or a director, officer or employee of an Acquired Company for the purpose of assisting the Sellers to make a representation, give a warranty or prepare the EME Disclosure Schedule without indemnifying the Purchaser Parties and the applicable Acquired Company to the extent such director, officer or employee is entitled to indemnification from them, provided that the Sellers and EME shall not be obligated to indemnify for claims related to acts of the Purchaser or its Affiliates (as they exist prior to the Closing Date).

        (d)   Without limiting Section 5.8 , the Purchaser Parties' rights under this Agreement in relation to the representations and warranties contained in this Article IV (including under Article XI ) shall not be affected by any investigation conducted, or any knowledge acquired (or capable of being acquired), by any of the Purchaser Parties at any time or by the waiver of any condition contained in Sections 8.1 to 8.3 .

ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER PARTIES

        Each Purchaser Party represents and warrants to the Sellers, as of the Effective Date, that:

        5.1     Organization and Good Standing.     Each Purchaser Party is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization (as indicated in the list of Parties at the beginning of this Agreement) and has the requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now conducted and to perform its part in the Contemplated Transactions.

        5.2     Authorization of Agreement.     The execution and delivery by the Purchaser Party of this Agreement and any Related Agreements to which the Purchaser Party is a party and the performance and consummation by the Purchaser Party of the Contemplated Transactions have been duly authorized by all necessary corporate or similar action on the part of the Purchaser Party (subject, in the case of IPR, to satisfaction of the IPR Shareholder Consent Condition). This Agreement has been, and each of the Related Agreements to which the Purchaser Party is a party, as of the Closing, will have been duly executed and delivered by the Purchaser Party and, assuming due execution and delivery by all other parties to this Agreement or each such Related Agreement, as applicable, this Agreement constitutes, and each of the Related Agreements to which the Purchaser Party is a party when duly executed and delivered will constitute, a valid and binding obligation of the Purchaser Party, enforceable against the Purchaser Party in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, preference, moratorium or other similar Laws now or hereafter in effect relating to creditors' rights generally and that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding may be brought.

        5.3     No Breach or Conflict.     Subject to the provisions of Sections 5.4(a) and 5.4(b) regarding consents from private parties and Governmental Authorities, and except for compliance with the requirements of the Merger Control Laws and any regulatory or licensing Laws applicable to the Acquired Companies, the execution and delivery by the Purchaser Party or any Purchaser Designee of this Agreement or any Related Agreement to which the Purchaser Party or any Purchaser Designee is a

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party and performance and consummation of the Contemplated Transactions by the Purchaser Party or any Purchaser Designee (as the case may be) does not and will not:

        (a)   violate any provision of the Governing Documents of the Purchaser Party or any Purchaser Designee the violation of which would prejudice the validity of the Contemplated Transactions or the ability of the Purchaser Party or any Purchaser Designee to consummate them to an extent which is material in the context of the Contemplated Transactions; and

        (b)   assuming that the consents of Governmental Authorities referred to in this Section 5.3 are obtained and assuming compliance with all Merger Control Laws, violate any Law or Order of any Governmental Authority applicable to the Purchaser Party or any Purchaser Designee, except where the effect of such violation, either individually or in the aggregate, will not prejudice the validity or enforceability of this Agreement or the Related Agreements to which the Purchaser Party or any Purchaser Designee is a party or the validity of the Contemplated Transactions to an extent which is material in the context of those transactions.

        5.4     Consents.     

        (a)   The execution and delivery by the Purchaser Party or any Purchaser Designee of this Agreement and any Related Agreements to which the Purchaser Party or any Purchaser Designee is a party and the performance and consummation by the Purchaser Party or any Purchaser Designee of the Contemplated Transactions do not require the authorization, consent or approval of any non-governmental third party of such a nature that the failure to obtain the same would prejudice the validity or enforceability of this Agreement or the Related Agreements to which the Purchaser Party or any Purchaser Designee (as the case may be) is a party, the validity of the Contemplated Transactions or the ability of the Purchaser Party or any Purchaser Designee to consummate the Contemplated Transactions in each case to an extent which is material in the context of the Contemplated Transactions.

        (b)   Except for compliance with the Merger Control Laws, the execution and delivery by the Purchaser Party or any Purchaser Designee of this Agreement and any Related Agreements to which the Purchaser Party or any Purchaser Designee is a party and the performance and consummation by the Purchaser Party and any Purchaser Designee of the Contemplated Transactions do not require any authorization, consent, approval, certification, license or order of, or any filing with, any court or Governmental Authority of such a nature that the failure to obtain the same would prejudice the validity or enforceability of this Agreement or any Related Agreements to which the Purchaser Party or any Purchaser Designee (as the case may be) is a party, the validity of the Contemplated Transactions or the ability of the Purchaser Party or any Purchaser Designee to consummate the Contemplated Transactions in each case to an extent which is material in the context of the Contemplated Transactions.

        5.5     Litigation.     There are no Actions pending, or to the Knowledge of the Purchaser Party, threatened against the Purchaser Party or any Purchaser Designee which if decided against the Purchaser Party or any Purchaser Designee would prejudice the validity of the Contemplated Transactions or the ability of the Purchaser Party or any Purchaser Designee to consummate them, in each case to an extent which is material in the context of the Contemplated Transactions. Neither the Purchaser Party nor any Purchaser Designee is subject to any Order involving, affecting or relating to the Contemplated Transactions.

        5.6     Investment Intention.     

        (a)   The Purchaser and the Purchaser Designees are purchasing the Shares and the Owner Notes for investment for their own accounts, and not with a view to, or for the offer or sale in connection with, any distribution thereof in violation of applicable securities Laws. The Purchaser Party and the Purchaser Designees acknowledge that the Shares have not been registered for offer or sale under the

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Securities Act of 1933, as amended (the " Securities Act "), or other applicable securities Laws (including state or foreign securities Laws), and that the Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act and other applicable securities Laws or pursuant to an applicable exemption therefrom.

        (b)   Each of the Purchaser Parties and any Purchaser Designee is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act.

        5.7     Financial Capability.     The Purchaser (and, if applicable, the Purchaser Designees) will at Closing have sufficient liquid funds available to enable the Purchaser and any Purchaser Designees to consummate the Contemplated Transactions and to permit the Purchaser and any Purchaser Designee to timely perform all of its obligations under this Agreement.

        5.8     No Knowledge of Breach.     There is no material breach by any Seller of this Agreement that a Purchaser Party has Knowledge of (based solely on facts existing on the Effective Date concerning such material breach) that would cause it to claim failure of the condition contained in Section 8.2(b) (a " Currently Known Material Breach "); it being understood that Sellers have the burden of proving any breach of this representation and warranty. The sole remedy for a breach of this representation and warranty is that the Currently Known Material Breach would not constitute a failure of the condition contained in Section 8.2(b) .

        5.9     Qualified for Licenses.     To the Knowledge of the Purchaser, the Purchaser Party or any Purchaser Designee is qualified to obtain any Licenses necessary for the operation by the Purchaser or any Purchaser Designee of the Acquired Companies as of the Closing in the same manner as the Acquired Companies are currently operated, except where the failure to be so qualified would not affect the validity or enforceability of this Agreement or the Related Agreements or the validity of the Contemplated Transactions or the Purchaser's or Purchaser Designee's ability to consummate the Contemplated Transactions.

        5.10     Purchaser Designees.     

        (a)   As of the Closing, each Purchaser Designee will be an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Purchaser Designee will at the Closing have all requisite corporate or other power and authority to own, lease and operate its properties and to carry on its business as now conducted and to perform the Contemplated Transactions on its part.

        (b)   Each Purchaser Designee will have, by the date of the Closing, taken all necessary corporate or similar action to authorize (i) the purchase of the Shares or Owner Notes to be purchased by, and the assumption of the EME Guarantees to be assumed by, such Purchaser Designee and (b) the execution, delivery and performance of this Agreement and any Related Agreements to which such Purchaser Designee is a party. No other corporate or similar action or proceeding on the part of any Purchaser Designee will be necessary to authorize this Agreement or any Related Agreement or the Contemplated Transactions.

        (c)   This Agreement and any Related Agreements to which a Purchaser Designee is a party will, as of the Closing, have been duly executed and delivered by each such Purchaser Designee, and this Agreement and each Related Agreement to which any Purchaser Designee is a party, when executed and delivered, will constitute a valid and binding obligation of such Purchaser Designee, enforceable against such Purchaser Designee in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, preference, moratorium or other similar Laws now or hereafter in effect relating to creditors' rights generally and that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding may be brought.

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        5.11     Financial Advisors.     No broker, finder or investment banker will be entitled to any brokerage, finder's or other fee or commission from any Seller in connection with this Agreement or the Contemplated Transactions based upon any agreements, arrangements or commitments, written or oral, made by or on behalf of any Purchaser Party or its Affiliates (but excluding Acquired Companies).

        5.12     CBK.     No Purchaser Party owns, operates or controls any installed generating capacity in the Philippines.

        5.13     Limitation of Representations and Warranties.     EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE V, NO PURCHASER PARTY NOR ANY PURCHASER DESIGNEE IS MAKING ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, CONCERNING ANY MATTER WHATSOEVER, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT. THE SELLER PARTIES EXPRESSLY ACKNOWLEDGE THAT NEITHER THE PURCHASER PARTIES NOR ANY PURCHASER DESIGNEE HAS MADE, AND THE SELLER PARTIES HEREBY EXPRESSLY DISCLAIM AND NEGATE, AND THE SELLER PARTIES HEREBY EXPRESSLY WAIVE, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO, AND THE SELLER PARTIES HEREBY EXPRESSLY WAIVE AND RELINQUISH ANY AND ALL RIGHTS, CLAIMS AND CAUSES OF ACTION AGAINST, ANY PURCHASER PARTY OR ANY PURCHASER DESIGNEE AND THEIR RESPECTIVE AFFILIATES AND REPRESENTATIVES (INCLUDING EMPLOYEES) IN CONNECTION WITH, THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) HERETOFORE FURNISHED TO ANY OF THE SELLER PARTIES OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES BY OR ON BEHALF OF ANY PURCHASER PARTY.

        5.14     Other Provisions Relating to Representations and Warranties.     The representations and warranties given by the Purchaser Parties in this Article V are given severally and not jointly and severally and no Purchaser Party shall have any Liability to any of the Sellers in relation to a representation or warranty given by another Purchaser Party.

ARTICLE VI.
COVENANTS

        6.1     Access to Information and Employees.     Between the Effective Date and the Closing Date, EME and the Sellers (x) will, (y) will cause each Acquired Company that is a Controlled Acquired Company to, and (z) will exercise Commercially Reasonable Efforts to cause each Non-Controlled Acquired Company to afford the Purchaser Parties and their respective Representatives reasonable access during normal business hours and upon reasonable advance notice to the properties, books, records and personnel of the Acquired Companies for the purposes of consummating the Contemplated Transactions and transitioning ownership of such Acquired Companies (including discussions with the personnel of any Controlled Acquired Company of the terms and conditions of any employment following the Closing Date), provided that in no event shall any Seller or any Acquired Company be obligated to provide (a) access or information in violation of Applicable Law, (b) bids, letters of intent, expressions of interest, proposals, agreements, documents or other communications received from or communicated to other parties in connection with the Auction Process or information or analysis relating to any of the foregoing. If any Purchaser Parties request any information the disclosure of which would (in EME's reasonable judgment) jeopardize any privilege or confidentiality available to any Seller, any Acquired Company or any of their respective Affiliates relating to such information (including Tax workpapers), the Parties will collaborate in good faith to implement an arrangement for providing the requested information that avoids any exposure, waiver or partial waiver of privilege with respect thereto and any exposure for any Seller or Acquired Company to any claim by a third party in relation to a breach of that third party's rights in relation to such information. Without

29

limitation to the foregoing, prior to the Closing, EME shall procure that all information that has been posted to Intralinks is retained there and that the Purchaser is able to access such information on Intralinks in the same manner as during the Auction Process.

        6.2     Purchaser Diligence Obligations.     In connection with the access provided in Section 6.1 , the Purchaser Parties and their respective Representatives shall cooperate with the Representatives of the Sellers and the Acquired Companies and shall use their reasonable efforts to minimize any disruption of the business of any Seller or such Acquired Company, including providing EME with at least three (3) Business Days' prior notice of any desire for physical access to the personnel, properties, Contracts, books or records of any such Acquired Company and shall permit EME, at its request, to have a Representative present with any Purchaser Party or its Representatives at all times that such Purchaser Party or its Representatives is on any such premises or with any such personnel. The Purchaser Parties will abide, and will cause their respective Representatives to abide, by the terms of the Confidentiality Agreements and any safety rules or rules of conduct reasonably imposed by any Seller or any such Acquired Company with respect to such access and any information furnished to it or its Representatives pursuant to Section 6.1 .

        6.3     Operating Covenants.     Between the Effective Date and the Closing Date, except (i) as otherwise required, contemplated or permitted by this Agreement including, in relation to Section 6.3(a)(i) below, Section 1.3 , Section 3.2 and Section 6.22 , (ii) as set forth in Section 6.3 of the EME Disclosure Schedule, (iii) as required by Applicable Law, (iv) as required by Contract in existence as of the Effective Date, (v) for Permitted Transfers or (vi) with the prior written consent of Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned):

        (a)   the Sellers shall not permit any Controlled Acquired Company to and shall use their Commercially Reasonable Efforts not to permit any Non-Controlled Acquired Company to:

        (i)    transfer, issue, sell or dispose of any shares of capital stock or other securities of any such Acquired Company or grant options, warrants, calls or other rights to purchase or otherwise acquire shares of the capital stock or other securities of any such Acquired Company except to a Controlled Acquired Company that is a Wholly Owned Subsidiary of MEC BV;

        (ii)   effect any recapitalization, reclassification, stock split or like change in the capitalization of any such Acquired Company that reduces the percentage of the equity or voting power therein that the Purchaser and Purchaser Designees will acquire therein, directly or indirectly, when they acquire the Shares and the Owner Notes;

        (iii)  amend any of the respective Governing Documents of any Controlled Acquired Company except in a manner reasonably calculated to facilitate closing of the Contemplated Transactions or to achieve the purposes of Section 6.9 or in connection with a transaction not prohibited by Section 6.3(a) ;

        (iv)  except as provided under the EME BV Severance Plans and under any other employment arrangements listed in the EME Disclosure Schedule, increase the annual level of compensation and benefits of any employee of an Acquired Company earning annual cash compensation in excess of $250,000 (or its equivalent in foreign currency) or of employees of an Acquired Company generally;

        (v)   incur any indebtedness for money borrowed except for (A) refinancings of existing indebtedness, if any, that are in process or that are reasonably required by pending maturities subject to such processes or maturities (as the case may be) having been disclosed in the EME Disclosure Schedule or renewal of existing working capital facilities or the renewal of other lines of credit, (B) drawings under existing lines of credit or under new working capital or revolving lines of credit in the Ordinary Course of Business, (C) indebtedness to MEC BV or

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any Wholly Owned Subsidiary thereof, (D) other planned indebtedness in the Ordinary Course of Business under existing credit lines, or (E) indebtedness represented by Owner Notes or that is contributed to the capital of an Acquired Company or that represents a Payment Obligation to an Acquired Company;

        (vi)  enter into any Major Contract, or waive any material right under, or enter into a material amendment of, any existing Major Contract, except in the Ordinary Course of Business; provided that in each case that the Sellers shall promptly provide the Purchaser with notice prior to the occurrence of any of the foregoing;

        (vii) make any change in any method of accounting for financial reporting with respect to any such Acquired Company except for any such change after the Effective Date required by reason of a concurrent change in or interpretation of US GAAP or Local GAAP, whichever is used by such Acquired Company as of the Effective Date to prepare its financial statements;

        (viii) make any capital expenditure with respect to any such Acquired Company in excess of the aggregate amount for the applicable period set forth in the capital expenditure budget therefor as disclosed in the EME Disclosure Schedule or posted on Intralinks, except for reasonable expenditures in excess thereof made in the Ordinary Course of Business in connection with any emergency or other force majeure events affecting any such Acquired Company;

        (ix)  enter into any Affiliate Contracts, or amend, modify or change in any material respect any outstanding Affiliate Contract or waive any material rights thereunder;

        (x)   effect a Material Purchase or Sale save for any transactions between MEC BV and its Wholly Owned Subsidiaries. For this purpose, the term " Material Purchase or Sale " means (A) the purchase or sale by an Acquired Company of an asset (other than fuel stocks) having a value in excess of $10,000,000 (or its equivalent in foreign currency) or (B) the purchase or sale by an Acquired Company of an asset having a value in excess of $500,000 (or its equivalent in foreign currency) outside the Ordinary Course of Business;

        (xi)  give a guarantee, indemnity or other agreement to secure, or incur financial or other obligations with respect to, another Person's obligation outside the Ordinary Course of Business, except for guarantees, indemnities or other similar agreements between the Acquired Companies;

        (xii) save for non-material routine claims incidental to the business of each Acquired Company (including non-material Actions for negligence, workers' compensation claims, so-called "slip and fall" claims and the like) start litigation or arbitration proceedings or compromise or settle litigation or arbitration proceedings or any action, demand or dispute or waive a right in relation to litigation or arbitration proceedings, other than settlements requiring payments in the aggregate of less than $5,000,000 (or its equivalent in foreign currency);

        (xiii) make any election or exercise any discretion in connection with any Benefit Plan outside the Ordinary Course of Business;

        (xiv) make any voluntary prepayment to an unaffiliated third party under a Financing Agreement, except (i) as permitted pursuant to clause (v) above;

        (xv) merge or amalgamate any Acquired Company with or into any other body corporate or effect any restructuring of any Acquired Company or the Acquired Companies or allow any Acquired Company to participate in any joint venture arrangement which such Acquired Company does not participate at the Effective Date;

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        (xvi) present any petition, apply for any order or pass any resolution for the winding up of an Acquired Company or for the appointment of a liquidator or provisional liquidator to, or an administrator in respect of, an Acquired Company; appoint a receiver over the whole or part of any Acquired Company's business or assets; propose any voluntary arrangement with any of the creditors of an Acquired Company; agree to a composition, compromise, assignment or arrangement with any of creditors of an Acquired Company;

        (xvii) incorporate any new Subsidiary of an Acquired Company;

        (xviii) create or grant any Lien over its assets or undertakings outside the Ordinary Course of Business;

        (xix) lend any monies to any Person who is not an Acquired Company outside the Ordinary Course of Business; or

        (xx) agree to do any of the things set out in clauses (i) to (xix) above; and

        (b)   EME shall procure that each Controlled Acquired Company shall and shall use its Commercially Reasonable Efforts to procure that each Non-Controlled Acquired Company shall:

        (i)    subject to Section 6.3(a) , conduct its business in the Ordinary Course of Business and otherwise in all material respects in accordance with Applicable Law; and

        (ii)   continue, without amendment, each of the Applicable Policies and not do, or omit to do, anything which might: (A) make any such policy void or voidable and (B) entitle any of the insurers under any such policy to refuse indemnity in relation to particular claims in whole or in part (provided that nothing in this clause (ii) will prevent the notification to insurers of claims in circumstances which might give rise to claims under any such policy in accordance with the terms of the relevant policy).

        (c)   EME and the Purchaser Parties shall use Commercially Reasonable Efforts to procure that, as soon as reasonably practicable after the Effective Date, the shareholders of PT Paiton Energy pass a resolution such that, for the purposes of Article 62(1) of the Law on Limited Liability Companies, Law 1 1995 of the Republic of Indonesia, the shareholders deem that a resolution that no dividend or distribution of profit be made was passed at each previous Annual General Meeting of Shareholders of PT Paiton Energy.

        6.4     Efforts to Close.     Through the Closing Date, subject to the terms and conditions herein provided, the Parties will, and will cause the respective Subsidiaries within their control to, use Commercially Reasonable Efforts to take all reasonable actions and do all reasonable things necessary, proper or advisable, under Applicable Laws, Contract or otherwise to consummate and make effective, as soon as reasonably practicable, the Contemplated Transactions, including the satisfaction of all conditions thereto set forth herein. Such actions shall include using their Commercially Reasonable Efforts to obtain the consents, authorizations and approvals of all non-governmental third parties and Governmental Authorities whose consent is reasonably necessary to effectuate the Contemplated Transactions (including the Governmental Conditions and Third-Party Conditions) and to reasonably promptly make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement, any Related Agreement and the Contemplated Transactions required under any Contract or Applicable Law. Without limitation to the foregoing, through to the Closing Date (i) the Parties shall be obliged to keep each other reasonably informed of the steps taken in compliance with this Section 6.4 and the progress toward satisfying the of the closing conditions set forth in Article VIII including by communicating with each other on a regular basis with respect to progress made to date in respect of satisfaction of any and all of the closing conditions set forth in Article VIII and any issues arising in connection therewith which might reasonably be expected to delay or prevent such satisfaction; and (ii) in relation to any Governmental Condition, if the Purchaser or the Sellers, as the

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case may be, requests that it do so, the Sellers or the Purchaser, as applicable, will use all Commercially Reasonable Efforts to provide the requesting party with access to the Governmental Authority responsible for such Governmental Condition for the purposes of fulfilling such Governmental Condition and provide such information in connection with any application in connection with that Governmental Condition as the requesting party shall reasonably request.

        6.5     Applications.     

        (a)   All filings, applications, notices, analyses, appearances, presentations, memoranda, submissions, briefs, arguments, opinions and proposals made or submitted by or on behalf of any Party before any regulatory authority in connection with the approval of the Contemplated Transactions (except with respect to Taxes and excluding the IPR Shareholder Circular and any other prospectus or similar investment circular of the type referred to in Section 6.1 ) shall require the joint approval and be under the joint control of EME and Purchaser, acting with the advice of their respective counsel, it being the intent that EME (on behalf of all Sellers) and the Purchaser (on behalf of all Purchaser Parties and Purchaser Designees) will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such filing, application, notice, analysis, appearance, presentation, memorandum, submission, brief, argument, opinion and proposal; provided that in the event of a disagreement concerning any such filing, application, notice, analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal, the determinations of EME or, to the extent relating to any Merger Control Law, the Purchaser Parties, shall be conclusive; and provided further that nothing will prevent a Party from responding to or complying with a subpoena or other legal process as required by Applicable Law or submitting factual information in response to a request therefor. EME shall provide to the Purchaser, and the Purchaser shall provide to EME, copies of all written communications with Governmental Authorities relating to the approval or disapproval of the Contemplated Transactions.

        (b)   EME shall use Commercially Reasonable Efforts to procure that, within three (3) days after the Effective Date, in compliance with the Certificate of Compliance issued by the Philippines Energy Regulatory Commission in respect of the Project known as "CBK", notice of the sale of EME's interest in that Project under this Agreement is given to the Philippines Energy Regulatory Commission.

        6.6     Post-Closing Cooperation.     After the Closing, upon prior reasonable written request, all of the Parties and their respective Affiliates shall reasonably cooperate with the other Parties, or any of them, at the requesting Party's expense (which shall be limited to out-of-pocket costs and expenses to third parties, in each case as reasonably incurred), in furnishing all necessary records, information, testimony, data or other assistance in connection with (i) any inquiries, Actions or disputes involving any of the Parties, and their respective Affiliates (other than in connection with disputes between them) and based upon Contracts, arrangements or acts of any Seller or its Affiliates which were in effect or occurred on or prior to Closing and which relate to the Shares, the Owner Notes, the EME Guarantees or the Acquired Companies, including arranging discussions with (and the calling as witness of) Representatives of the Purchaser Parties and their Affiliates (including, after the Closing Date, the Acquired Companies) or (ii) any audits, accounting matters, Tax matters or fulfilling their respective disclosure and reporting obligations under Applicable Law, including the timely filing of any documents or reports under the Securities Exchange Act of 1934 relating in any way to the Acquired Companies or the Contemplated Transactions.

        6.7     Confidentiality.     The Parties acknowledge that one or more Purchaser Parties and EME previously executed those confidentiality agreements listed in the EME Disclosure Schedule (collectively, the " Confidentiality Agreements "), which Confidentiality Agreements shall continue in full force and effect until the Closing Date (except that IPR and the Purchaser may make such disclosure of Review Material as it or they are advised by their outside legal counsel are necessary for the purposes of the IPR Shareholder Circular or Investment Circular and any such disclosure shall not

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constitute a breach of any Confidentiality Agreement), at which time the Purchaser Parties' obligations to EME thereunder with respect to the Review Material shall terminate, except with respect to Excluded Items, Projects acquired by a Project Counterparty exercising a Preemptive Right and any confidential and proprietary information unique to EME and its Non-Acquired Subsidiaries contained therein. In addition, the Parties agree that the terms and conditions of the Contemplated Transactions and information provided to any Purchaser Party in connection with the execution of this Agreement and any Related Agreement shall be subject to a substantially similar standard of confidentiality as set forth in the Confidentiality Agreements. At the Closing, EME will execute and deliver to Purchaser a confidentiality agreement relating to the Acquired Companies having a substantially similar standard of confidentiality as set forth in the Confidentiality Agreements (the " EME Confidentiality Agreement ").

        6.8     Public Announcements.     Subject to Sections 6.5 and 6.7 , prior to the Closing Date, no press or other public announcement, or public statement or comment in response to any inquiry, relating to the Contemplated Transactions shall be issued or made by any Party or any of their respective Affiliates or Representatives without the joint approval of EME and the Purchaser; provided that (i) this Section 6.8 shall not apply to the IPR Shareholder Circular or any other prospectus or similar investment circular of the type referred to in Section 6.1 and