10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

Commission File Number 333-59348

Midwest Generation, LLC
(Exact name of registrant as specified in its charter)

Delaware	33-0868558
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, Illinois	60605
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (312) 583-6000

Securities registered pursuant to Section 12(b) of the Act:

None	Not Applicable
(Title of Class)	(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

       Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO ý

       Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO ý

       Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o

       Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ý

       Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):    Large accelerated filer o    Accelerated filer o    Non-accelerated filer ý

       Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO ý

       Aggregate market value of the registrant's Membership Interests held by non-affiliates of the registrant as of June 30, 2005: $0. Number of units outstanding of the registrant's Membership Interests as of February 28, 2006: 100 units (all units held by an affiliate of the registrant).

DOCUMENTS INCORPORATED BY REFERENCE

       Portions of the following documents listed below have been incorporated by reference into the parts of this report so indicated.

(1)	Designated portions of Edison Mission Energy's Amendment to Form 10-K for the year ended December 31, 2005	Part III
(2)	Designated portions of the Proxy Statement relating to Edison International's 2006 Annual Meeting of Shareholders	Part III

       Each of Midwest Generation, LLC and Edison Mission Energy is an indirect wholly owned subsidiary of Edison International. Although Edison International is a large accelerated filer as defined under Exchange Act Rule 12b-2, Midwest Generation and Edison Mission Energy are non-accelerated filers. Midwest Generation and Edison Mission Energy are filing their respective annual reports on Form 10-K concurrently with Edison International's filing of its annual report on Form 10-K. Midwest Generation and Edison Mission Energy have been advised by Edison International that, prior to March 31, 2006, Edison International will file with the Securities and Exchange Commission a definitive proxy statement containing information relating to executive compensation. Edison Mission Energy will file an amendment to its Form 10-K relating to the compensation of Edison Mission Energy's executive officers concurrently with Edison International's filing of its definitive proxy statement. The amendment will include some of the executive compensation information included in Edison International's definitive proxy statement as such information pertains to Edison Mission Energy's executive officers.

       Because Midwest Generation officers receive compensation from Edison Mission Energy or Edison International and receive no compensation from Midwest Generation, the above-mentioned portions of Edison Mission Energy's amendment to its Form 10-K for the year ended December 31, 2005 and Proxy Statement relating to Edison International 2006 Annual Meeting of Shareholders, when filed, will become incorporated by reference into parts of this annual report.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
	Executive Officers of the Registrant	22
PART II
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	24
Item 6.	Selected Financial Data	25
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	60
Item 8.	Financial Statements and Supplementary Data	61
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	61
Item 9A.	Controls and Procedures	61
Item 9B.	Other Information	61
PART III
Item 10.	Managers and Executive Officers of the Registrant	100
Item 11.	Executive Compensation	101
Item 12.	Security Ownership of Certain Beneficial Owners and Management	101
Item 13.	Certain Relationships and Related Transactions	102
Item 14.	Principal Accounting Fees and Services	102
PART IV
Item 15.	Exhibits and Financial Statement Schedules	103
	Signatures	109

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PART I

ITEM 1.    BUSINESS

The Company

       Midwest Generation, LLC, which is referred to as Midwest Generation in this annual report, was formed on July 12, 1999 as a Delaware limited liability company with Edison Mission Midwest Holdings Co. as the sole owner. Edison Mission Midwest Holdings is a wholly owned subsidiary of Midwest Generation EME, LLC, which is in turn a wholly owned subsidiary of Edison Mission Energy, which is referred to as EME in this annual report. EME is a wholly owned subsidiary of Mission Energy Holding Company and is an indirect wholly owned subsidiary of Edison International. Midwest Generation was formed for the purpose of owning or leasing, making improvements to, and operating and selling the capacity and energy of, the power generation assets it purchased from Commonwealth Edison Company (Commonwealth Edison), which are referred to as the Illinois Plants. Midwest Generation acquired the Illinois Plants on December 15, 1999 for a purchase price of approximately $4.9 billion, with adjustments for changes in the book value of inventories and pro-rations related to specific items, including but not limited to taxes, rents and fees.

       Concurrent with the acquisition of the Illinois Plants, Midwest Generation assigned its right to purchase the Collins Station, a 2,698 megawatts (MW) gas and oil-fired generating station located in Illinois, to four third-party entities. After this assignment, and the purchase of the facility by the third parties, an affiliate of Midwest Generation leased and Midwest Generation subleased the Collins Station. Each of the leases and subleases had an initial term of 33.75 years. In April 2004, Midwest Generation terminated the Collins Station lease through a negotiated transaction with the lease equity investor and received title to the Collins Station as part of the transaction. Following the lease termination, Midwest Generation permanently ceased operations at the Collins Station, effective September 30, 2004, and decommissioned the plant by December 31, 2004, and all units were permanently retired from service, disconnected from the grid, and rendered inoperable, with all operating permits surrendered.

       As of December 31, 2005, Midwest Generation owned or leased 5,876 MW of operating power plants consisting of the following:

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six coal-fired generating plants consisting of 5,621 MW, which include the Powerton, Joliet, Will County, Waukegan, Crawford and Fisk Stations; and

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the Fisk and Waukegan on-site generating peakers consisting of 255 MW, based on summer net dependable capacity.

       Midwest Generation has a contract with Edison Mission Marketing & Trading, Inc. (EMMT), an affiliate of Midwest Generation engaged in the power marketing and trading business, to sell energy and capacity into the wholesale market, to engage in hedging activities and to provide scheduling and other services. Midwest Generation has a revolving credit agreement with EMMT in order to make revolving loans to, or have letters of credit issued on behalf of, EMMT, to provide credit support for forward contracts. EMMT also purchases natural gas and has the ability to enter into fuel hedging arrangements on Midwest Generation's behalf. Midwest Generation also has an agreement with another affiliate, Edison Mission Energy Services, Inc., to provide fuel and transportation services related to coal and fuel oil.

       In August 2000, Midwest Generation completed a sale-leaseback transaction with respect to the Powerton and Joliet power facilities to third-party lessors for an aggregate purchase price of

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$1.367 billion. In connection with this transaction, Midwest Generation facilitated the issuance of $333.5 million 8.30% Series A Pass-Through Certificates due 2009 and $813.5 million 8.56% Series B Pass-Through Certificates due 2016 through a private placement. In 2001, these certificates were subsequently exchanged for certificates identical in all material respects, which were registered with the Securities and Exchange Commission.

       EME, Mission Energy Holding Company and Edison International are each registered with the Securities and Exchange Commission and have financial statements that are filed in accordance with rules enacted by the Securities and Exchange Commission. For more information regarding each of these companies, see their respective annual reports on Form 10-K for the year ended December 31, 2005.

       Midwest Generation's principal executive offices are located at One Financial Place, 440 South LaSalle Street, Suite 3500, Chicago, Illinois 60605, and its telephone number is (312) 583-6000.

       Midwest Generation's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, are electronically filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and are available on the Securities and Exchange Commission's internet web site at http://www.sec.gov.

Forward-Looking Statements

       This annual report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect Midwest Generation's current expectations and projections about future events based on Midwest Generation's knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Midwest Generation that is incorporated in this annual report, or that refers to or incorporates this annual report, may also contain forward-looking statements. In this annual report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ, or that otherwise could impact Midwest Generation, include but are not limited to:

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supply and demand for electric capacity and energy, and the resulting prices and dispatch volumes, in the wholesale markets to which Midwest Generation's generating units have access;

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the cost and availability of fuel and fuel transportation services;

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market volatility and other market conditions that could increase Midwest Generation's obligations to post collateral beyond the amounts currently expected, and the potential effect of such conditions on the ability of Midwest Generation to provide sufficient collateral in support of its hedging activities and purchases of fuel;

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the cost and availability of emission credits or allowances;

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transmission congestion in and to each market area and the resulting differences in prices between delivery points;

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governmental, statutory, regulatory or administrative changes or initiatives affecting Midwest Generation or the electricity industry generally, including market structure rules and environmental

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regulations that could require additional expenditures or otherwise affect Midwest Generation's cost and manner of doing business;

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the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities and technologies that may be able to produce electricity at a lower cost than Midwest Generation's generating facilities and/or increased access by competitors to Midwest Generation's markets as a result of transmission upgrades;

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operating risks, including equipment failure, availability, heat rate and output;

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effects of legal proceedings, changes in or interpretations of tax laws, rates or policies, and changes in accounting standards;

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general political, economic and business conditions; and

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weather conditions, natural disasters and other unforeseen events.

       Certain of the risk factors listed above are discussed in more detail in "Item 1A. Risk Factors" below and in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures." Additional information about the risk factors listed above and other risks and uncertainties is contained throughout this annual report. Readers are urged to read this entire annual report, including the information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect Midwest Generation's business. Forward-looking statements speak only as of the date they are made, and Midwest Generation is not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Midwest Generation with the Securities and Exchange Commission.

Description of the Industry

Industry Overview

       The United States electric industry, including companies engaged in providing generation, transmission, distribution and ancillary services, has undergone significant deregulation, which has led to increased competition. Until the enactment of the Public Utility Regulatory Policies Act of 1978, referred to as PURPA in this annual report, utilities and government-owned power agencies were the only producers of bulk electric power intended for sale to third parties in the United States. PURPA encouraged the development of independent power by removing regulatory constraints relating to the production and sale of electric energy by certain non-utilities and requiring electric utilities to buy electricity from specified types of non-utility power producers, known as qualifying facilities, under specified conditions. The passage of the Energy Policy Act of 1992 further encouraged the development of independent power by significantly expanding the options available to independent power producers with respect to their regulatory status and by liberalizing transmission access. In addition, in the Energy Policy Act of 2005, referred to as EPAct 2005 in this annual report, Congress made several changes to PURPA and other statutory provisions recognizing that a significant market for electric power produced by independent power producers, such as Midwest Generation, has developed in the United States and indicating that competitive wholesale electricity markets have become accepted as a fundamental aspect of the electricity industry.

       As part of the regulatory developments discussed above, the Federal Energy Regulatory Commission, referred to as the FERC in this annual report, encouraged the formation of independent system operators (ISOs) and regional transmission organizations (RTOs). In those areas where ISOs and RTOs have been formed, market participants have expanded access to transmission service. ISOs and RTOs may also

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operate real-time and day-ahead energy and ancillary service markets, which are governed by FERC-approved tariffs and market rules. The development of such organized markets into which independent power producers are able to sell has reduced their dependence on bilateral contracts with electric utilities. See further discussion of regulations under "Regulatory Matters—U.S. Federal Energy Regulation."

Power Markets

       The Illinois Plants sell power into PJM Interconnection, LLC, commonly referred to as PJM. PJM operates a wholesale spot energy market and determines the market-clearing price for each hour based on bids submitted by participating generators which indicate the minimum prices a bidder is willing to accept to be dispatched at various incremental generation levels. PJM conducts both day-ahead and real-time energy markets. PJM's energy markets are based on locational marginal pricing, which establishes hourly prices at specific locations throughout PJM. Locational marginal pricing is determined by considering a number of factors, including generator bids, load requirements, transmission congestion and transmission losses. PJM requires all load serving entities to maintain prescribed levels of capacity, including a reserve margin, to ensure system reliability. PJM also determines the amount of capacity available from each specific generator and operates capacity markets. PJM's capacity markets have a single market-clearing price. Load serving entities and generators, such as Midwest Generation, may participate in PJM's capacity markets or transact capacity sales on a bilateral basis.

       All the energy and capacity from the Illinois Plants is now sold under terms, including price and quantity, negotiated by EMMT with customers through a combination of bilateral agreements, forward energy sales and spot market sales. Thus, Midwest Generation is subject to market risks related to the price of energy and capacity from the Illinois Plants. Capacity prices for merchant energy sales within PJM are, and are expected in the near term, to remain, at a level unlikely to generate significant revenue for Midwest Generation.

       On April 1, 2005, the Midwest Independent Transmission System Operator (MISO) commenced operation, linking portions of Illinois, Wisconsin, Indiana, Michigan, and Ohio, as well as other states in the region, in the MISO, where there is a bilateral market and day-ahead and real-time markets based on locational marginal pricing similar to that of PJM. While Midwest Generation does not own generating facilities within MISO, its opening has further facilitated transparency of prices and provided liquidity to support risk management strategies.

       For a discussion of the risks related to Midwest Generation's sale of electricity, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures."

Competition

       Midwest Generation is subject to intense competition from energy marketers, industrial companies and other independent power producers. For a number of years until the recent upturn in its price, natural gas has been the fuel of choice for new power generation facilities for economic, operational and environmental reasons. While natural gas-fired facilities will continue to be an important part of the nation's generation portfolio, some regulated utilities are now constructing clean coal units and units powered by renewable resources, often with subsidies or under legislative mandate. These utilities enjoy a lower cost of capital than most independent power producers and often are able to recover fixed costs through rate base mechanisms, allowing them to build, buy and upgrade generation without relying exclusively on market clearing prices to recover their investments.

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       Where Midwest Generation sells power from the Illinois Plants, it is subject to market fluctuations in prices based on a number of factors, including the amount of capacity available to meet demand, the price and availability of fuel and the presence of transmission constraints. Some of Midwest Generation's competitors, such as electric utilities and distribution companies, have their own generation capacity, including nuclear generation. These companies, generally larger than Midwest Generation, have a lower cost of capital and may have competitive advantages as a result of their scale and location of their generation facilities.

Facilities Overview

The Crawford Station

       The Crawford Station is a 542 MW coal-fired power plant located in Cook County, Illinois, and is within the city limits of Chicago. The Crawford Station occupies approximately 72 acres, inclusive of the switchyard. The operating units are referred to as Units 7 and 8 and began operations in 1958 and 1961, respectively.

       Southern Powder River Basin coal is loaded into barges at the Will County Station and delivered by barge primarily on a "just-in-time" basis supported by Crawford's on-site storage. Natural gas is used for ignition and combustion support and for full boiler operation, when economical. Peoples Energy Corporation delivers natural gas under a delivery contract that includes balancing storage, which is also shared by the Fisk Station.

The Fisk Station

       The Fisk Station is a 326 MW coal-fired power plant located in Cook County, Illinois, and is within the city limits of Chicago. The Fisk Station is located on approximately 44 acres, inclusive of the switchyard. The operating unit comprising the Fisk Station is referred to as Unit 19 and began operations in 1959.

       Southern Powder River Basin coal is loaded into barges at the Will County Station, delivered by barge on a "just-in-time" basis. Natural gas is used for ignition and combustion support and for full boiler operation, when economical. Peoples Gas delivers natural gas under a delivery contract that includes balancing storage, which is shared by the Crawford Station.

The Joliet Station

       The Joliet Station is located in Joliet, Will County, Illinois, approximately 40 miles southwest of Chicago on an approximately 467-acre site. The operating units comprising the Joliet Station are referred to as Units 6, 7 and 8. Only Units 7 and 8 are subject to the leveraged lease transaction described in this annual report. The operation of Units 6, 7 and 8 began in 1959, 1965 and 1966, respectively. Joliet Unit 6 is a 290 MW coal-fired unit located adjacent to, but across the Des Plaines River from, Joliet Units 7 and 8. Joliet Units 7 and 8 are coal-fired and have a combined capacity of 1,044 MW.

       The Joliet Station burns Southern Powder River Basin coal which is shipped by rail. With the completion of a new rail spur in early 2003, direct deliveries are received from the Union Pacific Railroad. Natural gas is delivered for the boilers as a startup and stabilizing fuel by Nicor Gas Company under a delivery contract.

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The Powerton Station

       The Powerton Station is a 1,538 MW coal-fired station located in Pekin, Tazwell County, Illinois, approximately 16 miles southwest of Peoria or 166 miles from Chicago on an approximately 568-acre site. The Powerton Station is subject to the leveraged lease transaction described in this annual report. The site also includes an approximately 1,440-acre lake. The operating units comprising the Powerton Station are referred to as Units 5 and 6 and began operations in 1972 and 1975, respectively.

       The Powerton Station burns Southern Powder River Basin coal which is shipped by rail by the Illinois and Midland Railroad Company from interchange points with the Union Pacific Railroad.

The Waukegan Station

       The Waukegan Station is a 789 MW coal-fired power plant located in Waukegan, Lake County, Illinois, on Lake Michigan. The Waukegan Station occupies approximately 194 acres, inclusive of the switchyard. The operating units comprising the Waukegan Station are referred to as Units 6, 7 and 8 and began operations in 1952, 1958 and 1962, respectively.

       Unit 6 utilizes oil for ignition and startup, while Unit 7 utilizes oil or natural gas and Unit 8 utilizes natural gas for ignition and startup. The Waukegan Station burns Southern Powder River Basin coal, which is shipped by rail by the Union Pacific Railroad.

The Will County Station

       The Will County Station is a 1,092 MW coal-fired power plant located in Romeoville, Will County, Illinois. The Will County Station is located on approximately 215 acres, inclusive of the switchyard. The operating units comprising the Will County Station are referred to as Units 1, 2, 3 and 4 and began operations between 1955 and 1963. Beginning in January 2003, operations at Units 1 and 2, representing 310 MW of capacity, were suspended pending improvement in market conditions. In late 2004, both units were returned to service.

       The Will County Station burns Southern Powder River Basin coal, which is shipped by rail by the Elgin, Joliet & Eastern Railway Company from interchange points with the Union Pacific Railroad. The Will County Station uses No. 2 fuel oil for ignition and combustion support, which is delivered by tanker truck to a 100,000 gallon on-site storage tank.

The Collins Station

       On September 30, 2004, Midwest Generation permanently ceased operations at the Collins Station and all units were decommissioned by December 31, 2004. The Collins Station was a 2,698 MW gas and oil-fired power plant located in Grundy County, near Morris, Illinois.

On-Site and Off-Site Peaking Facilities

       The on-site peaking units of Joliet and the off-site peaking units of Calumet, Electric Junction, Lombard and Sabrooke ceased operations as of December 31, 2004 following a management analysis of the future competitiveness of eight of Midwest Generation's small peaking units in the expanded PJM marketplace in September 2004. In addition, the on-site peaking units of Crawford ceased operations as of April 21, 2005 as a result of the same management analysis. The remaining on-site peaking units consist of Fisk and Waukegan, which were commissioned in 1968.

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       The Fisk and Waukegan peaking units burn No. 1 fuel oil (jet fuel). Natural gas is used by the Fisk peaking unit for ignition. Natural gas is purchased in the monthly and daily spot markets and is shipped at the seller's risk to Chicago. Peoples Gas provides delivery services, including balancing storage, to the site under tariffs approved by the Illinois Commerce Commission. Midwest Generation purchases No. 1 fuel oil and No. 2 fuel oil from bids taken annually. The oil price is tied to the Oil Price Information Service posted price (the market price) on the date of delivery. Shipments to the various sites are in tanker trucks and inventory is replenished as needed by the site. Truck delivery charges are at fixed agreed-upon prices.

Transmission

       Station units at Will County, Crawford, Waukegan, and Joliet Unit 6 are connected to Commonwealth Edison's 138 kilovolt (kV) transmission system. The Fisk Station is connected via various circuit breakers and transformers to transmission substations. The Joliet Units 7 and 8, subject to the leveraged lease transactions, and the two Powerton units deliver their power into Commonwealth Edison's 345kV transmission system.

       Prior to May 1, 2004, sales of power produced by Midwest Generation required using transmission that had to be obtained from Commonwealth Edison. As discussed previously, the Illinois Plants are now dispatched into the broader PJM market. In addition, a number of other utilities in the region participate in the MISO, where there is a single rate for transmission within the MISO.

       On November 18, 2004, the FERC issued an order eliminating regional through and out transmission rates in the region encompassed by PJM and the MISO. The effect of this order was to eliminate so-called rate pancaking between PJM and the MISO on a prospective basis. Rate pancaking occurs when energy must move through multiple, separately priced transmission systems to travel from its point of production to its point of delivery, and each transmission owner along the line charges separately for the use of its system. At the same time, the FERC also imposed a transitional revenue recovery mechanism which has created controversy and some continuing uncertainty as to its impact on transactions in the region. The mechanism required the filing of tariffs by PJM and the MISO imposing a "Seams Elimination Cost Adjustment" (SECA) to be in effect until May 1, 2006, to compensate the "new PJM companies"—AEP, Commonwealth Edison and Dayton Power & Light, among others—for lost revenues attributable to the elimination. On November 30, 2004, the FERC clarified that SECAs can be recovered for lost revenues associated with elimination of intra-RTO pancaked rates.

       The response to the November 18 and November 30 orders from the parties potentially liable for the SECAs was strongly negative. Rehearings were sought by a broad range of interests that are opposed to the imposition of SECAs. Although both PJM and the MISO have made tariff filings with the FERC that purport to comply with the orders and eliminate through and out transmission rates as of December 1, 2004, numerous protests to such filings have been made, challenging SECAs on legal and equitable grounds and demanding evidentiary hearings by the FERC. Pending further orders of the FERC and/or the outcome of future hearings, under the provisions of the PJM tariff as filed, Midwest Generation is currently not subject to SECAs with respect to its sales of power within PJM. It is not possible, however, to predict the outcome of the hearings or to rule out the possibility that Midwest Generation could be ordered in the future to pay SECAs with respect to sales within PJM after December 1, 2004.

       For further discussion of the market risks related to Midwest Generation's transmission service, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures."

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Significant Customer

       In the past two fiscal years, Midwest Generation derived a significant source of its operating revenues from electric power sold into the PJM market by EMMT. Sales into the PJM pool accounted for approximately 75% and 14% of Midwest Generation's consolidated operating revenues for the years ended December 31, 2005 and 2004, respectively.

       In 2004 and 2003, Midwest Generation also derived a significant source of its operating revenues from the sale of energy and capacity to Exelon Generation primarily under three power purchase agreements. These power purchase agreements had all expired by the end of 2004. Exelon Generation accounted for approximately 54% and 67% of Midwest Generation's consolidated operating revenues for the years ended December 31, 2004 and 2003, respectively.

Fuel Supply

       Coal is used to fuel 5,621 MW of Midwest Generation's generating capacity. The coal is purchased from several suppliers that operate mines in the Southern Powder River Basin of Wyoming. The total volume of coal consumed annually is largely dependent on the amount of generation and ranges between 16 million to 20 million tons.

       All coal is transported under long-term transportation agreements with the Union Pacific Railroad and various delivering carriers. As of December 31, 2005, Midwest Generation leased approximately 4,400 railcars to transport the coal from the mines to the generating stations and the leases have remaining terms that range from as short as 2 months up to 15 years, with options to extend the leases or purchase some railcars at the end of the lease terms. The coal is transported nearly 1,200 miles from the mines to the Illinois Plants.

       Coal for the Fisk and Crawford Stations is first shipped by rail to the Will County Station where it is transferred from the railcars, blended as necessary to meet station specifications, and loaded into river barges. These barges are towed to the stations by an independent contractor under a transportation agreement with Midwest Generation.

       Midwest Generation has approximately 255 MW of peaking capacity in the form of simple cycle combustion turbines at the Fisk and Waukegan Stations. These units are fueled with distillate fuel oils.

       During 2005, the rail lines that bring coal from the Powder River Basin to the Illinois Plants were damaged from derailments caused by heavy rains. The railroads are in the process of making repairs to these rail lines. During 2005, Midwest Generation received sufficient quantities to meet generation requirements. Rail line maintenance is expected to continue in 2006. Based on communication with the transportation provider, Midwest Generation expects to continue receiving a sufficient amount of coal to generate power at historical levels while these repairs are being completed.

       See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations, Commitments and Contingencies," for additional discussion of contractual commitments related to Midwest Generation's fuel supply and coal transportation contracts.

Emission Allowances

       Certain state and federal environmental laws require power plant operators to hold or obtain emission allowances equal, on an annual basis, to their plants' emissions of nitrogen oxide or sulfur dioxide.

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Emission allowances were acquired as part of the acquisition of the Illinois Plants. Additional allowances are purchased by Midwest Generation when operations make this necessary and are sold by Midwest Generation when it has more than needed for planned levels of operation.

       See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Environmental Matters and Regulations" for a discussion of environmental regulations related to emissions.

Insurance

       Midwest Generation maintains insurance policies consistent with those normally carried by companies engaged in similar business and owning similar properties. Midwest Generation's insurance program includes all-risk property insurance, including business interruption, covering real and personal property, including losses from boilers, machinery breakdowns, and the perils of earthquake and flood, subject to specific sublimits. Midwest Generation also carries general liability insurance covering liabilities to third parties for bodily injury or property damage resulting from operations, automobile liability insurance and excess liability insurance. Limits and deductibles in respect of these insurance policies are comparable to those carried by other electric generating facilities of similar size. However, no assurance can be given that Midwest Generation's insurance will be adequate to cover all losses.

Seasonality

       Due to higher electric demand resulting from warmer weather during the summer months, electric revenues are generally higher during the third quarter of each year. However, as a result of recent increases in market prices for power, driven in part by higher natural gas and oil prices, this historical trend may not be applicable to quarterly revenue in the future. Prior to 2005, Midwest Generation's electric revenues were substantially higher during the June through September months because Midwest Generation received significantly higher capacity payments during those months under the terms of the power purchase agreements with Exelon Generation.

Regulatory Matters

General

       Midwest Generation's operations are subject to extensive regulation by government agencies. Federal laws and regulations govern, among other things, transactions by and with purchasers of power, including utility companies, the operations of a power plant and the ownership of a power plant. Under limited circumstances where exclusive federal jurisdiction is not applicable or specific exemptions or waivers from state or federal laws or regulations are otherwise unavailable, federal and/or state utility regulatory commissions may have broad jurisdiction over non-utility owned electric power plants. Energy-producing projects are also subject to federal, state and local laws and regulations that govern the geographical location, zoning, land use and operation of a project. Federal, state and local environmental requirements generally require that a wide variety of permits and other approvals be obtained before the commencement of construction or operation of an energy-producing facility and that the facility then operate in compliance with these permits and approvals.

       Midwest Generation is subject to a varied and complex body of laws and regulations that are in a state of flux. Intricate and changing environmental and other regulatory requirements could necessitate substantial expenditures and could create a significant risk of expensive delays or significant loss of value in a power plant if Midwest Generation were to become unable to function as planned due to changing requirements or local opposition.

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U.S. Federal Energy Regulation

       The FERC has ratemaking jurisdiction and other authority with respect to interstate wholesale sales and transmission of electric energy (other than transmission that is "bundled" with retail sales) under the Federal Power Act and with respect to certain interstate sales, transportation and storage of natural gas under the Natural Gas Act of 1938. Prior to February 8, 2006, the Securities and Exchange Commission had regulatory powers with respect to upstream owners of electric and natural gas utilities under the Public Utility Holding Company Act of 1935, or PUHCA 1935, which was repealed as of that date by EPAct 2005. The enactment of PURPA and the adoption of regulations under PURPA by the FERC provided incentives for the development of cogeneration facilities and small power production facilities using alternative or renewable fuels by establishing certain exemptions from the Federal Power Act and PUHCA 1935 for the owners of qualifying facilities. The passage of the Energy Policy Act in 1992 further encouraged independent power production by providing additional exemptions from PUHCA 1935 for exempt wholesale generators, or EWGs, such as Midwest Generation.

The Energy Policy Act of 2005

       A comprehensive energy bill was passed by the U.S. House and Senate in July 2005 and was signed by President Bush on August 8, 2005. Known as "EPAct 2005," this comprehensive legislation includes provisions for the repeal of PUHCA 1935 and amendments to PURPA, for merger review reform, for the introduction of new regulations regarding "Transmission Operation Improvements," for transmission rate reform, for incentives for various generation technologies and for the extension through December 31, 2007 of production tax credits for wind and other specified types of generation.

       The FERC has finalized rules to implement the Congressionally mandated repeal of PUHCA 1935, effective February 8, 2006, and enactment of the Public Utility Holding Company Act of 2005 (PUHCA 2005). The repeal of PUHCA 1935 and its replacement by PUHCA 2005 effectively eliminates many of the restrictions on outside investment in the electricity industry, investment by and transactions between utilities, and geographic constraints on utility systems. PUHCA 1935 repeal is expected to enable investment in utility systems by private equity funds, financial institutions, foreign utility companies, and other non-utility companies without the burden of registration as a "public utility holding company." It also eliminates limits on investment in non-utility operations companies that were registered holding companies under PUHCA 1935, subject to other applicable regulatory limitations, as well as geographic limits on potential utility combinations. PUHCA 2005 is primarily a "books and records access" statute and does not give the FERC any new substantive authority under the Federal Power Act or Natural Gas Act. The FERC has also issued final rules to implement the electric company merger and acquisition provisions of EPAct 2005.

       Under both PUHCA 1935 and PUHCA 2005, a company engaged exclusively in the business of owning and/or operating a facility used for the generation of electric energy exclusively for sale at wholesale may be exempted from regulation as an EWG. On November 9, 1999, the FERC issued an order determining that, based on the facts stated in Midwest Generation's application, Midwest Generation is an EWG. If Midwest Generation were to lose its EWG status, defaults under the covenants in Midwest Generation's agreements could be triggered.

Federal Power Act

       The Federal Power Act grants the FERC exclusive jurisdiction over the rates, terms and conditions of wholesale sales of electricity and transmission services in interstate commerce (other than transmission that is "bundled" with retail sales), including ongoing, as well as initial, rate jurisdiction. This

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jurisdiction allows the FERC to revoke or modify previously approved rates after notice and opportunity for hearing. These rates may be based on a cost-of-service approach or, in geographic and product markets determined by the FERC to be workably competitive, may be market based. Exempt wholesale generators and other non-qualifying facility independent power projects are subject to the Federal Power Act and to the FERC's ratemaking jurisdiction thereunder, but the FERC typically grants exempt wholesale generators the authority to charge market-based rates to purchasers which are not affiliated electric utility companies as long as the absence of market power is shown. In addition, the Federal Power Act grants the FERC jurisdiction over the sale or transfer of jurisdictional facilities, including wholesale power sales contracts and, after EPAct 2005, generation facilities, and in some cases, jurisdiction over the issuance of securities or the assumption of specified liabilities and some interlocking directorates. In granting authority to make sales at market-based rates, the FERC typically also grants blanket approval for the issuance of securities and partial waiver of the restrictions on interlocking directorates.

       Midwest Generation is subject to the FERC ratemaking regulation under the Federal Power Act. In addition, the FERC's order, as is customary with market-based rate schedules, reserved the right to revoke Midwest Generation's market-based rate authority on a prospective basis if it is subsequently determined that Midwest Generation or any of its affiliates possess excessive market power. If the FERC were to revoke Midwest Generation's market-based rate authority, it would be necessary for Midwest Generation to file, and obtain the FERC's acceptance of, its rate schedule as a cost-of-service rate schedule. In addition, the loss of market-based rate authority would subject Midwest Generation to the accounting, record keeping and reporting requirements that are imposed on utilities with cost-based rate schedules.

Natural Gas Act

       Midwest Generation's peaking units have the dual capability of burning natural gas or oil. Under the Natural Gas Act, the FERC has jurisdiction over certain sales of natural gas and over transportation and storage of natural gas in interstate commerce. The FERC has granted blanket authority to all persons to make sales of natural gas without restriction but continues to exercise significant oversight with respect to transportation and storage of natural gas services in interstate commerce.

State Energy Regulation

       The Illinois Commerce Commission does not have jurisdiction over Midwest Generation. Midwest Generation is not considered a public utility for purposes of Illinois state law, nor is Midwest Generation certified by the Illinois Commerce Commission as an alternative retail electric supplier.

       Some states that have restructured their electric industries require generators to register to provide electric service to customers. Many states are currently undergoing significant changes in their electric statutory and regulatory frameworks that result from restructuring the electric industries that may affect generators in those states. Although the FERC generally has exclusive jurisdiction over the rates charged by a non-qualifying facility independent power project to its wholesale customers, a state's public utility commission has the ability, in practice, to influence the establishment of these rates by asserting jurisdiction over a purchasing utility's ability to pass the resulting cost of purchased power through to its retail customers. In addition, states may assert jurisdiction over the siting and construction of independent power projects and, among other things, the issuance of securities, related party transactions and the sale or other transfer of assets by these facilities. The actual scope of jurisdiction over independent power projects by state public utility commissions varies from state to state. See "Midwest Deregulation Status" below.

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       Although state public utility commissions do not have jurisdiction to modify the terms of wholesale power sales, Midwest Generation cannot provide assurance that its power sales contracts will not be subject to adverse consequences as a result of regulatory actions by a state commission even though it sells power exclusively at wholesale.

Midwest Deregulation Status

Illinois Restructuring

       In December 1997, the Governor of Illinois signed into law the Electric Service Customer Choice and Rate Relief Law of 1997. Midwest Generation refers to this law as the Illinois Electric Law. The Illinois Electric Law required electric utilities to file delivery services implementation plans for non-residential retail customers no later than March 1, 1999 and for residential customers no later than August 1, 2001 and allowed utilities to recover the costs associated with the provision of delivery services. The Illinois Electric Law also required the Illinois Commerce Commission to adopt reliability rules for the transmission and distribution systems of Illinois utilities. These rules have been adopted and include reporting and penalty provisions that apply to Commonwealth Edison.

       Illinois' transition to retail electric competition was conducted in phases with approximately one-third of non-residential customers having had the opportunity to purchase electricity from alternative retail electric suppliers or electric utilities serving retail customers outside their service areas, effective October 1, 1999. Choice of suppliers is now available to all non-residential customers, and the retail market for residential electric customers was opened to competition on May 1, 2002. Currently, there are no alternative retail electric suppliers certified to sell electricity to residential customers in Illinois. Alternative retail electric suppliers include any person or company, other than an Illinois electric utility, that sells electricity to one or more retail electric customers in Illinois.

       During the transition period that runs until the end of 2006, customers that switch to alternative retail electric suppliers or electric utilities serving retail customers outside their service areas may be required to pay transition charges, also known as "stranded cost" charges, to compensate the utilities that previously supplied these customers for past investments, including investments in generating plants. The Illinois Electric Law calls for these transition charges to end no later than December 31, 2006.

       In February 2005, Commonwealth Edison and the Ameren Illinois utilities filed tariffs at the Illinois Commerce Commission. The tariffs propose the adoption of what is known as a New Jersey style full requirement auction process for the procurement of power for the utilities' bundled customers beginning January 1, 2007. The proposed process could potentially allow Midwest Generation to secure multi-year power supply contracts through a competitive transparent process. The Illinois Commerce Commission unanimously approved the competitive auction process on January 24, 2006.

Transmission of Wholesale Power

       Midwest Generation utilizes power lines owned by others for the transmission of electricity. The prices and other terms and conditions of transmission contracts are regulated by the FERC when the entity providing the transmission service is a jurisdictional public utility under the Federal Power Act, Order No. 2000, and subsequent orders.

       The Energy Policy Act of 1992 laid the groundwork for a competitive wholesale market for electricity by, among other things, expanding the FERC's authority to order electric utilities to transmit third-party electricity over their transmission lines, thus allowing qualifying facilities under PURPA, power marketers and those qualifying as exempt wholesale generators under PUHCA 1935, such as

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Midwest Generation, to more effectively compete in the wholesale market. See "Regulatory Matters—U.S. Federal Energy Regulation" for further detail on legislative developments.

       In 1996, the FERC issued Order No. 888, also known as the Open Access Rules, which required utilities to offer eligible wholesale transmission customers open access on utility transmission lines on a comparable basis to the utilities' own use of the lines and directed jurisdictional public utilities that control a substantial portion of the nation's electric transmission networks to file uniform, non-discriminatory open access tariffs containing the terms and conditions under which they would provide such open access transmission service. The FERC subsequently issued Order Nos. 888-A, 888-B and 888-C to clarify the terms that jurisdictional transmitting utilities are required to include in their open access transmission tariffs, and also issued Order No. 889, which required those transmitting utilities to abide by specified standards of conduct when using their own transmission systems to make wholesale sales of power, and to post specified transmission information, including information about transmission requests and availability, on a publicly available computer bulletin board.

       On September 16, 2005, the FERC issued a Notice of Inquiry, inviting comments on (1) whether reforms are needed to the Order No. 888 pro forma open access transmission tariff and the open access transmission tariffs of public utilities to ensure that services thereunder are just, reasonable and not unduly discriminatory or preferential; (2) the implementation of the newly established section 211A of the Federal Power Act concerning the provision of open access transmission service by unregulated transmitting utilities; and (3) section 1233 of EPAct 2005, which defines the native load service obligation.

Environmental Matters and Regulations

       See the discussion on environmental matters and regulations in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Environmental Matters and Regulations."

Employees

       At December 31, 2005, Midwest Generation employed 983 employees, approximately 752 of whom were covered by a collective bargaining agreement with the International Brotherhood of Electrical Workers, Local 15, AFL-CIO (Local 15), governing wages, certain benefits and working conditions. This agreement expired on December 31, 2005. A new agreement was reached with Local 15 with an expiration date of December 31, 2009. Midwest Generation also has a separate collective bargaining agreement governing retirement, health care, disability and insurance benefits that expires on June 15, 2006.

       On June 28, 2001, following unsuccessful negotiations over a new collective bargaining agreement, Local 15 commenced a strike at all the Illinois Plants. With the exception of eight employees who continued working, the entire bargaining unit of approximately 1,150 employees joined the strike. During the course of the strike, fifty-three additional employees, known as crossover employees, abandoned the strike and returned to work. In late August 2001, Local 15 offered to end the strike, but the offer was not accompanied by an agreement to accept Midwest Generation's collective bargaining offer. Midwest Generation rejected Local 15's offer and instituted a partial "lockout" of striking employees only. Midwest Generation advised Local 15 that those employees who had abandoned the strike earlier in the summer would be allowed to continue working. Local 15 filed an unfair labor practice charge with the National Labor Relations Board (NLRB) and the NLRB issued a complaint which alleged that Midwest

13

Generation's partial lockout constituted an unlawful act because it did not extend to crossover employees and those employees who did not strike in the first instance.

       On September 30, 2004, the NLRB dismissed Local 15's complaint. Local 15 appealed the NLRB's ruling to the United States Court of Appeals for the Seventh Circuit. On October 31, 2005, the Seventh Circuit reversed the NLRB's decision and ordered that the case be sent back to the NLRB with instructions to find the partial lockout an unfair labor practice, and further ordered the NLRB to consider whether the partial lockout coerced employees into accepting Midwest Generation's contract offer. Midwest Generation and the NLRB sought and were denied rehearing of the October 31 order. Midwest Generation is evaluating its options, which include seeking review by the United States Supreme Court and pursuing relief before the NLRB. The remedies in unfair labor practice proceedings traditionally include a posting notifying employees of the unfair labor practice, a cease and desist order and, where appropriate, back pay. Given the unique facts and procedures of this case, Midwest Generation cannot predict with certainty the remedy that the NLRB might fashion.

ITEM 1A.    RISK FACTORS

Midwest Generation's operations are subject to market risks related to wholesale energy prices.

       Midwest Generation no longer sells power pursuant to long-term power purchase agreements with Exelon Generation. Thus, Midwest Generation is subject to market risks related to the price of energy, capacity, and ancillary services. The factors that influence the market prices for these products in PJM include:

•

prevailing market prices for coal, natural gas and fuel oil, and associated transportation;

•

the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities or technologies that may be able to produce electricity at a lower cost than Midwest Generation's operations and/or increased access by competitors to Midwest Generation's markets as a result of transmission upgrades;

•

transmission congestion in and to each market area and the resulting differences in prices between delivery points;

•

the market structure rules established for, and regulatory developments affecting, PJM, including any price limitations and other mechanisms adopted to address volatility or illiquidity in these markets or the physical stability of the system;

•

the cost and availability of emission credits or allowances;

•

the availability, reliability and operation of competing power generation facilities, including nuclear generating plants where applicable, and the extended operation of such facilities beyond their presently expected dates of decommissioning;

•

weather conditions prevailing in PJM from time to time; and

•

changes in the demand for electricity or in patterns of electricity usage as a result of factors such as regional economic conditions and the implementation of conservation programs.

       In addition, unlike most other commodities, electric power can only be stored on a very limited basis and generally must be produced concurrently with its use. As a result, the wholesale power markets are subject to significant and unpredictable price fluctuations over relatively short periods of time.

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       There is no assurance that Midwest Generation will be successful in selling energy and capacity into the markets or that the prices received for the energy and capacity will generate positive cash flow. Due to the volatility of market prices in PJM for energy and capacity during the past several years, Midwest Generation cannot predict whether sales of energy and capacity to other customers or the market will be at prices sufficient to generate cash flow necessary to meet Midwest Generation's obligations. If Midwest Generation's operations do not meet these objectives, Midwest Generation may not be able to generate enough cash to service its own debt and lease obligations, which would have a material adverse effect on Midwest Generation. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures."

Midwest Generation's financial results can be affected by changes in fuel prices, fuel transportation cost increases, and interruptions in fuel supply.

       Midwest Generation's business is subject to changes in fuel costs, which may negatively affect its financial results and financial position by increasing the cost of producing power. The fuel markets can be volatile, and actual fuel prices can differ from Midwest Generation's expectations.

       Although Midwest Generation attempts to purchase fuel based on its known fuel requirements, it is still subject to the risks of supply interruptions, transportation cost increases, and fuel price volatility. In addition, fuel deliveries may not exactly match energy sales, due in part to the need to purchase fuel inventories in advance for reliability and dispatch requirements. The price at which Midwest Generation can sell its energy may not rise or fall at the same rate as a corresponding rise or fall in fuel costs. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures—Commodity Price Risk."

Midwest Generation may not be able to hedge market risks effectively.

       Midwest Generation is exposed to market risks through its ownership and operation of the Illinois Plants. These market risks include, among others, volatility arising from the timing differences associated with buying fuel, converting fuel into energy and delivering energy to a buyer. Through EMMT, Midwest Generation uses forward contracts and derivative financial instruments, such as futures contracts and options, to manage market risks and exposure to fluctuating electricity and fuel prices. These activities, although intended to mitigate Midwest Generation's exposure, expose Midwest Generation to other risks.

       EME, directly and through a subsidiary, has historically provided credit support to its subsidiaries, including EMMT, which markets the energy and capacity from the Illinois Plants. Midwest Generation is permitted to use its working capital facility and cash on hand to provide credit support (either through loans or letters of credit) for forward contracts with third-party counterparties entered into by EMMT for capacity and energy generated by Midwest Generation. Although EME may provide credit support from time to time, Midwest Generation intends to use its working capital facility instead of relying on credit support from EME. Utilization of this credit facility in support of such forward contracts provides additional liquidity support for implementation of Midwest Generation's contracting strategy for the Illinois Plants. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Related Party Transactions—EMMT Agreements."

       The effectiveness of Midwest Generation's hedging activities may depend on the amount of working capital available to post as collateral in support of these transactions, either in support of performance guarantees or as a cash margin. The amount of credit support that must be provided typically is based on the difference between the price of the commodity in a given contract and the market price of the commodity. Significant movements in market prices can result in a requirement to provide cash collateral

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and letters of credit in very large amounts. Without adequate liquidity to meet margin and collateral requirements, Midwest Generation could be exposed to the following:

•

a reduction in the number of counterparties willing to enter into bilateral contracts, which would result in increased reliance on short-term and spot markets instead of bilateral contracts, increasing Midwest Generation's exposure to market volatility; and

•

a failure to meet a margining requirement, which could permit the counterparty to terminate the related bilateral contract early and demand immediate payment for the replacement value of the contract.

       As a result of these and other factors, Midwest Generation cannot predict with precision the effect that risk management decisions may have on its businesses, operating results or financial position.

Midwest Generation is exposed to credit and performance risk from third parties under supply and transportation contracts.

       The Illinois Plants rely on contracts for the supply and transportation of fuel and other services required for their operation. Midwest Generation's operations are exposed to the risk that counterparties will not perform their obligations. If a counterparty failed to perform under a contract, Midwest Generation would need to obtain alternate suppliers for its requirements of fuel or other services, which could result in higher costs or disruptions in its operations. Furthermore, Midwest Generation is exposed to credit risk because damages related to a breach of contract may not be recoverable. Accordingly, the failure of a supplier to fulfill its contractual obligations could have a material adverse effect on Midwest Generation's financial results.

Midwest Generation is subject to extensive energy industry regulation.

       Midwest Generation's operations are subject to extensive regulation by governmental agencies. Federal laws and regulations govern, among other things, transactions by and with purchasers of power, including utility companies, the development and construction of a power plant, the ownership and operations of a power plant, and access to transmission. Under limited circumstances where exclusive federal jurisdiction is not applicable or specific exemptions or waivers from state or federal laws or regulations are otherwise unavailable, federal and/or state utility regulatory commissions may have broad jurisdiction over non-utility owned electric power plants such as the Illinois Plants. Generation facilities are also subject to federal, state and local laws and regulations that govern, among other things, the geographical location, zoning, land use and operation of a project. For more information, see "Item 1. Business—Regulatory Matters."

       In addition to its exposure to government regulation affecting all electric power suppliers and generating companies on a national level, Midwest Generation is especially susceptible to regulatory actions and litigation outcomes that are specific to the geographic power market in which the Illinois Plants are located.

       There is no assurance that new laws or other future regulatory developments will not have a material adverse effect on Midwest Generation's business, results of operations or financial condition, nor can Midwest Generation provide assurance that it will be able to obtain and comply with all necessary licenses, permits and approvals for its plants. If Midwest Generation cannot comply with all applicable regulations, its business, results of operations and financial condition could be adversely affected.

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Midwest Generation is subject to extensive environmental regulation and permitting requirements that may involve significant and increasing costs.

       Midwest Generation's operations are subject to extensive environmental regulation. Midwest Generation is required to obtain and comply with conditions established by licenses, permits and other approvals in order to construct, operate or modify its facilities. Failure to comply with these requirements could subject Midwest Generation to civil or criminal liability, the imposition of liens or fines, or actions by regulatory agencies seeking to curtail Midwest Generation's operations. Midwest Generation may also be exposed to risks arising from past, current or future contamination at its former or existing facilities or with respect to off-site waste disposal sites that have been used in its operations.

       Midwest Generation devotes significant resources to environmental monitoring, pollution control equipment and emission allowances to comply with environmental regulatory requirements. Midwest Generation believes that it is in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect its financial position or results of operations. However, the current trend is toward more stringent standards, stricter regulation, and more expansive application of environmental regulations. Future environmental laws and regulations, and future enforcement proceedings that may be taken by environmental authorities could affect the costs and the manner in which Midwest Generation conducts its business and could cause it to make substantial additional capital expenditures. There is no assurance that Midwest Generation would be able to recover these increased costs from its customers or that its business, financial condition and results of operations would not be materially adversely affected.

       Environmental advocacy groups and regulatory agencies in the United States have been focusing considerable attention on carbon dioxide emissions from coal-fired power plants and their potential role in climate change. The adoption of laws and regulations to implement carbon dioxide controls could adversely affect Midwest Generation's coal-fired plants. Also, coal plant emissions of nitrogen oxides and sulfur oxides, mercury and particulates are subject to increased controls and mitigation expenses. Additionally, the State of Illinois is contemplating air pollution control regulations that are more stringent than existing and proposed federal regulations. Changing environmental regulations could require Midwest Generation to purchase additional emission allowances or install additional pollution control technology, and could make some units uneconomical to maintain or operate. If Midwest Generation cannot comply with all applicable regulations, it could be required to retire or suspend operations at its facilities, or restrict or modify the operations of its facilities, and its business, results of operations and financial condition could be adversely affected. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Environmental Matters and Regulations."

       Typically, environmental laws require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction, operation or modification of a project or generating facility. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed project as well as require extensive modifications to existing projects, which may involve significant capital expenditures. Midwest Generation cannot provide assurance that it will be able to obtain and comply with all necessary licenses, permits and approvals for its plants.

Midwest Generation has a substantial amount of indebtedness, including long-term lease obligations.

       As of December 31, 2005, Midwest Generation had $1.5 billion of long-term debt and $1.2 billion in lease financings. See "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated

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Financial Statements—Note 7. Long-Term Debt" and "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 12. Lease Commitments."

       Midwest Generation's substantial amount of debt and financial obligations presents the risk that Midwest Generation might not have sufficient cash to service its indebtedness or long-term lease obligations and could limit the ability of Midwest Generation to grow its business, to compete effectively or to operate successfully under adverse economic conditions.

Midwest Generation's ability to meet its obligations under its long-term leases is dependent on payment of interest and principal on its notes receivable from EME.

       During 2000, Midwest Generation loaned $1.367 billion to EME from the proceeds of the sale-leaseback of the Powerton and Joliet plants. The debt service payments made by EME on the intercompany notes evidencing this loan are used by Midwest Generation to make the lease payments under the Powerton and Joliet leases. Midwest Generation's ability to meet its obligations under the leases is partially dependent on receiving payment on these intercompany notes. There is no assurance that EME will have sufficient cash flow to meet its obligations under the intercompany notes or make payments on the EME guarantees of the Powerton and Joliet leases. A default by EME in the payment of these intercompany notes would result in a shortfall of cash available to Midwest Generation to meet its lease and debt obligations. A default by Midwest Generation in meeting its lease obligations could give rise to various remedies, including the right to terminate the Powerton and Joliet leases, which would result in the loss of revenues from the Powerton and Joliet power plants and would have a material adverse effect on Midwest Generation's business, results of operations and financial condition.

Competition could adversely affect Midwest Generation's business.

       The independent power industry is characterized by numerous capable competitors, some of whom may have more extensive operating experience in the acquisition and development of power projects, larger staffs, and greater financial resources than Midwest Generation does. Further, in recent years some power markets, including PJM, have been characterized by strong and increasing competition as a result of regulatory changes and other factors which can contribute to a reduction in market prices for power from time to time. These regulatory and other changes may increase competitive pressures in this market.

       Newer plants owned by Midwest Generation's competitors are often more efficient than Midwest Generation's facilities. This may put some of Midwest Generation's facilities at a competitive disadvantage to the extent that its competitors are able to produce more power from each increment of fuel than Midwest Generation's facilities are capable of producing.

       Several participants in the wholesale markets, including many regulated utilities, have a lower cost of capital than most merchant generators and often are able to recover fixed costs through rate base mechanisms, allowing them to build, buy and upgrade generation assets without relying exclusively on market clearing prices to recover their investments. This could affect Midwest Generation's ability to compete effectively in the markets in which those entities operate.

Restrictions in the financing documents binding on Midwest Generation and its affiliates limit the ability of Midwest Generation to enter into specified transactions that it otherwise might enter into.

       EME and Mission Energy Holding Company have entered into debt agreements that contain restrictive covenants that are applicable to their subsidiaries, including Midwest Generation. Midwest Generation has not guaranteed these obligations. However, these financing documents contain restrictions on the ability of Midwest Generation to enter into specified transactions or engage in specified business activities, including, in some instances, a requirement that EME obtain the approval of Mission Energy

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Holding Company's board of directors. The instruments governing Midwest Generation's indebtedness also contain financial and investment covenants. These restrictions may significantly impede the ability of Midwest Generation to take advantage of business opportunities as they arise, to grow its business or compete effectively, or to develop and implement any refinancing plans in respect of its indebtedness. See "—Midwest Generation has a substantial amount of indebtedness, including long-term lease obligations" for further discussion.

       In addition, in connection with the entry by Midwest Generation or its affiliates into new financings or amendments to existing financing arrangements, Midwest Generation's financial and operational flexibility may be further reduced as a result of more restrictive covenants, requirements for security and other terms that are often imposed on sub-investment grade entities.

The Illinois Plants may be affected by general operating risks and hazards customary to the power generation industry. Midwest Generation may not have adequate insurance to cover all these hazards.

       The operation of power generation facilities involves many operating risks, including:

•

performance below expected levels of output or efficiency;

•

interruptions in fuel supply;

•

disruptions in the transmission of electricity;

•

curtailment of operations due to transmission constraints;

•

breakdown or failure of equipment or processes;

•

imposition of new regulatory, permitting or environmental requirements, or violations of existing requirements;

•

employee work force factors, including strikes, work stoppages or labor disputes;

•

operator error; and

•

catastrophic events such as terrorist activities, fires, tornadoes, earthquakes, explosions, floods or other similar occurrences affecting power generation facilities or the transmission and distribution infrastructure over which power is transported.

       These and other hazards can cause significant personal injury or loss of life, severe damage to and destruction of property, plant and equipment, contamination of or damage to the environment, and suspension of operations. The occurrence of one or more of the events listed above could decrease or eliminate revenues generated by the Illinois Plants or significantly increase the costs of operating them, and could also result in Midwest Generation's being named as a defendant in lawsuits asserting claims for substantial damages, potentially including environmental cleanup costs, personal injury, property damage, fines and penalties. Equipment and plant warranties and insurance may not be sufficient or effective under all circumstances to cover lost revenues or increased expenses. A decrease or elimination in revenues generated by the facilities or an increase in the costs of operating them could decrease or eliminate funds available to meet Midwest Generation's obligations as they become due and could have a material adverse effect on Midwest Generation.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

       Inapplicable.

ITEM 2.    PROPERTIES

       As of December 31, 2005, Midwest Generation owned a fee interest in the Illinois Plants, with the exception of the Powerton Station and the Joliet Units 7 and 8, as more particularly described below.

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       Midwest Generation purchased all the properties, with the exception of the Collins Station, from Commonwealth Edison in December 1999. Midwest Generation assigned the right to purchase the Collins Station to third parties, who purchased the Collins Station, and entered into leases with an affiliate of Midwest Generation, who in turn subleased the plant to Midwest Generation. In April 2004, Midwest Generation terminated the Collins Station lease through a negotiated transaction with the lease equity investor and received title to the Collins Station as part of the transaction. On September 30, 2004, Midwest Generation permanently ceased operations at the Collins Station and decommissioned the plant by December 31, 2004. In December 1999, Commonwealth Edison sold only a portion of its then owned properties related to the Illinois Plants to Midwest Generation and retained the remaining portions of the properties for its own uses. Midwest Generation and Commonwealth Edison have various reciprocal permanent and temporary easements over Midwest Generation's respective parcels for the location, use, maintenance and repair of those facilities and equipment that are used in connection with the operations of Midwest Generation and Commonwealth Edison. On December 30, 2004, Midwest Generation acquired additional property adjacent to the Collins Station from Commonwealth Edison in exchange for easements Midwest Generation granted to Commonwealth Edison at the Will County, Joliet and Powerton Stations.

       In conjunction with the sale-leaseback of the Powerton Station and Joliet Units 7 and 8 in August 2000, Midwest Generation leased substantially all the property on which the generating units are located to the owner trusts under site leases, and the owner trusts in turn subleased their undivided ground interest in the property back to Midwest Generation under site subleases. The terms of the site subleases are 33.75 years for the Powerton property and 30 years for the Joliet property, with renewal options. Rent is paid on each January 2 and July 2.

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Description of Properties

Operating Plant or Site		Location	Leased/ Owned	Fuel	Megawatts
Electric Generating Facilities
	Crawford Station	Chicago, Illinois	owned	coal	542
	Fisk Station	Chicago, Illinois	owned	coal	326
	Joliet Unit 6	Joliet, Illinois	owned	coal	290
	Joliet Units 7 and 8	Joliet, Illinois	leased	coal	1,044
	Powerton Station	Pekin, Illinois	leased	coal	1,538
	Waukegan Station	Waukegan, Illinois	owned	coal	789
	Will County Station	Romeoville, Illinois	owned	coal	1,092	(1)
Peaking Units
	Fisk	Chicago, Illinois	owned	oil/gas	163
	Waukegan	Waukegan, Illinois	owned	oil/gas	92
Total					5,876
Other Plant or Site
	Collins Station(2)	Grundy County, Illinois	owned
	Crawford peaker(3)	Chicago, Illinois	owned
	Joliet peaker(4)	Joliet, Illinois	owned
	Calumet peaker(4)	Chicago, Illinois	owned
	Bloom peaker(5)	Chicago Heights, Illinois	owned
	Electric Junction peaker(4)	Aurora, Illinois	owned
	Lombard peaker(4)	Lombard, Illinois	owned
	Sabrooke peaker(4)	Rockford, Illinois	owned

(1)

Operations at Will County Station Units 1 and 2 (310 MW) were returned to service in late 2004 after being suspended since January 2003.

(2)

All Collins Station units ceased operations and were decommissioned by December 31, 2004.

(3)

Peaking units ceased operations as of April 21, 2005.

(4)

Peaking units ceased operations as of December 31, 2004.

(5)

Bloom peaking units were decommissioned in 2003.

ITEM 3.    LEGAL PROCEEDINGS

       No material legal proceedings are presently pending against Midwest Generation.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       Inapplicable.

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Pursuant to Form 10-K's General Instruction G(3), the following information is included as an additional item in Part I of this annual report:

EXECUTIVE OFFICERS OF THE REGISTRANT

       Listed below are Midwest Generation's current executive officers and their ages and positions as of December 31, 2005.

Name, Position and Age	Position Held Continuously Since
Guy F. Gorney, 51 President	2005
John P. Finneran, Jr., 46 Vice President	1999
W. James Scilacci, 50 Vice President	2005
Deborah A. Golden(1), 51 Vice President and General Counsel	2004
Fred W. McCluskey, 46 Vice President	1999

(1)

Ms. Golden resigned as vice president and general counsel of Midwest Generation, effective January 6, 2006.

Business Experience

       Described below are the principal occupations and business activities of Midwest Generation's executive officers for the past five years in addition to their positions indicated above.

Mr. Gorney has been vice president of Edison Mission Energy since August 2000, and president of Midwest Generation EME, LLC since June 2005. Mr. Gorney was vice president of Operations, Maintenance & Fuels for the Americas Region from January 2002 to January 2005, vice president of Operations Planning from August 2000 to January 2002 and regional vice president of Operations Planning from December 1999 to August 2000.

Mr. Finneran has been vice president of Business Management for Edison Mission Energy since April 2005. Mr. Finneran was vice president of Edison Mission Energy and vice president Finance, Americas from July 2002 to April 2005. Mr. Finneran was vice president of Edison Mission Energy and regional vice president of Finance, Americas Region from September 1999 to July 2002.

Mr. Scilacci has been vice president of Midwest Generation EME, LLC since April 2005 and senior vice president and chief financial officer of Edison Mission Energy since March 2005. Mr. Scilacci was senior vice president and chief financial officer of Southern California Edison Company from January 2003 to March 2005 and vice president and chief financial officer of Southern California Edison Company from January 2000 to December 2002.

Ms. Golden was vice president of Edison Mission Energy and vice president and general counsel of Midwest Generation EME, LLC from August 2004 to January 2006. Prior to joining Edison Mission

22

Energy, Ms. Golden served as deputy general counsel to the governor of Illinois from January 2003 until July 2004, and served as assistant general counsel, State Regulatory Legal Affairs for SBC from 1999 to 2001.

Mr. McCluskey has been vice president of Technical Services of Edison Mission Energy since April 2005. From January 2003 to April 2005, Mr. McCluskey was vice president of Technical Services and Partnership Management. From August 2000 to January 2003, Mr. McCluskey was vice president of Business Management. From November 1998 to August 2000, Mr. McCluskey was regional vice president of Business Development.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

       All the outstanding membership interest of Midwest Generation is, as of the date hereof, owned by Edison Mission Midwest Holdings Co., which is an indirect wholly owned subsidiary of Edison International. There is no market for Midwest Generation's membership interest.

       Distributions on the membership interest will be paid when declared by Midwest Generation's board of managers. Midwest Generation paid cash distributions to Edison Mission Midwest Holdings totaling $330 million in 2005 and $88 million in 2004.

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data was derived from Midwest Generation's audited financial statements and is qualified in its entirety by the more detailed information and financial statements, including the notes to the financial statements, included in this annual report.

		Years Ended December 31,
		2005			2004			2003			2002			2001
		(in millions)
INCOME STATEMENT DATA
Operating revenues		$	1,429.4		$	1,057.7		$	1,052.3		$	1,148.7		$	1,057.5
Operating expenses
	Fuel and plant operations		672.2			759.9			723.7			745.7			756.4
	Loss on lease termination, asset impairment and other charges and credits(1)		7.0			104.6			1,025.3			(0.3	)		—
	Depreciation and amortization		141.1			169.9			171.7			175.6			166.7
	Administrative and general		19.8			21.6			23.8			25.4			30.2
			840.1			1,056.0			1,944.5			946.4			953.3
Operating income (loss)			589.3			1.7			(892.2	)		202.3			104.2
Interest and other expense			(90.1	)		(138.5	)		(233.4	)		(227.6	)		(258.3	)
Income (loss) before income taxes			499.2			(136.8	)		(1,125.6	)		(25.3	)		(154.1	)
Provision (benefit) for income taxes			196.8			(58.2	)		(436.9	)		(9.5	)		(56.4	)
Income (loss) before accounting change			302.4			(78.6	)		(688.7	)		(15.8	)		(97.7	)
Cumulative effect of change in accounting, net of tax			(1.2	)		—			(0.1	)		—			—
Net income (loss)		$	301.2		$	(78.6	)	$	(688.8	)	$	(15.8	)	$	(97.7	)

(1)

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Operating Expenses" for more information regarding loss on lease termination, asset impairment and other charges in 2005, 2004 and 2003.

	As of December 31,
	2005		2004		2003		2002		2001
	(in millions)
BALANCE SHEET DATA
Assets	$	5,802.3	$	5,683.5	$	5,662.6	$	6,500.6	$	6,772.6
Current liabilities		446.4		251.8		981.7		1,179.1		230.1
Long-term debt		1,499.5		1,660.5		2,085.9		2,502.6		3,672.0
Lease financing		1,140.8		1,244.7		2,159.6		2,169.8		2,179.6
Other long-term obligations		197.9		164.1		103.3		191.8		227.3
Member's equity		2,517.7		2,362.4		332.1		457.3		463.5

	Years Ended December 31,
	2005			2004			2003			2002			2001
	(in millions)
CASH FLOW DATA
Cash provided by (used in) operating activities	$	145.3		$	190.5		$	97.2		$	171.3		$	(39.1	)
Cash provided by (used in) financing activities		(256.3	)		(37.8	)		(94.8	)		(77.7	)		132.3
Cash provided by (used in) investing activities		78.9			(33.0	)		(40.6	)		(71.6	)		(56.3	)

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect Midwest Generation's current expectations and projections about future events based on Midwest Generation's knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Midwest Generation that is incorporated in this MD&A, or that refers to or incorporates this MD&A, may also contain forward-looking statements in this MD&A and elsewhere. In this MD&A and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. See "Item 1. Business—Forward-Looking Statements" and "Item 1A. Risk Factors" for a discussion of some of the risks, uncertainties and other important factors that could cause results to differ, or otherwise could impact Midwest Generation. Additional information about risks and uncertainties is contained throughout this MD&A. Readers are urged to read this entire annual report, including the information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect Midwest Generation's business. Forward-looking statements speak only as of the date they are made, and Midwest Generation is not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Midwest Generation with the Securities and Exchange Commission.

       This MD&A presents a discussion of Midwest Generation's financial results and analysis of its financial condition. It is presented in four sections:

	Page
Management's Overview; Critical Accounting Estimates	26
Results of Operations	31
Liquidity and Capital Resources	39
Market Risk Exposures	53

MANAGEMENT'S OVERVIEW; CRITICAL ACCOUNTING ESTIMATES

Management's Overview

Introduction

       Midwest Generation is a Delaware limited liability company formed on July 12, 1999 for the purpose of owning or leasing, making improvements to, and operating and selling the capacity and energy of, the power generation assets it purchased from Commonwealth Edison, which are referred to as the Illinois Plants. Midwest Generation does not have any plans to purchase or develop new power plants at this time.

       Midwest Generation plans to operate 5,876 MW of power plants in 2006 consisting of:

•

six coal-fired generating plants consisting of 5,621 MW, which include the Powerton, Joliet, Will County, Waukegan, Crawford and Fisk Stations; and

26

•

the Fisk and Waukegan on-site generating peakers consisting of 255 MW, based on summer net dependable capacity.

       Midwest Generation's power plants are located in the control area managed by PJM. For further discussion, see "Item 1. Business—Description of the Industry—Power Markets," "Transmission," and "Regulatory Matters."

       The energy and capacity from the Illinois Plants are sold under terms, including price and quantity, negotiated by EMMT, on behalf of Midwest Generation, to customers through a combination of bilateral agreements, forward energy sales and spot market sales. See "Market Risk Exposures" for further discussion of forward market prices.

       Midwest Generation's operating income increased substantially during 2005 due to higher wholesale energy prices driven largely by increases in the market price of natural gas and oil. The average market price during 2005 at the Northern Illinois Hub increased to $46.39 per MWh, compared to the average market price of $29.52 per MWh during 2004 at "Into ComEd" and at the Northern Illinois Hub. Prior to 2005, Midwest Generation derived a substantial amount of its revenues under power purchase agreements with Exelon Generation, all of which had expired by the end of 2004.

Overview of Midwest Generation's Operating Performance

       Midwest Generation's net income (loss) was $301.2 million, ($78.6) million and ($688.7) million in 2005, 2004 and 2003, respectively. The 2005 increase in earnings was primarily attributable to:

•

An increase in the average energy price earned by Midwest Generation related to the coal-fired units to $46.68/MWh in 2005 compared to $24.84/MWh in 2004 and $22.27/MWh in 2003. During 2004 and 2003, 56% and 49% of generation from the Illinois Plants was merchant plant generation, respectively. The remaining 2004 and 2003 generation was sold under the power purchase agreements with Exelon Generation, which provided for higher capacity payments and lower payments for energy (with an average energy price of $17.46/MWh in 2004). Average energy prices increased in 2005, as compared to 2004 and 2003, driven primarily by higher natural gas prices and the elimination of lower contract energy prices set forth in the Exelon Generation power purchase agreements.

•

The second quarter of 2004 included a $63.6 million (pre-tax) loss, $39.1 million (after tax) loss, on termination and other charges related to the termination of the Collins Station lease. The third quarter of 2004 included a $12.2 million (pre-tax), $7.5 million (after tax), asset impairment and other charges related to the Collins Station. Management concluded that the Collins Station was not economically competitive in the marketplace given the generation overcapacity in the region and ceased operations effective September 30, 2004.

•

The third quarter of 2004 included a charge of $28.8 million (pre-tax), $17.7 million (after tax), related to impairment of six small peaking units. In September 2004, management completed an analysis of future competitiveness of Midwest Generation's eight small peaking units in the expanded PJM marketplace. Based on this analysis, management decided to decommission six of the eight small peaking units. As a result of this decision, projected future cash flows associated with the peaking units were less than the book value of the units, resulting in an impairment.

•

An increase in sales of emission allowances in 2005, as compared to 2004, due to higher market prices.

•

A decrease in fuel expenses in 2005 as compared to 2004. The 2005 decrease was attributable to there being no natural gas and fuel oil costs incurred at the Collins Station, partially offset by an

27

increase in coal costs from higher coal prices primarily due to price escalation under coal and transportation agreements.

•

A decrease in interest expense in 2005, as compared to 2004. The 2005 decrease was due to the elimination of interest expense related to intercompany debt and related to the Collins Station lease, since April 2004, when the intercompany debt was refinanced and when the Collins Station lease was terminated. The 2005 decrease was partially offset by a full year of interest in 2005 versus approximately eight months of interest in 2004 on Midwest Generation's senior notes, term loan and working capital facilities.

Obligations of Indirect Parent Companies of Midwest Generation

       In July 2001, Mission Energy Holding Company, the parent company of EME and indirect parent of Midwest Generation, issued $800 million of notes due 2008. The financing documents entered into by Mission Energy Holding Company contain financial and investment covenants restricting EME and its subsidiaries. The instruments governing Midwest Generation's indebtedness also contain financial and investment covenants. Restrictions contained in these documents could affect, and in some cases, significantly limit or prohibit Midwest Generation's ability to, among other things, incur, refinance and prepay debt, make capital expenditures, make distributions, make investments, create liens, sell assets, enter into sale and leaseback transactions, issue equity interests, enter into transactions with affiliates, create restrictions on the ability to make distributions, engage in mergers and consolidations, make capital expenditures, or engage in speculative transactions. See "Item 1A. Risk Factors—Restrictions in the financing documents binding on Midwest Generation and its affiliates limit the ability of Midwest Generation to enter into specified transactions that it otherwise might enter into" for further discussion.

Critical Accounting Estimates

Introduction

       The accounting policies described below are viewed by management as "critical" because their correct application requires the use of material judgments and estimates, and they have a material impact on Midwest Generation's results of operations and financial position.

Derivative Financial Instruments and Hedging Activities

       Midwest Generation uses derivative financial instruments for price risk management activities for non-trading purposes. Derivative financial instruments are mainly utilized to manage exposure from changes in electricity and fuel prices. Midwest Generation follows Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), which requires derivative financial instruments to be recorded at their fair value unless an exception applies. SFAS No. 133 also requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. For derivatives that qualify for hedge accounting, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings.

       Management's judgment is required to determine if a transaction meets the definition of a derivative and, if it does, whether the normal sales and purchases exception applies or whether individual transactions qualify for hedge accounting treatment. The majority of Midwest Generation's long-term power sales and fuel supply agreements related to its generation activities either: (1) do not meet the

28

definition of a derivative, or (2) qualify as normal purchases and sales and are, therefore, recorded on an accrual basis. Determining the fair value of derivatives under SFAS No. 133 is a critical accounting estimate because the fair value of a derivative is susceptible to significant change resulting from a number of factors, including: volatility of energy prices, credit risks, market liquidity and discount rates. See "Market Risk Exposures" for a description of risk management activities and sensitivities to change in market prices.

Impairment of Long-Lived Assets

       Midwest Generation follows Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). Midwest Generation evaluates long-lived assets whenever indicators of impairment exist. This accounting standard requires that if the undiscounted expected future cash flow from a company's assets or group of assets (without interest charges) is less than its carrying value, asset impairment must be recognized in the financial statements. The amount of impairment is determined by the difference between the carrying amount and fair value of the asset.

       The assessment of impairment is a critical accounting estimate because significant management judgment is required to determine: (1) if an indicator of impairment has occurred, (2) how assets should be grouped, (3) the forecast of undiscounted expected future cash flow over the asset's estimated useful life to determine if an impairment exists, and (4) if an impairment exists, the fair value of the asset or asset group. Factors that Midwest Generation considers important, which could trigger an impairment, include operating losses from a project, projected future operating losses, the financial condition of counterparties, or significant negative industry or economic trends. At December 31, 2005, the expected undiscounted future cash flow from long-lived assets exceeded the carrying value of those assets. During 2004 and 2003, Midwest Generation recorded impairment charges of $39.1 million and $1.025 billion, respectively, related to specific assets. See "Results of Operations—Operating Expenses" for additional discussion.

Contract Indemnity

       Midwest Generation has agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific existing asbestos claims and expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in a supplemental agreement. See "Liquidity and Capital Resources—Contractual Obligations, Commitments and Contingencies—Contingencies—Indemnity Provided as Part of the Acquisition from Commonwealth Edison." Midwest Generation engaged an independent actuary during 2004 with extensive experience in performing asbestos studies to estimate future losses based on its claims experience and other available information. In calculating future losses, the actuary made various assumptions, including but not limited to, the settlement of future claims under the supplemental agreement with Commonwealth Edison as described above, the distribution of exposure sites, and that the filing date of asbestos claims will not be after 2045. At December 31, 2005, Midwest Generation recorded a liability related to this contract indemnity of $67.4 million.

Income Taxes

       Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), requires the asset and liability approach for financial accounting and reporting for deferred income taxes. Midwest Generation uses the asset and liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. See

29

"Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 9. Income Taxes" for additional details.

       As part of the process of preparing its consolidated financial statements, Midwest Generation is required to estimate its income taxes in each jurisdiction in which it operates. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within Midwest Generation's balance sheet. At December 31, 2005, Midwest Generation had net federal and California state deferred tax assets of $275.8 million. The deferred tax assets primarily relate to net operating loss carryforwards that are available to reduce future taxable income. The net operating losses primarily relate to tax deductions from the termination of the Collins Station lease and subsequent decommissioning of the power plant. In assessing the realization of Midwest Generation's deferred tax assets, management considered whether it is more likely than not the deferred tax assets will be realized. The ultimate realization of Midwest Generation's deferred income tax assets depends upon its ability to generate taxable income in the future (which under Midwest Generation's tax-allocation agreement is not subject to a net operating loss carryforward period). On a quarterly basis, management evaluates the recoverability of its deferred tax assets based upon forecasted taxable income to ensure there is adequate support for the realization of the deferred tax assets. While management has considered future taxable income in assessing the need for a valuation allowance, in the event management were to determine that Midwest Generation would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged as a reduction to income in the period such determination was made. Although realization is not assured, management believes it is more likely than not that the net deferred tax asset balance as of December 31, 2005 will be realized.

       For additional information regarding Midwest Generation's accounting policies, see "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 2. Summary of Significant Accounting Policies."

30

RESULTS OF OPERATIONS

Summary

       The table below summarizes total revenues as well as key performance measures related to coal-fired generation, which represents the majority of Midwest Generation's operations.

			Years Ended December 31,
			2005			2004			2003
Operating Revenues (in millions)
	Energy revenues		$	1,445		$	758		$	667
	Capacity revenues			27			289			380
	Other revenues			10			15			8
	Loss from price risk management			(53	)		(4	)		(3	)
		Total operating revenues	$	1,429		$	1,058		$	1,052
Statistics—Coal-Fired Generation
	Generation (in GWh):
		Merchant		30,953			17,133			13,561
		Power purchase agreement		—			13,435			13,949
		Total coal-fired generation		30,953			30,568			27,510
	Equivalent availability(1)			79.6%			84.4%			82.7%
	Forced outage rate(2)			7.8%			5.4%			7.7%
	Average energy price/MWh:
		Merchant	$	46.68		$	31.11		$	26.57
		Power purchase agreement	$	—		$	17.46		$	18.08
		Total coal-fired generation(3)	$	46.68		$	24.84		$	22.27
	Average fuel costs/MWh		$	12.40		$	11.60		$	11.28

(1)

The availability factor is determined by the number of megawatt-hours the coal plants are available to generate electricity divided by the product of the capacity of the coal plants (in megawatts) and the number of hours in the period. Equivalent availability reflects the impact of the unit's inability to achieve full load, referred to as derating, as well as outages which result in a complete unit shutdown. The coal plants are not available during periods of planned and unplanned maintenance.

(2)

Midwest Generation refers to unplanned maintenance as a forced outage.

(3)

The average energy price in prior year periods represents an average, weighted by generation, of energy prices earned by the merchant coal plants and energy prices earned under the power purchase agreements with Exelon Generation. Due to the structure of the power purchase agreements with Exelon Generation (with higher capacity prices and lower energy prices), the composite data in 2004 and 2003 is not directly comparable to 2005 merchant energy prices.

Operating Revenues

       Operating revenues increased $371.6 million in 2005 compared to 2004 and $5.5 million in 2004 compared to 2003. The 2005 increase was primarily due to higher average energy prices. The increase in average energy prices was driven largely by higher natural gas prices and the elimination of sales to Exelon Generation under power purchase agreements with lower contract energy prices. The 2004 increase was primarily due to higher energy revenues of $89.9 million from increased merchant generation and higher merchant energy prices, offset by a $91.1 million decrease in capacity revenue

31

resulting from the reduction in megawatts contracted under the power purchase agreements with Exelon Generation. Midwest Generation currently earns minimal capacity revenues from its merchant activities.

       During 2003 and 2004, one unit at the Collins Station was available for sale into the wholesale power market. Due to the substantial increase in natural gas prices in 2003 and 2004, the marginal cost of generation generally exceeded the spot price for energy. As a result, merchant sales from the Collins Station were minimal during 2003 and 2004. Midwest Generation permanently ceased operations at all Collins Station units on September 30, 2004 after termination of the Collins Station lease.

       Losses from price risk management were $53.3 million, $3.6 million and $3.1 million in 2005, 2004 and 2003, respectively. The 2005 increase was primarily due to significant price increases in 2005 on power contracts that did not qualify for hedge accounting under SFAS No. 133 resulting in losses. These energy contracts were entered into to hedge the price risk related to projected sales of power through 2007 (sometimes referred to as economic hedges). The 2005 losses included $30.2 million related to 2005 hedge contracts, which related to activities reported as energy revenues and $23.1 million unrealized losses related to 2006 and 2007 hedge contracts. See "Market Risk Exposures—Commodity Price Risk" for more information regarding forward market prices.

       The 2004 losses were primarily related to power contracts that did not qualify for hedge accounting under SFAS No. 133. The 2003 losses primarily reflect a mark-to-market adjustment of $2.7 million related to an option under which Midwest Generation had to purchase energy from Calumet Energy Team LLC, which is accounted for as a derivative under SFAS No. 133.

       Due to higher electric demand resulting from warmer weather during the summer months, electric revenues are generally higher during the third quarter of each year. However, as a result of recent increases in market prices for power, driven in part by higher natural gas and oil prices, this historical trend may not be applicable to quarterly revenue in the future.

Operating Expenses

       Operating expenses decreased $215.9 million in 2005 compared to 2004 and $888.4 million in 2004 compared to 2003. Operating expenses consist of fuel, sale of emission allowances, plant operations, loss on lease termination, asset impairment and other charges, depreciation and amortization and administrative and general expenses. The change in the components of operating expenses is discussed below.

       Fuel expenses decreased $23.5 million in 2005 compared to 2004, and increased $6.1 million in 2004 compared to 2003. The 2005 decrease was primarily attributable to a reduction of $42.7 million in the costs for natural gas and fuel oil related to the cessation of operations at the Collins Station, partially offset by an increase of $27.6 million in coal costs primarily due to higher coal prices from price escalation under coal and transportation agreements. The 2004 increase was primarily due to higher fuel costs at the coal plants resulting from increased generation, partially offset by lower fuel costs at the Collins Station and peaking units.

       Sale of emission allowances income increased $36.4 million in 2005 compared to 2004, and $15.3 million in 2004 compared to 2003. Midwest Generation sold excess sulfur dioxide (SO2) emission allowances primarily to affiliates in all three years. The 2005 and 2004 increases are due to an increase in the market price of SO2 emission allowances.

       Plant operations expenses decreased $27.8 million in 2005 compared to 2004, and increased $45.5 million in 2004 compared to 2003. The 2005 decrease was primarily due to a $56 million charge

32

recorded during the fourth quarter of 2004 related to an estimate of possible future payments related to asbestos claims with respect to activities at the Illinois Plants prior to their acquisition in 1999. There was no similar charge recorded in 2005. Partially offsetting this decrease in 2005 were higher plant overhaul expenses. The 2004 increase was due to the asbestos claims charge explained above partially offset by lower property taxes at the Collins Station, lower plant overhaul expenses and lower railcar lease costs. See "Liquidity and Capital Resources—Contractual Obligations, Commitments and Contingencies—Contingencies—Guarantees and Indemnities—Indemnity Provided as Part of the Acquisition from Commonwealth Edison" for a discussion of the contract indemnity agreement with Commonwealth Edison.

       Asset impairment charges for 2005 consisted of $7.0 million primarily associated with a redefined capital program related to coal dust mitigation.

       Loss on lease termination, asset impairment and other charges in 2004 consisted of $60.9 million related to the loss on termination of the Collins Station lease, $10.3 million of impairment charges related to the termination of the power purchase agreement for the remaining two units at the Collins Station, a $4.6 million inventory reserve for excess spare parts and fuel oil inventory at the Collins Station, and $28.8 million related to the impairment of the small peaking units.

       Asset impairment charges for 2003 consisted of a $1.025 billion impairment charge that resulted from a revised long-term outlook for capacity revenues from the Collins Station and eight small peaking units. The lower capacity revenue outlook was the result of a number of factors, including higher long-term natural gas prices and the current oversupply of generation. The book value of capitalized assets related to the Collins Station was written down from $858 million to a then estimated fair market value of $78 million, and the book value of the eight small peaking units was also written down from $286 million to a then estimated fair market value of $41 million.

       Depreciation and amortization expense decreased $28.8 million in 2005 compared to 2004 and $1.8 million in 2004 compared to 2003. The 2005 decrease was primarily attributable to the elimination of depreciation on the Collins Station since September 30, 2004 and the peaking units since June 30, 2004, as a result of impairments and decommissioning. The decrease in 2004 and 2003 was primarily due to the elimination of depreciation and amortization on the portion of the Collins Station and eight peaking units as a result of the impairment charges taken in 2004 and 2003. The amortization expense relates to the Powerton-Joliet facilities sale-leaseback which is being amortized over the term of the lease and the Collins Station lease through its termination in April 2004.

Other Income (Expense)

		Years Ended December 31,
		2005			2004			2003
		(in thousands)
Interest income and other expense		$	848		$	(551	)	$	(490	)
Interest income from affiliate			113,084			113,229			113,354
Gain on disposal of assets			3,226			(1,042	)		—
Interest expense			(207,271	)		(184,016	)		(124,391	)
Interest expense to affiliate			—			(66,148	)		(221,845	)
	Total other expense	$	(90,113	)	$	(138,528	)	$	(233,372	)

33

       In 2005, Midwest Generation recorded gains on asset disposal primarily related to the sale of Collins Station equipment. In 2004, Midwest Generation recorded a loss on asset disposal related to various station equipment.

       Interest expense increased $23.3 million in 2005 compared to 2004 and $59.6 million in 2004 compared to 2003. The 2005 increase was primarily due to a full year of interest in 2005 versus approximately eight months of interest in 2004 on Midwest Generation's 8.75% second priority senior secured notes, first priority secured institutional term loan and working capital facilities. The increase was partially offset by lower lease financing interest from the termination of the Collins Station lease. Interest expense in 2004 relates to $1.74 billion in new debt entered into by Midwest Generation in April 2004 in addition to the lease financings of the Powerton and Joliet Stations and the Collins Station through April 27, 2004. Interest expense in 2003 relates to the lease financings of the Collins, Powerton and Joliet Stations. All debt in 2003 related to affiliates.

       Interest expense to affiliate was zero in 2005 and decreased $155.7 million in 2004 compared to 2003. Interest expense to affiliate in 2004 and 2003 related to borrowings from Edison Mission Overseas Co., a wholly owned subsidiary of Midwest Generation's parent, under subordinated loan agreements that were settled and terminated in April 2004.

Provision (Benefit) For Income Taxes

       Midwest Generation had effective income tax provision (benefit) rates of 39.4%, (42.5)% and (38.8)% in 2005, 2004 and 2003, respectively. The effective tax rates were different from the federal statutory rate of 35% due to state income taxes. The income tax benefit results from the tax-allocation agreement with Midwest Generation's parent, Edison Mission Midwest Holdings.

Cumulative Effect of Change in Accounting Principle

Statement of Financial Accounting Standard Interpretation No. 47

       Effective December 31, 2005, Midwest Generation adopted Financial Accounting Standard Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" (FIN 47). For further discussion of FIN 47 refer to "New Accounting Pronouncements." Midwest Generation recorded a $1.2 million, after tax, decrease to net income as the cumulative effect of the adoption of FIN 47.

Statement of Financial Accounting Standards No. 143

       Effective January 1, 2003, Midwest Generation adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. On January 1, 2003, Midwest Generation recorded a $74,000, after tax, decrease to net income as the cumulative effect of the adoption of SFAS No. 143.

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Related Party Transactions

EMMT Agreements

       Midwest Generation entered into a revolving credit agreement with EMMT, dated as of April 27, 2004, pursuant to which Midwest Generation can, from time to time, make revolving loans to, and have letters of credit issued on behalf of, EMMT. The loans and letters of credit provide credit support for forward contracts entered into by EMMT related to the Illinois Plants. Midwest Generation had provided $328.1 million and $9.8 million to EMMT as of December 31, 2005 and 2004, respectively, which EMMT used to provide credit support for forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward contract. The amount repaid includes interest earned, if any, under margining agreements supporting such contracts. The maximum amount of available credit under the agreement is $500 million.

       Midwest Generation has entered into a master purchase, sale and services agreement with EMMT, pursuant to which EMMT arranges for purchases and sales of the following products, including related services: (i) energy and capacity; (ii) natural gas; (iii) fuel oil; and (iv) emission allowances.

       Midwest Generation compensates EMMT in accordance with the following table with respect to these transactions, and reimburses EMMT for brokers' fees, taxes, and other reasonably incurred direct out-of-pocket expenses. Payment for these services is due within 30 days of billing.

Service	Compensation
Energy	$.02/MWh
Capacity	$.02/MW-day
Natural gas	$.02/MMBtu
Fuel oil	$.05/bbl
Emission allowances	$.25/SO2 allowance; and $25/NOx allowance

       The net fees earned by EMMT were $1.5 million, $1.8 million and $1.1 million for the years ended December 31, 2005, 2004 and 2003, respectively. Midwest Generation had receivables due from EMMT of $203.6 million and $51.8 million at December 31, 2005 and 2004, respectively. The increase in receivable balance in 2005 is due to higher sales of power and emissions by Midwest Generation through EMMT in the month of December 2005 as compared to the month of December 2004.

       Midwest Generation entered into several transactions through EMMT to sell surplus or purchase SO2 and NOx allowances to or from other EME affiliates. All transactions were completed at market price on the date of the transaction. Net consideration received by Midwest Generation was $54.7 million, $26.1 million and $10.3 million during 2005, 2004 and 2003, respectively.

Fuel Services Agreement

       Midwest Generation has entered into an agreement with Edison Mission Energy Services, Inc. to provide fuel and transportation services related to coal and fuel oil. Under the terms of this agreement, Midwest Generation pays a service fee of $.06 for each ton of coal delivered and $.05 for each barrel of fuel oil delivered, plus the actual cost of the commodities. The amount billable under this agreement for the service fee for each of the years ended December 31, 2005, 2004 and 2003 was $1.1 million.

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Notes Receivable from EME

       The proceeds received by Midwest Generation from the Powerton-Joliet sale-leaseback transaction were loaned to EME. The loan is evidenced by four intercompany notes amounting to $1.367 billion. EME is obligated to repay the principal on the notes in a series of installments on the dates and in the amounts set forth on a schedule to each note. EME has paid and is required to pay interest on the notes on each January 2 and July 2 at an 8.30% fixed interest rate. All amounts due under the notes are due to be repaid in full by January 2, 2016. Midwest Generation earned interest income of $113.1 million, $113.2 million and $113.4 million during 2005, 2004 and 2003, respectively.

Loan Agreements with Edison Mission Overseas Co.

       Edison Mission Midwest Holdings used the proceeds of the loan under the credit agreement that it entered into in December 1999 (a total of approximately $1.8 billion) to make an equity investment in its wholly owned subsidiary, Edison Mission Overseas Co., which in turn loaned the money to Midwest Generation. Edison Mission Overseas and Midwest Generation entered into a subordinated loan agreement with terms matching the terms of Edison Mission Midwest Holdings' credit agreement. Under the terms of the subordinated loan agreement, Midwest Generation was required to make payments to Edison Mission Overseas similar to those payments made by Edison Mission Midwest Holdings under its credit agreement. The obligations of Edison Mission Midwest Holdings were guaranteed by Midwest Generation. In April 2004, Midwest Generation refinanced the borrowings of approximately $693 million (plus accrued interest and fees) under the subordinated loan agreement with proceeds of its $1.7 billion notes issuance and term loan. Midwest Generation then also settled the outstanding balance on the subordinated revolving loan agreement with Edison Mission Overseas with an equity contribution of approximately $2.2 billion from Edison Mission Midwest Holdings.

Tax-Allocation Agreements

       Midwest Generation is included in the consolidated federal and state income tax returns of Edison International and is party to a tax-allocation agreement with its parent, Edison Mission Midwest Holdings. As long as Edison International continues to own, directly or indirectly, at least 80% of the voting power of the stock of EME and its existing subsidiaries and at least 80% of the value of such stock, Midwest Generation will be included in the consolidated federal and state income tax returns of Edison International. In accordance with the agreement and the tax-allocation procedures that have been in effect since Midwest Generation's formation, its current tax liability or benefit is generally determined on a separate return basis, except for calculating consolidated state income taxes, for which Midwest Generation uses the long-term state tax apportionment factors of the Edison International group. Also, while Midwest Generation is generally subject to separate return limitations for net losses, under the tax-allocation agreement it is permitted to transfer to Edison Mission Midwest Holdings, or its subsidiaries, net operating loss benefits which would not yet be realized in a separate return in exchange for a reduction in Midwest Generation's intercompany account balances (including subordinated loans).

       Amounts included in due from affiliates on the balance sheet associated with this tax-allocation agreement totaled $13.0 million at December 31, 2005.

Services Agreements with EME and Edison International

       Certain administrative services, such as payroll, employee benefit programs, insurance and information technology are shared among all affiliates of Edison International, and the costs of these corporate support services are allocated to all affiliates. The cost of services provided by Edison

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International and EME, including those related to Midwest Generation, are allocated based on one of the following formulas: percentage of the time worked, equity in investment and advances, number of employees, or multi-factor (operating revenues, operating expenses, total assets and total employees). Midwest Generation participates in a common payroll and benefit program with all Edison International employees. In addition, Midwest Generation is billed for any direct labor and out-of-pocket expenses for services directly requested for its benefit. Midwest Generation believes the allocation methodologies are reasonable. Costs incurred for these programs, payroll funding, and other services during the years ended December 31, 2005, 2004 and 2003 were $125.7 million, $138.1 million and $134.2 million, respectively. Midwest Generation had a $0.9 million net receivable due from Edison International at December 31, 2005 and a $4.9 million net payable due to Edison International at December 31, 2004 related to these programs.

       Midwest Generation participates in the insurance program of Edison International, including property, general liability, workers compensation and various other specialty policies. Midwest Generation's insurance premiums are generally based on its share of risk related to each policy. In connection with the property insurance program, a portion of the risk is reinsured by a captive insurance subsidiary of Edison International.

Agreements with Midwest Generation EME, LLC

Contribution of Services/Management and Administration Agreement

       Midwest Generation EME, LLC is Midwest Generation's indirect parent and provided executive management, legal, human resources, accounting and other administrative services in Chicago on Midwest Generation's behalf without charge through March 2004. In connection with regulations of the Securities and Exchange Commission, the costs of these services must be recorded as part of Midwest Generation's financial results, although Midwest Generation does not have a cash obligation to pay for these activities. The costs of these services, after tax, were $2.5 million and $10.6 million for the first quarter of 2004 and the year ended December 31, 2003, respectively. Midwest Generation has reflected these activities as a non-cash contribution of services by its parent in the accompanying consolidated financial statements. In April 2004, Midwest Generation EME and Midwest Generation entered into a new management and administration agreement pursuant to which Midwest Generation EME began charging Midwest Generation for management and administrative services. Actual costs billable under this agreement for the years ended December 31, 2005 and 2004 were $13.1 million and $15.7 million, respectively.

Support Services Agreement

       Midwest Generation has entered into an agreement with Midwest Generation EME for support services, including construction and construction management, operations and maintenance management, technical services and training, environmental, health and safety services, administrative and IT support, and other managerial and technical services needed to operate and maintain electric power facilities. Under the terms of the agreement, Midwest Generation reimburses Midwest Generation EME for actual costs incurred by functional area in providing support services, or in the case of specific tasks requested by Midwest Generation, the amount negotiated for the task. Actual costs billable under this agreement for the years ended December 31, 2005, 2004 and 2003 were $6.9 million, $6.1 million and $6.3 million, respectively.

       Midwest Generation had payables of $1.5 million and $2.6 million due to Midwest Generation EME at December 31, 2005 and 2004, respectively, related to these agreements.

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New Accounting Pronouncements

       In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, "Inventory Costs." SFAS No. 151 requires that abnormal amounts of idle facility expense, freight, handling costs and spoilage be recognized as current-period charges. Further, SFAS No. 151 requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. Unallocated overheads must be recognized as an expense in the period in which they are incurred. SFAS No. 151 is effective for inventory costs incurred beginning in the first quarter of 2006. Midwest Generation does not expect the adoption of this standard to have a material impact on Midwest Generation's consolidated financial statements.

       In March 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement Obligations (AROs), an interpretation of SFAS 143. This interpretation clarifies that an entity is required to recognize a liability for the fair value of a conditional ARO if the fair value can be reasonably estimated, even though uncertainty exists about the timing and/or method of settlement. This interpretation became effective as of December 31, 2005 for Midwest Generation. Midwest Generation identified conditional AROs related to asbestos removal and disposal costs at its owned buildings and power plant facilities and at retired structures leased at the Powerton Station. Midwest Generation recorded a $1.2 million, after tax, charge as a cumulative effect adjustment for asbestos removal and disposal activities associated with retired Powerton structures that are currently scheduled for demolition in 2007. Midwest Generation has not recorded a liability related to the owned structures because it cannot reasonably estimate fair value of the obligation at this time. The range of time over which Midwest Generation may settle this obligation in the future (demolition or other method) is sufficiently large to not allow for the use of expected present value techniques.

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LIQUIDITY AND CAPITAL RESOURCES

Introduction

       The following discussion of liquidity and capital resources is organized in the following sections:

	Page
Financing Developments	39
Consolidated Cash Flow	39
Capital Expenditures	40
Credit Facility and Indenture Covenants	40
Powerton-Joliet Lease Payments	42
Credit Ratings	42
Contractual Obligations, Commitments and Contingencies	43
Off-Balance Sheet Transactions	46
Environmental Matters and Regulations	46

Financing Developments

       On December 15, 2005, Midwest Generation completed a refinancing of indebtedness. The refinancing was effected through the amendment and restatement of Midwest Generation's existing credit facility, previously amended and restated on April 18, 2005. The credit facility, as previously amended and restated, provided for approximately $343 million of first priority secured institutional term loans due in 2011 and $500 million of first priority secured revolving credit, working capital facilities, $200 million due in 2009 and $300 million due in 2011, with a lender option to require prepayment in 2010.

       The refinancing consisted of, among other things, a reduction in the interest rate applicable to the term loan and the working capital facilities, and a modification of financial covenants. After giving effect to the refinancing, all the facilities carry a lower interest rate of LIBOR + 1.75%. The maturity date of the repriced term loan remains 2011. The previously existing working capital facilities were combined into one $500 million facility, maturing in 2011, with a lender option to require prepayment in 2010. Also, as part of the refinancing, Midwest Generation's financial covenants were modified, with its consolidated interest coverage ratio for the immediately preceding four consecutive fiscal quarters required to be at least 1.40 to 1 (increased from 1.25 to 1), and its secured leverage ratio for the 12-month period ended on the last day of the immediately preceding fiscal quarter required to be no greater than 7.25 to 1 (reduced from 8.75 to 1).

       As of December 31, 2005, Midwest Generation had $333 million outstanding under its term loan and a $500 million working capital facility available for working capital requirements, including credit support for hedging activities. As of December 31, 2005, approximately $175 million was utilized under the working capital facility.

Consolidated Cash Flow

       At December 31, 2005, Midwest Generation had cash and cash equivalents of $124.1 million, compared to $156.2 million at December 31, 2004. Net working capital at December 31, 2005 was $395.4 million, compared to $159.6 million at December 31, 2004. The increase in working capital was primarily the result of $328.1 million in loans receivable from EMMT, which loans were made by Midwest Generation, to fund collateral under margining agreements, a $151.8 million increase in receivables from EMMT related to power sales and emission sales, partially offset by a $180.6 million

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increase in net liabilities under price risk management related to electricity contracts and financial instruments and a $49.0 million increase in the current portion due from lease financings.

       Net cash provided by operating activities totaled $145.3 million, $190.5 million and $97.2 million in 2005, 2004 and 2003, respectively. Midwest Generation's significant profits in 2005 contributed to net cash provided by operating activities, partially offset by the timing of cash receipts and disbursements related to working capital items, as described above.

       Net cash used in financing activities totaled $256.3 million, $37.8 million and $94.8 million in 2005, 2004 and 2003, respectively. In 2005, Midwest Generation paid a $330.2 million distribution to its parent, repaid $493.0 million of long-term debt, received a $300 million capital contribution from its parent and borrowed $328.4 million of long-term debt. In 2004, Midwest Generation refinanced all its affiliate debt by completing a $1 billion private offering of secured notes and borrowing $700 million under a new term loan facility. Midwest Generation used these proceeds primarily to pay off the $692.7 million of debt that was due to its affiliate in December 2004 and to make the approximately $960 million termination payment under the Collins Station lease. Midwest Generation settled the remaining balance of its affiliate debt by receiving a $2.2 billion non-cash equity contribution from its parent. Midwest Generation also entered into a new $200 million working capital facility that replaced a prior facility, of which $40 million had been drawn during 2004 and subsequently paid off by December 31, 2004. In 2004, Midwest Generation generated excess cash flow as defined in its new credit agreement which allowed Midwest Generation to make an $87.9 million cash distribution to its parent.

       Net cash provided by (used in) investing activities totaled $78.9 million, $(33.0) million and $(40.6) million in 2005, 2004 and 2003, respectively. The 2005 increase in cash provided by investing activities was primarily due to an increase in the proceeds received from the sale of excess S02 allowances, proceeds received from the sale of Collins Station assets and the sale of $20.0 million of auction rate security investments. The 2004 decrease in cash used in investing activities was attributable to higher proceeds received from the sale of excess S02 allowances and lower capital expenditures, partially offset by net purchases of auction rate securities of $20 million and a $9.8 million net loan advance to EMMT under its revolving credit agreement.

       Midwest Generation's principal sources of liquidity are cash on hand, $500 million of available credit under its working capital facility, payments by EME under the intercompany notes issued in connection with the Powerton-Joliet facilities sale-leaseback and future cash flow from operations.

Capital Expenditures

       Midwest Generation plans to spend $49.9 million, $35.4 million and $18.3 million in 2006, 2007 and 2008, respectively, for capital expenditures. These expenditures will primarily be for non-environmental related projects such as upgrades to dust collection/mitigation systems and various other projects. Included in the planned spending above is $2.7 million, $3.1 million and $6.3 million related to environmental improvements. Midwest Generation plans to finance these capital expenditures by cash generated from operations.

Credit Facility and Indenture Covenants

       Midwest Generation is bound by the covenants in its credit agreement and indenture as well as certain covenants under the Powerton-Joliet lease documents with respect to Midwest Generation making payments under the leases. These covenants include restrictions on the ability to, among other things, incur debt, create liens on its property, merge or consolidate, sell assets, make investments, engage in

40

transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions, engage in other lines of business or engage in transactions for any speculative purpose. In addition, the credit agreement contains financial covenants binding on Midwest Generation.

Covenants in Credit Agreement

       In order for Midwest Generation to make a distribution, it must be in compliance with the covenants specified under its credit agreement, including maintaining the following two financial performance requirements:

•

At the end of each fiscal quarter, Midwest Generation's consolidated interest coverage ratio for the immediately preceding four consecutive fiscal quarters must be at least 1.40 to 1. The consolidated interest coverage ratio is defined as the ratio of consolidated net income (plus or minus specified amounts as set forth in the credit agreement), to consolidated interest expense (as more specifically defined in the credit agreement). During the twelve months ended December 31, 2005, the interest coverage ratio was 6.40 to 1.

•

Midwest Generation's secured leverage ratio for the 12-month period ended on the last day of the immediately preceding fiscal quarter may be no greater than 7.25 to 1. The secured leverage ratio is defined as the ratio of the aggregate principal amount of Midwest Generation secured debt plus all indebtedness of a subsidiary of Midwest Generation, to the aggregate amount of consolidated net income (plus or minus specified amounts as set forth in the credit agreement). During the twelve months ended December 31, 2005, the secured leverage ratio was 1.99 to 1.

       In addition, Midwest Generation's distributions are limited in amount. Under the terms of Midwest Generation's credit agreement, Midwest Generation is permitted to distribute 75% of its excess cash flow (as defined in the credit agreement). In addition, if equity is contributed to Midwest Generation, Midwest Generation is permitted to distribute 100% of excess cash flow until the aggregate portion of distributions that Midwest Generation attributed to the equity contribution equals the amount of the equity contribution. Because EME made a $300 million equity contribution to Midwest Generation on April 19, 2005, Midwest Generation is permitted to distribute 100% of excess cash flow until the aggregate portion of such distributions attributed to that equity contribution equals $300 million. After taking into account Midwest Generation's most recent distribution in January 2006, $177 million of the equity contribution is still available for this purpose. To the extent Midwest Generation makes a distribution which is not fully attributed to an equity contribution, Midwest Generation is required to make concurrently with such distribution an offer to repay debt in an amount equal to the excess, if any, of one-third of such distribution over the amount attributed to the equity contribution.

       In January 2005, Midwest Generation made a distribution of $61 million and, as required under its credit agreement, Midwest Generation offered to prepay $20 million of the term loan, of which $5 million was accepted by certain lenders and repaid on January 24, 2005. Midwest Generation subsequently made a voluntary prepayment, as provided under the credit agreement, of $15 million on January 28, 2005. In April 2005 and October 2005, Midwest Generation made additional distributions of $109 million and $160 million, respectively. On January 24, 2006, Midwest Generation made a distribution of $185 million to Edison Mission Midwest Holdings.

Covenants in Indenture

       Midwest Generation's indenture contains restrictions on its ability to make a distribution substantially similar to those in the credit agreement. Failure to achieve the conditions required for distributions will

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not result in a default under the indenture, nor does the indenture contain any other financial performance requirements.

Powerton-Joliet Lease Payments

       As part of the sale-leaseback of the Powerton and Joliet Stations, Midwest Generation loaned the proceeds (in the original amount of $1.367 billion) to EME in exchange for promissory notes in the same aggregate amount. EME's obligations under the promissory notes payable to Midwest Generation are general corporate obligations of EME and are not contingent upon receiving distributions from its subsidiaries. There is no assurance that EME will have sufficient cash flow to meet these obligations. For additional discussion, see "Results of Operations—Related Party Transactions—Notes Receivable from EME." Furthermore, EME has guaranteed Midwest Generation's lease obligations under these leases. If EME fails to pay under its guarantee, including payments due under the Powerton-Joliet leases in the event that Midwest Generation could not make such payments, this would result in an event of default under the Powerton and Joliet leases. This event would have a material adverse effect on Midwest Generation.

Credit Ratings

Overview

       The credit ratings for EME, Midwest Generation and EMMT are as follows:

		Moody's Rating	S&P Rating
EME		B1	B+
Midwest Generation:
	First priority senior secured rating	Ba3	BB-
	Second priority senior secured rating	B1	B
EMMT		Not Rated	B+

       Midwest Generation cannot provide assurance that the credit ratings above will remain in effect for any given period of time or that one or more of these ratings will not be lowered. Midwest Generation notes that these credit ratings are not recommendations to buy, sell or hold securities and may be revised at any time by a rating agency.

Credit Rating of EMMT

       Midwest Generation sells merchant energy and capacity and purchases its natural gas through EMMT, which currently has a below investment grade credit rating. In order to support Midwest Generation's forward sales and hedging, historically, EME (which also has a below investment grade credit rating) provided collateral in the form of cash and letters of credit for the benefit of EMMT's counterparties. Currently, Midwest Generation provides credit support for forward contracts entered into by EMMT related to the Illinois Plants. Midwest Generation is expected to have cash on hand and has a $500 million working capital facility that can be used to provide the necessary credit support. As of December 31, 2005, approximately $175 million was utilized under this facility.

       As of December 31, 2005, Midwest Generation had $328.1 million in loans receivable from EMMT. EMMT borrows under its revolving credit agreement with Midwest Generation to provide credit support for futures and forward contracts. Loans provided under this revolving credit agreement are repaid by

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EMMT upon the return of the funds under the terms of the related forward contracts. The amount repaid includes interest earned, if any, under margining agreements supporting such contracts.

       Midwest Generation anticipates that sales of its power through EMMT may require additional credit support, depending upon market conditions and the strategies adopted for the sale of this power. Changes in forward market prices and margining requirements and increases in merchant sales could further increase the need for credit support related to price risk management activities. Midwest Generation is able to provide collateral to support bilateral contracts for power and fuel to the extent that any such transactions relate to its merchant energy operations. Depending on market conditions and the volume and duration of forward sales, there is no assurance that Midwest Generation will be able to provide sufficient credit support to EMMT.

Contractual Obligations, Commitments and Contingencies

Contractual Obligations

       The following table summarizes Midwest Generation's significant contractual obligations as of December 31, 2005.

				Payments Due by Period (in millions)
Contractual Obligations		Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Long-term debt(1)		$	2,411.4	$	120.8	$	242.9	$	242.1	$	1,805.6
Lease financing			1,851.3		184.9		369.9		354.9		941.6
Operating lease obligations			144.3		19.4		33.0		24.5		67.4
Purchase obligations:
	Capital improvements		7.1		7.1		—		—		—
	Calumet Energy Team contract		20.5		3.8		7.9		8.4		0.4
	Fuel supply contracts		494.2		152.9		196.5		125.6		19.2
	Coal transportation		653.3		219.8		280.5		153.0		—
Employee benefit plan contribution(2)			7.9		7.9		—		—		—
Total Contractual Obligations		$	5,590.0	$	716.6	$	1,130.7	$	908.5	$	2,834.2

(1)

See "Midwest Generation, LLC Notes to Consolidated Financial Statements—Note 7. Long-Term Debt" for additional details. Table assumes long-term debt is held to maturity. Amount also includes interest payments over life of debt.

(2)

Amount includes estimated contribution to the pension and postretirement benefits other than pensions plans. The estimated contributions beyond 2006 are not available. For more information, see "Midwest Generation, LLC Notes to Consolidated Financial Statements—Note 10. Employee Benefit Plans."

Lease Financing

       In August 2000, Midwest Generation entered into a sale-leaseback transaction with respect to the Powerton-Joliet power facilities to third-party lessors for an aggregate purchase price of $1.367 billion. Midwest Generation loaned the proceeds from the sale of the facilities to EME. Under the terms of the leases (33.75 years for Powerton and 30 years for Joliet), Midwest Generation makes semi-annual lease payments on each January 2 and July 2, which began January 2, 2001. EME guarantees Midwest Generation's payments under the leases. If a lessor intends to sell its interest in the Powerton or Joliet power facility, Midwest Generation has a right of first refusal to acquire the interest at fair market value. Under the terms of each lease, Midwest Generation may request a lessor, at its option, to refinance the

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lessor debt, which, if completed, would affect the base lease rent. Midwest Generation can make lease payments from the principal and interest payments it receives from EME under the intercompany notes as well as Midwest Generation's cash flow from operating activities. However, in certain situations, the Powerton-Joliet lease documentation restricts the ability of Midwest Generation to use cash flow from its operating activities to make lease payments. Midwest Generation is also required to pay operating expenses and other expenses, including interest and principal on its debt. The gain on the sale of the power facilities has been deferred and is being amortized over the term of the leases. For more information on Midwest Generation's loans to EME, see "Item 1A. Risk Factors."

       In the event of a default under the leases, each lessor can exercise all its rights under the applicable lease, including repossessing the power plant and seeking monetary damages. Each lease sets forth a termination value payable upon termination for default and in certain other circumstances, which generally declines over time and in the case of default may be reduced by the proceeds arising from the sale of the repossessed power plant. A default under the terms of a lease could result in a loss of Midwest Generation's ability to use the power plant subject to that lease, and would have a material adverse effect on Midwest Generation's results of operations and financial position.

Calumet Energy Team Contract

       At December 31, 2005, Midwest Generation was party to a long-term power purchase contract with Calumet Energy Team LLC entered into as part of the settlement agreement with Commonwealth Edison, which terminated Midwest Generation's obligation to build additional gas-fired generation in the Chicago area. The contract requires Midwest Generation to pay a monthly capacity payment and gives Midwest Generation an option to purchase energy from Calumet Energy Team at prices based primarily on operations and maintenance and fuel costs.

Fuel Supply Contracts

       At December 31, 2005, Midwest Generation had fuel purchase commitments with various third-party suppliers for the purchase of coal. The remaining contracts' lengths range from one year to seven years. The minimum commitments are based on the contract provisions, which consist of fixed prices, subject to adjustment clauses.

Coal Transportation Agreements

       At December 31, 2005, Midwest Generation had contractual commitments for the transport of coal to its facilities, with remaining contract lengths that range from two years to six years. The primary contract is with Union Pacific Railroad (and various delivering carriers) which extends through 2011. Midwest Generation commitments under this agreement are based on actual coal purchases from the Powder River Basin. Accordingly, Midwest Generation's contractual obligations for transportation are based on coal volumes set forth in its fuel supply contracts.

Commitments

Interconnection Agreement

       Midwest Generation has entered into interconnection agreements with Commonwealth Edison to provide interconnection services necessary to connect the Illinois Plants with its transmission systems. Unless terminated earlier in accordance with their terms, the interconnection agreements will terminate on a date mutually agreed to by both parties. Midwest Generation is required to compensate Commonwealth Edison for all reasonable costs associated with any modifications, additions or

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replacements made to the interconnection facilities or transmission systems in connection with any modification, addition or upgrade to the Illinois Plants.

Contingencies

Guarantees and Indemnities

Tax Indemnity Agreement—

       In connection with the sale-leaseback transactions related to the Powerton and Joliet Stations and previously the Collins Station, EME, Midwest Generation and another wholly owned subsidiary of EME entered into tax indemnity agreements. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in the tax indemnity agreement, including specified defaults under the respective leases. The potential indemnity obligation under these tax indemnity agreements could be significant. Due to the nature of these obligations, Midwest Generation cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. Midwest Generation has not recorded a liability related to these indemnities. In connection with the termination of the Collins Station lease in April 2004, Midwest Generation will continue to have obligations under the tax indemnity agreement with the former lease equity investor.

Indemnity Provided as Part of the Acquisition from Commonwealth Edison—

       In connection with the acquisition of the Illinois Plants, Midwest Generation agreed to indemnify Commonwealth Edison with respect to specified environmental liabilities before and after December 15, 1999, the date of sale. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a requirement that Commonwealth Edison take all reasonable steps to mitigate losses related to any such indemnification claim. Due to the nature of the obligation under this indemnity, a maximum potential liability cannot be determined. This indemnification for environmental liabilities is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Except as discussed below, Midwest Generation has not recorded a liability related to this indemnity.

       Midwest Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation Company on February 20, 2003 to resolve a dispute regarding interpretation of its reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific existing asbestos claims and expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the agreement. As a general matter, Commonwealth Edison and Midwest Generation apportion responsibility for future asbestos-related claims based upon the number of exposure sites that are Commonwealth Edison locations or Midwest Generation locations. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement has a five-year term with an automatic renewal provision (subject to the right of either party to terminate). Payments are made under this indemnity upon tender by Commonwealth Edison of appropriate proof of liability for an asbestos-related settlement, judgment, verdict, or expense. There were between 185 and 195 cases for which Midwest Generation was potentially liable and that had not been settled and dismissed at December 31, 2005. Midwest Generation had recorded a $67.4 million liability at December 31, 2005 related to this matter.

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       The amounts recorded by Midwest Generation for the asbestos-related liability are based upon a number of assumptions. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than projected.

Tax Matters

       Midwest Generation is, and may in the future be, under examination by tax authorities with respect to positions it takes in connection with the filing of its tax returns. Matters raised upon tax audit may involve substantial amounts, which, if resolved unfavorably, could possibly be material, though Midwest Generation does not believe such an unfavorable resolution is likely to occur. In Midwest Generation's opinion, it is unlikely that the resolution of any such tax audit matters will have a material adverse effect upon Midwest Generation's financial condition or results of operations.

Off-Balance Sheet Transactions

       Midwest Generation has off-balance sheet activities related to operating leases in place for equipment, primarily leased barges and railcars that have terms which range from as short as 2 months to 15 years. See "—Contractual Obligations, Commitments and Contingencies" for Midwest Generation's minimum operating lease obligations.

Environmental Matters and Regulations

Introduction

       Midwest Generation is subject to environmental regulation by federal, state and local authorities in the United States. Midwest Generation believes that it is in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect its financial position or results of operations. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations, future proceedings that may be initiated by environmental authorities, and settlements agreed to by other companies could affect the costs and the manner in which Midwest Generation conducts its business, and may also cause it to make substantial additional capital expenditures. There is no assurance that Midwest Generation would be able to recover these increased costs from its customers or that Midwest Generation's financial position and results of operations would not be materially adversely affected as a result.

       Typically, environmental laws and regulations require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction, operation or modification of a project or generating facility. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed project, as well as require extensive modifications to existing projects, which may involve significant capital expenditures. If Midwest Generation fails to comply with applicable environmental laws, it may be subject to injunctive relief or penalties and fines imposed by regulatory authorities.

Federal—United States of America

Clean Air Act

Clean Air Interstate Rule—

       On May 12, 2005, the Clean Air Interstate Rule (CAIR) was published in the Federal Register. The CAIR requires 28 eastern states and the District of Columbia to address ozone attainment issues by

46

reducing regional nitrogen oxide (NOx) and sulfur dioxide (SO2) emissions. The CAIR reduces the current Clean Air Act Title IV Phase II SO2 emissions allowance cap for 2010 and 2015 by 50% and 65%, respectively. The CAIR also reduces regional NOx emissions in 2009 and 2015 by 53% and 61%, respectively, from 2003 levels. The CAIR has been challenged in court by state, environmental and industry groups, which may result in changes to the substance of the rule and to the timetables for implementation.

       Midwest Generation expects that compliance with the CAIR and the regulations and revised state implementation plans developed as a consequence of the CAIR will result in increased capital expenditures and operating expenses. Given the uncertainty of the requirements that will need to be implemented and the options available to meet the NOx and SO2 reductions fleetwide, Midwest Generation at this time cannot accurately estimate the cost to meet these obligations. Midwest Generation's approach to meeting these obligations will consist of a blending of capital expenditure and emission allowance purchases that will be based on an ongoing assessment of the dynamics of its market conditions.

Mercury Regulation—

       The Clean Air Mercury Rule (CAMR), published in the Federal Register on May 18, 2005, creates a market-based cap-and-trade program to reduce nationwide utility emissions of mercury in two distinct phases. In the first phase of the program, which will come into effect in 2010, the annual nationwide cap will be 38 tons. Emissions of mercury are to be reduced primarily by taking advantage of mercury reductions achieved by reducing SO2 and NOx emissions under the CAIR. In the second phase, which is to take effect in 2018, coal-fired power plants will be subject to a lower annual cap, which will reduce emissions nationwide to 15 tons. States may join the trading program by adopting the CAMR model trading rule in state regulations, or they may adopt regulations that mirror the necessary components of the model trading rule. States are not required to adopt a cap-and-trade program and may promulgate alternative regulations, such as command and control regulations, that are equivalent to or more stringent than the CAMR's suggested cap-and-trade program. Any program adopted by a state must be approved by the United States Environmental Protection Agency (US EPA).

       Contemporaneous with the adoption of the CAMR, the US EPA rescinded its previous finding that mercury emissions from coal-fired power plants had to be regulated as a hazardous air pollutant pursuant to Section 112 of the federal Clean Air Act, which would have imposed technology-based standards. Litigation has been filed challenging the US EPA's rescission action and claiming that the agency should have imposed technology-based limitations on mercury emissions instead of adopting a market-based program. Litigation was also filed to challenge the CAMR. As a result of these challenges, the CAMR rules may change.

       If Illinois implements the CAMR by adopting a cap-and-trade program for achieving reductions in mercury emissions, Midwest Generation may have the option to purchase mercury emission allowances, to install pollution control equipment, to otherwise alter its operations to reduce mercury emissions, or to implement some combination thereof. Because the mercury state implementation plans are not due until the fourth quarter of 2006 and such plans may not adopt the CAMR's cap-and-trade program, and because Midwest Generation cannot predict the outcome of the legal challenge to the CAMR and the US EPA's decision not to regulate mercury emissions pursuant to Section 112 of the federal Clean Air Act, the full impact of this regulation currently cannot be assessed. Additional capital costs, particularly for the Illinois coal units, related to these regulations could be required in the future and they could be material. Midwest Generation's approach to meeting these obligations will continue to be based upon an ongoing assessment of applicable legal requirements and market conditions.

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National Ambient Air Quality Standards—

       Ambient air quality standards for ozone and fine particulate matter were adopted by the US EPA in July 1997. These standards were challenged in the courts, and on March 26, 2002, the United States Court of Appeals for the District of Columbia Circuit upheld the US EPA's revised ozone and fine particulate matter ambient air quality standards.

       The US EPA designated non-attainment areas for the 8-hour standard on April 30, 2004, and for the fine particulate standard on January 5, 2005. Almost all of Midwest Generation's facilities are located in counties that have been identified as being in non-attainment with both standards. States are required to revise their implementation plans for the ozone and particulate matter standards within three years of the effective date of the respective non-attainment designations. The revised state implementation plans are likely to require additional emission reductions from facilities that are significant emitters of ozone precursors and particulates. Any additional obligations on Midwest Generation's facilities to further reduce their emissions of SO2, NOx and fine particulates to address local non-attainment with the 8-hour ozone and fine particulate matter standards will not be known until the states revise their implementation plans. Depending upon the final standards that are adopted, Midwest Generation may incur substantial costs or experience other financial impacts resulting from required capital improvements or operational changes.

       On January 17, 2006, the US EPA proposed revisions to its fine particulate standard. Under the proposal, the annual standard would remain the same but the 24-hour fine particulate standard would be significantly lowered. The US EPA is under court order to issue a final rule in December 2006. If the US EPA retains its proposed new 24-hour standard or lowers the annual standard, states may be required to impose further emission reductions beyond what would be necessary to meet the existing standards. Although Midwest Generation may incur substantial costs or experience financial impacts as a result of any new standards, the uncertainties associated with this ongoing rulemaking at this time render Midwest Generation unable to accurately estimate the costs to meet any such obligation. Midwest Generation anticipates, however, that any such further emission reduction obligations would not be imposed until 2010 at the earliest.

Regional Haze—

       The goal of the 1999 regional haze regulations is to restore visibility in mandatory federal Class I areas, such as national parks and wilderness areas, to natural background conditions in 60 years. Sources such as power plants that are reasonably anticipated to contribute to visibility impairment in Class I areas may be required to install Best Available Retrofit Technology (BART) or implement other control strategies to meet regional haze control requirements. States are required to revise their state implementation plans to demonstrate reasonable further progress towards meeting regional haze goals. Emission reductions that are achieved through other ongoing control programs may be sufficient to demonstrate reasonable progress toward the long-term goal, particularly for the first 10 to 15 year phase of the program. States must develop implementation plans by December 2007. It is possible that sources that are subject to the CAIR will be able to satisfy their obligations under the regional haze regulations through compliance with the more stringent CAIR. However, until the state implementation plans are revised, Midwest Generation cannot predict whether it will be required to install BART or implement other control strategies, and cannot identify the financial impacts of any additional control requirements.

New Source Review Requirements—

       Since 1999, the US EPA has pursued a coordinated compliance and enforcement strategy to address Clean Air Act New Source Review (NSR) compliance issues at the nation's coal-fired power plants. The

48

NSR regulations impose certain requirements on facilities, such as electric generating stations, in the event that modifications are made to air emissions sources at a facility. The US EPA's strategy included both the filing of a number of suits against power plant owners, and the issuance of a number of administrative notices of violation to power plant owners alleging NSR violations. Midwest Generation has not been named as a defendant in these lawsuits and has not received any administrative Notices of Violation alleging NSR violations at any of its facilities.

       In response to conflicting court decisions concerning the applicable emissions test used to determine whether an operational or physical change at an electric generating station would require the plant to install additional pollution controls, the US EPA, on October 13, 2005, proposed a change to the NSR program. The proposal put forth several options for a new emissions test based on the impact of a facility modification on a facility's maximum hourly emissions or its emissions per unit of energy produced. The existing NSR emissions test is based on the impact of a modification on a generating station's net annual emissions.

       In October 2005, the US EPA announced a revised NSR strategy to take account of recent US EPA rulemakings, such as the CAIR and regional haze rules, affecting coal-fired power plants. Under the revised strategy, while the US EPA will continue to pursue filed cases and cases in active negotiation, it intends to shift its future enforcement focus from coal-fired power plants to other sectors where compliance assurance activities have the potential to produce significant environmental benefits.

       On February 21, 2003, Midwest Generation received a request for information under Section 114 regarding past operations, maintenance and physical changes at the Illinois coal plants from the US EPA. This request was part of the US EPA's industry-wide investigation of compliance by coal-fired plants with the Clean Air Act NSR requirements. On July 28, 2003, Commonwealth Edison received a substantially similar request for information from the US EPA related to these same plants. Under date of February 1, 2005, the US EPA submitted a request for additional information to Midwest Generation. Midwest Generation has provided responses to these requests. Other than these requests for information, no NSR enforcement-related proceedings have been initiated by the US EPA with respect to Midwest Generation's facilities. See also "State—Illinois—Air Quality."

       Developments with respect to changes to the NSR program and NSR enforcement will continue to be monitored by Midwest Generation to assess what implications, if any, they will have on the operation of its power plants or on Midwest Generation's results of operations or financial condition.

Clean Water Act—Cooling Water Intake Structures

       On July 9, 2004, the US EPA published the final Phase II rule implementing Section 316(b) of the Clean Water Act establishing standards for cooling water intake structures at existing electrical generating stations that withdraw more than 50 million gallons of water per day and use more than 25% of that water for cooling purposes. The purpose of the regulation is to reduce substantially the number of aquatic organisms that are pinned against cooling water intake structures or drawn into cooling water systems. Pursuant to the regulation, a demonstration study must be conducted when applying for a new or renewed National Pollutant Discharge Elimination System (NPDES) wastewater discharge permit. If one can demonstrate that the costs of meeting the presumptive standards set forth in the regulation are significantly greater than the costs that the US EPA assumed in its rule making or are significantly disproportionate to the expected environmental benefits, a site-specific analysis may be performed to establish alternative standards. Depending on the findings of the demonstration studies, cooling towers and/or other mechanical means of reducing impingement/ entrainment may be required. Midwest Generation has begun to collect impingement and entrainment data at its potentially affected Illinois Plants to begin the process of determining what corrective actions may need to be taken.

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       After the final promulgation of the Phase II cooling water intake structure regulation, legal challenges were filed by environmental groups, the Attorneys General for six states, a utility trade association and several individual electric power generating companies. These cases have been consolidated and transferred to the United States Court of Appeals for the Second Circuit. A briefing schedule has been established for the case and a decision is not expected until sometime in 2006. The final requirements of the Phase II rule will not be fully known until these appeals are resolved and, if necessary, the regulation is revised by the US EPA. Although the Phase II rule could have a material impact on Midwest Generation's operations, Midwest Generation cannot reasonably determine the financial impact on it at this time because it is in the beginning stages of collecting the data required by the regulation and due to the legal challenges mentioned above which may affect the obligations imposed by the rule.

Federal Legislative Initiatives

       There have been a number of bills introduced in Congress that would amend the Clean Air Act to specifically target emissions of specific pollutants from electric utility generating stations. These bills would mandate reductions in emissions of NOx, SO2 and mercury. Some bills would also impose limitations on carbon dioxide emissions. The various proposals differ in many details, including the timing of any required reductions; the extent of required reductions; and the relationship of any new obligations that would be imposed by these bills with existing legal requirements. There is significant uncertainty as to whether any of the proposed legislative initiatives will pass in its current form or whether any compromise can be reached that would facilitate passage of legislation. Accordingly, Midwest Generation is not able to evaluate the potential impact of these proposals at this time.

Environmental Remediation

       Under various federal, state and local environmental laws and regulations, a current or previous owner or operator of any facility, including an electric generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products located at that facility, and may be held liable to a governmental entity or to third parties for property damage, personal injury, natural resource damages, and investigation and remediation costs incurred by these parties in connection with these releases or threatened releases. In addition, persons who arrange for the disposal or treatment of hazardous or toxic substances at a disposal or treatment facility may be liable for the costs to remediate releases of hazardous substances from such facilities even where the disposal of such wastes was undertaken in compliance with applicable laws. Many of these laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly referred to as CERCLA, as amended by the Superfund Amendments and Reauthorization Act of 1986, impose liability without regard to whether the owner knew of or caused the presence of the hazardous substances, and courts have interpreted liability under these laws to be strict and joint and several.

       With respect to Midwest Generation's potential liabilities arising under CERCLA or similar laws for the investigation and remediation of contaminated property, Midwest Generation accrues a liability to the extent the costs are probable and can be reasonably estimated. Midwest Generation has accrued approximately $2 million at December 31, 2005 for estimated environmental investigation and remediation costs for the Illinois Plants. This estimate is based upon the number of sites, the scope of work and the estimated costs for environmental activity where such expenditures could be reasonably estimated. Future estimated costs may vary based on changes in regulations or requirements of federal, state, or local governmental agencies, changes in technology, and actual costs of disposal. In addition, future remediation costs will be affected by the nature and extent of contamination discovered at the sites

50

that requires remediation. Given the prior history of the operations at its facilities, Midwest Generation cannot be certain that the existence or extent of all contamination at its sites has been fully identified. However, based on available information, management believes that future costs in excess of the amounts disclosed on all known and quantifiable environmental contingencies will not be material to Midwest Generation's financial position.

       Federal, state and local laws, regulations and ordinances also govern the removal, encapsulation or disturbance of asbestos-containing materials when these materials are in poor condition or in the event of construction, remodeling, renovation or demolition of a building. Those laws and regulations may impose liability for release of asbestos-containing materials and may provide for the ability of third parties to seek recovery from owners or operators of these properties for personal injury associated with asbestos-containing materials. In connection with the ownership and operation of its facilities, Midwest Generation may be liable for these costs. Midwest Generation has agreed to indemnify Commonwealth Edison for specified environmental liabilities. See "Contractual Obligations, Commitments and Contingencies—Contingencies—Guarantees and Indemnities" for a discussion of this indemnity agreement.

State—Illinois

Air Quality

       Beginning with the 2003 ozone season (May 1 through September 30), Midwest Generation has been required to comply with an average NOx emission rate of 0.25 lb NOx/mmBtu of heat input. This limitation is commonly referred to as the East St. Louis State Implementation Plan. This regulation is a State of Illinois requirement. Each of the Illinois Plants complied with this standard in 2004. Beginning with the 2004 ozone season, the Illinois Plants became subject to the federally mandated "NOx SIP Call" regulation that provided ozone-season NOx emission allowances to a 19-state region east of the Mississippi. This program provides for NOx allowance trading similar to the SO2 (acid rain) trading program already in effect. Midwest Generation has qualified for early reduction allowances by reducing NOx emissions at various plants ahead of the imposed deadline. Additionally, the installation of emission control technology at certain plants has demonstrated over-compliance at those individual plants with the pending NOx emission limitations. Finally, NOx emission trading will be utilized, as needed, to comply with any shortfall at plants where installation of emission control technology has demonstrated reductions at levels short of the NOx limitations.

       During 2004, the Illinois Plants stayed within their NOx allocations by augmenting their allocation with early reduction credits generated within the fleet. In 2005, the Illinois Plants used banked allowances, along with some purchased allowances, to stay within their NOx allocations. After 2005, Midwest Generation plans to continue to purchase allowances while evaluating the cost and benefits of various technologies to determine whether any additional pollution controls should be installed at the Illinois Plants.

       On January 5, 2006, Illinois Governor Rod Blagojevich announced that he was directing the Illinois Environmental Protection Agency to draft rules that would impose state limits on mercury emissions from coal-fired power plants which would be more stringent than the US EPA's CAMR issued in May 2005. Illinois is required to submit a state implementation plan (SIP) for CAMR to the US EPA by November 17, 2006. The Governor or his spokespersons have said that rules to be submitted to the Illinois Pollution Control Board will require a 90% reduction in mercury emissions averaged across company-owned Illinois generators and a minimum reduction of 75% for individual generating units by June 30, 2009. A 90% reduction at each generating unit would be required by 2013. Buying or selling of

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emission allowances under the CAMR federal cap and trade program would be prohibited. The Pollution Control Board must act on proposed rules submitted by the Illinois EPA after evidentiary hearings, including the presentation and cross-examination of expert testimony. After the Pollution Control Board adopts rules, they must be submitted to the General Assembly's Joint Committee on Administrative Rules for notice, hearing, and adoption, rejection or modification. Rules adopted through such state proceedings are also subject to court appeal. Midwest Generation is not able at this time to predict the final form of these rules or provide an estimate of their financial impact.

       During 2006, the Illinois EPA is expected to begin the process of developing a SIP to implement the federal CAIR which requires reductions in NOx and SO2. This SIP is to be submitted to the US EPA by September 11, 2006. The Illinois EPA has also begun to develop SIPs to meet National Ambient Air Quality Standards for 8-hour ozone and fine particulates. These SIPs will be developed with the intent of bringing non-attainment areas, such as Chicago, into attainment. They are expected to deal with all emission sources, not just power generators, and to address emissions of NOx, SO2, and Volatile Organic Carbon. These SIPs are to be submitted to the US EPA by June 15, 2007 for 8-hour ozone, and by April 5, 2008 for fine particulates. Midwest Generation is not able at this time to predict the final form of the SIPs or to estimate their financial impact.

Water Quality

       The Illinois EPA is reviewing the water quality standards for the Des Plaines River adjacent to the Joliet Station and immediately downstream of the Will County Station to determine if the use classification should be upgraded. An upgraded use classification could result in more stringent limits being applied to wastewater discharges to the river from these plants. If the existing use classification is changed, the limits on the temperature of the discharges from the Joliet and Will County plants may be made more stringent. The Illinois EPA has also begun a review of the water quality standards for the Chicago River and Chicago Sanitary and Ship Canal which are adjacent to the Fisk and Crawford Stations. Proposed changes to the existing standards are still being developed. Accordingly, Midwest Generation is not able to estimate the financial impact of potential changes to the water quality standards. However, the cost of additional cooling water treatment, if required, could be substantial.

Climate Change

       The Kyoto Protocol on climate change officially came into effect on February 16, 2005. Under the Kyoto Protocol, the United States would have been required, by 2008-2012, to reduce its greenhouse gas emissions, such as carbon dioxide, by 7% from 1990 levels. Under the Bush administration, however, the United States has chosen not to pursue ratification of the Kyoto Protocol. Instead, the Bush administration has proposed several alternatives to mandatory reductions of greenhouse gases.

       There have been petitions from states and other parties to compel the US EPA to regulate greenhouse gases under the Clean Air Act. Also, in 2004, several states and environmental organizations brought a complaint in federal court in New York, alleging that several electric utility corporations are jointly and severally liable under a theory of public nuisance for damages caused by their alleged contribution to global warming resulting from carbon dioxide emissions from coal-fired power plants owned and operated by these companies or their subsidiaries. Midwest Generation was not named as a defendant in the complaint. The case was dismissed and is currently on appeal with the United States Court of Appeals for the Second Circuit.

       The ultimate outcome of the climate change debate could have a significant economic effect on Midwest Generation. Any legal obligation that would require Midwest Generation to reduce substantially its emissions of carbon dioxide would likely require extensive mitigation efforts and would raise considerable uncertainty about the future viability of fossil fuels, particularly coal, as an energy source for new and existing electric generating facilities.

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MARKET RISK EXPOSURES

Introduction

       Midwest Generation sells all its energy into wholesale power markets. Midwest Generation's primary market risk exposures arise from fluctuations in electricity, capacity and fuel prices, emission allowances, and transmission rights. Additionally, Midwest Generation's financial results can be affected by fluctuations in interest rates. Midwest Generation manages these risks in part by using derivative financial instruments in accordance with established policies and procedures.

       This section discusses these market risk exposures under the following headings:

	Page
Commodity Price Risk	53
Derivative Financial Instruments	59
Credit Risk	59
Interest Rate Risk	60

Commodity Price Risk

Overview

       Midwest Generation's revenues and results of operations of its merchant power plants will depend upon prevailing market prices for capacity, energy, ancillary services, emission allowances or credits, coal, natural gas and fuel oil, and associated transportation costs in PJM. Among the factors that influence the price of energy, capacity and ancillary services in PJM are:

•

prevailing market prices for coal, natural gas and fuel oil, and associated transportation;

•

the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities and/or technologies that may be able to produce electricity at a lower cost than the Illinois Plants and/or increased access by competitors to Midwest Generation's markets as a result of transmission upgrades;

•

transmission congestion in and to each market area and the resulting differences in prices between delivery points;

•

the market structure rules to be established for, and regulatory developments affecting, PJM, including any price limitations and other mechanisms adopted to address volatility or illiquidity in these markets or the physical stability of the system;

•

the cost and availability of emission credits or allowances;

•

the availability, reliability and operation of competing power generation facilities, including nuclear generating plants where applicable, and the extended operation of such facilities beyond their presently expected dates of decommissioning;

•

weather conditions prevailing in surrounding areas from time to time; and

•

changes in the demand for electricity or in patterns of electricity usage as a result of factors such as regional economic conditions and the implementation of conservation programs.

       A discussion of commodity price risk for the Illinois Plants is set forth below.

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Introduction

       Midwest Generation sells all its energy and capacity into wholesale power markets through EMMT. EMMT enters into forward contracts for Midwest Generation's electric output in order to provide more predictable earnings and cash flow. When appropriate, EMMT manages the spread between electric prices and fuel prices through the use of forward contracts, swaps, futures, or options contracts. There is no assurance that contracts to hedge changes in market prices will be effective.

       Midwest Generation's operations expose it to commodity price risk, which represents the potential loss that can be caused by a change in the market value of a particular commodity. Commodity price risks are actively monitored by a risk management committee to ensure compliance with Midwest Generation's risk management policies through EMMT. Policies are in place which define risk management processes, and procedures exist which allow for monitoring of all commitments and positions with regular reviews by a risk management committee. Despite this, there can be no assurance that all risks have been accurately identified, measured and/or mitigated.

       In addition to prevailing market prices, Midwest Generation's ability to derive profits from the sale of electricity will be affected by the cost of production, including costs incurred to comply with environmental regulations. The costs of production of the units vary and, accordingly, depending on market conditions, the amount of generation that will be sold from the units is expected to vary from unit to unit.

       EMMT uses "value at risk" to identify, measure, monitor and control Midwest Generation's overall market risk exposure. The use of value at risk allows management to aggregate overall commodity risk, compare risk on a consistent basis and identify risk factors. Value at risk measures the possible loss over a given time interval, under normal market conditions, at a given confidence level. Given the inherent limitations of value at risk and relying on a single risk measurement tool, EMMT supplements this approach with the use of stress testing and worst-case scenario analysis for key risk factors, as well as stop loss limits and counterparty credit exposure limits.

Hedging Strategy

       To reduce its exposure to market risk, Midwest Generation hedges a portion of its merchant portfolio risk through EMMT. To the extent that Midwest Generation does not hedge its merchant portfolio, the unhedged portion will be subject to the risks and benefits of spot market price movements. Hedge transactions are primarily implemented through the use of contracts cleared on the Intercontinental Trading Exchange and the New York Mercantile Exchange. Hedge transactions are also entered into as forward sales to utilities and power marketing companies.

       The extent to which Midwest Generation hedges its market price risk depends on several factors. First, Midwest Generation evaluates over-the-counter market prices to determine whether sales at forward market prices are sufficiently attractive compared to assuming the risk associated with fluctuating spot market sales. Second, Midwest Generation's ability to enter into hedging transactions depends upon its and EMMT's credit capacity and upon the forward sales markets having sufficient liquidity to enable Midwest Generation to identify appropriate counterparties for hedging transactions.

       Midwest Generation is permitted to use its working capital facility and cash on hand to provide credit support for hedging transactions related to the Illinois Plants entered into by EMMT. Utilization of this credit facility in support of these hedging transactions provides additional liquidity support for

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implementation of Midwest Generation's contracting strategy for the Illinois Plants. See "—Credit Risk," below.

Energy Price Risk

       All the energy and capacity from the Illinois Plants is sold under terms, including price and quantity, negotiated by EMMT, an EME subsidiary engaged in the power marketing and trading business, with customers through a combination of bilateral agreements, forward energy sales and spot market sales. As discussed further below, power generated at the Illinois Plants has generally been sold into the PJM market. Capacity prices for merchant energy sales within PJM are, and are expected in the near term to remain, substantially lower than those Midwest Generation received under the power purchase agreements with Exelon Generation.

       Prior to May 1, 2004, the primary markets available to Midwest Generation for wholesale sales of electricity from the Illinois Plants were direct "wholesale customers" and broker arranged "over-the-counter customers." Effective May 1, 2004, the transmission system of Commonwealth Edison was placed under the control of PJM as the Northern Illinois control area, and on October 1, 2004, the transmission system of AEP was integrated into PJM, linking eastern PJM and the Northern Illinois control areas of the PJM system and allowing the Illinois Plants to be dispatched into the broader PJM market. Further, on April 1, 2005, MISO commenced operation, linking portions of Illinois, Wisconsin, Indiana, Michigan, and Ohio, as well as other states in the area, in the MISO, where there is a bilateral market and day-ahead and real-time markets based on locational marginal pricing similar to that of PJM.

       Midwest Generation sells its power into PJM at spot prices based upon locational marginal pricing and is no longer required to arrange and pay separately for transmission when making sales to wholesale buyers within the PJM system. Hedging transactions related to the generation of the Illinois units are entered into at the Northern Illinois Hub in PJM, the AEP/Dayton Hub in PJM and, with the advent of MISO, at the Cinergy Hub in MISO. Because of proximity, the Illinois Plants are primarily hedged with transactions at the Northern Illinois Hub, but from time to time may be hedged in limited amounts at the AEP/Dayton Hub and the Cinergy Hub. These trading hubs have been the most liquid locations for these hedging purposes. However, hedging transactions which settle at points other than the Northern Illinois Hub are subject to the possibility of basis risk. See "—Basis Risk" below for further discussion.

       The PJM pool has a short-term market, which establishes an hourly clearing price. The Illinois Plants are situated in the western PJM control area and are physically connected to high-voltage transmission lines serving this market.

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       The following table depicts the average historical market prices for energy per megawatt-hour during 2005 and 2004.

	2005(1)		2004
January	$	38.36	$	27.88	(2)
February		34.92		29.98	(2)
March		45.75		30.66	(2)
April		38.98		27.88	(2)
May		33.60		34.05	(1)
June		42.45		28.58	(1)
July		50.87		30.92	(1)
August		60.09		26.31	(1)
September		53.30		27.98	(1)
October		49.39		30.93	(1)
November		44.03		29.15	(1)
December		64.99		29.90	(1)
Yearly Average	$	46.39	$	29.52

(1)

Represents average historical market prices for energy as quoted for sales into the Northern Illinois Hub. Energy prices were calculated at the Northern Illinois Hub delivery point using hourly real-time prices as published by PJM.

(2)

Represents average historical market prices for energy "Into ComEd." Energy prices were determined by obtaining broker quotes and other public price sources for "Into ComEd" delivery points.

       Forward market prices at the Northern Illinois Hub fluctuate as a result of a number of factors, including natural gas prices, transmission congestion, changes in market rules, electricity demand (which in turn is affected by weather, economic growth, and other factors), plant outages in the region, and the amount of existing and planned power plant capacity. The actual spot prices for electricity delivered by the Illinois Plants into these markets may vary materially from the forward market prices set forth in the table below.

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       The following table sets forth the forward month-end market prices for energy per megawatt-hour for the calendar year 2006 and calendar year 2007 "strips," which are defined as energy purchases for the entire calendar year, as quoted for sales into the Northern Illinois Hub during 2005:

	24-Hour Northern Illinois Hub Forward Energy Prices*
	2006		2007
January 31, 2005	$	34.67	$	33.85
February 28, 2005		36.52		35.61
March 31, 2005		41.49		40.49
April 29, 2005		41.52		39.73
May 31, 2005		40.15		39.45
June 30, 2005		42.73		42.17
July 29, 2005		44.66		43.17
August 31, 2005		51.29		46.79
September 30, 2005		52.74		47.61
October 31, 2005		49.52		43.38
November 30, 2005		53.75		47.73
December 30, 2005		53.08		46.66

*

Energy prices were determined by obtaining broker quotes and information from other public sources relating to the Northern Illinois Hub delivery point.

       The following table summarizes Midwest Generation's hedge position (primarily based on prices at the Northern Illinois Hub) at December 31, 2005:

	2006		2007
Megawatt hours		15,047,414		11,004,000
Average price/MWh(1)	$	44.29	$	48.04

(1)

The above hedge positions include forward contracts for the sale of power during different periods of the year and the day. Market prices tend to be higher during on-peak periods during the day and during summer months, although there is significant variability of power prices during different periods of time. Accordingly, the above hedge position at December 31, 2005 is not directly comparable to the 24-hour Northern Illinois Hub prices set forth above.

Basis Risk

       Sales made from the Illinois Plants in the real-time or day-ahead market receive the actual spot prices at the busbars (delivery points) of the individual plants. In order to mitigate price risk from changes in spot prices at the individual plant busbars, Midwest Generation may enter into cash settled futures contracts as well as forward contracts with counterparties for energy to be delivered in future periods. Currently, a liquid market for entering into these contracts at the individual plant busbars does not exist. A liquid market does exist for a settlement point known as the Northern Illinois Hub. Midwest Generation's price risk management activities use this settlement point (and, to a lesser extent, other similar trading hubs) to enter into hedging contracts. Midwest Generation's revenues with respect to such forward contracts include:

•

sales of actual generation in the amounts covered by the forward contracts with reference to PJM spot prices at the busbar of the plant involved, plus,

57

•

sales to third parties at the price under such hedging contracts at designated settlement points (generally the Northern Illinois Hub) less the cost of power at spot prices at the same designated settlement points.

       Under the PJM market design, locational marginal pricing, which establishes hourly prices at specific locations throughout PJM by considering factors including generator bids, load requirements, transmission congestion and losses, can cause the price of a specific delivery point to be higher or lower relative to other locations depending on how the point is affected by transmission constraints. To the extent that, on the settlement date of a hedge contract, spot prices at the relevant busbar are lower than spot prices at the settlement point, the proceeds actually realized from the related hedge contract are effectively reduced by the difference. This is referred to by Midwest Generation as "basis risk." During 2005, the prices at the Northern Illinois Hub were substantially the same as those at the individual busbars of the Illinois Plants.

Coal Price and Transportation Risk

       The Illinois Plants use approximately 18 million to 20 million tons of coal annually, primarily obtained from the Southern Powder River Basin of Wyoming. Coal purchases are made under a variety of supply agreements with terms ranging from three years to eight years. The following table summarizes the percent of expected coal requirements for the next five years that were under contract at December 31, 2005.

	2006	2007	2008	2009	2010
Percent of coal requirements under contract	100%	91%	32%	32%	33%

       Midwest Generation is subject to price risk for purchases of coal that are not under contract. Prices of Powder River Basin (PRB) coal (with 8,800 Btu per pound heat content and 0.8 pounds of SO2 per MMBtu sulfur content), which is purchased for the Illinois Plants, significantly increased in 2005 due to the curtailment of coal shipments during 2005 due to increased PRB coal demand from other regions (east), rail constraints (discussed below), higher oil and natural gas prices and higher prices for SO2 allowances. On December 30, 2005, the Energy Information Administration reported the price of coal to be $18.48 per ton, which compares to 2004 prices of generally below $7 per ton.

       During 2005, the rail lines that bring coal from the PRB to the Illinois Plants were damaged from derailments caused by heavy rains. The railroads are in the process of making repairs to these rail lines. During 2005, Midwest Generation received sufficient quantities to meet generation requirements. Rail line maintenance is expected to continue in 2006. Based on communication with the transportation provider, Midwest Generation expects to continue receiving a sufficient amount of coal to generate power at historical levels while these repairs are being completed.

58

Derivative Financial Instruments

       The following table summarizes the fair values for outstanding financial instruments used for price risk management activities. The change in fair value of electricity contracts in 2005 as compared to 2004 is attributable to the increase in average market prices for power as compared to contracted prices at December 31, 2005, which is the valuation date, causing the fair value of the contracts to become liabilities instead of assets.

		December 31, 2005			December 31, 2004
		(in thousands)
Commodity price:
	Electricity contracts	$	(203,882	)	$	4,150

       In assessing the fair value of Midwest Generation's derivative financial instruments, EMMT uses a variety of methods and assumptions based on the market conditions and associated risks existing at each balance sheet date. The fair value of commodity price contracts takes into account quoted market prices, time value of money, volatility of the underlying commodities and other factors. A 10% change in the market price at December 31, 2005 would increase or decrease the fair value of outstanding derivative commodity price contracts by $142.3 million. The following table summarizes the maturities and the related fair value, based on actively traded prices, of Midwest Generation's commodity price risk management assets and liabilities as of December 31, 2005 (in thousands):

	Total Fair Value			Maturity <1 year			Maturity 1 to 3 years			Maturity 4 to 5 years		Maturity >5 years
Prices actively quoted	$	(203,882	)	$	(176,490	)	$	(27,392	)	$	—	$	—

Credit Risk

       In conducting Midwest Generation's price risk management activities, EMMT contracts with a number of utilities, energy companies, financial institutions and other companies, collectively referred to as counterparties. In the event a counterparty were to default on its trade obligation, Midwest Generation would be exposed to the risk of possible loss associated with re-contracting the product at a price different from the original contracted price if the non-performing counterparty were unable to pay the resulting liquidated damages owed to Midwest Generation. Midwest Generation's agreement with EMMT transfers the risk of non-payment of accounts receivable from counterparties to EMMT. Notwithstanding the foregoing, Midwest Generation will not be in default under the senior secured notes and credit agreement if it fails to enforce payment from EMMT in the case of nonpayment of an account receivable from a counterparty, so long as the counterparty is rated investment grade.

       The obligations of Midwest Generation under the senior secured notes and credit agreement are secured by, among other things, an account of EMMT in which EMMT will deposit funds received from third-party counterparties for sales of energy and capacity from the Illinois Plants. See "Results of Operations—Related Party Transactions—EMMT Agreements."

       To manage credit risk, EMMT looks at the risk of a potential default by counterparties. Credit risk is measured by the loss that would be incurred if counterparties failed to perform pursuant to the terms of their contractual obligations. EMMT measures, monitors and mitigates credit risk to the extent possible. To mitigate credit risk from counterparties, master netting agreements are used whenever possible and

59

counterparties may be required to pledge collateral when deemed necessary. EMMT also takes other appropriate steps to limit or lower credit exposure. Processes have also been established to determine and monitor the creditworthiness of counterparties. EMMT manages the credit risk on the portfolio based on credit ratings using published ratings of counterparties and other publicly disclosed information, such as financial statements, regulatory filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements, including master netting agreements. A risk management committee regularly reviews the credit quality of EMMT's counterparties. Despite this, there can be no assurance that these efforts will be wholly successful in mitigating credit risk or that collateral pledged will be adequate.

       In addition, coal for the Illinois Plants is purchased from suppliers under contracts which may be for multiple years. A number of the coal suppliers to the Illinois Plants do not currently have an investment grade credit rating and, accordingly, Midwest Generation may have limited recourse to collect damages in the event of default by a supplier. Midwest Generation seeks to mitigate this risk through diversification of its coal suppliers and through guarantees and other collateral arrangements when available. Despite this, there can be no assurance that these efforts will be successful in mitigating credit risk from coal suppliers.

       Midwest Generation derived a significant source of its operating revenues from electric power sold into the PJM market by EMMT. Sales into the PJM pool accounted for approximately 75% of Midwest Generation's consolidated operating revenues for the year ended December 31, 2005. Moody's Investor Service rates PJM's senior unsecured debt Aa3. PJM, an independent system operator with over 300 member companies, maintains its own credit risk policies and does not extend unsecured credit to non-investment grade companies. Any losses due to a PJM member default is shared by all members based upon a predetermined formula.

Interest Rate Risk

       Interest rate changes affect the cost of capital needed to operate the facilities. Midwest Generation has a $333 million variable rate term loan facility due in 2011 and a $500 million working capital facility, maturing in 2011, which exposes Midwest Generation to the risk of earnings loss resulting from changes in interest rates. Based on the amount of variable rate debt outstanding on December 31, 2005, a 100 basis point change in interest rates at December 31, 2005 would increase or decrease Midwest Generation's 2006 annual income before taxes by approximately $5.0 million.

       Midwest Generation also has $1 billion of 8.75% second priority senior secured notes due 2034. The fair market value of this fixed interest rate obligation is also subject to interest rate risk. The fair market value of Midwest Generation's total long-term obligations (including current portion) was $1.6 billion at December 31, 2005, compared to the carrying value of $1.5 billion. A 10% increase in market interest rates at December 31, 2005 would result in a decrease in the fair value of Midwest Generation's total long-term obligations by approximately $87.7 million. A 10% decrease in market interest rates at December 31, 2005 would result in an increase in the fair value of Midwest Generation's total long-term obligations by approximately $101 million.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Information responding to Item 7A is filed with this report under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

60

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements:
	Report of Independent Registered Public Accounting Firm	62
	Consolidated Statements of Income (Loss) for the years ended December 31, 2005, 2004 and 2003	63
	Consolidated Balance Sheets at December 31, 2005 and 2004	64
	Consolidated Statements of Member's Equity for the years ended December 31, 2005, 2004 and 2003	65
	Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2005, 2004 and 2003	66
	Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003	67
	Notes to Consolidated Financial Statements	68

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

       None.

ITEM 9A.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

       Midwest Generation's management, with the participation of the company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Midwest Generation's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period, Midwest Generation's disclosure controls and procedures are effective.

Internal Control over Financial Reporting

       There were no changes in Midwest Generation's internal control over financial reporting (as such term is defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fourth fiscal quarter of 2005 that have materially affected, or are reasonably likely to materially affect, Midwest Generation's internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

       None.

61

MIDWEST GENERATION, LLC
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Member and Board of Managers of Midwest Generation, LLC

       In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Midwest Generation, LLC and its subsidiary at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

       As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for asset retirement costs as of January 1, 2003 and December 31, 2005.

PricewaterhouseCoopers LLP
Los Angeles, California
March 6, 2006

62

MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands)

			Years Ended December 31,
			2005			2004			2003
Operating Revenues
	Energy and capacity revenues from marketing affiliate		$	1,472,043		$	492,152		$	365,141
	Energy revenues			—			282,750			302,227
	Capacity revenues			—			271,280			379,804
	Other revenues			10,689			15,207			8,189
	Loss from price risk management			(53,347	)		(3,625	)		(3,105	)
		Total operating revenues		1,429,385			1,057,764			1,052,256
Operating Expenses
	Fuel			383,746			407,264			401,153
	Sale of emission allowances			(62,253	)		(25,873	)		(10,552	)
	Plant operations			350,708			378,493			333,012
	Loss on lease termination, asset impairment and other charges			7,023			104,652			1,025,332
	Depreciation and amortization			141,129			169,921			171,714
	Administrative and general			19,771			21,593			23,837
		Total operating expenses		840,124			1,056,050			1,944,496
	Operating income (loss)			589,261			1,714			(892,240	)
Other Income (Expense)
	Interest and other income			113,932			112,677			112,864
	Gain on disposal of assets			3,226			(1,042	)		—
	Interest expense			(207,271	)		(250,163	)		(346,236	)
		Total other expense		(90,113	)		(138,528	)		(233,372	)
Income (loss) before income taxes				499,148			(136,814	)		(1,125,612	)
Provision (benefit) for income taxes				196,814			(58,199	)		(436,945	)
Income (Loss) Before Accounting Change				302,334			(78,615	)		(688,667	)
Cumulative effect of change in accounting, net of tax (Note 3)				(1,159	)		—			(74	)
Net Income (Loss)			$	301,175		$	(78,615	)	$	(688,741	)

The accompanying notes are an integral part of these consolidated financial statements.

63

MIDWEST GENERATION, LLC
CONSOLIDATED BALANCE SHEETS
(In thousands)

			December 31,
			2005			2004
Assets
Current Assets
	Cash and cash equivalents		$	124,118		$	156,154
	Short-term investments			—			20,000
	Accounts receivable			—			32,210
	Due from affiliates			193,311			58,795
	Fuel inventory			39,542			40,182
	Spare parts inventory			18,636			17,726
	Loans to affiliate for margin deposits			328,051			—
	Interest receivable from affiliate			56,210			56,282
	Assets under price risk management			1,861			20,543
	Deferred taxes			70,734			—
	Other current assets			9,355			9,493
		Total current assets		841,818			411,385
Property, Plant and Equipment				4,198,503			4,216,464
	Less accumulated depreciation			851,917			747,952
		Net property, plant and equipment		3,346,586			3,468,512
Notes receivable from affiliate				1,362,017			1,373,567
Deferred taxes				205,067			384,325
Long-term assets under price risk management				737			—
Other assets				46,052			45,707
Total Assets			$	5,802,277		$	5,683,496
Liabilities and Member's Equity
Current Liabilities
	Accounts payable		$	15,892		$	17,833
	Accrued liabilities			78,267			73,267
	Due to affiliates			6,043			17,330
	Interest payable			60,498			65,010
	Liabilities under price risk management			178,352			16,393
	Current maturities of long-term obligations			3,450			7,000
	Current portion of lease financing			103,927			54,953
		Total current liabilities		446,429			251,786
Lease financing, net of current portion				1,140,760			1,244,688
Long-term obligations				1,499,546			1,660,518
Long-term liabilities under price risk management				28,129			—
Benefit plans and other long-term liabilities				169,756			164,082
Total Liabilities				3,284,620			3,321,074
Commitments and Contingencies (Notes 11 and 12)
Member's Equity
	Membership interests, no par value; 100 units authorized, issued and outstanding (Note 1)			—			—
	Additional paid-in capital			3,404,279			3,434,488
	Accumulated deficit			(776,332	)		(1,077,507	)
	Accumulated other comprehensive income (loss)			(110,290	)		5,441
Total Member's Equity				2,517,657			2,362,422
Total Liabilities and Member's Equity			$	5,802,277		$	5,683,496

The accompanying notes are an integral part of these consolidated financial statements.

64

MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY
(In thousands)

		Membership Interests		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Member's Equity
Balance at December 31, 2002		$	—	$	680,515		$	(222,225	)	$	(999	)	$	457,291
	Contributions		—		550,000			—			—			550,000
	Non-cash contribution of services		—		10,618			—			—			10,618
	Net loss		—		—			(688,741	)		—			(688,741	)
	Other comprehensive income		—		—			—			2,905			2,905
Balance at December 31, 2003			—		1,241,133			(910,966	)		1,906			332,073
	Non-cash equity contribution		—		2,190,902			—			—			2,190,902
	Non-cash contribution of services		—		2,453			—			—			2,453
	Net loss		—		—			(78,615	)		—			(78,615	)
	Other comprehensive income		—		—			—			3,535			3,535
	Cash distribution to parent		—		—			(87,926	)		—			(87,926	)
Balance at December 31, 2004			—		3,434,488			(1,077,507	)		5,441			2,362,422
	Equity contribution		—		300,000			—			—			300,000
	Net income		—		—			301,175			—			301,175
	Other comprehensive loss		—		—			—			(115,731	)		(115,731	)
	Cash distribution to parent		—		(330,209	)		—			—			(330,209	)
Balance at December 31, 2005		$	—	$	3,404,279		$	(776,332	)	$	(110,290	)	$	2,517,657

The accompanying notes are an integral part of these consolidated financial statements.

65

MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)

			Years Ended December 31,
			2005			2004			2003
Net Income (Loss)			$	301,175		$	(78,615	)	$	(688,741	)
Other comprehensive income (loss), net of tax:
	Unrealized gains (losses) on derivatives qualified as cash flow hedges:
		Other unrealized holding losses arising during period, net of income tax benefit of $17,051, $21,653 and $6,219 for 2005, 2004 and 2003, respectively		(26,682	)		(33,886	)		(9,764	)
		Reclassification adjustments included in net income (loss), net of income tax expense (benefit) of $56,907, $(23,915) and $(8,073) for 2005, 2004 and 2003, respectively		(89,049	)		37,421			12,669
Other comprehensive income (loss)				(115,731	)		3,535			2,905
Comprehensive Income (Loss)			$	185,444		$	(75,080	)	$	(685,836	)

The accompanying notes are an integral part of these consolidated financial statements.

66

MIDWEST GENERATION, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

			Years Ended December 31,
			2005			2004			2003
Cash Flows From Operating Activities
	Income (loss) after accounting change, net		$	301,175		$	(78,615	)	$	(688,741	)
	Adjustments to reconcile income (loss) to net cash provided by operating activities:
		Depreciation and amortization		145,989			172,676			171,714
		Non-cash contribution of services		—			2,453			10,618
		(Gain) loss on disposal of assets		(3,226	)		1,067			—
		Gain on sale of emission allowances		(62,253	)		(25,873	)		(10,552	)
		Loss on lease termination, asset impairment and other charges		7,023			104,652			1,025,332
		Deferred taxes		109,265			(55,174	)		(402,458	)
		Cumulative effect of change in accounting, net of tax		1,159			—			74
	Decrease in accounts receivable			32,210			6,497			22,383
	Increase in due to/from affiliates			(145,803	)		(3,072	)		(61,200	)
	Decrease (increase) in inventory			(425	)		21,201			14,286
	Increase in loans to affiliate for margin deposits			(328,051	)		—			—
	Decrease in interest receivable from affiliate			72			68			45
	Decrease (increase) in other current assets			(6,443	)		1,032			16,319
	Decrease in accounts payable			(1,941	)		(7,966	)		(6,534	)
	Increase (decrease) in accrued liabilities			5,000			2,928			(20,636	)
	Increase (decrease) in interest payable			(4,512	)		(13,675	)		40,397
	Increase (decrease) in other liabilities			3,774			60,754			(13,945	)
	Increase in net liabilities under price risk management			92,301			1,517			125
		Net cash provided by operating activities		145,314			190,470			97,227
Cash Flows From Financing Activities
	Borrowings from subordinated long-term debt with affiliate			—			20,000			20,000
	Repayments of subordinated long-term debt with affiliate			—			(712,704	)		(1,046,604	)
	Borrowings from credit revolver			—			40,666			460,460
	Repayments of credit revolver			—			—			(68,848	)
	Issuance of long-term debt			328,437			1,740,000			—
	Repayment of long-term debt			(492,959	)		(72,482	)		—
	Capital contributions from parent			300,000			—			550,000
	Cash distribution to parent			(330,209	)		(87,926	)		—
	Repayment of capital lease obligation			(54,954	)		(931,185	)		(9,792	)
	Financing costs			(6,577	)		(34,176	)		—
		Net cash used in financing activities		(256,262	)		(37,807	)		(94,784	)
Cash Flows From Investing Activities
	Capital expenditures			(31,975	)		(32,817	)		(37,862	)
	Proceeds from sale of assets			9,131			44			—
	Proceeds from sale of emission allowances			62,253			25,873			10,552
	Decrease (increase) in restricted cash			7,953			2,000			(14,329	)
	Sale of short-term investments			20,000			43,125			202,375
	Purchase of short-term investments			—			(63,125	)		(202,375	)
	Loan to affiliates			—			(156,274	)		—
	Repayment of loan to affiliates			11,550			148,130			1,079
		Net cash provided by (used in) investing activities		78,912			(33,044	)		(40,560	)
Net increase (decrease) in cash and cash equivalents				(32,036	)		119,619			(38,117	)
Cash and cash equivalents at beginning of period				156,154			36,535			74,652
Cash and cash equivalents at end of period			$	124,118		$	156,154		$	36,535

The accompanying notes are an integral part of these consolidated financial statements.

67

MIDWEST GENERATION, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. General

       Midwest Generation, LLC, which is referred to as Midwest Generation, is a wholly owned subsidiary of Edison Mission Midwest Holdings Co., which is an indirect wholly owned subsidiary of EME. EME is a wholly owned subsidiary of Mission Energy Holding Company and is an indirect wholly owned subsidiary of Edison International. Midwest Generation is a Delaware limited liability company formed on July 12, 1999 by the issuance of 100% of its membership interests to Edison Mission Midwest Holdings Co. for one hundred dollars. No additional interests have been issued. Subsequent capital contributions received from Edison Mission Midwest Holdings Co. have been recorded as additional paid-in capital. The amount outstanding for the membership interests is not reflected on the face of the Balance Sheet due to rounding to the nearest thousand. Midwest Generation was formed for the purpose of obtaining financing and acquiring, owning and operating multiple fossil-fuel electric generating units located within the state of Illinois, which are referred to as the Illinois Plants, for the purpose of producing electric energy.

       Midwest Finance Corp., formed as a Delaware corporation on April 22, 2004, is Midwest Generation's wholly owned subsidiary. Therefore, Midwest Generation now reports on a consolidated basis. Midwest Finance has no material assets, operations or revenues. Midwest Finance was formed in April 2004 solely to serve as a co-issuer of Midwest Generation's second priority senior secured notes in order to facilitate the offering of these notes. For further discussion, see Note 7—Long Term Debt.

       On December 15, 1999, Midwest Generation completed its acquisition of 100% of the ownership interests in the Illinois Plants and assumed specified liabilities from Commonwealth Edison. The accompanying consolidated financial statements reflect the operations of the Illinois Plants commencing from the date of acquisition. The acquisition has been accounted for utilizing the purchase method. The purchase price was allocated to the assets acquired and liabilities assumed based upon their respective fair market values. The acquisition was financed through a capital contribution by Edison Mission Midwest Holdings of approximately $650 million and subordinated debt from another subsidiary of Edison Mission Midwest Holdings of approximately $3.4 billion.

       Concurrent with the acquisition of the Illinois Plants, Midwest Generation assigned its right to purchase the Collins Station, a 2,698 MW gas and oil-fired generating station located in Illinois, to four third-party entities. After this assignment, and the purchase of the facility by the third parties, an affiliate of Midwest Generation leased and Midwest Generation subleased the Collins Station. Each of the leases and subleases had an initial term of 33.75 years. In April 2004, Midwest Generation terminated the Collins Station lease through a negotiated transaction with the lease equity investor and received title to the Collins Station as part of the transaction. On September 30, 2004, Midwest Generation permanently ceased operations at the Collins Station and decommissioned the plant by December 31, 2004. For further discussion, see Note 4—Loss on Lease Termination, Asset Impairment and Other Charges.

       As of December 31, 2005, Midwest Generation owned or leased 5,876 megawatts (MW) of operating power plants consisting of the following:

•

six coal-fired generating plants consisting of 5,621 MW, which include the Powerton, Joliet, Will County, Waukegan, Crawford and Fisk Stations; and

•

the Fisk and Waukegan on-site generating peakers consisting of 255 MW, based on summer net dependable capacity.

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       In connection with the acquisition of the Illinois Plants, Midwest Generation entered into three separate five-year power purchase agreements for the coal-fired stations, the Collins Station and the peaker stations with Commonwealth Edison, which were subsequently assigned to its affiliate, Exelon Generation. The Collins Station power purchase agreement was terminated on September 30, 2004 and the other power purchase agreements expired on December 31, 2004. For the year ended December 31, 2003, Exelon Generation accounted for approximately 67% of Midwest Generation's consolidated operating revenue, 65% of which came from the power purchase agreements. For the year ended December 31, 2004, Exelon Generation accounted for approximately 54% of Midwest Generation's operating revenue, 52% of which came from the power purchase agreements. As each of the power purchase agreements has expired, Midwest Generation now sells all its energy and capacity into the wholesale power markets.

       Midwest Generation has entered into a contract with Edison Mission Marketing & Trading, Inc. (EMMT), a marketing affiliate, to sell energy and capacity into the wholesale market, to engage in hedging activities and to provide scheduling and other services. In April 2004, Midwest Generation entered into a revolving credit agreement with EMMT in order to make revolving loans to, or have letters of credit issued on behalf of, EMMT, in order to provide credit support for forward contracts. EMMT also purchases natural gas and has the ability to enter into fuel hedging arrangements on Midwest Generation's behalf. Midwest Generation has also entered into an agreement with another affiliate, Edison Mission Energy Services, Inc., to provide fuel and transportation services related to coal and fuel oil.

Note 2. Summary of Significant Accounting Policies

Reclassifications

       Certain prior year reclassifications have been made to conform to the current year financial statement presentation.

Management's Use of Estimates in Financial Statements

       The preparation of financial statements in conformity with generally accepted accounting principles requires Midwest Generation to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

       Cash equivalents include time deposits and other investments totaling $124 million and $154 million at December 31, 2005 and 2004, respectively, with maturities of three months or less.

Short-term Investments

       Short-term investments consist of marketable securities that are categorized as available-for-sale under Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." At December 31, 2004, the fair value of short-term investments was approximately $20 million, and consisted of auction rate securities rated AAA or Aaa by S&P or Moody's, respectively, with interest rate reset dates of less than thirty days. Midwest Generation sold all $20 million of its investment in auction rate securities and had no purchases in 2005. At December 31, 2005, Midwest Generation had no short-term investments.

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Inventory

       Inventory consists of spare parts, natural gas, coal and fuel oil and is stated at the lower of weighted average cost or market.

Property, Plant and Equipment

       Property, plant and equipment are stated at cost. Depreciation and amortization are computed by using the straight-line method over the following estimated useful lives:

Power plant facilities	3 – 34.5 years
Emission allowances	25 – 34.5 years
Equipment, furniture and fixtures	3 – 7 years
Plant and equipment under lease financing	30 – 33.75 years

       As part of the acquisition of the Illinois Plants, Midwest Generation acquired emission allowances under the United States Environmental Protection Agency's Acid Rain Program. Although the emission allowances granted under this program are freely transferable, Midwest Generation intends to use substantially all the emission allowances in the normal course of its business to generate electricity. Accordingly, Midwest Generation has classified emission allowances expected to be used to generate power as part of property, plant and equipment. Acquired emission allowances are amortized over the estimated lives of the Illinois Plants on a straight-line basis.

Impairment of Long-Lived Assets

       Midwest Generation periodically evaluates the potential impairment of its long-lived assets based on a review of estimated future cash flows expected to be generated. If the carrying amount of the asset exceeds the amount of the expected future cash flows, undiscounted and without interest charges, then an impairment loss for its long-lived assets is recognized in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

Repairs and Maintenance

       Certain major pieces of Midwest Generation's equipment require repairs and maintenance on a periodic basis. These costs, including major maintenance costs, are expensed as incurred.

Revenue Recognition

       Midwest Generation records revenue and related costs as electricity is generated or services are provided unless Midwest Generation is subject to Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133) and does not qualify for the normal sales and purchases exception. Midwest Generation enters into power and fuel hedging and optimization transactions under a contract with EMMT. These transactions are executed primarily through the use of physical forward commodity purchases and sales and financial commodity swaps and options. With respect to its physical forward contracts, Midwest Generation generally takes title to the commodities, and assumes the risks and rewards of ownership. Therefore, Midwest Generation records settlement of non-trading physical forward contracts on a gross basis. Financial swap and option transactions are settled net and, accordingly, Midwest Generation does not take title to the underlying commodity. Therefore, gains and losses from settlement of financial swaps and options are recorded net. Managed risks typically include commodity price risk associated with fuel purchases and power sales.

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Deferred Financing Costs

       Bank, legal and other direct costs incurred in connection with obtaining financing are deferred and amortized as interest expense on a basis which approximates the effective interest rate method over the term of the related debt. Accumulated amortization of these costs amounted to $7.6 million in 2005 and $2.8 million in 2004.

Derivative Instruments

       SFAS No. 133 as amended and interpreted by other related accounting literature, establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). SFAS No. 133 requires companies to record derivatives on their balance sheets as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal sale and purchase. The coal contracts either do not qualify as derivatives under SFAS No. 133 or meet the normal sales and purchases exception. All changes in the fair value of derivatives are recognized currently in earnings unless specific hedge criteria are met, which requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

       SFAS No. 133 sets forth the accounting requirements for cash flow hedges. SFAS No. 133 provides that the effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedging instrument be reported as a component of other comprehensive income and be reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. The remaining gain or loss on the derivative instrument, if any, must be recognized currently in earnings.

Income Taxes

       Midwest Generation is included in the consolidated federal and state income tax returns of Edison International and is party to a tax allocation agreement with its parent Edison Mission Midwest Holdings. As long as Edison International continues to own, directly or indirectly, at least 80% of the voting power of the stock of EME and its existing subsidiaries and at least 80% of the value of such stock, Midwest Generation will be included in the consolidated federal and state income tax returns of Edison International. In accordance with the agreement and the tax-allocation procedures that have been in effect since Midwest Generation's formation, its current tax liability or benefit is generally determined on a separate return basis, except for calculating consolidated state income taxes, for which Midwest Generation uses the long-term state tax apportionment factors of the Edison International group. Also, while Midwest Generation is generally subject to separate return limitations for net losses, under the tax-allocation agreement it is permitted to transfer to Edison Mission Midwest Holdings, or its subsidiaries, net operating loss benefits which would not yet be realized in a separate return in exchange for a reduction in Midwest Generation's intercompany account balances (including subordinated loans).

       The amount included in due from affiliates on the balance sheet associated with this tax-allocation agreement totaled $13.0 million at December 31, 2005.

       Midwest Generation accounts for deferred income taxes using the asset-and-liability method, wherein deferred tax assets and liabilities are recognized for future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities using enacted income tax rates.

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New Accounting Pronouncements

Statement of Financial Accounting Standards No. 151

       In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." SFAS No. 151 requires that abnormal amounts of idle facility expense, freight, handling costs and spoilage be recognized as current-period charges. Further, SFAS No. 151 requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. Unallocated overheads must be recognized as an expense in the period in which they are incurred. SFAS No. 151 is effective for inventory costs incurred beginning in the first quarter of 2006. Midwest Generation does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

Note 3. Asset Retirement Obligations

       Effective January 1, 2003, Midwest Generation adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The adoption of SFAS No. 143 did not have a material impact on Midwest Generation's financial statements ($74,000, after tax, decrease to net income as the cumulative effect of adoption of SFAS No. 143).

       In March 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement Obligations (AROs), an interpretation of SFAS 143. This interpretation clarifies that an entity is required to recognize a liability for the fair value of a conditional ARO if the fair value can be reasonably estimated, even though uncertainty exists about the timing and/or method of settlement. This interpretation became effective as of December 31, 2005 for Midwest Generation. Midwest Generation identified conditional AROs related to asbestos removal and disposal costs at its owned buildings and power plant facilities and at retired structures leased at the Powerton Station. Midwest Generation recorded a $1.2 million, after tax, charge as a cumulative effect adjustment for asbestos removal and disposal activities associated with retired Powerton structures that are currently scheduled for demolition in 2007. Midwest Generation has not recorded a liability related to the owned structures because it cannot reasonably estimate fair value of the obligation at this time. The range of time over which Midwest Generation may settle this obligation in the future (demolition or other method) is sufficiently large to not allow for the use of expected present value techniques.

       Midwest Generation recorded a liability representing expected future costs associated with site reclamation, facilities dismantlement and removal of environmental hazards as follows:

	2005		2004		2003
	(in thousands)
Beginning balance	$	291	$	265	$	241
Cumulative effect of accounting change		1,900		—		—
Accretion expense		29		26		24
Ending balance	$	2,220	$	291	$	265

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       The pro forma net income effect of adopting FIN 47 is not shown due to its immaterial impact on Midwest Generation's results of operations. The pro forma liability for conditional AROs is not shown due to the immaterial impact on Midwest Generation's consolidated balance sheet.

Note 4. Loss on Lease Termination, Asset Impairment and Other Charges

       During 2004, Midwest Generation recorded loss on lease termination, asset impairment and other charges of $104.7 million. On April 27, 2004, Midwest Generation terminated the Collins Station lease through a negotiated transaction with the lease equity investor. Midwest Generation made a lease termination payment of approximately $960 million. This amount represented the $774 million of lease debt outstanding, plus accrued interest, and the amount owed to the lease equity investor for early termination of the lease. Midwest Generation received title to the Collins Station as part of the transaction. Midwest Generation recorded a pre-tax loss of approximately $65.5 million (approximately $40.2 million after tax) due to termination of the lease and the planned decommissioning of the asset. Included in the pre-tax loss is a $2.7 million inventory reserve for excess spare parts at the Collins Station and $1.9 million pre-tax loss for fuel oil inventory.

       Following the termination of the Collins Station lease, Midwest Generation announced plans on May 28, 2004 to permanently cease operations at the Collins Station by December 31, 2004 and decommission the plant. By the fourth quarter of 2004, the Collins Station was decommissioned and all units were permanently retired from service, disconnected from the grid and rendered inoperable with all operating permits surrendered. In September 2004, Midwest Generation recorded a pre-tax impairment charge of $10.3 million resulting from the termination of the power purchase agreement effective September 30, 2004 for the two units at the Collins Station that remained under contract. In addition, Midwest Generation recognized a $4.5 million pre-tax charge for exit costs related to reducing the workforce in Illinois during the fourth quarter of 2004.

       In September 2004, management completed an analysis of future competitiveness in the expanded PJM Interconnection, LLC (PJM) marketplace of its eight remaining small peaking units. Based on this analysis, management decided to decommission six of the eight small peaking units. As a result of the decision to decommission the units, projected future cash flows associated with the peaking units were less than the book value of the units resulting in an impairment under Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or the Disposal of Long-Lived Assets." During the third quarter of 2004, Midwest Generation recorded a pre-tax impairment charge of $28.8 million (approximately $17.7 million after tax).

       During the second quarter of 2003, Midwest Generation recorded an asset impairment charge of $1.025 billion ($625 million after tax) that resulted from a revised long-term outlook for capacity revenues from the Collins Station and eight small peaking plants. The lower capacity revenue outlook was the result of a number of factors, including higher long-term natural gas prices and the current generation overcapacity in the MAIN region market. The book value of capitalized assets related to the Collins Station was written down from $858 million to an estimated fair market value of $78 million, and the book value of the eight small peaking plants was written down from $286 million to an estimated fair market value of $41 million. The estimated fair value was determined based on discounting estimated future pretax cash flows using a 17.5% discount rate.

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Note 5. Accumulated Other Comprehensive Income (Loss)

       Accumulated other comprehensive income (loss) consisted of the following:

		Unrealized Gains (Losses) on Cash Flow Hedges			Accumulated Other Comprehensive Income (Loss)
		(in thousands)
Balance at December 31, 2003		$	1,906		$	1,906
	Change for 2004		3,535			3,535
Balance at December 31, 2004			5,441			5,441
	Change for 2005		(115,731	)		(115,731	)
Balance at December 31, 2005		$	(110,290	)	$	(110,290	)

       Unrealized losses on cash flow hedges, net of tax, at December 31, 2005, include unrealized losses on commodity hedges primarily related to futures and forward energy sales contracts that qualify for hedge accounting. These losses arise because current forecasts of future electricity prices are greater than Midwest Generation's contract prices. The increase in the unrealized losses during 2005 resulted from a combination of new hedges for 2006 and 2007 and an increase in market prices for power driven largely by higher natural gas and oil prices.

       As Midwest Generation's hedged positions are realized, $93.4 million, after tax, of the net unrealized losses on cash flow hedges at December 31, 2005 are expected to be reclassified into earnings during the next twelve months. Management expects that reclassification of net unrealized losses will offset energy revenue recognized at market prices. Actual amounts ultimately reclassified to earnings over the next twelve months could vary materially from this estimated amount as a result of changes in market conditions. The maximum period over which a cash flow hedge is designated is through December 31, 2007.

       Under SFAS No. 133, the portion of a cash flow hedge that does not offset the change in value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings. Midwest Generation recorded net gains (losses) of $(2.5) million, $0.5 million and $(0.4) million during the years ended December 31, 2005, 2004 and 2003, respectively, representing the amount of cash flow hedges' ineffectiveness, reflected in income (loss) from price risk management in the consolidated income statements.

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Note 6. Property, Plant and Equipment

       At December 31, 2005 and 2004, property, plant and equipment consisted of the following:

	2005		2004
	(in thousands)
Land	$	33,209	$	33,209
Power plant facilities		1,929,889		1,942,636
Emission allowances		834,203		834,203
Construction in progress		25,118		29,176
Equipment, furniture and fixtures		10,410		10,794
Plant and equipment under lease financing		1,365,674		1,366,446
		4,198,503		4,216,464
Less accumulated depreciation		851,917		747,952
Property, plant and equipment, net	$	3,346,586	$	3,468,512

       In connection with Midwest Generation's financing activities, Midwest Generation has given first and second priority security interests in substantially all the coal-fired generating plants owned by Midwest Generation and the assets relating to those plants, the receivables of EMMT directly related to Midwest Generation's hedge activities, and the pledge of the intercompany notes from EME (approximately $1.4 billion at December 31, 2005). The amount of assets pledged or mortgaged totals approximately $2.9 billion at December 31, 2005. In addition to these assets, Midwest Generation's membership interests and the capital stock of Edison Mission Midwest Holdings were pledged. Emission allowances have not been pledged.

       Property, plant and equipment includes assets which are capitalized under lease financing. Midwest Generation recorded amortization expense related to the leased facilities of $42.6 million, $43.0 million and $55.8 million for 2005, 2004 and 2003, respectively. Accumulated amortization related to the leased facilities was $228.0 million, $185.6 million and $147.6 million at December 31, 2005, 2004 and 2003, respectively.

Note 7. Long-Term Debt

       On April 27, 2004, Midwest Generation completed a private offering of $1 billion aggregate principal amount of 8.75% second priority senior secured notes due 2034. The notes were co-issued by a newly formed wholly owned subsidiary, Midwest Finance Corp. Holders of the notes may require Midwest Generation to repurchase, or Midwest Generation may elect to repay, the notes on May 1, 2014 and on each one-year anniversary thereafter at 100% of their principal amount, plus accrued and unpaid interest. At December 31, 2005 and 2004, $1 billion remained outstanding. Concurrent with the issuance of the notes, Midwest Generation entered into a term loan and working capital facility, which terms have been amended as discussed below.

       On December 15, 2005, Midwest Generation completed a refinancing of indebtedness. The refinancing was effected through the amendment and restatement of Midwest Generation's existing credit facility previously amended and restated on April 18, 2005. The credit facility, as previously amended and restated, provided for approximately $343 million of first priority secured institutional term loans due in 2011 and $500 million of first priority secured revolving credit, working capital facilities, $200 million due in 2009 and $300 million due in 2011, with a lender option to require prepayment in 2010.

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       The refinancing consisted of, among other things, a reduction in the interest rate applicable to the term loan and the working capital facilities, and a modification of financial covenants. After giving effect to the refinancing, all the facilities carry a lower interest rate of LIBOR + 1.75% (5.913% at December 31, 2005). The maturity date of the repriced term loan remains 2011. The previously existing working capital facilities were combined into one $500 million facility, maturing in 2011, with a lender option to require prepayment in 2010. Also, as part of the refinancing, Midwest Generation's financial covenants were modified, with its consolidated interest coverage ratio for the immediately preceding four consecutive fiscal quarters required to be at least 1.40 to 1 (increased from 1.25 to 1), and its secured leverage ratio for the 12-month period ended on the last day of the immediately preceding fiscal quarter required to be no greater than 7.25 to 1 (reduced from 8.75 to 1).

       Midwest Generation is permitted to use its working capital facility and cash on hand to provide credit support for forward contracts with third-party counterparties entered into by EMMT for capacity and energy generated by Midwest Generation. Utilization of this credit facility in support of such forward contracts is expected to provide additional liquidity support for implementation of Midwest Generation's contracting strategy for the Illinois Plants.

       As of December 31, 2005, Midwest Generation had $333 million outstanding under its term loan and a $500 million working capital facility available for working capital requirements, including credit support for hedging activities. As of December 31, 2005, approximately $175 million was utilized under the working capital facility.

       The term loan and working capital facility share a first priority lien and the senior secured notes have a second priority lien in a collateral package which consists of, among other things, substantially all the coal-fired generating plants owned by Midwest Generation and the assets relating to those plants, as well as the equity interests of Midwest Generation and its parent company, the intercompany notes entered into by EME and Midwest Generation in connection with the Powerton-Joliet sale-leaseback transaction, and the receivables of EMMT directly related to Midwest Generation's hedge activities.

Annual Maturities on Long-Term Debt

       Annual maturities on long-term debt at December 31, 2005 for the next five years, 2006 through 2010, are $3.5 million each year.

Midwest Generation Credit Agreement and Indenture Covenants

       Midwest Generation is bound by the covenants in its credit agreement and indenture as well as certain covenants under the Powerton-Joliet lease documents with respect to Midwest Generation making payments under the leases. These covenants include restrictions on the ability to, among other things, incur debt, create liens on its property, merge or consolidate, sell assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions, engage in other lines of business or engage in transactions for any speculative purpose. In addition, the credit agreement contains financial covenants binding on Midwest Generation.

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Covenants in Credit Agreement

       In order for Midwest Generation to make a distribution, it must be in compliance with covenants specified under its credit agreement. Compliance with the covenants in its credit agreement includes maintaining the following two financial performance requirements:

•

At the end of each fiscal quarter, Midwest Generation's consolidated interest coverage ratio for the immediately preceding four consecutive fiscal quarters must be at least 1.40 to 1. The consolidated interest coverage ratio is defined as the ratio of consolidated net income (plus or minus specified amounts as set forth in the credit agreement), to consolidated interest expense (as more specifically defined in the credit agreement). During the twelve months ended December 31, 2005, the interest coverage ratio was 6.40 to 1.

•

Midwest Generation's secured leverage ratio for the 12-month period ended on the last day of the immediately preceding fiscal quarter may be no greater than 7.25 to 1. The secured leverage ratio is defined as the ratio of the aggregate principal amount of Midwest Generation secured debt plus all indebtedness of a subsidiary of Midwest Generation, to the aggregate amount of consolidated net income (plus or minus specified amounts as set forth in the credit agreement). During the twelve months ended December 31, 2005, the secured leverage ratio was 1.99 to 1.

       In addition, Midwest Generation's distributions are limited in amount. Under the terms of Midwest Generation's credit agreement, Midwest Generation is permitted to distribute 75% of its excess cash flow (as defined in the credit agreement). In addition, if equity is contributed to Midwest Generation, Midwest Generation is permitted to distribute 100% of excess cash flow until the aggregate portion of distributions that Midwest Generation attributed to the equity contribution equals the amount of the equity contribution. Because EME made a $300 million equity contribution to Midwest Generation on April 19, 2005, Midwest Generation is permitted to distribute 100% of excess cash flow until the aggregate portion of such distributions attributed to that equity contribution equals $300 million. After taking into account Midwest Generation's most recent distribution in January 2006, $177 million of the equity contribution is still available for this purpose. To the extent Midwest Generation makes a distribution which is not fully attributed to an equity contribution, Midwest Generation is required to make concurrently with such distribution an offer to repay debt in an amount equal to the excess, if any, of one-third of such distribution over the amount attributed to the equity contribution.

Covenants in Indenture

       Midwest Generation's indenture contains restrictions on its ability to make a distribution substantially similar to those in the credit agreement. Failure to achieve the conditions required for distributions will not result in a default under the indenture, nor does the indenture contain any other financial performance requirements.

Loan Agreement with EMMT

       Midwest Generation entered into a revolving credit agreement with EMMT, dated as of April 27, 2004, pursuant to which Midwest Generation will, from time to time, make revolving loans to, and have letters of credit issued on behalf of, EMMT. The loans and letters of credit provide credit support for forward contracts entered into by EMMT related to the Illinois Plants. As of December 31, 2005, Midwest Generation has provided EMMT $328.1 million, which EMMT has used to provide credit support for forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward contract. The amount repaid

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includes interest earned, if any, under margining agreements supporting such contracts. The maximum amount of available credit under the agreement is $500 million.

Restricted Cash

       Several cash balances are restricted primarily to provide collateral for trading activities and fuel suppliers. The total restricted cash included in Midwest Generation's consolidated balance sheet was $6.3 million at December 31, 2005 and $14.3 million at December 31, 2004. Included in restricted cash are collateral reserves of $6.3 million and $14.3 million at December 31, 2005 and 2004, respectively.

Fair Values of Non-Derivative Financial Instruments

       The carrying amount of cash and cash equivalents, accounts receivables and payables contained in Midwest Generation's consolidated balance sheet approximates fair value. The following table summarizes the carrying amounts and fair values for outstanding non-derivative financial instruments:

		December 31, 2005				December 31, 2004
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
				(in thousands)
Instruments
Non-derivatives:
	Long-term obligations	$	1,502,996	$	1,629,984	$	1,667,518	$	1,824,759

       In assessing the fair value of Midwest Generation's financial instruments, Midwest Generation uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. Quoted market prices for the same or similar instruments are used for long-term obligations.

Note 8. Price Risk Management Activities

Commodity Price Risk Management

       Midwest Generation's risk management policy allows for the use of derivative financial instruments through EMMT to limit financial exposure to electricity, capacity, fuel prices, emission allowances and transmission rights for non-trading purposes. Use of these instruments exposes Midwest Generation to commodity price risk, which represent the potential loss that can be caused by a change in the market value of a particular commodity. Commodity price risks are actively monitored by a risk management committee to ensure compliance with Midwest Generation's risk management policies through EMMT. Policies are in place which define risk management processes, and procedures exist which allow for monitoring of all commitments and positions with regular reviews by a risk management committee. Despite this, there can be no assurance that all risks have been accurately identified, measured and/or mitigated. EMMT uses "value at risk" to identify, measure, monitor and control Midwest Generation's overall market risk exposure. The use of value at risk allows management to aggregate overall commodity risk, compare risk on a consistent basis and identify risk factors. Value at risk measures the possible loss over a given time interval, under normal market conditions, at a given confidence level. Given the inherent limitations of value at risk and relying on a single risk measurement tool, EMMT supplements this approach with the use of stress testing and worst-case scenario analysis for key risk factors, as well as stop loss limits and counterparty credit exposure limits.

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       The following table summarizes the carrying amounts and fair values for outstanding financial instruments used for price risk management activities. The change in fair value of electricity contracts in 2005 as compared to 2004 is attributable to the increase in average market prices for power as compared to contracted prices at December 31, 2005, which is the valuation date, causing the fair value of the contracts to become liabilities instead of assets.

		December 31, 2005						December 31, 2004
		Carrying Amount			Fair Value			Carrying Amount		Fair Value
		(in thousands)
Commodity price:
	Electricity contracts	$	(203,882	)	$	(203,882	)	$	4,150	$	4,150

       In assessing the fair value of Midwest Generation's electricity contracts, Midwest Generation uses a variety of methods and assumptions based on market conditions and associated risks existing at each balance sheet date. The fair value of the electricity contracts takes into account quoted market prices, time value of money, volatility of the underlying commodities and other factors.

Credit Risk

       In conducting price risk management activities, EMMT contracts with a number of utilities, energy companies, financial institutions and other companies, collectively referred to as counterparties. In the event a counterparty were to default on its trade obligation, Midwest Generation would be exposed to the risk of possible loss associated with re-contracting the product at a price different from the original contracted price if the non-performing counterparty were unable to pay the resulting liquidated damages owed to Midwest Generation under the intercompany energy services agreement. Midwest Generation's agreement with EMMT transfers the risk of non-payment of accounts receivable from counterparties to EMMT. Notwithstanding the foregoing, Midwest Generation will not be in default under the senior secured notes and credit agreement if it fails to enforce payment from EMMT in the case of nonpayment of an account receivable from a counterparty, so long as the counterparty is rated investment grade.

       The obligations of Midwest Generation under the senior secured notes and credit agreement are secured by, among other things, an account of EMMT in which EMMT will deposit funds received from third-party counterparties for sales of energy and capacity from the Illinois Plants. See "Note 7—Long-term Debt" and "Note 13—Related Party Transactions—EMMT Agreements."

       To manage credit risk, EMMT looks at the risk of a potential default by counterparties. Credit risk is measured by the loss that would be incurred if counterparties failed to perform pursuant to the terms of their contractual obligations. EMMT measures, monitors and mitigates credit risk to the extent possible. To mitigate credit risk from counterparties, master netting agreements are used whenever possible and counterparties may be required to pledge collateral when deemed necessary. EMMT also takes other appropriate steps to limit or lower credit exposure. Processes have also been established to determine and monitor the creditworthiness of counterparties. EMMT manages the credit risk on the portfolio based on credit ratings using published ratings of counterparties and other publicly disclosed information, such as financial statements, regulatory filings, and press releases, to guide it in the process of setting credit levels, risk limits and contractual arrangements, including master netting agreements. A risk management committee regularly reviews the credit quality of EMMT's counterparties. Despite this, there can be no assurance that these efforts will be wholly successful in mitigating credit risk or that collateral pledged will be adequate.

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       In addition, coal for the Illinois Plants is purchased from suppliers under contracts which may be for multiple years. A number of the coal suppliers to the Illinois Plants do not currently have an investment grade credit rating and, accordingly, Midwest Generation may have limited recourse to collect damages in the event of default by a supplier. Midwest Generation seeks to mitigate this risk through diversification of its coal suppliers and through guarantees and other collateral arrangements when available. Despite this, there can be no assurance that these efforts will be successful in mitigating credit risk from coal suppliers.

       Midwest Generation derived a significant source of its operating revenues from electric power sold into the PJM market by EMMT. Sales into the PJM pool accounted for approximately 75% and 14% of Midwest Generation's consolidated operating revenues for the years ended December 31, 2005 and 2004, respectively. Moody's Investor Service rates PJM's senior unsecured debt Aa3. PJM, an independent system operator with over 300 member companies, maintains its own credit risk policies and does not extend unsecured credit to non-investment grade companies. Any losses due to a PJM member default is shared by all members based upon a predetermined formula.

Note 9. Income Taxes

       Income tax provision (benefit) includes the current tax provision (benefit) from operating income (loss) and the change in deferred income taxes during the year. The components of the net accumulated deferred income tax asset were:

			Years Ended December 31,
			2005			2004
			(in thousands)
Deferred tax assets
	Lease financing		$	27,227		$	23,831
	Price risk management			84,490			3,416
	Accrued expenses			5,870			3,789
	Credit carryforward			12,265			—
	Net operating loss carryforward			191,488			393,868
		Total	$	321,340		$	424,904
Deferred tax liabilities
	Property, plant and equipment—basis differences		$	(41,905	)	$	(6,039	)
	Employee benefits			(9,738	)		(13,929	)
	State taxes			10,141			(17,873	)
	Other			(4,037	)		(2,738	)
		Total		(45,539	)		(40,579	)
Deferred tax asset, net			$	275,801		$	384,325
Classification of accumulated deferred income taxes:
	Included in current assets		$	70,734		$	—
	Included in non-current assets		$	205,067		$	384,325

       Midwest Generation has $465 million and $961 million of federal net operating losses at December 31, 2005 and December 31, 2004, respectively, which expire beginning in 2024. Midwest Generation has $297 million and $584 million of California net operating losses at December 31, 2005 and December 31, 2004, respectively, which expire beginning in 2014. In addition, Midwest Generation has $57 million and $125 million of Illinois net operating losses at December 31, 2005 and

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December 31, 2004, respectively, which expire beginning in 2015. The provision (benefit) for income taxes is comprised of the following:

			Years Ended December 31,
			2005		2004			2003
			(in thousands)
Current
	Federal		$	11,414	$	—		$	(30,159	)
	State			2,149		—			(2,472	)
		Total current	$	13,563	$	—		$	(32,631	)
Deferred
	Federal		$	152,239	$	(47,805	)	$	(341,610	)
	State			31,012		(10,394	)		(62,704	)
		Total deferred		183,251		(58,199	)		(404,314	)
Provision (benefit) for income taxes			$	196,814	$	(58,199	)	$	(436,945	)

       Variations from the 35% federal statutory rate are as follows:

		Years Ended December 31,
		2005		2004			2003
		(in thousands)
Expected benefit for federal income taxes		$	174,702	$	(47,885	)	$	(393,964	)
Increase in benefit resulting from:
	State tax benefit, net of federal taxes		21,554		(480	)		(42,981	)
	Reversal of valuation allowance		—		(9,655	)		—
	Other		558		(179	)		—
Provision (benefit) for income taxes		$	196,814	$	(58,199	)	$	(436,945	)
Effective provision (benefit) rate			39.4%		(42.5	)%		(38.8	)%

       Midwest Generation is, and may in the future be, under examination by tax authorities with respect to positions it takes in connection with the filing of its tax returns. In Midwest Generation's opinion, it is unlikely that the resolution of any such tax audit matters will have a material adverse effect upon Midwest Generation's financial condition or results of operations.

Note 10. Employee Benefit Plans

       Employees of Midwest Generation are eligible for various benefit plans of Edison International.

Pension Plans

       Midwest Generation maintains a pension plan specifically for the benefit of its union employees. A portion of Midwest Generation's non-union employees participate in the Edison International pension plan. Eligibility depends on a number of factors, including the employee's hire date. Both plans are noncontributory, defined benefit pension plans and cover employees who fulfill minimum service requirements. The Edison International plan has a cash balance feature.

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       The expected contributions (all by employer) for the plans are approximately $7.5 million for the year ended December 31, 2006. The amount is subject to change based on, among other things, the limits established for federal tax deductibility.

       Midwest Generation uses a December 31 measurement date for all its plans. The fair value of plan assets is determined by market value.

       Information on plan assets and benefit obligations is shown below:

			Years Ended December 31,
			2005			2004
			(in thousands)
Change in projected benefit obligation
	Projected benefit obligation at beginning of year		$	71,122		$	49,390
	Service cost			12,143			11,796
	Interest cost			3,746			3,013
	Actuarial loss (gain)			(2,595	)		6,269
	Benefits paid			(1,034	)		654
		Projected benefit obligation at end of year	$	83,382		$	71,122
Accumulated benefit obligation at end of year			$	65,632		$	55,029
Change in plan assets
	Fair value of plan assets at beginning of year		$	38,043		$	25,192
	Actual return on plan assets			5,040			2,711
	Employer contributions			7,589			9,486
	Benefits paid			(1,034	)		654
		Fair value of plan assets at end of year	$	49,638		$	38,043
Funded status			$	(33,744	)	$	(33,079	)
Unrecognized net loss				7,530			12,439
Unrecognized prior service cost				2,304			2,535
Recorded liability			$	(23,910	)	$	(18,105	)
Additional detail of amounts recognized in balance sheets:
Intangible asset				—			—
Accumulated other comprehensive income				—			—
Weighted-average assumptions at end of year:
Discount rate				5.50%			5.50%
Rate of compensation increase				5.00%			5.00%

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       Components of pension expense are:

	Years Ended December 31,
	2005			2004			2003
	(in thousands)
Service cost	$	12,143		$	11,796		$	10,185
Interest cost		3,746			3,013			2,251
Expected return on plan assets		(3,002	)		(2,148	)		(1,376	)
Net amortization and deferral		507			395			463
Total expense recognized	$	13,394		$	13,056		$	11,523
Change in accumulated other comprehensive income		—			—			—
Weighted-average assumptions:
Discount rate		5.50%			6.00%			6.50%
Rate of compensation increase		5.00%			5.00%			5.00%
Expected return on plan assets		7.50%			7.50%			8.50%

       Asset allocations for plans are:

		December 31,
	Target for 2006
		2005	2004
United States equity	45%	47%	47%
Non-United States equity	25%	26%	25%
Private equity	4%	2%	2%
Fixed income	26%	25%	26%

Postretirement Benefits Other Than Pensions

       A portion of Midwest Generation's non-union employees retiring at or after age 55 with at least ten years of service are eligible for postretirement health care, dental, life insurance and other benefits paid in part by Midwest Generation. Eligibility depends on a number of factors, including the employee's hire date.

       On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The Act authorized a federal subsidy to be provided to plan sponsors for certain prescription drug benefits under Medicare. Midwest Generation adopted FASB Staff Position FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," for the effects of the Act, effective July 1, 2004, which reduced Midwest Generation's accumulated benefits obligation by $813,000 upon adoption.

       The expected contributions (all by the employer) for the postretirement benefits other than pensions plan are $359,000 for the year ended December 31, 2006. This amount is subject to change based on, among other things, the Act referenced above and the impact of any benefit plan amendments.

       Midwest Generation uses a December 31 measurement date.

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       Information on non-union plan assets and benefit obligations is shown below:

			Years Ended December 31,
			2005			2004
			(in thousands)
Change in benefit obligation
	Benefit obligation at beginning of year		$	19,534		$	18,605
	Service cost			582			608
	Interest cost			1,288			1,046
	Actuarial loss (gain)			4,082			(1,179	)
	Amendments			—			466
	Benefits paid			(324	)		(12	)
		Benefit obligation at end of year	$	25,162		$	19,534
Change in plan assets
	Fair value of plan assets at beginning of year		$	—		$	—
	Employer contributions			324			12
	Benefits paid			(324	)		(12	)
		Fair value of plan assets at end of year	$	—		$	—
Funded status			$	(25,162	)	$	(19,534	)
Unrecognized net loss				9,742			6,312
Unrecognized prior service cost				(3,943	)		(4,658	)
Recorded liability			$	(19,363	)	$	(17,880	)
Assumed health care cost trend rates:
Rate assumed for following year				10.25%			10.00%
Ultimate rate				5.00%			5.00%
Year ultimate rate reached				2011			2010
Weighted-average assumptions at end of year:
Discount rate				5.50%			5.75%

       Expense components of postretirement benefits are:

	Years Ended December 31,
	2005			2004			2003
	(in thousands)
Service cost	$	582		$	608		$	576
Interest cost		1,288			1,046			1,029
Net amortization and deferral		(63	)		(435	)		(290	)
Total expense	$	1,807		$	1,219		$	1,315
Assumed health care cost trend rates:
Current year		10.00%			12.00%			9.75%
Ultimate rate		5.00%			5.00%			5.00%
Year ultimate rate reached		2010			2010			2008
Weighted-average assumptions:
Discount rate		5.75%			6.25%			6.40%

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       Increasing the health care cost trend rate by one percentage point would increase the accumulated obligation as of December 31, 2005 by $4.4 million and annual aggregate service and interest costs by $352,000. Decreasing the health care cost trend rate by one percentage point would decrease the accumulated obligation as of December 31, 2005 by $3.7 million and annual aggregate service and interest costs by $296,000.

Discount Rate

       The discount rate enables Midwest Generation to state expected future cash flows at a present value on the measurement date. Midwest Generation selects its discount rate by performing a yield curve analysis. This analysis determines the equivalent discount rate on projected cash flows, matching the timing and amount of expected benefit payments. Three yield curves were considered: two corporate yield curves (Citigroup and AON) and a curve based on treasury rates (plus 90 basis points). Midwest Generation also compared the yield curve analysis against the Moody's AA Corporate bond rate. At the December 31, 2005 measurement date, Midwest Generation used a discount rate of 5.5% for both pensions and postretirement benefits other than pensions.

Description of Investment Strategies

       The investment of plan assets is overseen by a fiduciary investment committee. Plan assets are invested using a combination of asset classes, and may have active and passive investment strategies within asset classes. Midwest Generation employs multiple investment management firms. Investment managers within each asset class cover a range of investment styles and approaches. Risk is controlled through diversification among multiple asset classes, managers, styles, and securities. Plan, asset class and individual manager performance is measured against targets. Midwest Generation also monitors the stability of its investments managers' organizations.

       Allowable investment types include:

•

United States Equity: Common and preferred stocks of large, medium, and small companies which are predominantly United States-based.

•

Non-United States Equity: Equity securities issued by companies domiciled outside the United States and in depositary receipts which represent ownership of securities of non-United States companies.

•

Private Equity: Limited partnerships that invest in non-publicly traded entities.

•

Fixed Income: Fixed income securities issued or guaranteed by the United States government, non- United States governments, government agencies and instrumentalities, mortgage backed securities and corporate debt obligations. A small portion of the fixed income position may be held in debt securities that are below investment grade.

       Permitted ranges around asset class portfolio weights are plus or minus 5%. Where approved by the fiduciary investment committee, futures contracts are used for portfolio rebalancing and to approach fully invested portfolio positions. Where authorized, a few of the plan's investment managers employ limited use of derivatives, including futures contracts, options, options on futures and interest rate swaps in place of direct investment in securities to gain efficient exposure to markets. Derivatives are not used to leverage the plans or any portfolios.

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Determination of the Expected Long-Term Rate of Return on Assets for United States Plans

       The overall expected long term rate of return on assets assumption is based on the target asset allocation for plan assets, capital markets return forecasts for asset classes employed, and active management excess return expectations.

Capital Markets Return Forecasts

       The estimated total return for fixed income is based on an equilibrium yield for intermediate United States government bonds plus a premium for exposure to non-government bonds in the broad fixed income market. The equilibrium yield is based on analysis of historic data and is consistent with experience over various economic environments. The premium of the broad market over United States government bonds is a historic average premium. The estimated rate of return for equity is estimated to be a 3% premium over the estimated total return of intermediate United States government bonds. This value is determined by combining estimates of real earnings growth, dividend yields and inflation, each of which is determined using historical analysis. The rate of return for private equity is estimated to be a 5% premium over public equity, reflecting a premium for higher volatility and illiquidity.

Active Management Excess Return Expectations

       For asset classes that are actively managed, an excess return premium is added to the capital market return forecasts discussed above.

Estimated Future Benefits Payable

       Estimated future benefits payable under the pension and other postretirement benefits as of December 31, 2005 are as follows:

			Other Postretirement Benefits
Years Ended December 31,	Pension Plans		Before Subsidy		Net
	(in thousands)
2006	$	1,303	$	359	$	359
2007		1,709		445		445
2008		2,218		529		529
2009		2,971		652		651
2010		3,965		799		798
2011-2015		42,105		6,746		6,690

Employee Stock Plans

       A 401(k) plan is maintained to supplement eligible employees' retirement income. Midwest Generation matches 100% of non-union employee contributions, up to 6% of such employees' base annual compensation. Midwest Generation also matches 75% of contributions made by union employees, up to 6% of base annual compensation. Employer contributions vest 20% per year. Contribution expense for the years ended December 31, 2005, 2004 and 2003 was $2.6 million, $2.5 million and $2.7 million, respectively.

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Note 11. Commitments and Contingencies

Capital Improvements

       At December 31, 2005, Midwest Generation had firm commitments to spend approximately $7.1 million on capital expenditures in 2006 primarily for dust collection and mitigation system and various other projects. These capital expenditures are planned to be financed by cash generated from operations.

Calumet Energy Team LLC Power Purchase Contract

       At December 31, 2005, Midwest Generation was party to a long-term power purchase contract with Calumet Energy Team LLC entered into as part of the settlement agreement with Commonwealth Edison, which terminated Midwest Generation's obligation to build additional gas-fired generation in the Chicago area. The contract requires Midwest Generation to pay a monthly capacity payment and gives Midwest Generation an option to purchase energy from Calumet Energy Team at prices based primarily on operations and maintenance and fuel costs. These minimum commitments are currently estimated to aggregate $20.1 million in the next five years, summarized as follows: 2006—$3.8 million; 2007—$3.9 million; 2008—$4.0 million; 2009—$4.1 million; and 2010—$4.3 million.

Fuel Supply Contracts

       At December 31, 2005, Midwest Generation had fuel purchase commitments with various third-party suppliers for the purchase of coal. The remaining contracts' lengths range from one year to seven years. Based on the contract provisions, which consist of fixed prices subject to adjustment clauses, these minimum commitments are currently estimated to aggregate $475.0 million in the next five years, summarized as follows: 2006—$152.9 million; 2007—$140.0 million; 2008—$56.5 million; 2009—$61.5 million; and 2010—$64.1 million.

Coal Transportation Agreements

       At December 31, 2005, Midwest Generation had contractual commitments for the transport of coal to its facilities, with remaining contract lengths that range from two years to six years. The primary contract is with Union Pacific Railroad (and various delivering carriers) which extends through 2011. Midwest Generation commitments under this agreement are based on actual coal purchases from the Powder River Basin. Accordingly, Midwest Generation's contractual obligations for transportation are based on coal volumes set forth in its fuel supply contracts. Based on the committed coal volumes in the fuel supply contracts described above, these minimum commitments are currently estimated to aggregate $653.3 million in the next five years, summarized as follows: 2006—$219.8 million; 2007—$206.3 million; 2008—$74.3 million; 2009—$75.7 million; and 2010—$77.2 million.

Interconnection Agreement

       Midwest Generation has entered into interconnection agreements with Commonwealth Edison to provide interconnection services necessary to connect the Illinois Plants with its transmission systems. Unless terminated earlier in accordance with their terms, the interconnection agreements will terminate on a date mutually agreed to by both parties. Midwest Generation is required to compensate Commonwealth Edison for all reasonable costs associated with any modifications, additions or replacements made to the interconnection facilities or transmission systems in connection with any modification, addition or upgrade to the Illinois Plants.

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Guarantees and Indemnities

Tax Indemnity Agreement

       In connection with the sale-leaseback transactions related to the Powerton and Joliet Stations and previously the Collins Station, EME, Midwest Generation and another wholly owned subsidiary of EME entered into tax indemnity agreements. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in the tax indemnity agreement, including specified defaults under the respective leases. The potential indemnity obligation under these tax indemnity agreements could be significant. Due to the nature of these obligations, Midwest Generation cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. Midwest Generation has not recorded a liability related to these indemnities. In connection with the termination of the Collins Station lease in April 2004, Midwest Generation will continue to have obligations under the tax indemnity agreement with the former lease equity investor.

Indemnity Provided as Part of the Acquisition from Commonwealth Edison

       In connection with the acquisition of the Illinois Plants, Midwest Generation agreed to indemnify Commonwealth Edison with respect to specified environmental liabilities before and after December 15, 1999, the date of sale. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a requirement that Commonwealth Edison take all reasonable steps to mitigate losses related to any such indemnification claim. Due to the nature of the obligation under this indemnity, a maximum potential liability cannot be determined. This indemnification for environmental liabilities is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Except as discussed below, Midwest Generation has not recorded a liability related to this indemnity.

       Midwest Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation Company on February 20, 2003 to resolve a dispute regarding interpretation of its reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific existing asbestos claims and expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the agreement. As a general matter, Commonwealth Edison and Midwest Generation apportion responsibility for future asbestos-related claims based upon the number of exposure sites that are Commonwealth Edison locations or Midwest Generation locations. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement has a five-year term with an automatic renewal provision (subject to the right of either party to terminate). Payments are made under this indemnity upon tender by Commonwealth Edison of appropriate proof of liability for an asbestos-related settlement, judgment, verdict, or expense. There were between 185 and 195 cases for which Midwest Generation was potentially liable and that had not been settled and dismissed at December 31, 2005. Midwest Generation had recorded a $67.4 million liability at December 31, 2005 related to this matter.

       The amounts recorded by Midwest Generation for the asbestos-related liability are based upon a number of assumptions. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than projected.

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Environmental Matters and Regulations

Introduction

       Midwest Generation is subject to environmental regulation by federal, state and local authorities in the United States. Midwest Generation believes that it is in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect its financial position or results of operations. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations, future proceedings that may be initiated by environmental authorities, and settlements agreed to by other companies could affect the costs and the manner in which Midwest Generation conducts its business, and may also cause it to make substantial additional capital expenditures. There is no assurance that Midwest Generation would be able to recover these increased costs from its customers or that Midwest Generation's financial position and results of operations would not be materially adversely affected as a result.

       Typically, environmental laws and regulations require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction, operation or modification of a project or generating facility. Meeting all the necessary requirements can delay or sometimes prevent the completion of a proposed project, as well as require extensive modifications to existing projects, which may involve significant capital expenditures. If Midwest Generation fails to comply with applicable environmental laws, it may be subject to injunctive relief or penalties and fines imposed by regulatory authorities.

Federal—United States of America

Clean Air Act

Clean Air Interstate Rule—

       On May 12, 2005, the Clean Air Interstate Rule (CAIR) was published in the Federal Register. The CAIR requires 28 eastern states and the District of Columbia to address ozone attainment issues by reducing regional nitrogen oxide (NOx) and sulfur dioxide (SO2) emissions. The CAIR reduces the current Clean Air Act Title IV Phase II SO2 emissions allowance cap for 2010 and 2015 by 50% and 65%, respectively. The CAIR also reduces regional NOx emissions in 2009 and 2015 by 53% and 61%, respectively, from 2003 levels. The CAIR has been challenged in court by state, environmental and industry groups, which may result in changes to the substance of the rule and to the timetables for implementation.

       Midwest Generation expects that compliance with the CAIR and the regulations and revised state implementation plans developed as a consequence of the CAIR will result in increased capital expenditures and operating expenses. Given the uncertainty of the requirements that will need to be implemented and the options available to meet the NOx and SO2 reductions fleetwide, Midwest Generation at this time cannot accurately estimate the cost to meet these obligations. Midwest Generation's approach to meeting these obligations will consist of a blending of capital expenditure and emission allowance purchases that will be based on an ongoing assessment of the dynamics of its market conditions.

Mercury Regulation—

       The Clean Air Mercury Rule (CAMR), published in the Federal Register on May 18, 2005, creates a market-based cap-and-trade program to reduce nationwide utility emissions of mercury in two distinct phases. In the first phase of the program, which will come into effect in 2010, the annual nationwide cap

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will be 38 tons. Emissions of mercury are to be reduced primarily by taking advantage of mercury reductions achieved by reducing SO2 and NOx emissions under the CAIR. In the second phase, which is to take effect in 2018, coal-fired power plants will be subject to a lower annual cap, which will reduce emissions nationwide to 15 tons. States may join the trading program by adopting the CAMR model trading rule in state regulations, or they may adopt regulations that mirror the necessary components of the model trading rule. States are not required to adopt a cap-and-trade program and may promulgate alternative regulations, such as command and control regulations, that are equivalent to or more stringent than the CAMR's suggested cap-and-trade program. Any program adopted by a state must be approved by the United States Environmental Protection Agency (US EPA).

       Contemporaneous with the adoption of the CAMR, the US EPA rescinded its previous finding that mercury emissions from coal-fired power plants had to be regulated as a hazardous air pollutant pursuant to Section 112 of the federal Clean Air Act, which would have imposed technology-based standards. Litigation has been filed challenging the US EPA's rescission action and claiming that the agency should have imposed technology-based limitations on mercury emissions instead of adopting a market-based program. Litigation was also filed to challenge the CAMR. As a result of these challenges, the CAMR rules may change.

       If Illinois implements the CAMR by adopting a cap-and-trade program for achieving reductions in mercury emissions, Midwest Generation may have the option to purchase mercury emission allowances, to install pollution control equipment, to otherwise alter its operations to reduce mercury emissions, or to implement some combination thereof. Because the mercury state implementation plans are not due until the fourth quarter of 2006 and such plans may not adopt the CAMR's cap-and-trade program, and because Midwest Generation cannot predict the outcome of the legal challenge to the CAMR and the US EPA's decision not to regulate mercury emissions pursuant to Section 112 of the federal Clean Air Act, the full impact of this regulation currently cannot be assessed. Additional capital costs, particularly for the Illinois coal units, related to these regulations could be required in the future and they could be material. Midwest Generation's approach to meeting these obligations will continue to be based upon an ongoing assessment of applicable legal requirements and market conditions.

National Ambient Air Quality Standards—

       Ambient air quality standards for ozone and fine particulate matter were adopted by the US EPA in July 1997. These standards were challenged in the courts, and on March 26, 2002, the United States Court of Appeals for the District of Columbia Circuit upheld the US EPA's revised ozone and fine particulate matter ambient air quality standards.

       The US EPA designated non-attainment areas for the 8-hour standard on April 30, 2004, and for the fine particulate standard on January 5, 2005. Almost all of Midwest Generation's facilities are located in counties that have been identified as being in non-attainment with both standards. States are required to revise their implementation plans for the ozone and particulate matter standards within three years of the effective date of the respective non-attainment designations. The revised state implementation plans are likely to require additional emission reductions from facilities that are significant emitters of ozone precursors and particulates. Any additional obligations on Midwest Generation's facilities to further reduce their emissions of SO2, NOx and fine particulates to address local non-attainment with the 8-hour ozone and fine particulate matter standards will not be known until the states revise their implementation plans. Depending upon the final standards that are adopted, Midwest Generation may incur substantial costs or experience other financial impacts resulting from required capital improvements or operational changes.

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       On January 17, 2006, the US EPA proposed revisions to its fine particulate standard. Under the proposal, the annual standard would remain the same but the 24-hour fine particulate standard would be significantly lowered. The US EPA is under court order to issue a final rule in December 2006. If the US EPA retains its proposed new 24-hour standard or lowers the annual standard, states may be required to impose further emission reductions beyond what would be necessary to meet the existing standards. Although Midwest Generation may incur substantial costs or experience financial impacts as a result of any new standards, the uncertainties associated with this ongoing rulemaking at this time render Midwest Generation unable to accurately estimate the costs to meet any such obligation. Midwest Generation anticipates, however, that any such further emission reduction obligations would not be imposed until 2010 at the earliest.

Regional Haze—

       The goal of the 1999 regional haze regulations is to restore visibility in mandatory federal Class I areas, such as national parks and wilderness areas, to natural background conditions in 60 years. Sources such as power plants that are reasonably anticipated to contribute to visibility impairment in Class I areas may be required to install Best Available Retrofit Technology (BART) or implement other control strategies to meet regional haze control requirements. States are required to revise their state implementation plans to demonstrate reasonable further progress towards meeting regional haze goals. Emission reductions that are achieved through other ongoing control programs may be sufficient to demonstrate reasonable progress toward the long-term goal, particularly for the first 10 to 15 year phase of the program. States must develop implementation plans by December 2007. It is possible that sources that are subject to the CAIR will be able to satisfy their obligations under the regional haze regulations through compliance with the more stringent CAIR. However, until the state implementation plans are revised, Midwest Generation cannot predict whether it will be required to install BART or implement other control strategies, and cannot identify the financial impacts of any additional control requirements.

New Source Review Requirements—

       Since 1999, the US EPA has pursued a coordinated compliance and enforcement strategy to address Clean Air Act New Source Review (NSR) compliance issues at the nation's coal-fired power plants. The NSR regulations impose certain requirements on facilities, such as electric generating stations, in the event that modifications are made to air emissions sources at a facility. The US EPA's strategy included both the filing of a number of suits against power plant owners, and the issuance of a number of administrative notices of violation to power plant owners alleging NSR violations. Midwest Generation has not been named as a defendant in these lawsuits and has not received any administrative Notices of Violation alleging NSR violations at any of its facilities.

       In response to conflicting court decisions concerning the applicable emissions test used to determine whether an operational or physical change at an electric generating station would require the plant to install additional pollution controls, the US EPA, on October 13, 2005, proposed a change to the NSR program. The proposal put forth several options for a new emissions test based on the impact of a facility modification on a facility's maximum hourly emissions or its emissions per unit of energy produced. The existing NSR emissions test is based on the impact of a modification on a generating station's net annual emissions.

       In October 2005, the US EPA announced a revised NSR strategy to take account of recent US EPA rulemakings, such as the CAIR and regional haze rules, affecting coal-fired power plants. Under the revised strategy, while the US EPA will continue to pursue filed cases and cases in active negotiation, it

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intends to shift its future enforcement focus from coal-fired power plants to other sectors where compliance assurance activities have the potential to produce significant environmental benefits.

       On February 21, 2003, Midwest Generation received a request for information under Section 114 regarding past operations, maintenance and physical changes at the Illinois coal plants from the US EPA. This request was part of the US EPA's industry-wide investigation of compliance by coal-fired plants with the Clean Air Act NSR requirements. On July 28, 2003, Commonwealth Edison received a substantially similar request for information from the US EPA related to these same plants. Under date of February 1, 2005, the US EPA submitted a request for additional information to Midwest Generation. Midwest Generation has provided responses to these requests. Other than these requests for information, no NSR enforcement-related proceedings have been initiated by the US EPA with respect to Midwest Generation's facilities. See also "State—Illinois—Air Quality."

       Developments with respect to changes to the NSR program and NSR enforcement will continue to be monitored by Midwest Generation to assess what implications, if any, they will have on the operation of its power plants or on Midwest Generation's results of operations or financial condition.

Clean Water Act—Cooling Water Intake Structures

       On July 9, 2004, the US EPA published the final Phase II rule implementing Section 316(b) of the Clean Water Act establishing standards for cooling water intake structures at existing electrical generating stations that withdraw more than 50 million gallons of water per day and use more than 25% of that water for cooling purposes. The purpose of the regulation is to reduce substantially the number of aquatic organisms that are pinned against cooling water intake structures or drawn into cooling water systems. Pursuant to the regulation, a demonstration study must be conducted when applying for a new or renewed National Pollutant Discharge Elimination System (NPDES) wastewater discharge permit. If one can demonstrate that the costs of meeting the presumptive standards set forth in the regulation are significantly greater than the costs that the US EPA assumed in its rule making or are significantly disproportionate to the expected environmental benefits, a site-specific analysis may be performed to establish alternative standards. Depending on the findings of the demonstration studies, cooling towers and/or other mechanical means of reducing impingement/ entrainment may be required. Midwest Generation has begun to collect impingement and entrainment data at its potentially affected Illinois Plants to begin the process of determining what corrective actions may need to be taken.

       After the final promulgation of the Phase II cooling water intake structure regulation, legal challenges were filed by environmental groups, the Attorneys General for six states, a utility trade association and several individual electric power generating companies. These cases have been consolidated and transferred to the United States Court of Appeals for the Second Circuit. A briefing schedule has been established for the case and a decision is not expected until sometime in 2006. The final requirements of the Phase II rule will not be fully known until these appeals are resolved and, if necessary, the regulation is revised by the US EPA. Although the Phase II rule could have a material impact on Midwest Generation's operations, Midwest Generation cannot reasonably determine the financial impact on it at this time because it is in the beginning stages of collecting the data required by the regulation and due to the legal challenges mentioned above which may affect the obligations imposed by the rule.

Federal Legislative Initiatives

       There have been a number of bills introduced in Congress that would amend the Clean Air Act to specifically target emissions of specific pollutants from electric utility generating stations. These bills

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would mandate reductions in emissions of NOx, SO2 and mercury. Some bills would also impose limitations on carbon dioxide emissions. The various proposals differ in many details, including the timing of any required reductions; the extent of required reductions; and the relationship of any new obligations that would be imposed by these bills with existing legal requirements. There is significant uncertainty as to whether any of the proposed legislative initiatives will pass in its current form or whether any compromise can be reached that would facilitate passage of legislation. Accordingly, Midwest Generation is not able to evaluate the potential impact of these proposals at this time.

Environmental Remediation

       Under various federal, state and local environmental laws and regulations, a current or previous owner or operator of any facility, including an electric generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products located at that facility, and may be held liable to a governmental entity or to third parties for property damage, personal injury, natural resource damages, and investigation and remediation costs incurred by these parties in connection with these releases or threatened releases. In addition, persons who arrange for the disposal or treatment of hazardous or toxic substances at a disposal or treatment facility may be liable for the costs to remediate releases of hazardous substances from such facilities even where the disposal of such wastes was undertaken in compliance with applicable laws. Many of these laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly referred to as CERCLA, as amended by the Superfund Amendments and Reauthorization Act of 1986, impose liability without regard to whether the owner knew of or caused the presence of the hazardous substances, and courts have interpreted liability under these laws to be strict and joint and several.

       With respect to Midwest Generation's potential liabilities arising under CERCLA or similar laws for the investigation and remediation of contaminated property, Midwest Generation accrues a liability to the extent the costs are probable and can be reasonably estimated. Midwest Generation has accrued approximately $2 million at December 31, 2005 for estimated environmental investigation and remediation costs for the Illinois Plants. This estimate is based upon the number of sites, the scope of work and the estimated costs for environmental activity where such expenditures could be reasonably estimated. Future estimated costs may vary based on changes in regulations or requirements of federal, state, or local governmental agencies, changes in technology, and actual costs of disposal. In addition, future remediation costs will be affected by the nature and extent of contamination discovered at the sites that requires remediation. Given the prior history of the operations at its facilities, Midwest Generation cannot be certain that the existence or extent of all contamination at its sites has been fully identified. However, based on available information, management believes that future costs in excess of the amounts disclosed on all known and quantifiable environmental contingencies will not be material to Midwest Generation's financial position.

       Federal, state and local laws, regulations and ordinances also govern the removal, encapsulation or disturbance of asbestos-containing materials when these materials are in poor condition or in the event of construction, remodeling, renovation or demolition of a building. Those laws and regulations may impose liability for release of asbestos-containing materials and may provide for the ability of third parties to seek recovery from owners or operators of these properties for personal injury associated with asbestos-containing materials. In connection with the ownership and operation of its facilities, Midwest Generation may be liable for these costs. Midwest Generation has agreed to indemnify Commonwealth Edison for specified environmental liabilities. See "—Guarantees and Indemnities" for a discussion of this indemnity agreement.

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State—Illinois

Air Quality

       Beginning with the 2003 ozone season (May 1 through September 30), Midwest Generation has been required to comply with an average NOx emission rate of 0.25 lb NOx/mmBtu of heat input. This limitation is commonly referred to as the East St. Louis State Implementation Plan. This regulation is a State of Illinois requirement. Each of the Illinois Plants complied with this standard in 2004. Beginning with the 2004 ozone season, the Illinois Plants became subject to the federally mandated "NOx SIP Call" regulation that provided ozone-season NOx emission allowances to a 19-state region east of the Mississippi. This program provides for NOx allowance trading similar to the SO2 (acid rain) trading program already in effect. Midwest Generation has qualified for early reduction allowances by reducing NOx emissions at various plants ahead of the imposed deadline. Additionally, the installation of emission control technology at certain plants has demonstrated over-compliance at those individual plants with the pending NOx emission limitations. Finally, NOx emission trading will be utilized, as needed, to comply with any shortfall at plants where installation of emission control technology has demonstrated reductions at levels short of the NOx limitations.

       During 2004, the Illinois Plants stayed within their NOx allocations by augmenting their allocation with early reduction credits generated within the fleet. In 2005, the Illinois Plants used banked allowances, along with some purchased allowances, to stay within their NOx allocations. After 2005, Midwest Generation plans to continue to purchase allowances while evaluating the cost and benefits of various technologies to determine whether any additional pollution controls should be installed at the Illinois Plants.

       On January 5, 2006, Illinois Governor Rod Blagojevich announced that he was directing the Illinois Environmental Protection Agency to draft rules that would impose state limits on mercury emissions from coal-fired power plants which would be more stringent than the US EPA's CAMR issued in May 2005. Illinois is required to submit a state implementation plan (SIP) for CAMR to the US EPA by November 17, 2006. The Governor or his spokespersons have said that rules to be submitted to the Illinois Pollution Control Board will require a 90% reduction in mercury emissions averaged across company-owned Illinois generators and a minimum reduction of 75% for individual generating units by June 30, 2009. A 90% reduction at each generating unit would be required by 2013. Buying or selling of emission allowances under the CAMR federal cap and trade program would be prohibited. The Pollution Control Board must act on proposed rules submitted by the Illinois EPA after evidentiary hearings, including the presentation and cross-examination of expert testimony. After the Pollution Control Board adopts rules, they must be submitted to the General Assembly's Joint Committee on Administrative Rules for notice, hearing, and adoption, rejection or modification. Rules adopted through such state proceedings are also subject to court appeal. Midwest Generation is not able at this time to predict the final form of these rules or provide an estimate of their financial impact.

       During 2006, the Illinois EPA is expected to begin the process of developing a SIP to implement the federal CAIR which requires reductions in NOx and SO2. This SIP is to be submitted to the US EPA by September 11, 2006. The Illinois EPA has also begun to develop SIPs to meet National Ambient Air Quality Standards for 8-hour ozone and fine particulates. These SIPs will be developed with the intent of bringing non-attainment areas, such as Chicago, into attainment. They are expected to deal with all emission sources, not just power generators, and to address emissions of NOx, SO2, and Volatile Organic Carbon. These SIPs are to be submitted to the US EPA by June 15, 2007 for 8-hour ozone, and by April 5, 2008 for fine particulates. Midwest Generation is not able at this time to predict the final form of the SIPs or to estimate their financial impact.

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Water Quality

       The Illinois EPA is reviewing the water quality standards for the Des Plaines River adjacent to the Joliet Station and immediately downstream of the Will County Station to determine if the use classification should be upgraded. An upgraded use classification could result in more stringent limits being applied to wastewater discharges to the river from these plants. If the existing use classification is changed, the limits on the temperature of the discharges from the Joliet and Will County plants may be made more stringent. The Illinois EPA has also begun a review of the water quality standards for the Chicago River and Chicago Sanitary and Ship Canal which are adjacent to the Fisk and Crawford Stations. Proposed changes to the existing standards are still being developed. Accordingly, Midwest Generation is not able to estimate the financial impact of potential changes to the water quality standards. However, the cost of additional cooling water treatment, if required, could be substantial.

Climate Change

       The Kyoto Protocol on climate change officially came into effect on February 16, 2005. Under the Kyoto Protocol, the United States would have been required, by 2008-2012, to reduce its greenhouse gas emissions, such as carbon dioxide, by 7% from 1990 levels. Under the Bush administration, however, the United States has chosen not to pursue ratification of the Kyoto Protocol. Instead, the Bush administration has proposed several alternatives to mandatory reductions of greenhouse gases.

       There have been petitions from states and other parties to compel the US EPA to regulate greenhouse gases under the Clean Air Act. Also, in 2004, several states and environmental organizations brought a complaint in federal court in New York, alleging that several electric utility corporations are jointly and severally liable under a theory of public nuisance for damages caused by their alleged contribution to global warming resulting from carbon dioxide emissions from coal-fired power plants owned and operated by these companies or their subsidiaries. Midwest Generation was not named as a defendant in the complaint. The case was dismissed and is currently on appeal with United States Court of Appeals for the Second Circuit.

       The ultimate outcome of the climate change debate could have a significant economic effect on Midwest Generation. Any legal obligation that would require Midwest Generation to reduce substantially its emissions of carbon dioxide would likely require extensive mitigation efforts and would raise considerable uncertainty about the future viability of fossil fuels, particularly coal, as an energy source for new and existing electric generating facilities.

Note 12. Lease Commitments

       Midwest Generation has lease financings with respect to its Powerton-Joliet Stations, which are described in more detail below. Midwest Generation also has operating leases in place with respect to equipment, primarily leased barges and railcars that have remaining terms which range from as short as 2 months to 15 years.

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       At December 31, 2005, the future operating and lease financing commitments were as follows:

Years Ending December 31,	Operating Leases		Lease Financing
	(in thousands)
2006	$	19,408	$	184,940
2007		17,909		184,942
2008		15,041		184,930
2009		12,377		184,941
2010		12,172		169,973
Thereafter		67,395		941,624
Total future commitments	$	144,302	$	1,851,350
Amount representing interest				(606,662	)
Net commitments			$	1,244,688

       Operating lease expense amounted to $18.0 million, $17.0 million and $19.1 million in 2005, 2004 and 2003, respectively.

Powerton-Joliet Facilities Sale-Leaseback

       On August 24, 2000, Midwest Generation entered into a sale-leaseback transaction with respect to the Powerton and Joliet power facilities located in Illinois to third-party lessors for an aggregate purchase price of $1.367 billion. Under the terms of the leases (33.75 years for Powerton and 30 years for Joliet), Midwest Generation makes semi-annual lease payments on each January 2 and July 2, beginning January 2, 2001. If a lessor intends to sell its interest in the Powerton or Joliet power facility, Midwest Generation has a first right of refusal to acquire the interest at fair market value. Under the terms of each lease, Midwest Generation may request a lessor, at its option, to refinance the lessor debt, which if completed would affect the base lease rent. The lessor debt of $1.147 billion was obtained from the issuance pursuant to two pass-through trust agreements between Midwest Generation and pass-through trustees of Pass-Through Certificates with terms ranging from nine to sixteen years with fixed interest rates ranging from 8.30% to 8.56%. The gain on the sale of the power facilities has been deferred and is being amortized over the term of the leases.

Note 13. Related Party Transactions

EMMT Agreements

       Midwest Generation entered into a revolving credit agreement with EMMT, dated as of April 27, 2004, pursuant to which Midwest Generation can, from time to time, make revolving loans to, and have letters of credit issued on behalf of, EMMT. The loans and letters of credit provide credit support for forward contracts entered into by EMMT related to the Illinois Plants. Midwest Generation had provided $328.1 million and $9.8 million to EMMT as of December 31, 2005 and 2004, respectively, which EMMT has used to provide credit support for forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward contract. The amount repaid includes interest earned, if any, under margining agreements supporting such contracts. The maximum amount of available credit under the agreement is $500 million.

       Midwest Generation has entered into a master purchase, sale and services agreement with EMMT, pursuant to which EMMT arranges for purchases and sales of the following products, including related services: (i) energy and capacity; (ii) natural gas; (iii) fuel oil; and (iv) emission allowances.

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       Midwest Generation compensates EMMT in accordance with the following table with respect to these transactions, and reimburses EMMT for brokers' fees, taxes, and other reasonably incurred direct out-of-pocket expenses. Payment for these services is due within 30 days of billing.

Service	Compensation
Energy	$.02/MWh
Capacity	$.02/MW-day
Natural gas	$.02/MMBtu
Fuel oil	$.05/bbl
Emission allowances	$.25/SO2 allowance; and $25/NOx allowance

       The net fees earned by EMMT were $1.5 million, $1.8 million and $1.1 million for the years ended December 31, 2005, 2004 and 2003, respectively. Midwest Generation had receivables due from EMMT of $203.6 million and $51.8 million at December 31, 2005 and 2004, respectively. The increase in receivable balance in 2005 is due to higher sales of power and emissions by Midwest Generation through EMMT in the month of December 2005 as compared to the month of December 2004.

       Midwest Generation also entered into several transactions through EMMT to sell surplus or purchase SO2 and NOx allowances to or from other EME affiliates. All transactions were completed at market price on the date of the transaction. Net consideration received by Midwest Generation was $54.7 million, $26.1 million and $10.3 million during 2005, 2004 and 2003, respectively.

Fuel Services Agreement

       Midwest Generation has entered into an agreement with Edison Mission Energy Services, Inc. to provide fuel and transportation services related to coal and fuel oil. Under the terms of this agreement, Midwest Generation pays a service fee of $.06 for each ton of coal delivered and $.05 for each barrel of fuel oil delivered, plus the actual cost of the commodities. The amount billable under this agreement for the service fee for each of the years ended December 31, 2005, 2004 and 2003 was $1.1 million.

Notes Receivable from EME

       The proceeds received by Midwest Generation from the Powerton-Joliet sale-leaseback transaction were loaned to EME. The loan is evidenced by four intercompany notes amounting to $1.367 billion. EME is obligated to repay the principal on the notes in a series of installments on the dates and in the amounts set forth on a schedule to each note. EME has paid and is required to pay interest on the notes on each January 2 and July 2 at an 8.30% fixed interest rate. All amounts due under the notes are due to be repaid in full by January 2, 2016. Midwest Generation earned interest income of $113.1 million, $113.2 million and $113.4 million during 2005, 2004 and 2003, respectively.

Services Agreements with EME and Edison International

       Certain administrative services, such as payroll, employee benefit programs, insurance and information technology are shared among all affiliates of Edison International, and the costs of these corporate support services are allocated to all affiliates. The cost of services provided by Edison International and EME, including those related to Midwest Generation, are allocated based on one of the following formulas: percentage of the time worked, equity in investment and advances, number of employees, or multi-factor (operating revenues, operating expenses, total assets and total employees). Midwest Generation participates in a common payroll and benefit program with all Edison International employees. In addition, Midwest Generation is billed for any direct labor and out-of-pocket expenses for

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services directly requested for its benefit. Midwest Generation believes the allocation methodologies are reasonable. Costs incurred for these programs, payroll funding, and other services during the years ended December 31, 2005, 2004 and 2003 were $125.7 million, $138.1 million and $134.2 million, respectively. Midwest Generation had a $0.9 million net receivable due from Edison International at December 31, 2005 and a $4.9 million net payable due to Edison International at December 31, 2004 related to these programs.

       Midwest Generation participates in the insurance program of Edison International, including property, general liability, workers compensation and various other specialty policies. Midwest Generation's insurance premiums are generally based on its share of risk related to each policy. In connection with the property insurance program, a portion of the risk is reinsured by a captive insurance subsidiary of Edison International.

Agreements with Midwest Generation EME, LLC

Contribution of Services/Management and Administration Agreement

       Midwest Generation EME, LLC is Midwest Generation's indirect parent and provided executive management, legal, human resources, accounting and other administrative services in Chicago on Midwest Generation's behalf without charge through March 2004. In connection with regulations of the Securities and Exchange Commission, the costs of these services must be recorded as part of Midwest Generation's financial results, although Midwest Generation does not have a cash obligation to pay for these activities. The costs of these services, after tax, were $2.5 million and $10.6 million for the first quarter of 2004 and the year ended December 31, 2003, respectively. Midwest Generation has reflected these activities as a non-cash contribution of services by its parent in the accompanying consolidated financial statements. In April 2004, Midwest Generation EME and Midwest Generation entered into a new management and administration agreement pursuant to which Midwest Generation EME began charging Midwest Generation for management and administrative services. Actual costs billable under this agreement for the years ended December 31, 2005 and 2004 were $13.1 million and $15.7 million, respectively.

Support Services Agreement

       Midwest Generation has entered into an agreement with Midwest Generation EME for support services, including construction and construction management, operations and maintenance management, technical services and training, environmental, health and safety services, administrative and IT support, and other managerial and technical services needed to operate and maintain electric power facilities. Under the terms of the agreement, Midwest Generation reimburses Midwest Generation EME for actual costs incurred by functional area in providing support services, or in the case of specific tasks requested by Midwest Generation, the amount negotiated for the task. Actual costs billable under this agreement for the years ended December 31, 2005, 2004 and 2003 were $6.9 million, $6.1 million and $6.3 million, respectively.

       Midwest Generation had payables of $1.5 million and $2.6 million due to Midwest Generation EME at December 31, 2005 and 2004, respectively, related to these agreements.

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Note 14. Supplemental Statements of Cash Flows Information

		Years Ended December 31,
		2005		2004		2003
		(in thousands)
Cash paid:
	Interest	$	206,893	$	261,057	$	305,816
Non-cash financing activities:
	Reduction in affiliate debt due to tax-allocation agreement offset	$	—	$	25,966	$	—
	Reduction in affiliate debt and affiliate interest due to equity contribution as part of refinancing	$	—	$	2,190,902	$	—

Note 15. Quarterly Financial Data (unaudited)

2005	First			Second			Third			Fourth			Total
	(in thousands)
Operating revenues	$	324,924		$	252,655		$	417,858		$	433,948		$	1,429,385
Operating income		104,135			25,457			198,271			261,398			589,261
Provision for income taxes		31,077			1,556			68,669			95,512			196,814
Income before accounting change		48,158			2,227			107,085			144,864			302,334
Net income		48,158			2,227			107,085			143,705			301,175
2004	First			Second			Third(i)			Fourth			Total
Operating revenues	$	233,257		$	224,143		$	367,777		$	232,587		$	1,057,764
Operating income (loss)		1,127			(69,421	)  (ii)		91,633	(iii)		(21,625	)  (iv)		1,714
Provision (benefit) for income taxes		(20,019	)		(39,631	)  (ii)		25,653	(iii)		(24,202	)  (iv)		(58,199	)
Net income (loss)		(31,874	)		(63,160	)  (ii)		40,870	(iii)		(24,451	)  (iv)		(78,615	)

(i)

Reflects Midwest Generation's seasonal pattern, in which the majority of earnings were recorded in the third quarter of the year.

(ii)

Reflects a $64 million ($39 million, after tax) loss on termination of the lease and other charges related to the Collins Station.

(iii)

Reflects asset impairment charge of $29 million ($18 million, after tax) related to impairment of six of the eight remaining small peaking units in Illinois and $10 million ($6 million, after tax) related to the termination of the power purchase agreement for the remaining two units at the Collins Station.

(iv)

Reflects a $56 million ($34 million, after tax) charge related to an estimate of possible future payments under a contract indemnity agreement related to asbestos claims with respect to activities at the Illinois Plants prior to their acquisition in 1999.

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PART III

ITEM 10.    MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       Midwest Generation's members elect the Board of Managers. The Board of Managers may appoint officers as Midwest Generation's business may require. Information concerning executive officers of Midwest Generation is set forth in Part I in accordance with General Instruction G(3), pursuant to Instruction 3 to Item 401(b) of Regulation S-K. Other information responding to Item 10 is set forth below.

Managers

Name and Age	Manager Continuously Since
Guy F. Gorney, 51	2005
W. James Scilacci, 50	2005
Raymond W. Vickers, 63	1999

Business Experience

       Below is a description of the principal business experience during the past five years of each of the managers named above.

       Refer to "Executive Officers of the Registrant" set forth in Part I for Messrs. Gorney and Scilacci's business experience.

Mr. Vickers has been senior vice president and general counsel of Edison Mission Energy since March 1999.

Audit Committee Financial Expert

       The Board of Managers has determined that Midwest Generation has at least one audit committee financial expert (as defined in rules of the Securities and Exchange Commission) serving on its audit committee. The name of the audit committee financial expert is W. James Scilacci, who is not an independent manager.

Ethics and Compliance Code for Principal Officers

       Midwest Generation has adopted a Ethics and Compliance Code that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Ethics and Compliance Code is posted on the Internet website maintained by Midwest Generation's ultimate parent, Edison International, at www.edisonethics.com. Any amendment to or waiver from a provision of the Ethics and Compliance Code that must be disclosed under rules and forms of the Securities and Exchange Commission will be disclosed at the same Internet website address within four business days following the date of the amendment or waiver.

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ITEM 11.    EXECUTIVE COMPENSATION

       Midwest Generation managers and officers receive compensation from EME or Edison International and receive no compensation from Midwest Generation. For information concerning the chief executive officer and four most highly paid executive officers, other than the chief executive officer, of EME and Edison International, see Item 11 of EME's Amendment to Form 10-K for the year ended December 31, 2005 and the Summary Compensation Table in the Executive Compensation section of Edison International's definitive proxy statement relating to its 2006 Annual Meeting of Shareholders, respectively, which will be incorporated herein by reference when filed. EME's Amendment to Form 10-K for the year ended December 31, 2005 will be filed with the Securities and Exchange Commission concurrently with Edison International's filing of its definitive proxy statement.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Certain Beneficial Owners

       Set forth below is certain information regarding each person who is known by Midwest Generation to be a beneficial owner.

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner	Percent of Class
Membership interests	Edison Mission Midwest Holdings Co. One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, Illinois 60605	100 units held directly and with exclusive voting and investment power	100	%

       For information concerning the number of equity securities of Edison International beneficially owned by all directors and executive officers of EME and Edison International, individually and as a group, see Item 12 of EME's Amendment to Form 10-K for the year ended December 31, 2005 and the table entitled "Stock Ownership of Directors, Director Nominee, and Executive Officers" of Edison International's definitive proxy statement relating to its 2006 Annual Meeting of Shareholders, respectively, which will be incorporated herein by reference when filed. EME's Amendment to Form 10-K for the year ended December 31, 2005 will be filed with the Securities and Exchange Commission concurrently with Edison International's filing of its definitive proxy statement.

Changes in Control

       On April 27, 2004, EME entered into a $98 million secured corporate credit agreement. The secured credit agreement matures on April 27, 2007. As security for its obligations under this credit agreement, EME pledged, among other things, its ownership interest in Midwest Generation EME, LLC, an indirect parent of Midwest Generation. In addition, Midwest Generation EME, LLC pledged its interest in Edison Mission Midwest Holdings Co., Midwest Generation's parent, and Edison Mission Midwest Holdings Co. in turn pledged its ownership interest in Midwest Generation. During 2001, Mission Energy Holding Company issued $800 million of senior secured notes, which are secured by a security interest in EME's common stock. Any foreclosure on any of these pledges would result in a change in control of Midwest Generation.

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Equity Compensation Plans

       Item 201(d) of Regulation S-K, "Securities Authorized For Issuance Under Equity Compensation Plans," is not applicable because Midwest Generation has no compensation plans under which equity securities of Midwest Generation are authorized for issuance.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       For information concerning transactions between Midwest Generation and specified security holders, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Related Party Transactions—Notes Receivable from EME," "—Tax-Allocation Agreements," "—Services Agreements with EME and Edison International," and "—Agreements with Midwest Generation EME, LLC."

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

INDEPENDENT ACCOUNTANT FEES

       The following table sets forth the aggregate fees billed to Midwest Generation (consolidated total including Midwest Generation and its subsidiaries), for the fiscal years ended December 31, 2005 and December 31, 2004, by PricewaterhouseCoopers LLP:

	Midwest Generation and Subsidiaries ($000)
	2005		2004
Audit Fees	$	749	$	368
Audit Related Fees		—		—
Tax Fee		—		—
All Other Fees		—		—

       The Edison International Audit Committee reviews with management and pre-approves all audit services to be performed by the independent accountants and all non-audit services that are not prohibited and that require pre-approval under the Securities Exchange Act. The Edison International Audit Committee's pre-approval responsibilities may be delegated to one or more Edison International Audit Committee members, provided that such delegate(s) presents any pre-approval decisions to the Edison International Audit Committee at its next meeting. The independent auditors must assure that all audit and non-audit services provided to Midwest Generation, LLC and its subsidiaries have been approved by the Edison International Audit Committee.

       During the fiscal year ended December 31, 2005, all services performed by the independent accountants were pre-approved by the Edison International Audit Committee, regardless of whether the services required pre-approval under the Securities Exchange Act.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	(1)	List of Financial Statements
		See Index to Consolidated Financial Statements at Item 8 of this report.
	(2)	List of Financial Statement Schedules
		Schedule II—Valuation and Qualifying Accounts
		All other schedules have been omitted because they are not applicable or because the required information is included in the consolidated financial statements or notes thereto.
	(3)	List of Exhibits

Exhibit No.	Description
2.1	Asset Sale Agreement, dated March 22, 1999, between Commonwealth Edison Company and Edison Mission Energy as to the Fossil Generating Assets, incorporated by reference to Exhibit 2.5 to Edison Mission Energy's Form 10-K for the year ended December 31, 1998.
3.1	Limited Liability Company Agreement of Midwest Generation, LLC effective as of July 12, 1999, incorporated by reference to Exhibit 3.3 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
3.2	Certificate of Formation of Midwest Generation, LLC, dated as of July 9, 1999, incorporated by reference to Exhibit 3.4 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.1	Pass-Through Trust Agreement A, dated as of August 17, 2000, between Midwest Generation, LLC and United States Trust Company of New York, as Pass-Through Trustee, made with respect to the formation of the Midwest Generation Series A Pass-Through Trust, and the issuance of 8.30% Pass-Through Certificates, Series A, incorporated by reference to Exhibit 4.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.2	Pass-Through Trust Agreement B, dated as of August 17, 2000, between Midwest Generation, LLC and United States Trust Company of New York, as Pass-Through Trustee, made with respect to the formation of the Midwest Generation Series B Pass-Through Trust, and the issuance of 8.56% Pass-Through Certificates, Series B, incorporated by reference to Exhibit 4.2 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.3	Form of 8.30% Pass-Through Certificate, Series A (included in Exhibit 4.1), incorporated by reference to Exhibit 4.3 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.

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4.4	Form of 8.56% Pass-Through Certificate, Series B (included in Exhibit 4.2), incorporated by reference to Exhibit 4.4 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.5	Indenture of Trust, Mortgage and Security Agreement (T1), dated as of August 17, 2000, between Powerton Trust I and United States Trust Company of New York, as Lease Indenture Trustee, incorporated by reference to Exhibit 4.5 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.5.1	Schedule identifying substantially identical agreement to Indenture of Trust, Mortgage and Security Agreement constituting Exhibit 4.5 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.6	Indenture of Trust, Mortgage and Security Agreement (T1), dated as of August 17, 2000, between Joliet Trust I and United States Trust Company of New York, as Lease Indenture Trustee, incorporated by reference to Exhibit 4.6 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.6.1	Schedule identifying substantially identical agreement to Indenture of Trust, Mortgage and Security Agreement constituting Exhibit 4.6 hereto, incorporated by reference to Exhibit 4.6.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.7	Facility Lease Agreement (T1), dated as of August 17, 2000, by and between Powerton Trust I, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee, incorporated by reference to Exhibit 4.7 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.7.1	Schedule identifying substantially identical agreement to Facility Lease Agreement constituting Exhibit 4.7 hereto, incorporated by reference to Exhibit 4.7.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.8	Facility Lease Agreement (T1), dated as of August 17, 2000, by and between, Joliet Trust I, as Owner Lessor, and Midwest Generation, LLC, as Facility Lessee, incorporated by reference to Exhibit 4.8 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.8.1	Schedule identifying substantially identical agreement to Facility Lease Agreement constituting Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.8.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.9	Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Powerton Trust I, as Owner Lessor, incorporated by reference to Exhibit 4.9 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.

104

4.9.1	Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.9 hereto, incorporated by reference to Exhibit 4.9.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.10	Guarantee, dated as of August 17, 2000, made by Edison Mission Energy, as Guarantor in favor of Joliet Trust I, as Owner Lessor, incorporated by reference to Exhibit 4.10 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.10.1	Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.10 hereto, incorporated by reference to Exhibit 4.10.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.11	Registration Rights Agreement, dated as of August 17, 2000, among Edison Mission Energy, Midwest Generation, LLC and Credit Suisse First Boston Corporation and Lehman Brothers Inc., as representatives of the Initial Purchasers, incorporated by reference to Exhibit 4.11 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.12	Participation Agreement (T1), dated as of August 17, 2000, by and among, Midwest Generation, LLC, Powerton Trust I, as the Owner Lessor, Wilmington Trust Company, as the Owner Trustee, Powerton Generation I, LLC, as the Owner Participant, Edison Mission Energy, United States Trust Company of New York, as the Lease Indenture Trustee, and United States Trust Company of New York, as the Pass Through Trustees, incorporated by reference to Exhibit 4.12 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.12.1	Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.12 hereto, incorporated by reference to Exhibit 4.12.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.13	Participation Agreement (T1), dated as of August 17, 2000, by and among, Midwest Generation, LLC, Joliet Trust I, as the Owner Lessor, Wilmington Trust Company, as the Owner Trustee, Joliet Generation I, LLC, as the Owner Participant, Edison Mission Energy, United States Trust Company of New York, as the Lease Indenture Trustee and United States Trust Company of New York, as the Pass Through Trustees, incorporated by reference to Exhibit 4.13 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.13.1	Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.13 hereto, incorporated by reference to Exhibit 4.13.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
4.14	Promissory Note ($499,450,800), dated as of August 24, 2000, by Edison Mission Energy in favor of Midwest Generation, LLC, incorporated by reference to Exhibit 4.5 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000.

105

4.14.1	Schedule identifying substantially identical agreements to Promissory Note constituting Exhibit 4.14 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000.
10.1	Reimbursement Agreement, dated as of October 26, 2001, between Edison Mission Energy and Midwest Generation, LLC, incorporated by reference to Exhibit 10.15 to Edison Mission Energy's Form 10-Q for the quarter ended March 31, 2004.
10.2	Instrument of Assumption, dated as of December 15, 1999, by Midwest Generation, LLC in favor of Commonwealth Edison Company and Unicom Investment Inc., incorporated by reference to Exhibit 10.91 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
10.3	Pledge Agreement, dated as of August 17, 2000, between Midwest Generation, LLC and Citibank, N.A., incorporated by reference to Exhibit 10.105 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
10.3.1	Schedule identifying substantially identical agreements to the Pledge Agreement constituting Exhibit 10.3 hereto, incorporated by reference to Exhibit 10.105.1 to Edison Mission Energy's and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001.
10.4	Indenture, dated as of April 27, 2004, among Midwest Generation, LLC, Midwest Finance Corp. and The Bank of New York, as Trustee incorporated by reference to Exhibit 4.1 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.5	Registration Rights Agreement, dated April 27, 2004, among Midwest Generation, LLC, Midwest Finance Corp. and Credit Suisse First Boston LLC, as Representative of the Initial Purchasers incorporated by reference to Exhibit 4.2 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.6	Credit Agreement, dated as of April 27, 2004 among Midwest Generation, LLC, the Lenders referred to therein, the Issuing Lenders referred to therein and Citicorp North America, Inc., as Administrative Agent for the Lenders and the Issuing Lenders party thereto incorporated by reference to Exhibit 4.3 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.6.1	First Amended and Restated Credit Agreement (amending and restating the Credit Agreement listed as Exhibit 10.6 herein) dated as of April 18, 2005 among Midwest Generation, LLC, the Lenders referred to therein the Citicorp North America, Inc., as administrative Agent for the Lenders and the Issuing Lenders party thereto incorporated by reference to Exhibit 10.1 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2005.
10.6.2*	Second Amended and Restated Credit Agreement (amending and restating the Credit Agreement listed as Exhibit 10.6.1 herein) dated as of December 15, 2005, among Midwest Generation, LLC, the Lenders referred to therein and Citicorp North America, Inc. as Administrative Agent for the Lenders and the Issuing Lenders party thereto.

106

10.7	Accession Agreement dated as of April 18, 2005, among Midwest Generation, LLC, the Lenders referred to therein and Citicorp North America, Inc., as Administrative Agent for the Lenders and the Issuing Lenders party thereto incorporated by referenced to Exhibit 10.2 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2005.
10.7.1*	Accession Agreement dated as of December 15, 2005, among Midwest Generation LLC, the Lenders referred to therein and the Issuing Lenders party thereto.
10.8	Collateral Trust Agreement, dated as of April 27, 2004, among Midwest Generation, LLC, the Pledgors from time to time party thereto, Citicorp North America, Inc., as Administrative Agent, The Bank of New York, as Trustee, and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.4 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.9	Security Agreement, dated as of April 27, 2004, between Midwest Generation, LLC and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.5 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.10	Pledge Agreement, dated as of April 27, 2004, between Midwest Generation EME, LLC and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.6 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.11	Pledge Agreement, dated as of April 27, 2004, between Edison Mission Midwest Holdings Co. and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.7 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.12	Security Agreement, dated as of April 27, 2004, between Edison Mission Marketing & Trading, Inc. and Wilmington Trust Company, as Collateral Trustee incorporated by reference to Exhibit 4.8 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.13	Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement, dated as of April 27, 2004 from Midwest Generation, LLC to Wilmington Trust Company, as Collateral Trustee (Joliet No. 9 — Station No. 6 and Joliet Peaking Unit) incorporated by reference to Exhibit 4.9 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.14	Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement, dated as of April 27, 2004 from Midwest Generation, LLC and Chicago Title Land Trust Company to Wilmington Trust Company, as Collateral Trustee (Will County Facility) incorporated by reference to Exhibit 4.10 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.15	Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement, dated as of April 27, 2004 from Midwest Generation, LLC to Wilmington Trust Company, as Collateral Trustee (Calumet Facility) incorporated by reference to Exhibit 4.11 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.15.1	Schedule identifying substantially identical agreements to Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement constituting Exhibit 10.15 hereto incorporated by reference to Exhibit 4.11.1 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.

107

10.16	Tax-Allocation Agreement, effective January 1, 2002, by and between Midwest Generation, LLC and Edison Mission Midwest Holdings Co., incorporated by reference to Exhibit 10.25 to Midwest Generation, LLC's Form 10-Q for the quarter ended September 30, 2002.
10.17	Amended and Restated Master Purchase, Sale and Services Agreement, entered into on April 27, 2004, between Midwest Generation, LLC and Edison Mission Marketing & Trading, Inc incorporated by reference to Exhibit 10.2 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.18	Support Services Agreement, dated as of August 7, 2000, between Midwest Generation, LLC and Midwest Generation EME, LLC incorporated by reference to Exhibit 10.4 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.19	Management and Administration Agreement, effective as of April 27, 2004, between Midwest Generation, LLC and Midwest Generation EME, LLC incorporated by reference to Exhibit 10.1 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.20	Revolving Credit Agreement, dated as of April 27, 2004, between Edison Mission Marketing & Trading, Inc. as Borrower and Midwest Generation, LLC, as Lender incorporated by reference to Exhibit 10.5 to Midwest Generation, LLC's Form 10-Q for the quarter ended March 31, 2004.
10.20.1	Amendment One to Revolving Credit Agreement, dated as of August 30, 2005 by and between Edison Mission Marketing & Trading, Inc. as Borrower and Midwest Generation, LLC as Lender incorporated by reference to Exhibit 10.1 to Midwest Generation, LLC's Form 10-Q for the quarter ended September 31, 2005.
21*	List of Subsidiaries of Midwest Generation, LLC.
31.1*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
32*	Statement Pursuant to 18 U.S.C. Section 1350.

*

Filed herewith

108

SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MIDWEST GENERATION, LLC (REGISTRANT)
By:	/s/ W. James Scilacci W. James Scilacci Manager and Vice President
Date:	March 6, 2006

       Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Guy F. Gorney Guy F. Gorney	Manager and President (Principal Executive Officer)	March 6, 2006
/s/ W. James Scilacci W. James Scilacci	Manager and Vice President (Principal Financial Officer)	March 6, 2006
/s/ Mark C. Clarke Mark C. Clarke	Vice President and Controller (Controller or Principal Accounting Officer)	March 6, 2006
/s/ Raymond W. Vickers Raymond W. Vickers	Manager	March 6, 2006

109

SCHEDULE II

MIDWEST GENERATION, LLC
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

				Additions
Description		Balance at Beginning of Year		Charged to Costs and Expenses	Charged to Other Accounts	Deductions	Balance at End of Year
Year Ended December 31, 2005
	Allowance for doubtful accounts	$	—	—	—	—	$	—
Year Ended December 31, 2004
	Allowance for doubtful accounts	$	—	—	—	—	$	—
Year Ended December 31, 2003
	Allowance for doubtful accounts	$	4,269	—	—	4,269	$	—

110

QuickLinks

PART I

ITEM 1. BUSINESS

ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

EXECUTIVE OFFICERS OF THE REGISTRANT

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION

PART III

ITEM 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

SIGNATURES

EX-10.6.2

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Exhibit 10.6.2

EXECUTION COUNTERPART

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

dated as of December 15, 2005

among

MIDWEST GENERATION, LLC

and

THE LENDERS REFERRED TO HEREIN

and

CITICORP NORTH AMERICA, INC.,
as Administrative Agent for the Lenders

and

THE ISSUING LENDERS REFERRED TO HEREIN

CITIGROUP GLOBAL MARKETS INC.,
as Sole Lead Arranger

CITIGROUP GLOBAL MARKETS INC.,
as Sole Bookrunner

CITIGROUP GLOBAL MARKETS INC.,
as Syndication Agent

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS			1
	SECTION 1.1 Defined Terms		1
	SECTION 1.2 Use of Defined Terms		37
	SECTION 1.3 Cross-References		37
	SECTION 1.4 Accounting and Financial Determinations		37
ARTICLE II COMMITMENTS AND BORROWING PROCEDURES			38
	SECTION 2.1 Commitments		38
		SECTION 2.1.1 Term Loans	38
		SECTION 2.1.2 Revolver Loans	38
	SECTION 2.2 Loans		38
		SECTION 2.2.1 Obligations of Lenders	38
		SECTION 2.2.2 Type of Loans	38
		SECTION 2.2.3 Minimum Amounts; Limitation on Number of Loans	38
		SECTION 2.2.4 Limitations on Interest Periods	38
	SECTION 2.3 Borrowing Procedure		39
	SECTION 2.4 Continuation and Conversion Elections		39
	SECTION 2.5 Funding		40
	SECTION 2.6 Letters of Credit		40
		SECTION 2.6.1 Notice of Issuance, Amendment, Renewal or Extension	40
		SECTION 2.6.2 Limitations on Amounts	40
		SECTION 2.6.3 Expiration Date	40
		SECTION 2.6.4 Participations	41
		SECTION 2.6.5 Reimbursement	41
		SECTION 2.6.6 Obligations Absolute	41
		SECTION 2.6.7 Disbursement Procedures	42
		SECTION 2.6.8 Interim Interest	43
		SECTION 2.6.9 Addition and Replacement of Issuing Lenders	43
		SECTION 2.6.10 Cash Collateralization	43
		SECTION 2.6.11 Existing Letters of Credit	44
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES			44
	SECTION 3.1 Repayments, Amortization and Prepayments		44
		SECTION 3.1.1 Optional Prepayments and Commitment Reductions	44
		SECTION 3.1.2 Mandatory Prepayments	45
		SECTION 3.1.3 Acceleration; Penalty	46
	SECTION 3.2 Interest Provisions		46
		SECTION 3.2.1 Rates	46
		SECTION 3.2.2 Default Rates	47
		SECTION 3.2.3 Payment Dates	47
		SECTION 3.2.4 Interest Rate Determination	47
	SECTION 3.3 Fees		47
	SECTION 3.3.1 Commitment Fee		47
	SECTION 3.3.2 Letter of Credit Fees		48
	SECTION 3.3.3 Other Fees		48
	SECTION 3.3.4 Payment of Fees		48
ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS			48
	SECTION 4.1 LIBO Rate Lending Unlawful		48

ii

	SECTION 4.2 Inability to Determine Rates		49
	SECTION 4.3 Increased LIBO Rate Loan Costs		49
	SECTION 4.4 Obligation to Mitigate		49
	SECTION 4.5 Funding Losses		50
	SECTION 4.6 Increased Capital Costs		50
	SECTION 4.7 Taxes		50
	SECTION 4.8 Payments, Computations		51
	SECTION 4.9 Sharing of Payments		52
	SECTION 4.10 Setoff		52
	SECTION 4.11 Replacement of Lender		52
ARTICLE V CONDITIONS TO LOANS			53
	SECTION 5.1 Conditions to Effectiveness		53
		SECTION 5.1.1 Delivery of Loan Documents	53
		SECTION 5.1.2 Officer's Certificates	54
		SECTION 5.1.3 Resolutions	54
		SECTION 5.1.4 Opinions of Counsel	54
		SECTION 5.1.5 Closing Fees, Expenses	55
		SECTION 5.1.6 Financial Statements	55
		SECTION 5.1.7 Funds Flow Undertaking	55
		SECTION 5.1.8 Lien Search; Recordings and Filings	55
		SECTION 5.1.9 Collateral Trust Agreement	55
		SECTION 5.1.10 Title Policies	56
		SECTION 5.1.11 [Reserved]	56
		SECTION 5.1.12 Approvals	56
		SECTION 5.1.13 Ratings	56
		SECTION 5.1.14 Energy Trading Risk Management	56
		SECTION 5.1.15 Insurance	56
	SECTION 5.2 Credit Extensions		56
		SECTION 5.2.1 Representations and Warranties; No Default	56
		SECTION 5.2.2 Borrowing or Letter of Credit Request	57
	SECTION 5.3 Satisfactory Legal Form		57
ARTICLE VI REPRESENTATIONS AND WARRANTIES			57
	SECTION 6.1 Financial Information		57
	SECTION 6.2 Organization; Power		57
	SECTION 6.3 Due Authorization; Non-Contravention		57
	SECTION 6.4 Approvals		58
	SECTION 6.5 Accuracy of Information		58
	SECTION 6.6 Validity		58
	SECTION 6.7 Compliance with Law and Contractual Obligations		58
	SECTION 6.8 Regulations T, U and X		58
	SECTION 6.9 Litigation		59
	SECTION 6.10 Ownership of Properties		59
	SECTION 6.11 Taxes		59
	SECTION 6.12 Investment Company Act; Public Utility Holding Company Act; Other Regulations		59
	SECTION 6.13 Environmental Warranties		60
	SECTION 6.14 The Obligations		60
	SECTION 6.15 Pension and Welfare Plans		60
	SECTION 6.16 Solvency		61

iii

	SECTION 6.17 Subsidiaries		61
ARTICLE VII COVENANTS			61
	SECTION 7.1 Affirmative Covenants		61
		SECTION 7.1.1 Financial Information, Reports, Notices	61
		SECTION 7.1.2 Continuation of Business and Maintenance of Existence	63
		SECTION 7.1.3 Compliance with Requirements of Law and Contractual Obligations	64
		SECTION 7.1.4 Maintenance of Facilities	64
		SECTION 7.1.5 Insurance	64
		SECTION 7.1.6 Books and Records	65
		SECTION 7.1.7 Environmental Covenant	65
		SECTION 7.1.8 Further Assurances	65
		SECTION 7.1.9 Financial Covenants	66
		SECTION 7.1.10 Use of Proceeds	66
		SECTION 7.1.11 Recovery Events	66
		SECTION 7.1.12 Separateness	67
	SECTION 7.2 Negative Covenants		67
		SECTION 7.2.1 Restrictions on Indebtedness	67
		SECTION 7.2.2 Liens	68
		SECTION 7.2.3 Consolidation, Merger	70
		SECTION 7.2.4 Asset Sales	70
		SECTION 7.2.5 Investments	71
		SECTION 7.2.6 Transactions with Affiliates	71
		SECTION 7.2.7 Restricted Payments	72
		SECTION 7.2.8 Capital Expenditures	72
		SECTION 7.2.9 Restrictive Agreements	72
		SECTION 7.2.10 Limitation on Lines of Business	73
		SECTION 7.2.11 Limitation on Electricity Market Risk Exposure	73
		SECTION 7.2.12 Energy and Fuel Risk Management Policies	73
		SECTION 7.2.13 Amendment, Modification or Waiver of Certain Documents	73
ARTICLE VIII EVENTS OF DEFAULT			73
	SECTION 8.1 Listing of Events of Default		73
		SECTION 8.1.1 Non-Payment of Obligations	73
		SECTION 8.1.2 Breach of Warranty	73
		SECTION 8.1.3 Non-Performance of Certain Covenants and Obligations	74
		SECTION 8.1.4 Non-Performance of Other Covenants and Obligations	74
		SECTION 8.1.5 Default on other Indebtedness; Payment Default under EMMT Agreements	74
		SECTION 8.1.6 Bankruptcy, Insolvency	74
		SECTION 8.1.7 Pension Plans	75
		SECTION 8.1.8 Judgments	75
		SECTION 8.1.9 Regulatory Violation	75
		SECTION 8.1.10 Loan Documentation	75
		SECTION 8.1.11 Change-In-Control	75
		SECTION 8.1.12 Powerton/Joliet Leases	75
		SECTION 8.1.13 EME Obligations	76
		SECTION 8.1.14 Powerton/Joliet Documentation	76
		SECTION 8.1.15 EME Default	76
	SECTION 8.2 Action if Bankruptcy		76
	SECTION 8.3 Action if Other Event of Default		76
	SECTION 8.4 Rescission of Declaration		76

iv

ARTICLE IX THE ADMINISTRATIVE AGENT		77
	SECTION 9.1 Actions	77
	SECTION 9.2 Funding Reliance	77
	SECTION 9.3 Exculpation	78
	SECTION 9.4 Successor	78
	SECTION 9.5 Loans by CNAI	78
	SECTION 9.6 Reliance by Administrative Agent	78
	SECTION 9.7 Notice of Default	79
	SECTION 9.8 Credit Decisions	79
	SECTION 9.9 Copies	79
	SECTION 9.10 Collateral	79
ARTICLE X MISCELLANEOUS PROVISIONS		80
	SECTION 10.1 Waivers, Amendments	80
	SECTION 10.2 Notices	81
	SECTION 10.3 Payment of Costs and Expenses	81
	SECTION 10.4 Indemnification	82
	SECTION 10.5 Survival	82
	SECTION 10.6 Severability	83
	SECTION 10.7 Headings	83
	SECTION 10.8 Execution in Counterparts	83
	SECTION 10.9 Governing Law; Entire Agreement	83
	SECTION 10.10 Successors and Assigns	83
	SECTION 10.11 Sale and Transfer of Loans; Participations in Loans	83
	SECTION 10.11.1 Assignments	83
	SECTION 10.11.2 Participations	85
	SECTION 10.12 Other Transactions	86
	SECTION 10.13 Submission To Jurisdiction; Waivers	86
	SECTION 10.14 WAIVERS OF JURY TRIAL	86
	SECTION 10.15 Non-Recourse Persons	87
	SECTION 10.16 Acknowledgments	87
	SECTION 10.17 Confidentiality	87
	SECTION 10.18 USA PATRIOT Act	87
	SECTION 10.19 EMMH Credit Agreement	88
	SECTION 10.20 Retiring Lenders	88
	SECTION 10.21 Accession Agreement	88

SCHEDULES

1.1(a)—Addresses for Notices and Lending Offices
1.1(b)—Revolver Loan Commitments
2.2—Closing Date Bank Accounts
2.6.11—Revolver Letters of Credit
3.2.1—Pricing Grid
7.2.1(c)—Capitalized Lease Liabilities and Operating Lease Liabilities
7.2.1(e)—Fixed or Capital Asset Planned Acquisition, Construction or Improvement

EXHIBITS

A—Form of Funds Flow Undertaking
B—Form of Borrowing Request

v

C—Form of Continuation/Conversion Notice
D—Form of Assignment Agreement
E—Form of Accession Agreement
F—1—Form of Opinion of Special New York Counsel to the Borrower and the Midwest Related Parties
F—2—Form of Opinion of Special New York Counsel to the Borrower and the Midwest Related Parties Regarding UCC Matters
F—3—Form of Opinion of Internal Counsel to the Borrower and the Midwest Related Parties
F—4—Form of Opinion of Internal Counsel to EMMT
F—5—Form of Opinion of Illinois Regulatory Counsel to the Borrower
F—6—Form of Opinion of Federal Regulatory Counsel to the Borrower
G—Form of Communications Agreement
H—Form of Subsidiary Guarantee

vi

        SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 15, 2005 among MIDWEST GENERATION, LLC, a limited liability company duly organized and validly existing under the laws of Delaware (the "Borrower"), the Continuing Lenders (as defined below), the New Lenders (as defined below), the other Lenders from time to time party hereto, the Issuing Lenders party hereto, CITICORP NORTH AMERICA, INC. ("CNAI"), as Administrative Agent for the Lenders and the Issuing Lenders party hereto.

RECITALS

        A.    The Borrower is party to that certain First Amended and Restated Credit Agreement dated as of April 18, 2005 (as amended, supplemented, amended and restated or otherwise modified and in effect immediately prior to the satisfaction (or waiver) of the conditions set forth in Section 5, the "Existing Credit Agreement") among the Borrower, the lenders party thereto (the "Existing Lenders"), the issuing lenders party thereto and CNAI, as Administrative Agent.

        B.    Each of the Existing Lenders not a party hereto or not party to an Accession Agreement (each a "Retiring Lender") will cease to be a "Lender" under the Existing Credit Agreement as of the Closing Date. Each (a) Existing Lender party hereto or party to an Accession Agreement (each a "Continuing Lender") and (b) each Person party hereto (other than Continuing Lenders) (each a "New Lender") shall become or continue as a "Lender" under the Existing Credit Agreement as amended and restated by this Agreement.

        C.    The Borrower has requested certain amendments to the provisions of the Existing Credit Agreement, including the extension of the "Revolver A Commitments" and the "Revolver A Loans" under (and as defined in) the Existing Credit Agreement, and therefore has requested that the Continuing Lenders and New Lenders provide the credit facilities described herein under this Agreement which shall amend and restate the Existing Credit Agreement.

        D.    The Continuing Lenders and the New Lenders are willing to amend and restate the Existing Credit Agreement upon and subject to the terms and conditions hereinafter set forth.

        NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

        SECTION 1.1    Defined Terms.    The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):Second Amended and Restated Credit Agreement

        "Accession Agreement" means an Accession Agreement substantially in the form of Exhibit E.

        "Accession Lender" shall have the meaning set forth in an Accession Agreement.

        "Adjusted EBITDA" means, for any period, Consolidated Net Income for such period plus, without duplication, to the extent taken into account in calculating Consolidated Net Income:

        (a)   an amount equal to any extraordinary loss plus any net loss realized by the Borrower or any of its Subsidiaries in connection with an Asset Sale, minus any extraordinary gains or gains on sales of assets; plus

        (b)   a provision for Taxes based on income or profits of the Borrower and its Subsidiaries for such period, less income tax benefit; plus

        (c)   Consolidated Interest Expense for such period; plus

        (d)   all interest expense accrued on Powerton/Joliet Lease Liabilities during such period; minus

        (e)   all interest income accrued on the Powerton/Joliet Lease Intercompany Notes during such period; plus

        (f)    depreciation, amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of the Borrower and its Subsidiaries for such period; plus

        (g)   non-cash charges (including the effect of cumulative changes in accounting principles) and unrealized losses from price risk management under SFAS 133 decreasing such Consolidated Net Income for such period, other than the accrual of expenses in the ordinary course of business; minus

        (h)   non-cash gains (including the effect of cumulative changes in accounting principles) and unrealized gains from price risk management under SFAS 133 increasing such Consolidated Net Income for such period, other than the accrual of revenues in the ordinary course of business,

in each case, on a consolidated basis and determined in accordance with GAAP.

        "Administrative Agent" means CNAI in its capacity as administrative agent for the Lenders and Issuing Lenders hereunder, and includes each other Person as may have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4.

        "Administrative Questionnaire" means an Administrative Questionnaire in form and substance satisfactory to the Administrative Agent.

        "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, that Beneficial Ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings.

        "Affiliated Indebtedness" means Indebtedness of the Borrower or any of its Subsidiaries that is owed to the Borrower or any of its Affiliates.

        "Agent-Related Persons" means CNAI and each other Person as may have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of CNAI, each such other Person and such Affiliates.

        "Agreement" means, on any date, this Second Amended and Restated Credit Agreement as originally in effect on the Closing Date and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified and in effect on such date.

        "Alternate Base Rate" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the highest of:

        (a)   the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's "base rate"; and

        (b)   ¹/2 of 1% per annum above the Federal Funds Effective Rate.

Each change in any interest rate provided for herein based upon the Alternate Base Rate resulting from a change in the Alternate Base Rate shall take effect at the time of such change in the Alternate Base Rate.

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        "Applicable Margin" means, for any day with respect to any LIBO Rate Loans or Base Rate Loans of any Class, the rate per annum in effect for such type of Loans for such day based on the Borrower's Debt Rating for such day determined as provided in the Pricing Grid.

        "Approved Funds" means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

        "Asset Sale" has the meaning set forth in Section 7.2.4.

        "Assignee" has the meaning set forth in Section 10.11.1.

        "Assignment Agreement" means an Assignment Agreement substantially in the form of Exhibit D.

        "Assignor" has the meaning set forth in Section 10.11.1.

        "Authorized Representative" means, relative to any Person, those of its officers and employees whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to Section 5.1.3.

        "Back-to-Back Transaction" has the meaning set forth in the Energy Management Agreements.

        "Bank Account" means the Closing Date Bank Accounts and all other deposit accounts (as such term is defined in the UCC) now or hereafter owned by the Borrower.

        "Base Rate Loan" means a Loan bearing interest at a fluctuating rate of interest per annum determined by reference to the Alternate Base Rate plus the Applicable Margin for Base Rate Loans from time to time in effect.

        "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms "Beneficially Owns", "Beneficially Owned" and "Beneficial Ownership" have a corresponding meaning.

        "Board of Directors" means (a) with respect to a corporation, the board of directors of the corporation, (b) with respect to a partnership, the general partners or the management committee of the partnership, (c) with respect to a limited liability company, the board of managers of the limited liability company or (d) with respect to any other Person, the board or committee of such Person serving a similar function.

        "Borrower" has the meaning set forth in the preamble.

        "Borrower Security Agreement" means the Security Agreement dated as of April 27, 2004 between the Borrower and the Collateral Trustee, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Borrowing" means Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period, made by all Lenders on the same Business Day pursuant to the same Borrowing Request in accordance with Section 2.3.

        "Borrowing Request" means (a) the Funds Flow Undertaking and (b) each loan request and certificate duly executed by an Authorized Representative of the Borrower, substantially in the form of Exhibit B.

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        "Business Day" means:

        (a)   any day which is neither a Saturday or Sunday nor a legal holiday on which the Lenders are authorized or required to be closed in New York, New York; and

        (b)   relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market.

        "Calumet Peaking Unit" means the 129 MW (nominal summer rating) gas- and oil-fired Calumet peaking unit and related assets owned by the Borrower and located in Cook County, Illinois.

        "Capital Lease" means, with respect to any Person, a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability set forth on the balance sheet of such Person or such Person's Subsidiaries in accordance with GAAP.

        "Capital Stock" means:

        (a)   in the case of a corporation, corporate stock;

        (b)   in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

        (c)   in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and

        (d)   any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person,

but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

        "Capitalized Lease Liabilities" of any Person means all monetary obligations of such Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as Capital Leases, and, for purposes of each Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (excluding, to the extent included, Powerton/Joliet Lease Liabilities).

        "Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent in accordance with Section 2.6.10, for the ratable benefit of the Administrative Agent, the Issuing Lenders and the Lenders, as collateral for the LC Exposure, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the Issuing Lenders.

        "Cash Disbursements" means, in respect of any period, an amount equal to the aggregate, without duplication, of:

        (a)   all Obligations due and payable with respect to Secured Debt during such period, excluding, in each case, any mandatory prepayments or repurchases of Secured Debt made with the proceeds of (i) any Asset Sale, (ii) the sale of Equity Interests by, or the contributions to the common equity capital of, the Borrower or any of its Subsidiaries and (iii) the incurrence of Indebtedness by the Borrower or any of its Subsidiaries;

        (b)   all amounts paid by the Borrower with respect to the Powerton/Joliet Lease Liabilities during such period; and

        (c)   payments of interest or principal at the stated maturity thereof with respect to Indebtedness of Borrower or any of its Subsidiaries that is permitted to be incurred pursuant to Section 7.2.1, excluding Affiliated Indebtedness.

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        "Cash Equivalent Investment" means, at any time:

        (a)   any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States government or an agency thereof; or

        (b)   investments in securities or bank instruments rated at least "A" by S&P or "A2" by Moody's or "A-1" by S&P or "P-1" by Moody's and with maturities of not more than one year; or

        (c)   money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, as amended and (ii) have portfolio assets of at least $1,000,000,000.

        "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List.

        "CGMI" means Citigroup Global Markets Inc.

        "Change-In-Control" means the occurrence of any of the following:

        (a)   the adoption of a plan relating to the liquidation or dissolution of the Borrower;

        (b)   the consummation of any transaction (including any merger or consolidation) the result of which is that any "person" (as that term is used in Section 13(d) of the Exchange Act) becomes the direct Beneficial Owner of more than 50% of the Voting Stock of EME, measured by voting power rather than number of shares; provided, that the consummation of any such transaction shall not be deemed to be a Change-In-Control if such "person" (pro forma after giving effect to the transaction) has a Debt Rating that is the same or better than EME's Debt Rating as of the Original Effective Date (with a stable outlook from both rating agencies);

        (c)   the first day on which EME fails to own, directly or indirectly, a majority of the Equity Interests of the Borrower;

        (d)   the first day on which EMMH fails to own, directly or indirectly, 100% of the Equity Interests of the Borrower; provided, that EMMH may be consolidated, transferred or merged with or into MGE or the Borrower; provided, further, that MGE reaffirms the pledge of the Equity Interests of the Borrower for the benefit of the Collateral Trustee; or

        (e)   the first day on which the Borrower fails to own, directly or indirectly, 100% of the Equity Interests of Midwest Finance.

        "Citibank" means Citibank, N.A., a national banking association.

        "Class" refers to whether Loans are Revolver Loans or Term Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolver Commitment or Term Loan Commitment.

        "Closing Date" means the date that this Agreement becomes effective pursuant to Section 5.1.

        "Closing Date Bank Accounts" means each of the deposit accounts (as such term is defined in the UCC) of the Borrower listed on Schedule 2.2.

        "CNAI" shall have the meaning set forth in the preamble.

        "Code" means the Internal Revenue Code of 1986, as amended.

        "Collateral" means all assets of the Borrower, its Subsidiaries, EMMT and the Midwest Related Parties, whether now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

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        "Collateral Trust Agreement" means the Collateral Trust Agreement dated as of April 27, 2004 by and among the Borrower, the Administrative Agent, the Collateral Trustee and The Bank of New York, as Trustee, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Collateral Trust Joinder" has the meaning set forth in the Collateral Trust Agreement.

        "Collateral Trustee" has the meaning set forth in the Collateral Trust Agreement.

        "Collins Facility" means the fossil fuel-fired electric generating facility known as the Collins station, consisting of two 554 MW (net) units and three 530 MW (net) units, located near the town of Morris, in Grundy County, Illinois.

        "Commitment" means a Term Loan Commitment or a Revolver Commitment, or any combination thereof (as the context requires).

        "Communications Agreement" means the Communications Agreement dated as of December 15, 2005 between the Borrower and the Administrative Agent, substantially in the form of Exhibit G, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Consolidated Interest Coverage Ratio" means, for any period, the ratio of Adjusted EBITDA for such period to Consolidated Interest Expense for such period.

        In addition, for purposes of calculating the Consolidated Interest Coverage Ratio:

        (a)   acquisitions that have been made by the Borrower or any of its Subsidiaries, including through mergers or consolidations, or any Person or any of its Subsidiaries acquired by the Borrower or any of its Subsidiaries, and including any related financing transactions and including increases in ownership of Subsidiaries, during the applicable reference period or subsequent to such reference period and on or prior to the date on which the event for which the calculation of the Consolidated Interest Coverage Ratio is made (the "Calculation Date") will be given Pro Forma effect as if they had occurred on the first day of such reference period;

        (b)   the Adjusted EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded;

        (c)   the Consolidated Interest Expense attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Consolidated Interest Expense will not be obligations of the Borrower or any of its Subsidiaries following the Calculation Date;

        (d)   any Person that is a Subsidiary on the Calculation Date will be deemed to have been a Subsidiary at all times during such reference period; and

        (e)   any Person that is not a Subsidiary on the Calculation Date will be deemed not to have been a Subsidiary at any time during such reference period.

        "Consolidated Interest Expense" means, for any period, the sum, without duplication, of:

        (a)   the consolidated interest expense of the Borrower and its Subsidiaries for such period accrued (whether or not paid), including non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capitalized Lease Liabilities, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Interest Rate Hedging Transactions, plus one-third of all payments

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with respect to Operating Lease Liabilities related to sale and leaseback transactions of the Facilities; plus

        (b)   the consolidated interest expense of the Borrower and its Subsidiaries that was capitalized during such period; plus

        (c)   any interest accruing on Indebtedness of a Person that is Guaranteed by the Borrower or one of its Subsidiaries or secured by a Lien on assets of the Borrower or one of its Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

        (d)   the product of (i) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred equity of the Borrower or any of its Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Borrower or to the Borrower or any of its Subsidiaries, multiplied by (ii) a fraction, the numerator of which is one and the denominator of which is one minus the effective combined federal, state and local statutory tax rate of the Borrower for the immediately preceding fiscal year, expressed as a decimal,

in each case, on a consolidated basis and determined in accordance with GAAP.

        "Consolidated Net Income" means, for any period, the aggregate of Net Income for such period, on a consolidated basis, determined in accordance with GAAP.

        "Contingent Liability" means any agreement, undertaking or arrangement by which any Person Guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or Guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed for purposes of this Agreement to be the outstanding principal amount of the debt, obligation or other liability Guaranteed thereby; provided, however, that if the maximum amount of the debt, obligation or other liability Guaranteed thereby has not been established, the amount of such Contingent Liability shall be the maximum reasonably anticipated amount of the debt, obligation or other liability; provided, further, however, that any agreement to limit the maximum amount of such Person's obligation under such Contingent Liability shall not, of and by itself, be deemed to establish the maximum reasonably anticipated amount of such debt, obligation or other liability.

        "Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Representative of the Borrower, substantially in the form of Exhibit C.

        "Continuing Lenders" has the meaning set forth in the recitals.

        "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

        "Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.

        "Core Facilities" means the Crawford Facility (other than the Crawford Peaking Unit), the Fisk Facility (other than the Fisk Peaking Unit), the Waukegan Facility (other than Waukegan Unit 6 and the Waukegan Peaking Unit), the Joliet #9 Facility (other than the Joliet Peaking Unit), the Joliet

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Leased Facility, the Powerton Facility and the Will County Facility (other than Will County Units 1 and 2).

        "Crawford Facility" means the Crawford station, 542 MW net coal-fired electric generating facility and related assets owned by the Borrower, including the Crawford Peaking Unit, and located in Cook County, Illinois.

        "Crawford Peaking Unit" means the 121 MW (nominal summer rating) gas- and oil-fired Crawford peaking unit owned by the Borrower and located in Cook County, Illinois.

        "Credit Extension" means and includes (a) any Borrowing and (b) any Issuance of, or participation in, any Letter of Credit.

        "Debt Rating" means, with respect to any Person, a rating by each of Moody's and S&P of such Person's long-term debt which is not secured or supported by a guarantee, letter of credit or other form of credit enhancement; provided that, with respect to the Borrower, "Debt Rating" means, unless otherwise specified, a rating by each of Moody's and S&P of the Indebtedness evidenced by this Agreement. If Moody's or S&P shall have changed its system of classifications after the date hereof, a Debt Rating shall be considered to be at or above a specified level if it is at or above the new rating which most closely corresponds to the specified level under the old rating system.

        "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.

        "Dollar" and the sign "$" mean lawful money of the United States.

        "Domestic Office" means, relative to any Lender, the office of such Lender designated on Schedule 1.1(a) or designated in the Administrative Questionnaire of such Lender or Assignment Agreement pursuant to which such Lender became a Lender hereunder or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. A Lender may have separate Domestic Offices for purposes of making, maintaining or continuing, as the case may be, Base Rate Loans.

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        "Electric Junction Peaking Unit" means the 159 MW (nominal summer rating) gas- and oil-fired Electric Junction peaking unit and related assets owned by the Borrower and located in Dupage County, Illinois.

        "EME" means Edison Mission Energy, a Delaware corporation.

        "EME Equity Contribution" means the direct or indirect contribution to the equity capital of the Borrower in an amount equal to $300,000,000 made on April 19, 2005.

        "EME Trading Revolvers" means, collectively, (a) the Amended and Restated Revolving Credit Agreement (Margining) dated as of April 27, 2004 between EMMT and EME, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, and (b) the Amended and Restated Revolving Credit Agreement (Operations) dated as of April 27, 2004 between EMMT and EME, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "EMMH" means Edison Mission Midwest Holdings Co., a Delaware corporation.

        "EMMH Credit Agreement" means the Credit Agreement dated as of December 15, 1999 among EMMH, the Lenders party thereto and JPMorgan Chase Bank (successor to The Chase Manhattan Bank), as administrative agent, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "EMMH Pledge Agreement" means the Pledge Agreement dated as of April 27, 2004 between EMMH and the Collateral Trustee, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "EMMT" means Edison Mission Marketing & Trading, Inc., a California corporation.

        "EMMT Indebtedness" means, without duplication:

        (a)   all indebtedness of EMMT for borrowed money;

        (b)   all obligations of EMMT issued, undertaken or assumed as the deferred purchase price of property or services which purchase price is due more than six months from the date of incurrence of the obligation in respect thereof or is evidenced by a note or other instrument, except trade accounts arising in the ordinary course of business; provided, that any such obligation with respect to office equipment and similar property of EMMT entered into in the ordinary course of business shall not be considered EMMT Indebtedness for purposes of this clause (b);

        (c)   all reimbursement obligations of EMMT with respect to surety bonds, letters of credit (to the extent not collateralized with cash or Cash Equivalent Investments), bankers' acceptances and similar instruments (in each case, whether or not matured);

        (d)   all obligations of EMMT evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses;

        (e)   all indebtedness of EMMT created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by EMMT (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); provided, that any such conditional sale or other title retention agreement with respect to office equipment and similar property of EMMT entered into in the ordinary course of business shall not be considered EMMT Indebtedness for purposes of this clause (e);

        (f)    all Capitalized Lease Liabilities of EMMT and Operating Lease Liabilities of EMMT;

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        (g)   all net obligations with respect to interest cap arrangements, interest rate swaps agreements, sales of foreign exchange options and other hedging agreements or arrangements of EMMT (except insofar as incurred in connection with Permitted Trading Activities);

        (h)   all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by EMMT, even though EMMT has not assumed or become liable for the payment of such indebtedness; and

        (i)    all Contingent Liabilities of EMMT; provided, that NUG Contingent Liabilities shall not be EMMT Indebtedness for the purposes of this clause (i);

provided, that, EMMT Indebtedness shall not (x) include obligations and indebtedness of EMMT incurred in the ordinary course of business in connection with Permitted Trading Activities or (y) obligations of EMMT under each EME Trading Revolver.

        The amount of any EMMT Indebtedness outstanding as of any date will be (i) the accreted value of such EMMT Indebtedness, in the case of any EMMT Indebtedness issued with original issue discount, (ii) the principal amount of such EMMT Indebtedness, in the case of any other EMMT Indebtedness and (iii) in respect of Indebtedness of another Person secured by a Lien on the assets of EMMT, the lesser of (A) the fair market value of such asset at the date of determination and (B) the amount of Indebtedness of such other Person.

        "EMMT Security Agreement" means the Security Agreement dated as of April 27, 2004 between EMMT and the Collateral Trustee, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Energy and Fuel Risk Management Policies" means the Edison Mission Energy Risk Management Policy dated February 6, 2004, as such policy may be amended or otherwise modified in accordance with Section 7.2.12.

        "Energy Management Agreements" means the Master Purchase Agreement, the Midwest Trading Revolver and each other agreement between EMMT and the Borrower (as each such other agreement may be amended, supplemented, amended and restated or otherwise modified and in effect from time to time) relating to energy sales and fuel purchases by the Borrower (including the posting of collateral for such sales and purchases).

        "Environmental CapEx Debt" means Indebtedness of the Borrower incurred for the purpose of financing Environmental Capital Expenditures.

        "Environmental Capital Expenditures" means capital expenditures deemed necessary by the Borrower to comply with Environmental Laws.

        "Environmental Laws" means all applicable Federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to Hazardous Materials and/or to public health and protection of the environment.

        "Environmental Reports" means the Environmental Liabilities Reports concerning the Facilities prepared by Environmental Strategies Consulting LLC dated December 18, 2003 and February 12, 2004, in each case, as amended, modified or supplemented from time to time.

        "equally and ratably" means, in reference to sharing of Liens or proceeds thereof as between Secured Parties of the same Secured Class, that such Liens or proceeds:

        (a)   will be allocated and distributed first to the Secured Debt Representative for each outstanding Series of Secured Debt within that Secured Class, for the account of the holders of such Series of Secured Debt, ratably in proportion to the principal of, and interest and premium

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(if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made under such letters of credit) on each outstanding Series of Secured Debt within that Secured Class when the allocation or distribution is made, and thereafter

        (b)   will be allocated and distributed (if any remain after payment in full of all of the principal of, and interest and premium (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made on such letters of credit) on, all outstanding Secured Obligations within that Secured Class) to the Secured Debt Representative for each outstanding Series of Secured Obligations within that Secured Class, for the account of the holders of any remaining Secured Obligations within that Secured Class, ratably in proportion to the aggregate unpaid amount of such remaining Secured Obligations within that Secured Class due and demanded (with written notice to the applicable Secured Debt Representative and the Collateral Trustee) prior to the date such distribution is made.

        "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

        "Equity Issuance" means (a) any issuance or sale by any Person after the Closing Date of (i) any of its Capital Stock, (ii) any warrants or options exercisable in respect of its Capital Stock (other than any warrants or options issued to directors, officers or employees of such Person pursuant to employee benefit plans established in the ordinary course of business and any Capital Stock of such Person issued upon the exercise of such warrants or options) or (iii) any other security or instrument representing an equity interest (or the right to obtain any equity interest) in such Person or (b) the receipt by any of the Borrower's Subsidiaries after the Closing Date of any capital contribution (whether or not evidenced by any equity security issued by the recipient of such contribution); provided that Equity Issuance shall not include (A) any such issuance or sale described in clause (a) above by any Subsidiary of the Borrower to the Borrower or any direct or indirect Subsidiary of the Borrower; (B) any capital contribution by the Borrower or any direct or indirect Subsidiary of the Borrower to any Subsidiary of the Borrower or (C) Special Capital Contributions.

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.

        "Event of Default" has the meaning set forth in Section 8.1.

        "Excess Cashflow" means, for any period, the excess, if any, of Funds Flow from Operations for such period over Cash Disbursements for such period.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Excluded Taxes" means, with respect to the Administrative Agent, the Issuing Lenders or any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder or under any other Loan Document, (a) income or franchise Taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which it is located (other than a jurisdiction in which it is treated as being located solely by reason of its participation in transactions contemplated by the Loan Documents), (c) in the case of a Non-U.S. Lender, any Tax that is imposed on amounts payable to such Non-U.S. Lender at the time such Non-U.S. Lender becomes a party to this Agreement, except to the extent that such Non-U.S. Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to

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such Tax pursuant to Section 4.7(a) and (d) in the case of a Non-U.S. Lender, any Tax that is attributable to such Non-U.S. Lender's failure or inability to comply with Section 4.7(e).

        "Existing Credit Agreement" has the meaning set forth in the recitals.

        "Existing Lenders" has the meaning set forth in the recitals.

        "Facilities" means (a) certain electric generation facilities and other related assets associated therewith and ancillary thereto located in the State of Illinois acquired by the Borrower pursuant to the Asset Sale Agreement dated as of April 22, 1999 between Commonwealth Edison Company and EME, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, as assigned by EME and (b) any other electric generation facilities and other related assets associated therewith and ancillary thereto (or interests therein) owned, directly or indirectly, or leased by the Borrower from time to time.

        "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

        "Fee Letters" means (a) the Fee Letter dated as of December 1, 2005 between the Borrower and CNAI, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time and (b) each Fee Letter between the Borrower and any Issuing Lender, as each such Issuing Lender Fee Letter may be amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Financing" means, with respect to any Person, either Indebtedness of such Person or Lease Obligations of such Person, or a combination of both.

        "Fiscal Quarter" means any quarter of a Fiscal Year.

        "Fiscal Year" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the "2004 Fiscal Year") refers to the Fiscal Year ending on December 31 occurring during such calendar year.

        "Fisk Facility" means the Fisk station, 326 MW net coal-fired electric generating facility and related assets owned by the Borrower, including the Fisk Peaking Unit, and located in Cook County, Illinois.

        "Fisk Peaking Unit" means the 163 MW (nominal summer rating) oil-fired Fisk peaking unit owned by the Borrower and located in Cook County, Illinois.

        "Free Cashflow" has the meaning set forth in the Powerton/Joliet Lease Participation Agreements as in effect on the Original Effective Date.

        "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto.

        "Funds Flow from Operations" means, in respect of any period, the excess, if any, of:

        (a)   all cash amounts received by the Borrower during such period from any source, including revenues from the sale of energy and capacity and proceeds of business interruption insurance, and excluding, without duplication, the proceeds of (i) any Asset Sale, (ii) the sale of Equity Interests by, or contributions to the common equity capital of, the Borrower or any of its Subsidiaries and (iii) any incurrence of Indebtedness by the Borrower or any of its Subsidiaries, over

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        (b)   Operating Expenses during such period.

        "Funds Flow Undertaking" means the Funds Flow Undertaking substantially in the form of Exhibit A duly executed by the parties thereto.

        "GAAP" means generally accepted accounting principles in the United States.

        "Governmental Approval" means any authorization, consent, approval, license, permit, exemption, filing or registration with any Governmental Authority.

        "Governmental Authority" means any nation or government, any state, provincial or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

        "Granting Lender" has the meaning set forth in Section 10.11.1(e).

        "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise).

        "Hazardous Material" means:

        (a)   any "hazardous substance", as defined by any Environmental Law;

        (b)   any "hazardous waste", as defined by any Environmental Law;

        (c)   any petroleum product (including crude oil or any fraction thereof); or

        (d)   any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, force or substance (including polychlorinated biphenyls, urea-formaldehyde insulation, asbestos or radioactivity) that is regulated pursuant to or could give rise to liability under any Environmental Law.

        "herein", "hereof", "hereto", "hereunder" and similar terms contained in any Loan Document refer to such Loan Document as a whole and not to any particular Section, paragraph or provision of such Loan Document.

        "Holdings Collateral Agent" has the meaning set forth in each Powerton/Joliet Lease Participation Agreement.

        "including" means including without limiting the generality of any description preceding such term, and, for purposes of each Loan Document, the parties thereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned.

        "Indebtedness" of any Person means, without duplication:

        (a)   all indebtedness for borrowed money;

        (b)   all obligations issued, undertaken or assumed as the deferred purchase price of property or services which purchase price is due more than six months from the date of incurrence of the obligation in respect thereof or is evidenced by a note or other instrument, except trade accounts arising in the ordinary course of business;

        (c)   all reimbursement obligations with respect to surety bonds, letters of credit (to the extent not collateralized with cash or Cash Equivalent Investments), bankers' acceptances and similar instruments (in each case, whether or not matured);

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        (d)   all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses;

        (e)   all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property);

        (f)    all Capitalized Lease Liabilities and Operating Lease Liabilities;

        (g)   all net obligations with respect to interest cap arrangements, interest rate swaps agreements, sales of foreign exchange options and other hedging agreements or arrangements;

        (h)   all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness; and

        (i)    all Contingent Liabilities.

        For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. The amount of any Indebtedness outstanding as of any date will be (i) the accreted value of such Indebtedness, in the case of any Indebtedness issued with original issue discount, (ii) the principal amount of such Indebtedness, in the case of any other Indebtedness and (iii) in respect of Indebtedness of another Person secured by a Lien on the assets of such Person, the lesser of (A) the fair market value of such asset at the date of determination and (B) the amount of Indebtedness of such other Person.

        "Indemnified Parties" has the meaning set forth in Section 10.4(a).

        "Indemnified Liabilities" has the meaning set forth in Section 10.4(a).

        "Indemnified Taxes" means Taxes other than Excluded Taxes.

        "Insolvency" means, with respect to any Multiemployer Plan, the condition that such plan is insolvent within the meaning of Section 4245 of ERISA.

        "Interest Period" means, relative to any LIBO Rate Loan, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date one, two, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in either case as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however, that (a) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless, if such Interest Period applies to LIBO Rate Loans, such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day) and (b) no Interest Period may end later than (i) in the case of Term Loans, the date of the "Term Loan Maturity Date" and (ii) in the case of Revolver Loans, the date of the "Revolver Prepayment Date"; provided, that any Interest Period applicable to any Revolver Loans continuing on or after, or made after, the Revolver Prepayment Date may begin on a date after the Revolver Prepayment Date and end on a date no later than the "Revolver Commitment Termination Date". No Interest Period applicable to Revolver Loans shall begin prior to the Closing Date.

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        "Interest Rate Hedging Transactions" means all interest rate swaps, caps or collar agreements or similar arrangements entered into by any Person (a) in order to protect against fluctuations in, or hedge or manage, interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, and, in any event, not for speculative purposes and (b) with a counterparty who is either (i) a Revolver Lender or an Affiliate of such Revolver Lender, or (ii) such other Person with the prior approval of the Required Lenders, such approval not to be unreasonably withheld or delayed.

        "Investment" means, relative to any Person:

        (a)   any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business);

        (b)   any Contingent Liability of such Person; and

        (c)   any ownership or similar interest held by such Person in any other Person.

The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property.

        "Investment Grade" means, with respect to any Person, such Person's Debt Ratings are at least BBB- and Baa3 by S&P and Moody's, respectively.

        "Issuance Date" means the date on which a Letter of Credit is Issued pursuant to Section 2.6.

        "Issue" means, with respect to any Letter of Credit, to issue or to extend the expiry of, to amend or to renew or to increase the amount of, such Letter of Credit; and the terms "Issued", "Issuing" and "Issuance" have corresponding meanings.

        "Issuing Lenders" means CNAI in its capacity as the issuer of Letters of Credit hereunder and each other Person as may have subsequently been appointed as a successor or an additional Issuing Lender pursuant to Section 2.6.9.

        "Joliet #9 Facility" means the Joliet station, Unit 6, 314 MW of the 1,358 MW coal-fired electric generating facility and certain related assets owned by the Borrower, including the Joliet Peaking Unit, and located on the parcel of real property known as Joliet #9 in Will County, Illinois. For the avoidance of doubt, the Joliet #9 Facility does not include the Joliet Leased Facility.

        "Joliet Equity Financing Parties I" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Joliet Lease Participation Agreement (T1)).

        "Joliet Equity Financing Parties II" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Joliet Lease Participation Agreement (T2)).

        "Joliet Guarantee (T1)" means the Guaranty Agreement dated as of July 31, 2002 made by EME in favor of Joliet Trust I that, among other things, guarantees the payment by the Borrower of all Joliet Lease Liabilities (T1) payable to Joliet Trust I, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Guarantee (T1: Equity Financing Parties)" means the Guaranty Agreement dated as of July 31, 2002 made by EME in favor of the Joliet Equity Financing Parties I that, among other things, guarantees the payment by the Borrower of certain Joliet Lease Liabilities (T1) payable to Joliet Equity Financing Parties I, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

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        "Joliet Guarantee (T2)" means the Guaranty Agreement dated as of July 31, 2002 made by EME in favor of Joliet Trust II that, among other things, guarantees the payment by the Borrower of all Joliet Lease Liabilities (T2) payable to Joliet Trust II, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Guarantee (T2: Equity Financing Parties)" means the Guaranty Agreement dated as of July 31, 2002 made by EME in favor of the Joliet Equity Financing Parties II that, among other things, guarantees the payment by the Borrower of certain Joliet Lease Liabilities (T2) payable to Joliet Equity Financing Parties II, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Guarantees" means, collectively, the Joliet Guarantee (T1), the Joliet Guarantee (T2), the Joliet Guarantee (T1: Equity Financing Parties) and the Joliet Guarantee (T2: Equity Financing Parties).

        "Joliet Intercompany Note Pledge Agreement (T1)" means the Pledge Agreement (T1) dated as of August 17, 2000 between the Borrower and the Holdings Collateral Agent relating to the pledge of the Joliet Lease Intercompany Note (T1), as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Intercompany Note Pledge Agreement (T2)" means the Pledge Agreement (T2) dated as of August 17, 2000 between the Borrower and the Holdings Collateral Agent relating to the pledge of the Joliet Lease Intercompany Note (T2), as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Lease (T1)" means the Facility Lease Agreement (T1) dated as of August 17, 2000 between the Borrower and Joliet Trust I, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

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        "Joliet Lease (T2)" means the Facility Lease Agreement (T2) dated as of August 17, 2000 between the Borrower and Joliet Trust II, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Lease Intercompany Note (T1)" means the EME Note (as defined in the Joliet Lease Participation Agreement (T1)) dated the Closing Date (as defined in the Joliet Lease Participation Agreement (T1)) evidencing the loan by the Borrower to EME of the proceeds of the Joliet Lease Transaction (T1), as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Lease Intercompany Note (T2)" means the EME Note (as defined in the Joliet Lease Participation Agreement (T2)) dated the Closing Date (as defined in the Joliet Lease Participation Agreement (T2)) evidencing the loan by the Borrower to EME of the proceeds of the Joliet Lease Transaction (T2), as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Lease Intercompany Notes" means, collectively, the Joliet Lease Intercompany Note (T1) and the Joliet Lease Intercompany Note (T2).

        "Joliet Lease Liabilities" means, collectively, the Joliet Lease Liabilities (T1) and the Joliet Lease Liabilities (T2).

        "Joliet Lease Liabilities (T1)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that the Borrower is obligated to pay under the Joliet Lease (T1) or the other Joliet Lease Operative Documents (T1).

        "Joliet Lease Liabilities (T2)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that the Borrower is obligated to pay under the Joliet Leases (T2) or the other Joliet Lease Operative Documents (T2).

        "Joliet Lease Operative Documents" means, collectively, the Joliet Lease Operative Documents (T1) and the Joliet Lease Operative Documents (T2).

        "Joliet Lease Operative Documents (T1)" means, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T1).

        "Joliet Lease Operative Documents (T2)" means, collectively, the Operative Documents as defined in the Joliet Lease Participation Agreement (T2).

        "Joliet Lease Participation Agreement (T1)" means the Participation Agreement (T1) dated as of August 17, 2000 by and among the Borrower, EME, Joliet Trust I, Wilmington Trust Company, Joliet Generation I, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Lease Participation Agreement (T2)" means the Participation Agreement (T2) dated as of August 17, 2000 by and among the Borrower, EME, Joliet Trust II, Wilmington Trust Company, Joliet Generation II, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Lease Participation Agreements" means, collectively, the Joliet Lease Participation Agreement (T1) and the Joliet Lease Participation Agreement (T2).

        "Joliet Lease Transaction" means, collectively, the Joliet Lease Transaction (T1) and the Joliet Lease Transaction (T2).

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        "Joliet Lease Transaction (T1)" means the transactions pursuant to the Joliet Lease Participation Agreement (T1) and the Joliet Lease Operative Documents (T1) whereby the Borrower sold a 63.6% undivided interest in the Joliet Leased Facility to Joliet Trust I and Joliet Trust I leases such undivided interest to the Borrower pursuant to the Joliet Lease (T1).

        "Joliet Lease Transaction (T2)" means the transactions pursuant to the Joliet Lease Participation Agreement (T2) and the Joliet Lease Operative Documents (T2) whereby the Borrower sold a 36.4% undivided interest in the Joliet Leased Facility to Joliet Trust II and Joliet Trust II leases such undivided interest to the Borrower pursuant to the Joliet Lease (T2).

        "Joliet Lease Trusts" means, collectively, Joliet Trust I and Joliet Trust II.

        "Joliet Leased Facility" means the Joliet station, Units 7 and 8, 1,044 MW of the 1,358 MW coal-fired electric generating facility and certain related assets located in Will County, Illinois and more fully described in Exhibit B to each Joliet Lease.

        "Joliet Leases" means, collectively, the Joliet Lease (T1) and Joliet Lease (T2).

        "Joliet Peaking Unit" means the 112 MW (nominal summer rating) gas- and oil-fired peaking unit owned by the Borrower and located in Will County, Illinois.

        "Joliet Shared Facilities Agreements" means, collectively, (a) the Shared Facilities Agreement No. 1 dated as of August 17, 2000 between the Borrower and Joliet Trust I, (b) the Shared Facilities Agreement No. 2 dated as of August 17, 2000 between Joliet Trust I and the Borrower, (c) the Shared Facilities Agreement No. 1 dated as of August 17, 2000 between the Borrower and Joliet Trust II and (d) the Shared Facilities Agreement No. 2 dated as of August 17, 2000 between Joliet Trust II and the Borrower.

        "Joliet Subordination Agreement (T1)" means the Subordination Agreement dated as of August 17, 2000 between Joliet Trust I, the Owner Participant (as defined in the Joliet Lease Participation Agreement (T1)), the Lease Indenture Trustee (as defined in the Joliet Lease Participation Agreement (T1)) and the Holdings Collateral Agent, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Subordination Agreement (T2)" means the Subordination Agreement dated as of August 17, 2000 between Joliet Trust II, the Owner Participant (as defined in the Joliet Lease Participation Agreement (T2)), the Lease Indenture Trustee (as defined in the Joliet Lease Participation Agreement (T2)) and the Holdings Collateral Agent, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Joliet Trust I" means Nesbitt Asset Recovery, Series C-1 (formerly known as Joliet Trust I), a Delaware business trust.

        "Joliet Trust II" means Joliet Trust II, a Delaware business trust.

        "LC Collateral Account" means an account established in the name of the Borrower but under the exclusive dominion and control of the Administrative Agent, which shall be a "securities account" (as defined in Section 8-501(a) of the UCC) and, to the extent that credit balances not constituting "financial assets" (as defined in Section 8-102(a)(9) of the UCC) are credited thereto, a "deposit account" (as defined in Section 8-102(a)(29) of the UCC).

        "LC Disbursement" means a payment made by any Issuing Lender pursuant to a Letter of Credit.

        "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolver Lender at any time shall be its Percentage of the total LC Exposure at such time.

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        "Lease Obligations" means rent, supplemental rent, termination value, or a similar monetary obligation under, or pursuant to, a lease or related documents in connection with a leveraged lease transaction (including Contingent Liabilities related thereto).

        "Lenders" means, collectively, the Term Loan Lenders and the Revolver Lenders.

        "Letter of Credit" means any letter of credit issued pursuant to this Agreement and each letter of credit listed on Schedule 2.6.11.

        "Letter of Credit Application" has the meaning set forth in Section 2.6.1.

        "Letter of Credit Documents" means, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, Guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be amended, supplemented, amended and restated or otherwise in effect from time to time.

        "LIBO Rate" means, for each day during each Interest Period for each LIBO Rate Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Telerate Service Page 3750 as of 11:00 a.m., London time, two (2) Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Telerate Service Page 3750, the "LIBO Rate" shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 a.m., New York City time, two (2) Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. Notwithstanding any other provision hereof, at such time as there shall exist for any Lender a LIBOR Reserve Percentage which is greater than zero, the LIBO Rate used in the determination of LIBO Rate Loans made by such Lender shall be the LIBO Rate (Reserve Adjusted).

        "LIBO Rate Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan at a fixed rate of interest per annum determined by reference to the LIBO Rate plus the Applicable Margin for LIBO Rate Loans from time to time in effect.

        "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest whole multiple of l/100 of 1%) determined pursuant to the following formula:

LIBO Rate (Reserve Adjusted) = LIBO Rate 1.00–LIBOR Reserve Percentage

The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Administrative Agent, two (2) Business Days before the first day of such Interest Period.

        "LIBOR Office" means, relative to any Lender, the office of such Lender designated as such on Schedule 1.1(a) or designated in the Administrative Questionnaire of such Lender or the Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent pursuant to Section 4.4, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder.

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        "LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period.

        "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, in each case of any kind, to secure payment of a debt or performance of an obligation.

        "Loan Associated Expenses" has the meaning set forth in Section 7.1.10.

        "Loan Documents" means (a) this Agreement, (b) the Security Documents, (c) the Communications Agreement, (d) the Fee Letters, (e) the Letter of Credit Documents, (f) each Subsidiary Guarantee executed and delivered pursuant to Section 7.1.8(d) and (g) the other agreements, documents and instruments delivered in connection with this Agreement, including each Borrowing Request and each Continuation/ Conversion Notice.

        "Loans" means, collectively, the Term Loans and the Revolver Loans.

        "Lombard Peaking Unit" means the 64 MW (nominal summer rating) gas- and oil-fired Lombard peaking unit and related assets owned by the Borrower and located in DuPage County, Illinois.

        "Maintained Facilities" means (a) any Facility that is part of a Mortgaged Facility, (b) the Powerton Facility and (c) the Joliet Leased Facility.

        "Mandatory Prepayment Date" has the meaning set forth in Section 3.1.2(c).

        "Mandatory Prepayment Trigger Event" has the meaning set forth in Section 3.1.2(a).

        "Master Purchase Agreement" means the Amended and Restated Master Purchase, Sale and Services Agreement dated as of April 27, 2004 between the Borrower and EMMT, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Material Adverse Effect" means any event, development or circumstance that has had or would reasonably be expected to have a material adverse effect on (a) the business, assets, property, condition (financial or otherwise) or operations of the Borrower and its Subsidiaries, taken as a whole since the Closing Date, (b) the ability of the Borrower or any of its Subsidiaries to perform its obligations under any of the Loan Documents to which it is a party or (c) the aggregate value of the Collateral or the validity, enforceability or priority of the security interests granted in favor of the Lenders pursuant to the Security Documents granting a security interest in the Collateral.

        "MGE" means Midwest Generation EME LLC, a Delaware limited liability company.

        "MGE Pledge Agreement" means the Pledge Agreement dated as of April 27, 2004 between MGE and the Collateral Trustee, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Midwest Finance" means Midwest Finance Corp., a Delaware corporation.

        "Midwest Finance Note Guarantee" means the Guarantee dated as of April 27, 2004, made by the Borrower in favor of the trustee on behalf of the holders of the Notes, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Midwest Related Party" means each of EMMH and MGE.

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        "Midwest Trading Revolver" means the Credit Agreement dated as of April 27, 2004 between the Borrower and EMMT, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Moody's" means Moody's Investors Service, a division of Dun & Bradstreet Corporation, and its successors and assigns.

        "Mortgaged Facilities" means the Crawford Facility, the Fisk Facility, the Waukegan Facility, the Joliet #9 Facility, the Will County Facility, the Calumet Peaking Unit, the Electric Junction Peaking Unit, the Lombard Peaking Unit and the Sabrooke Peaking Unit together with any and all easements benefiting any of the foregoing.

        "Mortgaged Facility Mortgages" means (a) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Crawford Facility dated as of April 27, 2004, (b) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Fisk Facility dated as of April 27, 2004, (c) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Waukegan Facility dated as of April 27, 2004, (d) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Joliet #9 Facility dated as of April 27, 2004, (e) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Will County Facility dated as of April 27, 2004, (f) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Calumet Peaking Unit dated as of April 27, 2004, (g) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Electric Junction Peaking Unit dated as of April 27, 2004, (h) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Lombard Peaking Unit dated as of April 27, 2004 and (i) the Mortgage, Assignment of Rents and Leases, Fixture Filing, Financing Statement and Security Agreement with respect to the Sabrooke Peaking Unit dated as of April 27, 2004, in each case, made by the Borrower to the Collateral Trustee.

        "Multiemployer Plan" means a "multiemployer plan" as such term is defined in Section 4001(a)(3) of ERISA.

        "MW" means megawatts.

        "MWG Indenture" means that certain Indenture dated as of April 27, 2004 among the Borrower, Midwest Finance and The Bank of New York, as trustee, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Necessary Capital Expenditures" means capital expenditures that, in the exercise of Prudent Industry Practices, are reasonably necessary for the continued operation or maintenance of the Facilities or are required by applicable law (other than Environmental Laws). The term "Necessary Capital Expenditures" does not include any capital expenditure undertaken primarily to increase the efficiency of, expand or re-power the Facilities.

        "Net Cash Proceeds" means (a) in connection with any Recovery Event, the cash proceeds (or proceeds consisting of Cash Equivalent Investments) of such Recovery Event, reduced by (i) any expenses reasonably incurred in respect of such Recovery Event, including attorneys' fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset which is the subject of such Recovery Event (other than any Lien pursuant to a Security Document) and (ii) Taxes incurred or reasonably estimated to be incurred as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), to the extent that, in the case of Recovery Events relating to property or casualty insurance claims, the amount of such proceeds exceeds $15,000,000 with respect to any asset or group of related assets of the

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Borrower, (b) in connection with any Equity Issuance or any issuance or sale of debt securities by any Person, the cash proceeds (or proceeds consisting of Cash Equivalent Investments) received from such Equity Issuance, issuance or sale, reduced by (i) the amount of any Taxes incurred by the Borrower by reason of such Equity Issuance, issuance or sale and (ii) reasonable fees, costs and expenses directly and indirectly incurred by such Person in connection with such Equity Issuance, issuance or sale and (c) in connection with any Asset Sale, the cash proceeds (or proceeds consisting of Cash Equivalent Investments) received from such Asset Sale, reduced by (i) the amount of any legal, title, and recording tax expenses, commissions and other fees, costs and expenses directly or indirectly incurred by the Borrower as a result of such Asset Sale and (ii) the amount of any Taxes, incurred by the Borrower by reason of such Asset Sale.

        Notwithstanding the preceding, any proceeds received in connection with a Recovery Event in respect of either the Powerton Facility or the Joliet Leased Facility shall be applied in accordance with the Powerton/Joliet Lease Operative Documents, as in effect on the Original Effective Date, as applicable, and, to the extent so applied, shall not be included in the definition of "Net Cash Proceeds".

        "Net Income" means the net income (loss) of the Borrower, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding:

        (a)   any gain (but not loss), together with any related provision for Taxes on such gain (but not loss), realized in connection with (i) any Asset Sale or (ii) the disposition of any securities by the Borrower or any of its Subsidiaries or the extinguishment of any Indebtedness of the Borrower or any of its Subsidiaries; and

        (b)   any extraordinary gain (but not loss), together with any related provision for Taxes on such extraordinary gain (but not loss).

        "Non-Core Facilities" means the Facilities other than the Collins Facility and the Core Facilities.

        "Non-Recourse Persons" means Edison International, Edison Mission Group, EME, Mission Energy Holding Company and Southern California Edison Company, and each of their Affiliates (except as provided herein) and the officers, directors, employees, shareholders (except as aforesaid), agents, Authorized Representatives and other controlling persons (except as aforesaid) of the Borrower, provided that in no event shall the Borrower be deemed to be a Non-Recourse Person and provided further that each Midwest Related Party and EMMT shall be a Non-Recourse Person except with respect to, and to the extent, of the Collateral furnished thereby under the Security Documents to which it is a party and as otherwise provided in such Security Documents.

        "Non-U.S. Lender" has the meaning set forth in Section 4.7(e).

        "Notes" mean the 8.75% Second Priority Senior Secured Notes in an aggregate principal amount of $1,000,000,000 issued on the date of and pursuant to the MWG Indenture.

        "NUG Contingent Liabilities" means Contingent Liabilities of EMMT existing as of the Original Effective Date in connection with (a) the disaggregation of the New England Power Pool and (b) agreements existing as of the Original Effective Date relating to the NUG Trading Entities, Newhall Funding Company and Athens Funding, LLC.

        "NUG Trading Entities" means CL Power Sales One, L.L.C., CL Power Sales Two, L.L.C., CL Power Sales Three, L.L.C., CL Power Sales Seven, L.L.C., CL Power Sales Eight, L.L.C., CL Power Sales Nine, L.L.C., CL Power Sales Ten, L.L.C., CP Power Sales Twelve, L.L.C., CP Power Sales Sixteen, L.L.C. and CP Power Sales Seventeen, L.L.C.

        "Obligations" means with respect to any Indebtedness of any Person (collectively, without duplication): (a) all debt, financial liabilities and obligations of such Person of whatsoever nature and

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howsoever evidenced (including principal, interest, fees, reimbursement obligations, cash cover obligations, penalties, indemnities and legal and other expenses, whether due after acceleration or otherwise) to the providers or holders of such Indebtedness or to any agent, trustee or other representative of such providers or holders of such Indebtedness under or pursuant to each agreement, document or instrument evidencing, securing, Guaranteeing or relating to such Indebtedness, financial liabilities or obligations relating to such Indebtedness (including Loan Documents applicable to such Indebtedness (if any)), in each case, direct or indirect, primary or secondary, fixed or contingent, now or hereafter arising out of or relating to any such agreement, document or instrument; (b) any and all sums advanced by the Collateral Trustee or any other Person in order to preserve the Collateral or any other collateral securing such Indebtedness or to preserve the Liens and security interests in the Collateral or any other collateral, securing such Indebtedness; and (c) the costs and expenses of collection and enforcement of the obligations referred to in clauses (a) and (b) (including (i) the costs and expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on any Collateral or any other collateral, (ii) the costs and expenses of any exercise by the Collateral Trustee or any other Person of its rights under the Security Documents or any other security documents and (iii) reasonable attorneys' fees and court costs).

        "Officer's Certificate" means a certificate with respect to compliance with a condition or covenant provided for in this Agreement, signed on behalf of the Borrower by two Authorized Representatives of the Borrower, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Borrower, including:

        (a)   a statement that the Authorized Representative making such certificate or opinion has read such covenant or condition;

        (b)   a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

        (c)   a statement that, in the opinion of such Authorized Representative, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

        (d)   a statement as to whether or not, in the opinion of such Authorized Representative, such condition or covenant has been satisfied.

        "Operating Expenses" means, in respect of any period, all cash used in operating activities or investing activities of the Borrower (as determined in accordance with GAAP), including any Permitted Tax Payments; provided that Operating Expenses will exclude Powerton/Joliet Lease Liabilities to the extent included in Cash Disbursements; provided, further that cash used for investments made with the proceeds of (a) any Asset Sale, (b) the sale of Equity Interests by, or contributions to the common equity capital of, the Borrower or any of its Subsidiaries and (c) any incurrence of Indebtedness by the Borrower or any of its Subsidiaries shall be excluded from the calculation of Operating Expenses.

        "Operating Lease" means any lease other than a Capital Lease.

        "Operating Lease Liability" of any Person means all monetary obligations of such Person under any Operating Lease, and, for purposes of each Loan Document, the amount of such obligations shall be the termination value of such Operating Lease; provided, however, that for purposes of Section 7.2.1(c) and Schedule 7.2.1(c) the amount of such obligations shall be the aggregate future payments due under such Operating Lease.

        "Operation" has the meaning set forth in Section 6.10(b).

        "Optional Prepayment Notice" has the meaning set forth in Section 3.1.2(c).

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        "Organic Document" means, with respect to any Person that is a corporation, its certificate of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock; with respect to any Person that is a limited liability company, its certificate of formation and its limited liability agreement, and, with respect to a private limited liability company, its deed of incorporation, its articles of association, all shareholders agreements, if any, and the shareholders register in each case, as from time to time amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Original Effective Date" means April 27, 2004.

        "Other Taxes" means any and all present or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

        "Parity Debt Representative" means (a) in the case of the Notes, the trustee and (b) in the case of any other Series of Parity Lien Debt, the trustee, agent or representative of the holders of such Series of Parity Lien Debt who maintains the transfer register for such Series of Parity Lien Debt and is appointed as a Parity Debt Representative (for purposes related to the administration of the security documents) pursuant to the indenture or other agreement governing such Series of Parity Lien Debt, and who has executed a Collateral Trust Joinder.

        "Parity Debt Sharing Confirmation" has the meaning set forth in the Collateral Trust Agreement.

        "Parity Lien Debt" means:

        (a)   the Notes;

        (b)   Obligations under Interest Rate Hedging Transactions incurred to hedge or manage interest rate risk with respect to Parity Lien Debt and Priority Lien Debt (without duplication, other than Interest Rate Hedging Transactions that satisfy the requirement of clause (a)(iv) of the definition of "Priority Lien Debt") having an aggregate principal amount not to exceed the aggregate notional principal amount of outstanding Parity Lien Debt and Priority Lien Debt;

        (c)   Permitted Refinancing Indebtedness incurred or issued to Refinance Parity Lien Debt or Priority Lien Debt (other than Permitted Refinancing Indebtedness that satisfies the requirements of clause (b) of the definition of "Priority Lien Debt");

        (d)   any other Indebtedness that is permitted to be incurred pursuant to Section 7.2.1 if the aggregate principal amount of all such other Indebtedness contemplated by this clause (d) does not as of any date of incurrence exceed the greater of (i) $100,000,000 or (ii) such maximum principal amount of Indebtedness as would not, after giving Pro Forma effect to the incurrence thereof and the application of the proceeds therefrom, cause the Secured Leverage Ratio to be greater than 2.75 to 1.0;

        (e)   Indebtedness for Permitted Marketing Support to the extent such Indebtedness is permitted under the MWG Indenture; and

        (f)    any other Parity Lien Obligations;

provided, that, in each case:

        (A)  on or before the date on which such Indebtedness is incurred by the Borrower such Indebtedness is designated by the Borrower, in an Officer's Certificate delivered to each Parity Debt Representative and the Collateral Trustee, as Parity Lien Debt for the purposes of this Agreement and the Collateral Trust Agreement; provided, that no Obligation or Indebtedness may be designated as both Priority Lien Debt and Parity Lien Debt;

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        (B)  such Indebtedness is governed by an indenture or other agreement that includes a Parity Debt Sharing Confirmation; and

        (C)  all requirements set forth in the Collateral Trust Agreement as to the confirmation, grant or perfection of the Collateral Trustee's Lien to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (C) shall be conclusively established, for purposes of entitling the holders of such Indebtedness to share equally and ratably with the other holders of Parity Lien Debt in the benefits and proceeds of the Collateral Trustee's Lien on the Collateral, if the Borrower delivers to the Collateral Trustee an officer's certificate in the form required pursuant to the Collateral Trust Agreement stating that such requirements and other provisions have been satisfied and that such Indebtedness is Parity Lien Debt).

        "Parity Lien Obligations" means Parity Lien Debt and all other Obligations in respect thereof.

        "Participant" has the meaning set forth in Section 10.11.2.

        "Participation Fee" has the meaning set forth in Section 3.3.2.

        "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

        "Pension Plan" means a "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, has any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

        "Percentage" means, at any time of determination: (a) with respect to Revolver Lenders, the sum of the amount of such Revolver Lender's Revolver Exposure and unused Revolver Commitments at such time divided by the sum of the total amount Revolver Exposure and unused Revolver Commitments at such time and (b) with respect to Term Loan Lenders, the amount of such Term Loan Lender's Term Loans at such time divided by the total amount of all outstanding Term Loans at such time.

        "Permitted Liens" means the liens permitted under Section 7.2.2.

        "Permitted Marketing Support" shall mean the use by the Borrower of its funds, Parity Lien Debt and the proceeds of Revolver Loans and Letters of Credit, in each case, to support Permitted Trading Activities conducted by or for the benefit of the Borrower, whether directly with unaffiliated third parties or with EMMT, provided that, in the case of support for Permitted Trading Activities conducted for the benefit of the Borrower by EMMT, such support shall be provided to EMMT in a manner consistent with the Midwest Trading Revolver.

        "Permitted Refinancing Indebtedness" means any Indebtedness of the Borrower or any of its Affiliates issued in exchange for, or the net proceeds of which are used to Refinance other Indebtedness of the Borrower or any of its Subsidiaries (other than intercompany Indebtedness); provided, that:

        (a)   the aggregate principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the aggregate principal amount (or accreted value, if applicable) of the Indebtedness Refinanced (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);

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        (b)   such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being Refinanced; provided, that with respect to any Capitalized Lease Liabilities, the final maturity date thereof, for purposes of this definition and the definition of "Weighted Average Life to Maturity" shall be the earlier of (i) the expiration of such Capitalized Lease Liabilities and (ii) the final maturity date of any Indebtedness underlying such Capitalized Lease Liabilities; and

        (c)   if the Indebtedness being Refinanced is subordinated in right of payment to the Loans, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Loans on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being Refinanced.

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        "Permitted Tax Payment" means, with respect to the Borrower and its Subsidiaries, without duplication as to amounts, (a) any payment of United States Federal, state, local or foreign taxes required to be paid by the Borrower or its Subsidiaries and (b) any payments required by any tax allocation or similar agreements existing as of the Original Effective Date or any amendment or modification thereto, so long as such amendment, modification or waiver (i) does not result in such tax allocation or similar agreement requiring payments of the Borrower and its Subsidiaries in excess of United States Federal, state, local or foreign taxes attributable to the Borrower and its Subsidiaries or (ii) would otherwise cause a Material Adverse Effect.

        "Permitted Trading Activities" means (a) the daily or forward purchase and/or sale, or other acquisition or disposition, of wholesale or retail electric energy, capacity, ancillary services, transmission rights, emissions allowances, weather derivatives and/or related commodities, in each case, whether physical or financial, (b) the daily or forward purchase and/or sale, or other acquisition or disposition, of fuel, mineral rights and/or related commodities, including swaps, options and swaptions, in each case, whether physical or financial, (c) electric energy-related tolling transactions, as seller of tolling services, (d) price risk management activities or services, (e) other similar electric industry activities or services, or (f) additional services as may be consistent with Prudent Industry Practice from time to time to support the marketing and trading related to the Facilities, in each case, consistent with the Energy and Fuel Risk Management Policies.

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

        "Pledge Agreements" means (a) the MGE Pledge Agreement and (b) the EMMH Pledge Agreement.

        "Powerton Equity Financing Parties I" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Powerton Lease Participation Agreement (T1)).

        "Powerton Equity Financing Parties II" means, collectively, the Equity Investor, the Owner Participant and the OP Guarantor (each as defined in the Powerton Lease Participation Agreement (T2)).

        "Powerton Facility" means the Powerton station, 1,538 MW coal-fired electric generating facility and certain related assets located in Tazewell County, Illinois and more fully described in Exhibit B to each Powerton Lease.

        "Powerton Guarantee (T1)" means the Guaranty Agreement dated as of July 31, 2002 made by EME in favor of Powerton Trust I that, among other things, guarantees the payment by the Borrower of all Powerton Lease Liabilities (T1) payable to Powerton Trust I, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Guarantee (T1: Equity Financing Parties)" means the Guaranty Agreement dated as of July 31, 2002 made by EME in favor of the Powerton Equity Financing Parties I that, among other things, guarantees the payment by the Borrower of certain Powerton Lease Liabilities (T1) payable to Powerton Equity Financing Parties I, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Guarantee (T2)" means the Guaranty Agreement dated as of July 31, 2002 made by EME in favor of Powerton Trust II that, among other things, guarantees the payment by the Borrower of all Powerton Lease Liabilities (T2) payable to Powerton Trust II, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

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        "Powerton Guarantee (T2: Equity Financing Parties)" means the Guaranty Agreement dated as of July 31, 2002 made by EME in favor of the Powerton Equity Financing Parties II that, among other things, guarantees the payment by the Borrower of certain Powerton Lease Liabilities (T2) payable to Powerton Equity Financing Parties II, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Guarantees" means, collectively, the Powerton Guarantee (T1), the Powerton Guarantee (T2), the Powerton Guarantee (T1: Equity Financing Parties) and the Powerton Guarantee (T2: Equity Financing Parties).

        "Powerton Intercompany Note Pledge Agreement (T1)" means the Pledge Agreement (T1) dated as of August 17, 2000 among the Borrower and the Holdings Collateral Agent relating to the pledge of the Powerton Lease Intercompany Note (T1), as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Intercompany Note Pledge Agreement (T2)" means the Pledge Agreement (T2) dated as of August 17, 2000 among the Borrower and the Holdings Collateral Agent relating to the pledge of the Powerton Lease Intercompany Note (T2), as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Lease (T1)" means the Facility Lease Agreement (T1) dated as of August 17, 2000 between the Borrower and Powerton Trust I, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Lease (T2)" means the Facility Lease Agreement (T2) dated as of August 17, 2000 between the Borrower and Powerton Trust II, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Lease Intercompany Note (T1)" means the EME Note (as defined in the Powerton Lease Participation Agreement (T1)) dated the Closing Date (as defined in the Powerton Lease Participation Agreement (T1)) evidencing the loan by the Borrower to EME of the proceeds of the Powerton Lease Transaction (T1), as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Lease Intercompany Note (T2)" means the EME Note (as defined in the Powerton Lease Participation Agreement (T2)) dated the Closing Date (as defined in the Powerton Lease Participation Agreement (T2)) evidencing the loan by the Borrower to EME of the proceeds of the Powerton Lease Transaction (T2), as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Lease Intercompany Notes" means, collectively, the Powerton Lease Intercompany Note (T1) and the Powerton Lease Intercompany Note (T2).

        "Powerton Lease Liabilities" means, collectively, the Powerton Lease Liabilities (T1) and the Powerton Lease Liabilities (T2).

        "Powerton Lease Liabilities (T1)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that the Borrower is obligated to pay under the Powerton Lease (T1) or the other Powerton Lease Operative Documents (T1).

        "Powerton Lease Liabilities (T2)" mean the basic rent, the supplemental rent, termination value or any other amount, liability or obligation that the Borrower is obligated to pay under the Powerton Lease (T2) or the other Powerton Lease Operative Documents (T2).

        "Powerton Lease Operative Documents" means, collectively, the Powerton Lease Operative Documents (T1) and the Powerton Lease Operative Documents (T2).

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        "Powerton Lease Operative Documents (T1)" means, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T1).

        "Powerton Lease Operative Documents (T2)" means, collectively, the Operative Documents as defined in the Powerton Lease Participation Agreement (T2).

        "Powerton Lease Participation Agreement (T1)" means the Participation Agreement (T1) dated as of August 17, 2000 by and among the Borrower, EME, Powerton Trust I, Wilmington Trust Company, Powerton Generation I, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Lease Participation Agreement (T2)" means the Participation Agreement (T2) dated as of August 17, 2000 by and among the Borrower, EME, Powerton Trust II, Wilmington Trust Company, Powerton Generation II, the Lease Indenture Trustee named therein and the Pass Through Trustees named therein, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Lease Participation Agreements" means, collectively, the Powerton Lease Participation Agreement (T1) and the Powerton Lease Participation Agreement (T2).

        "Powerton Lease Transaction" means, collectively, the Powerton Lease Transaction (T1) and the Powerton Lease Transaction (T2).

        "Powerton Lease Transaction (T1)" means the transactions pursuant to the Powerton Lease Participation Agreement (T1) and the Powerton Lease Operative Documents (T1) whereby the Borrower sells a 63.6% undivided interest in the Powerton Facility to Powerton Trust I and Powerton Trust I leases such undivided interest to the Borrower pursuant to the Powerton Lease (T1).

        "Powerton Lease Transaction (T2)" means the transactions pursuant to the Powerton Lease Participation Agreement (T2) and the Powerton Lease Operative Documents (T2) whereby the Borrower sells a 36.4% undivided interest in the Powerton Facility to Powerton Trust II and Powerton Trust II leases such undivided interest to the Borrower pursuant to the Powerton Lease (T2).

        "Powerton Lease Trusts" means, collectively, Powerton Trust I and Powerton Trust II.

        "Powerton Leases" means, collectively, the Powerton Lease (T1) and Powerton Lease (T2).

        "Powerton Subordination Agreement (T1)" means the Subordination Agreement dated as of August 17, 2000 between Powerton Trust I, the Owner Participant (as defined in the Powerton Lease Participation Agreement (T1)), the Lease Indenture Trustee (as defined in the Powerton Lease Participation Agreement (T1)) and the Holdings Collateral Agent, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Subordination Agreement (T2)" means the Subordination Agreement dated as of August 17, 2000 between Powerton Trust II, the Owner Participant (as defined in the Powerton Lease Participation Agreement (T2)), the Lease Indenture Trustee (as defined in the Powerton Lease Participation Agreement (T2)) and the Holdings Collateral Agent, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton Trust I" means Nesbitt Asset Recovery, Series P-1 (formerly known as Powerton Trust I), a Delaware business trust.

        "Powerton Trust II" means Powerton Trust II, a Delaware business trust.

        "Powerton/Joliet Intercompany Note Pledge Agreements" means, collectively, the Powerton Intercompany Note Pledge Agreement (T1), the Powerton Intercompany Note Pledge Agreement (T2),

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the Joliet Intercompany Note Pledge Agreement (T1) and the Joliet Intercompany Note Pledge Agreement (T2).

        "Powerton/Joliet Lease Assets" means, collectively, the Powerton Facility and the Joliet Leased Facility.

        "Powerton/Joliet Lease Guarantees" means, collectively, the Powerton Guarantees, the Joliet Guarantees and the Powerton/Joliet Reimbursement Agreement.

        "Powerton/Joliet Lease Intercompany Notes" means, collectively, the Powerton Lease Intercompany Notes and the Joliet Lease Intercompany Notes.

        "Powerton/Joliet Lease Liabilities" means, collectively, the Powerton Lease Liabilities and the Joliet Lease Liabilities.

        "Powerton/Joliet Lease Operative Documents" means, collectively, the Powerton Lease Operative Documents and the Joliet Lease Operative Documents.

        "Powerton/Joliet Lease Participation Agreements" means, collectively, the Powerton Lease Participation Agreement (T1), Powerton Lease Participation Agreement (T2), Joliet Lease Participation Agreement (T1) and Joliet Lease Participation Agreement (T2).

        "Powerton/Joliet Lease Transaction" means, collectively, the Powerton Lease Transaction and the Joliet Lease Transaction.

        "Powerton/Joliet Lease Trusts" means, collectively, the Powerton Lease Trusts and the Joliet Lease Trusts.

        "Powerton/Joliet Leases" means, collectively, Powerton Leases and Joliet Leases.

        "Powerton/Joliet Reimbursement Agreement" means the Reimbursement Agreement dated as of August 17, 2000 between EME and the Borrower, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time.

        "Powerton/Joliet Subordination Agreements" means, collectively, the Powerton Subordination Agreement (T1), the Powerton Subordination Agreement (T2), the Joliet Subordination Agreement (T1) and the Joliet Subordination Agreement (T2).

        "Prepayment Lender" has the meaning set forth in Section 3.1.2(c).

        "Pricing Grid" means the pricing grid set forth on Schedule 3.2.1.

        "Priority Debt Representative" means (a) in the case of this Agreement, the Administrative Agent and (b) in the case of any other Priority Lien Debt the trustee, agent or representative of the holders of such Series of Priority Lien Debt who maintains the transfer register for such Series of Priority Lien Debt and is appointed as a Priority Lien Debt Representative (for purposes related to the administration of the security documents) pursuant to the credit agreement, indenture or other agreement governing such Priority Lien Debt, and who has executed a Collateral Trust Joinder.

        "Priority Debt Sharing Confirmation" has the meaning set forth in the Collateral Trust Agreement.

        "Priority Lien Debt" means:

        (a)   (i) the Indebtedness under this Agreement in an amount not to exceed $900,000,000, (ii) Environmental CapEx Debt, (iii) Indebtedness incurred to finance Necessary Capital Expenditures in an aggregate amount not to exceed $50,000,000, (iv) Obligations under Interest Rate Hedging Transactions incurred to hedge or manage interest rate risk with respect to Indebtedness under clause (i) having an aggregate notional principal amount not to exceed $172,500,000, and (v) all other Priority Lien Obligations;

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        (b)   Permitted Refinancing Indebtedness to Refinance Priority Lien Debt; provided that:

        (i)    on or before the date on which such Indebtedness is incurred by the Borrower such Indebtedness is designated by the Borrower, in an Officer's Certificate delivered to each Priority Debt Representative and the Collateral Trustee, as Priority Lien Debt for the purposes of this Agreement and the Collateral Trust Agreement; provided, that no Obligation or Indebtedness shall be designated as both Priority Lien Debt and Parity Lien Debt;

        (ii)   such Indebtedness is governed by a credit agreement, an indenture or other agreement that includes a Priority Debt Sharing Confirmation; and

        (iii)  all requirements set forth in the Collateral Trust Agreement as to the confirmation, grant or perfection of the Collateral Trustee's Lien to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (iii) shall be conclusively established, for purposes of entitling the holders of such Indebtedness to share equally and ratably with the other holders of Priority Lien Debt in the benefits and proceeds of the Collateral Trustee's Lien on the Collateral, if the Borrower delivers to the Collateral Trustee an officer's certificate in the form required pursuant to the Collateral Trust Agreement stating that such requirements and other provisions have been satisfied and that such Indebtedness is Priority Lien Debt).

        "Priority Lien Obligations" means the Priority Lien Debt and all other Obligations in respect of Priority Lien Debt.

        "Priority Lien Secured Parties" has the meaning set forth in the Collateral Trust Agreement.

        "Pro Forma" means, with respect to a calculation required to be made pursuant to this Agreement, that such calculation is made in accordance with the methodologies set forth in Regulation S-X under the Securities Act and gives effect to all relevant modifications to contractual arrangements that have been made prior to, or are being made on, the calculation date; provided, that in the case of a calculation for any period occurring prior to the Closing Date, all contractual arrangements in effect on the Closing Date shall be deemed to have been in effect for the entirety of such period.

        "Prudent Industry Practice" means, at a particular time, (a) any of the practices, methods and acts engaged in or approved by a significant portion of the competitive electric generating industry at such time, or (b) with respect to any matter to which clause (a) does not apply, any of the practices, methods and acts which, in the exercise of reasonable judgment at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. "Prudent Industry Practice" is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers' warranties and the requirements of any Governmental Authority of competent jurisdiction.

        "PUHCA" means the Public Utility Holding Company Act of 1935, as amended.

        "Quarterly Payment Date" means the first day of each January, April, July and October or, if any such day is not a Business Day, the next succeeding Business Day.

        "Recovery Event" means any settlement of or payment of $15,000,000 or more in respect of (a) any property or casualty insurance claim relating to any asset of the Borrower or (b) any seizure, condemnation, confiscation or taking of, or requisition of title or use of, the Facilities or any part thereof by any Governmental Authority.

        "Refinance" means with respect to any Financing, extensions, refinancing, renewal, replacement, defeasance or refund of such Financing for, or with the proceeds of, other Indebtedness.

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        "Register" has the meaning set forth in Section 10.11.1(b).

        "Regulatory Violation" means (a) the Borrower or any of its Subsidiaries becoming (i) subject to regulation as a "holding company" or a "subsidiary company" or an "affiliate" of a "holding company" under PUHCA or (ii) subject to regulation as a "public utility" under the laws of the State of Illinois or (b) the Borrower failing (i) to be an "exempt wholesale generator" under PUHCA, (ii) to be interconnected with the high voltage network or to have access to transmission services and ancillary services to sell wholesale electric power or (iii) to have the authority to sell wholesale electric power at market-based rates and, in the case of clause (a) or (b), such circumstance could reasonably be expected to result in a Material Adverse Effect.

        "Reimbursement Restricted Payments" means payments to reimburse or repay Special Capital Contributions.

        "Reinvestment Deferred Amount" means with respect to any Recovery Event, the aggregate Net Cash Proceeds received by the Borrower in connection therewith which are not applied to prepayments or reductions pursuant to Section 3.1.2(b) as a result of the delivery of a Reinvestment Notice.

        "Reinvestment Notice" has the meaning set forth in Section 7.1.11(a).

        "Reinvestment Prepayment Amount" means, with respect to any Recovery Event, the Reinvestment Deferred Amount relating thereto less any amount which, prior to the relevant Reinvestment Prepayment Date, the Borrower or its Subsidiaries have spent or have agreed, pursuant to a binding written contract (under which performance is in progress) to spend, to restore or replace the assets in respect of which a Recovery Event has occurred pursuant to Section 7.1.11.

        "Reinvestment Prepayment Date" means, with respect to any Recovery Event, the earliest of (a) the first date occurring after such Recovery Event on which an Event of Default shall have occurred, (b) the date occurring twelve months after such Recovery Event and (c) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, restore or replace the assets in respect of which a Recovery Event has occurred.

        "Reorganization" means, with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

        "Reportable Event" means any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty (30) day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615.

        "Required Lenders" means, at any time, subject to the last paragraph of Section 10.1, Lenders having Revolver Exposure, unused Revolver Commitments and outstanding Term Loans representing at least 50.1% of the sum of the total Revolver Exposure, unused and outstanding Revolver Commitments and outstanding Term Loans at such time. The "Required Lenders" of a particular Class of Loans (a) with respect to Revolver Loans, means Revolver Lenders having at least 50.1% of Revolver Exposure and unused and outstanding Revolver Commitments and (b) with respect to Terms Loans, Term Loan Lenders having at least 50.1% of the outstanding Term Loans at such time.

        "Requirement of Law" means, as to any Person, the Organic Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other authority, in each case, applicable to or binding upon such Person or any of its Property or to which such Person or any of its property is subject.

        "Restricted Payment" has the meaning set forth in Section 7.2.7.

        "Retiring Lenders" has the meaning set forth in the recitals.

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        "Revolver Availability Period" means the period from and including the Closing Date to but excluding the earlier of the Revolver Commitment Termination Date and the date of termination of the Revolver Commitments.

        "Revolver Commitment" means, with respect to each Revolver Lender, the commitment, if any, of such Revolver Lender to make Revolver Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Revolver Lender's Revolver Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 3.1 and (b) reduced or increased from time to time pursuant to assignments by or to such Revolver Lender pursuant to Section 10.11.1. The initial amount of each Revolver Lender's Revolver Commitment is set forth on Schedule 1.1(b) or in the Assignment Agreement pursuant to which such Revolver Lender shall have assumed its Revolver Commitment, as applicable. The initial aggregate amount of the Revolver Lenders' Revolver Commitments is $500,000,000.

        "Revolver Commitment Termination Date" means April 29, 2011.

        "Revolver Exposure" means, with respect to any Revolver Lender at any time, the sum of the outstanding principal amount of such Revolver Lender's Revolver Loans and LC Exposure at such time.

        "Revolver Lender" means a Lender with a Revolver Commitment, an outstanding Revolver Loan or an unreimbursed LC Disbursement.

        "Revolver Loan" has the meaning set forth in Section 2.1.2.

        "Revolver Prepayment Date" means April 27, 2010.

        "S&P" means Standard & Poor's Ratings Services and its successors and assigns.

        "Sabrooke Peaking Unit" means the 70 MW (nominal summer rating) oil-fired Sabrooke peaking unit and related assets owned by the Borrower and located in Winnebago County, Illinois.

        "Secured Class" means all Secured Parties having the same priority. This Agreement provides for two Classes of Secured Parties, the holders of Priority Lien Obligations and the holders of Parity Lien Obligations.

        "Secured Debt" means Priority Lien Debt and Parity Lien Debt.

        "Secured Debt Representative" means each Parity Debt Representative and each Priority Debt Representative.

        "Secured Leverage Ratio" means, on any date, the ratio of:

        (a)   the aggregate principal amount of Secured Debt outstanding on such date plus all Indebtedness of any Subsidiaries of the Borrower outstanding on such date (and, for this purpose, letters of credit will be deemed to have a principal amount equal to the maximum potential liability of the Borrower and its Subsidiaries thereunder) to

        (b)   the aggregate amount Adjusted EBITDA for the most recent four-quarter period for which financial information is available.

        In addition, for purposes of calculating the Secured Leverage Ratio:

        (i)    acquisitions that have been made by the Borrower or any of its Subsidiaries, including through mergers or consolidations, or any Person or any of its Subsidiaries acquired by the Borrower or any of its Subsidiaries, and including any related financing transactions and including increases in ownership of Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the date on which the event for which the calculation of the Secured Leverage Ratio is made (the "Leverage Calculation

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Date") will be given Pro Forma effect as if they had occurred on the first day of the four-quarter reference period;

        (ii)   the amount of Indebtedness arising out of Interest Rate Hedging Transactions will be deemed to be the net amount attributable to Interest Rate Hedging Transactions at the time outstanding;

        (iii)  the Adjusted EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Leverage Calculation Date will be excluded;

        (iv)  any Person that is a Subsidiary of the Borrower on the Leverage Calculation Date will be deemed to have been a Subsidiary of the Borrower at all times during such four-quarter period; and

        (v)   any Person that is not a Subsidiary of the Borrower on the Leverage Calculation Date will be deemed not to have been a Subsidiary of the Borrower at any time during such four-quarter period.

        "Secured Obligations" means the Parity Lien Obligations and the Priority Lien Obligations.

        "Secured Parties" has the meaning set forth in the Collateral Trust Agreement.

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

        "Security Documents" means (a) the Collateral Trust Agreement, (b) the Borrower Security Agreement, (c) each Pledge Agreement, (d) the EMMT Security Agreement, (e) the Powerton/Joliet Subordination Agreements, (f) the Mortgaged Facility Mortgages and (g) any other agreement or instrument hereafter entered into by the Borrower or any other Person which, directly or indirectly, Guarantees or secures payment of Indebtedness under this Agreement or payment or performance of any other Obligation arising under a Loan Document.

        "Series of Parity Lien Debt" means, severally, the Notes and each other issue or series of Parity Lien Debt for which a single transfer register is maintained.

        "Series of Priority Lien Debt" means indebtedness under this Agreement and each other issue or series of Priority Lien Debt for which a single transfer register is maintained.

        "Series of Secured Debt" means, severally, each Series of Priority Lien Debt and each Series of Parity Lien Debt.

        "Solvent" means, with respect to any Person, on any date of determination:

        (a)   the fair market value of its assets is in excess of the total amount of its liabilities (including net contingent liabilities);

        (b)   it is then able and expects to be able to pay its debts as they mature; and

        (c)   it has capital sufficient to carry on its business as conducted and as proposed to be conducted. For purposes of the foregoing, the amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, can reasonably be expected to become an actual or matured liability.

        "SPC" has the meaning set forth in Section 10.11.1(e).

        "Special Capital Contribution" means cash contributions (including the EME Equity Contribution) in the form of equity or subordinated intercompany loans made by EME or a Subsidiary of EME after the Original Effective Date.

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        "Special Restricted Payment" means a Restricted Payment in an amount up to $60,000,000, as contemplated by Section 7.2.7.

        "Subordinated Indebtedness" means Indebtedness of the Borrower or any of its Subsidiaries (other than Affiliated Indebtedness) that is unsecured and/or contractually subordinated to Priority Lien Debt and Parity Lien Debt.

        "Subsidiary" means, with respect to any Person: (a) any corporation, association or other business entity of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the directors, managers or trustees of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person; and (b) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof).

        "Subsidiary Guarantee" means a Subsidiary Guarantee substantially in the form of Exhibit H between a Subsidiary of the Borrower and the Administrative Agent, as amended, restated, amended and restated or otherwise modified and in effect from time to time.

        "Tax" or "Taxes" means, with respect to any Person, any present or future taxes (including income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value-added, ad valorem, alternative or add-on minimum, estimated, or other tax of any kind whatsoever), levies, imposts, duties, fees or charges imposed by any government or any governmental agency or instrumentality or any international or multinational agency or commission, including any interest, penalty, or addition thereto, whether disputed or not for which such Person may be liable (including any such Tax related to any other Person for which such Person is liable, by contract, as transferee or successor, by law or otherwise).

        "Tax Return" means all returns, declarations, reports, claims for refund and information returns and statements of any Person required to be filed with respect to, or in respect of, any Taxes, including any schedule or attachment thereto and any amendment thereof.

        "Term Loan Commitment" means, relative to any Term Loan Lender, the obligation of such Term Loan Lender to maintain a Term Loan on the Closing Date in a principal amount (taking into account the assignment and delegation contemplated by Section 10.11.1(f)) set forth in the notice to be delivered pursuant to Section 10.11.1(f)(iii). The Term Loan Commitments of all of the Term Loan Lenders shall not exceed $332,995,704.25 in the aggregate.

        "Term Loan Lender" means a Lender with a Term Loan Commitment or an outstanding Term Loan.

        "Term Loan Maturity Date" means April 27, 2011.

        "Term Loans" has the meaning set forth in Section 2.1.1.

        "Title Insurer" means Chicago Title Insurance Company.

        "Title Policies" means the American Land Title Association 1970 (revised 10/17/84) Form extended coverage Lender's Fee Policies of title insurance dated the date of recording of the Mortgaged Facility Mortgages issued by the Title Insurer insuring the Lien in favor of the Collateral Trustee for the benefit of the Secured Parties created by the Mortgaged Facility Mortgages.

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        "Transaction with an Affiliate" means, with respect to any Person (a) any agreement or contract with any Affiliate or Subsidiary of such Person and any amendment, modification or supplement thereof or thereto or (b) any other transaction or business arrangement with an Affiliate or Subsidiary of such Person not otherwise expressly permitted by the Loan Documents.

        "type" means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan.

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

        "United States" or "U.S." means the United States of America, its fifty States and the District of Columbia.

        "United States Person" has the meaning given to such term in Section 7701(a) (30) of the Code.

        "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

        "Waukegan Facility" means the Waukegan station, 789 MW net coal-fired electric generating facility and related assets owned by the Borrower, including the Waukegan Peaking Unit, and located in Lake County, Illinois.

        "Waukegan Peaking Unit" means the 92 MW (nominal summer rating) oil-fired Waukegan peaking unit owned by the Borrower and located in Lake County, Illinois.

        "Waukegan Unit 6" means the 100 MW net coal-fired Unit 6 that is part of the Waukegan Facility.

        "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

        (a)   the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

        (b)   the then outstanding principal amount of such Indebtedness.

        "Welfare Plan" means a "welfare plan", as such term is defined in Section 3(1) of ERISA.

        "Will County Facility" means the Will County station, 1,092 MW net coal-fired electric generating facility and related assets owned by the Borrower and located in Will County, Illinois.

        "Will County Units 1 and 2" means, collectively, (a) the 156 MW net coal-fired Unit 1 that is part of the Will County Facility and (b) the 154 MW net coal-fired Unit 2 that is part of the Will County Facility.

        SECTION 1.2    Use of Defined Terms.    Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in (a) the Funds Flow Undertaking and (b) each Borrowing Request, Continuation/Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with any Loan Document.

        SECTION 1.3    Cross-References.    Unless otherwise specified, references in this Agreement to any Article, Section, Annex, Exhibit or Schedule are references to such Article, Section, Annex, Exhibit or Schedule of or to this Agreement, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.

        SECTION 1.4    Accounting and Financial Determinations.    Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be

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interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II
COMMITMENTS AND BORROWING PROCEDURES

        SECTION 2.1    Commitments.    

        SECTION 2.1.1    Term Loans.    Subject to the terms and conditions set forth herein, each Term Loan Lender agrees to maintain its loan (each, a "Term Loan") to the Borrower in a principal amount not exceeding its Term Loan Commitment. The Term Loan Commitment of each of the Term Loan Lenders was fully utilized under the Existing Credit Agreement. Amounts prepaid or repaid in respect of Term Loans may not be reborrowed.

        SECTION 2.1.2    Revolver Loans.    Subject to the terms and conditions set forth herein, each Revolver Lender agrees to make revolving loans ("Revolver Loans") to the Borrower from time to time during the Revolver Availability Period in an aggregate principal amount that will not result in (a) such Revolver Lender's Revolver Exposure exceeding such Revolver Lender's Revolver Commitment or (b) the total Revolver Exposures exceeding the total Revolver Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolver Loans.

        SECTION 2.2    Loans.    

        SECTION 2.2.1    Obligations of Lenders.    Each Loan shall consist of the same Class and type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required.

        SECTION 2.2.2    Type of Loans.    Subject to Section 4.2, each Loan shall be constituted entirely of Base Rate Loans or of LIBO Rate Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any LIBO Rate Loans by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

        SECTION 2.2.3    Minimum Amounts; Limitation on Number of Loans.    Each Loan shall be in an aggregate amount of $5,000,000 or a larger multiple of $1,000,000; provided that a Base Rate Loan may be in an aggregate amount that is equal to the entire unused balance of the total Commitments of the applicable Class or (in the case of Revolver Loans) that is required to finance, in an amount not less than $5,000,000, the reimbursement of an LC Disbursement as contemplated by Section 2.6.5. Loans of more than one Class and type may be outstanding at the same time; provided that there shall not at any time be more than a total of (a) five (5) LIBO Rate Loans outstanding with respect to Term Loans and (b) ten (10) LIBO Rate Loans outstanding with respect to Revolver Loans.

        SECTION 2.2.4    Limitations on Interest Periods.    Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request (or to elect to convert to or continue as a LIBO Rate Loan): (a) any Revolver Loan if the Interest Period requested therefor would end after the Revolver Commitment Termination Date; (b) any Term Loan if the Interest Period requested therefor would end after the Term Loan Maturity Date; or (c) any Term Loan if the Interest Period requested therefor would commence before and end after any Quarterly Payment Date unless, after giving effect thereto, the aggregate principal amount of the Term Loans having Interest Periods that end after such Quarterly Payment Date shall be equal to or less than the aggregate principal amount of the Term

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Loans permitted to be outstanding after giving effect to the payments of principal required to be made on such Quarterly Payment Date.

        SECTION 2.3    Borrowing Procedure.    

        (a)   Each Borrowing of Revolver Loans shall be made on notice, given not later than 12:00 Noon, New York City time, on the third Business Day prior to the date of the proposed Borrowing (in the case of a Borrowing of Revolver Loans to consist of LIBO Rate Loans) and no later than 12:00 Noon, New York City time, on the Business Day of the proposed Borrowing (in the case of a Borrowing of Revolver Loans to consist of Base Rate Loans), by the Borrower to the Administrative Agent, which shall give to each Revolver Lender prompt notice thereof by facsimile transmission. Each such notice of a Borrowing of Revolver Loans shall be made in writing, in substantially the form of a Borrowing Request, specifying therein (i) the requested date of such Borrowing (which shall be a Business Day), (ii) whether such Borrowing is to be a LIBO Rate Loan or a Base Rate Loan, (iii) the requested aggregate amount of such Borrowing, (iv) in the case of a LIBO Rate Loan, the initial Interest Period therefor and (v) the location and number of the Borrower's Bank Account to which funds are to be disbursed.

        (b)   Each Revolver Lender shall make each Revolver Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 2:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Revolver Lenders. The Administrative Agent will make such Revolver Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to a Bank Account of the Borrower and designated by the Borrower in the applicable Borrowing Request; provided that Borrowings made to finance the reimbursement of an LC Disbursement as provided in Section 2.6.5 shall be remitted by the Administrative Agent to the Issuing Lender specified in Section 2.6.5.

        (c)   If no election as to the type of a Loan is specified, then the requested Loan shall be a Base Rate Loan. If no Interest Period is specified with respect to any requested LIBO Rate Loan, then the requested Loan shall be made instead as a Base Rate Loan.

        SECTION 2.4    Continuation and Conversion Elections.    By delivering a Continuation/Conversion Notice to the Administrative Agent on or before 12:00 Noon, New York City time, on a Business Day, the Borrower may from time to time irrevocably elect that all, or any portion in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000 in excess thereof, of any Loans be (a) on not less than three (3) Business Days' notice, converted into, or continued as, LIBO Rate Loans, or (b) on the same Business Day, be converted into Base Rate Loans. In the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan, such LIBO Rate Loan shall automatically be continued as a LIBO Rate Loan with an Interest Period of the same duration as the then expiring Interest Period; provided, however, that (i) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders, (ii) a LIBO Rate Loan may not be converted at any time other than the last day of the Interest Period applicable thereto and (iii) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default or Event of Default has occurred and is continuing. Each delivery of a Continuation/Conversion Notice shall constitute a certification and warranty by the Borrower that on the date of delivery of such notice no Default has occurred and is continuing. If prior to the time of such continuation or conversion any matter certified to by the Borrower by reason of the immediately preceding sentence will not be true and correct at such time if then made, the Borrower will immediately so notify the Administrative Agent. Except to the extent, if any, that prior to the time of such continuation or conversion the Administrative Agent shall have received written notice to the contrary from the Borrower, such certification and warranty shall be deemed to be made at the date of such continuation or conversion as if then made. Upon the occurrence and during the continuance of

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any Event of Default under Section 8.1.1, each LIBO Rate Loan shall convert automatically to a Base Rate Loan at the end of the Interest Period then in effect for such LIBO Rate Loan.

        SECTION 2.5    Funding.    Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made for purposes of Section 4.1, 4.2, 4.3, 4.4, or 4.5, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing deposits in its LIBOR Office's interbank eurodollar markets. Notwithstanding the foregoing, such foreign branch or Affiliate shall satisfy the requirements of Section 4.7(e).

        SECTION 2.6    Letters of Credit.    Subject to the terms and conditions set forth herein, in addition to the Loans provided for in Section 2.1, the Borrower may request an Issuing Lender to Issue, at any time and from time to time on any Business Day during the period from the Closing Date to the date which is ten (10) Business Days prior to the Revolver Prepayment Date, Letters of Credit for its own account in such form as is acceptable to such Issuing Lender in its reasonable determination. Letters of Credit Issued hereunder shall constitute utilization of the Revolver Commitments; provided, that the Borrower's ability to obtain Letters of Credit shall be fully revolving and accordingly the Borrower may, prior to the Revolver Prepayment Date, obtain Letters of Credit to replace Letters of Credit which have expired or which have been drawn and subsequently reimbursed.

        SECTION 2.6.1    Notice of Issuance, Amendment, Renewal or Extension.    To request the Issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by such Issuing Lender) to an Issuing Lender and the Administrative Agent at least three (3) Business Days (or such shorter time as such Issuing Lender may agree in a particular instance in its sole discretion) prior to the requested Issuance Date a notice (a "Letter of Credit Application") requesting the Issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying (a) the Issuing Lender for such Letter of Credit, (b) the Issuance Date (which shall be a Business Day), (c) the date on which such Letter of Credit is to expire (which shall comply with Section 2.6.3), (d) the amount of such Letter of Credit, (e) the name and address of the beneficiary thereof, (f) all other terms and conditions regarding such Letter of Credit and (g) such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by an Issuing Lender, the Borrower also shall submit a Letter of Credit Application on such Issuing Lender's standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of Letter of Credit Application or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

        SECTION 2.6.2    Limitations on Amounts.    A Letter of Credit shall be Issued only if (and upon Issuance of each Letter of Credit the Borrower shall be deemed to represent and warrant that) after giving effect to such Issuance the total Revolver Exposures shall not exceed the total Revolver Commitments.

        SECTION 2.6.3    Expiration Date.    Each Letter of Credit shall expire at or prior to the close of business on the earlier of (a) the date set forth in the Letter of Credit Application and (b) the date that is five (5) Business Days prior to the Revolver Prepayment Date.

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        SECTION 2.6.4    Participations.    By the Issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) by an Issuing Lender, or, in the case of the Letters of Credit set forth on Schedule 2.6.11, by each Revolver Lender's signature on the signature pages hereto, and without any further action on the part of such Issuing Lender or the Revolver Lenders, such Issuing Lender hereby grants to each Revolver Lender, and each Revolver Lender hereby acquires from such Issuing Lender a participation in such Letter of Credit equal to such Revolver Lender's Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Revolver Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or Event of Default or reduction or termination of the Revolver Commitments.

        In consideration and in furtherance of the foregoing, each Revolver Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of an Issuing Lender, such Revolver Lender's Percentage of each LC Disbursement made by such Issuing Lender promptly upon the request of such Issuing Lender at any time from the time of such LC Disbursement until such LC Disbursement is reimbursed by the Borrower or at any time after any reimbursement payment is required to be refunded to the Borrower for any reason. Such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each such payment shall be made in the same manner as provided in Section 2.3(b) with respect to Revolver Loans made by such Revolver Lender (and Section 2.3(b) shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the relevant Issuing Lender the amounts so received by it from the Revolver Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to Section 2.6.5, the Administrative Agent shall distribute such payment to the relevant Issuing Lender or, to the extent that the Revolver Lenders have made payments pursuant to this paragraph to reimburse such Issuing Lender, then to such Revolver Lenders and such Issuing Lender as their interests may appear. Any payment made by a Revolver Lender pursuant to this paragraph to reimburse an Issuing Lender for any LC Disbursement shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

        SECTION 2.6.5    Reimbursement.    If an Issuing Lender shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such Issuing Lender in respect of such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement and any interest accrued pursuant to Section 2.6.8 not later than 2:00 p.m., New York City time, four (4) Business Days after the Business Day on which the Borrower receives notice of such LC Disbursement, provided that, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.3(a) that an LC Disbursement be financed with a Borrowing (or a portion thereof) of Revolver Loans and, to the extent so financed, the Borrower's obligation to reimburse such LC Disbursement shall be discharged and replaced by the resulting Revolver Loan.

        If the Borrower fails to make such payment when due, the Administrative Agent shall notify each applicable Revolver Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Revolver Lender's Percentage thereof.

        SECTION 2.6.6    Obligations Absolute.    

        (a)   The Borrower's obligation to reimburse LC Disbursements as provided in Section 2.6.5 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect,

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(iii) payment by an Issuing Lender under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit, and (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.6, constitute a legal or equitable discharge of the Borrower's obligations hereunder.

        (b)   Neither the Administrative Agent, the Revolver Lenders nor the Issuing Lenders, nor any of their respective directors, officers, employees, agents or advisors, shall have any liability or responsibility by reason of or in connection with the Issuance or transfer of any Letter of Credit by an Issuing Lender or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of an Issuing Lender; provided that the foregoing shall not be construed to excuse any Issuing Lender from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Lender's gross negligence or willful misconduct when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that:

        (i)    each Issuing Lender may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit;

        (ii)   each Issuing Lender shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit; and

        (iii)  this sentence shall establish the standard of care to be exercised by each Issuing Lender when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing).

        (c)   Each Issuing Lender shall act on behalf of the Revolver Lenders with respect to any Letters of Credit Issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders, with respect to Revolver Lenders, to act for such Issuing Lender with respect thereto; provided, however, that each Issuing Lender shall have all of the benefits and immunities (i) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by each Issuing Lender in connection with Letters of Credit Issued by it or proposed to be Issued by it and the Letter of Credit Documents mutatis mutandis as if set forth in full therein as if the term "Administrative Agent", as used in Article IX, included each Issuing Lender with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to each Issuing Lender.

        SECTION 2.6.7    Disbursement Procedures.    Each Issuing Lender shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Each Issuing Lender shall promptly after such examination notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Lender has made or will make an LC Disbursement thereunder;

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provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Lender and the Revolver Lenders with respect to any such LC Disbursement.

        SECTION 2.6.8    Interim Interest.    If an Issuing Lender shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement (in an amount equal to the LC Disbursement if such LC Disbursement is reimbursed by the Borrower after the date the LC Disbursement is made), at a rate equal to the Alternate Base Rate, in effect from time to time, plus the Applicable Margin for Base Rate Loans that are Revolver Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to Section 2.6.5, then such overdue amount shall bear additional interest (after as well as before judgment) at a rate equal to 2% per annum. Interest accrued pursuant to this paragraph shall be for account of the Issuing Lender, except that interest accrued on and after the date of payment by any Revolver Lender pursuant to Section 2.6.5 to reimburse such Issuing Lender shall be for account of such Revolver Lender to the extent of such payment.

        SECTION 2.6.9    Addition and Replacement of Issuing Lenders.    Any Revolver Lender may become an Issuing Lender at any time by written agreement between the Borrower, the Administrative Agent, and such Revolver Lender. Any Issuing Lender may be replaced by a Revolver Lender at any time by written agreement between the Borrower, the Administrative Agent, the replaced Issuing Lender and such Revolver Lender. The Administrative Agent shall notify the Lenders of any such change of an Issuing Lender. At the time any such change shall become effective, the Borrower shall pay all unpaid fees accrued for account of the replaced Issuing Lender pursuant to Section 3.3.2. From and after the effective date of any such change, (a) the Revolver Lender becoming an Issuing Lender shall have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit to be Issued thereafter and (b) references herein to the term "Issuing Lender" shall be deemed to refer to such new or to any previous Issuing Lender, or to such new and all previous Issuing Lenders, as the context shall require. After the replacement of an Issuing Lender hereunder, the replaced Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit Issued by it prior to such replacement, but shall not be required to Issue additional Letters of Credit.

        SECTION 2.6.10    Cash Collateralization.    

        (a)   If an Event of Default shall occur and be continuing and the Borrower receives notice from the (i) Administrative Agent or (ii) the Required Lenders, with respect to Revolver Lenders, demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall immediately deposit into the LC Collateral Account an amount in cash equal to the LC Exposure requested to be Cash Collateralized in such notice from the Administrative Agent or such Required Lenders as of such date plus any accrued and unpaid interest thereon; provided that, in each case, the Borrower's obligation to Cash Collateralize shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind upon the occurrence of any Event of Default with respect to the Borrower described in Section 8.1.6. Deposits of cash collateral made pursuant to this clause (a) to Cash Collateralize LC Exposure shall be segregated within the LC Collateral Account for application in accordance with clause (d) below.

        (b)   If the Borrower is required to Cash Collateralize Letters of Credit pursuant to Section 3.1.2(d), the Borrower shall immediately deposit into the LC Collateral Account the amount specified in Section 3.1.2(d).

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        (c)   The Administrative Agent shall apply deposits made pursuant to clause (b) and any deposits remaining after application in accordance with clause (d) first to reimburse outstanding LC Disbursements ratably among the Revolver Lenders, second to be held in the LC Collateral Account as collateral for the aggregate undrawn amount of all outstanding Letters of Credit (other than Letters of Credit Cash Collateralized pursuant to clause (d) below) at such time under this Agreement and thereafter for the payment of the "Secured Obligations" under and as defined in the Collateral Trust Agreement, and, for these purposes, the Borrower hereby grants a security interest to the Administrative Agent for the benefit of the Lenders in the LC Collateral Account and in any "financial assets" (as defined in Section 8-102(a)(9) of the UCC) or other property held therein.

        (d)   The Administrative Agent shall apply deposits made pursuant to clause (a) to Cash Collateralize LC Exposure first to reimburse outstanding LC Disbursements among the Revolver Lenders, second to be held in the LC Collateral Account as collateral for the aggregate undrawn amount of all outstanding Letters of Credit at such time. Any deposits made pursuant to clause (a) and remaining after application in accordance with this clause (d) shall be applied pursuant to clause (c) above.

        (e)   At any time no Default or Event of Default has occurred and is continuing, the Borrower may request, upon five (5) Business Days' prior written notice to the Administrative Agent the refund of cash collateral deposited in the LC Collateral Account pursuant to clause (b) in an amount equal to the lesser of (i) the amount of cash collateral deposited pursuant to clause (b) and (ii) an amount equal to the excess of outstanding Revolver Commitments over the Revolver Exposure of all Revolver Lenders at such time.

        SECTION 2.6.11    Existing Letters of Credit.    The Borrower hereby (a) designates each Letter of Credit listed on Schedule 2.6.11 as a Letter of Credit and (b) accepts, acknowledges and assumes all obligations with respect to such Letters of Credit pursuant to the terms and conditions of this Agreement.

ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

        SECTION 3.1    Repayments, Amortization and Prepayments.    

        (a)   The Borrower hereby unconditionally promises to pay to the Administrative Agent $862,500 in the aggregate of principal amount of the Term Loans for the account of each Term Loan Lender on each Quarterly Payment Date. The Term Loans shall mature, and the Borrower hereby unconditionally promises to pay in full the unpaid principal amount and all amounts outstanding and unpaid in respect of the Term Loans to the Administrative Agent for the account of each Term Lender, on the Term Loan Maturity Date.

        (b)   The Revolver Loans shall mature, and the Borrower hereby unconditionally promises to pay in full the unpaid principal amount and all amounts outstanding and unpaid in respect of the Revolver Loans to the Administrative Agent for the account of each Revolver Lender, on the Revolver Commitment Termination Date.

        SECTION 3.1.1    Optional Prepayments and Commitment Reductions.    At any time, and from time to time, the Borrower may, on any Business Day, make a voluntary prepayment or permanent commitment reduction, in whole or in part, of the outstanding principal amount of the Term Loans or the Revolver Loans (in the Borrower's discretion) or the Commitments thereunder; provided, however, that:

        (a)   any such prepayment or commitment reduction shall be applied pro rata among the Lenders in accordance with the respective unpaid principal amounts of the Term Loans or the Revolver Loans, as applicable, and Commitments thereunder held by them; provided, that the Revolver Commitments shall not be reduced to an amount that is less than the aggregate Revolver Exposure then in effect;

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        (b)   any such prepayment or commitment reduction made shall be applied pro rata among Loans and Commitments of the same type and Class and, if applicable, having the same Interest Period;

        (c)   any such prepayment of any LIBO Rate Loan made on any day other than the last day of the Interest Period for such Loan shall be subject to the provisions of Section 4.5;

        (d)   any such prepayment of LIBO Rate Loans shall require at least two (2) Business Days' prior written notice to the Administrative Agent and any such prepayment of Base Rate Loans may be made on same day's written notice to the Administrative Agent; and

        (e)   any such partial prepayment of Loans shall be in an aggregate minimum amount of $10,000,000 and an integral multiple of $1,000,000 in excess thereof.

        SECTION 3.1.2    Mandatory Prepayments.    

        (a)   At any time either (x) the Borrower is not Investment Grade or (y) the Secured Leverage Ratio is greater than 2.75 to 1, the Borrower shall offer to make a prepayment to the Term Loan Lenders in an amount equal to (each of the following, a "Mandatory Prepayment Trigger Event"):

        (i)    the excess (if any) of one-third of the amount of any Restricted Payment (other than the Special Restricted Payment and Reimbursement Restricted Payments) over the amount of any Reimbursement Restricted Payments;

        (ii)   100% of the amount of Net Cash Proceeds from Indebtedness incurred pursuant to Section 7.2.1(j) after the Original Effective Date in excess of $100,000,000 in the aggregate;

        (iii)  50% of the amount of Net Cash Proceeds from Equity Issuances of EMMH or MGE; and

        (iv)  100% of the amount of Net Cash Proceeds from Asset Sales.

        At the option of any Prepayment Lender electing to receive its portion of the mandatory prepayments pursuant to Section 3.1.2(c), the Borrower shall make a prepayment of the Term Loans on the relevant Mandatory Prepayment Date to the Administrative Agent for the account of each Prepayment Lender in an amount equal to the amount elected by each such Prepayment Lender pursuant to Section 3.1.2(c) and in manner set forth in Section 3.1.2(e).

        (b)   If the Borrower shall receive any Net Cash Proceeds from any Recovery Event, the Borrower shall make a prepayment of the Term Loans in an amount equal to 100% of such Net Cash Proceeds as set forth in Section 3.1.2(e), unless the Borrower delivers a Reinvestment Notice in respect of such Recovery Event pursuant to Section 7.1.11, in which case, an amount equal to the Reinvestment Prepayment Amount with respect to such Recovery Event shall be applied on each Reinvestment Prepayment Date to the prepayment of the Term Loans as set forth in Section 3.1.2(e).

        (c)   The Borrower will give not less than ten (10) Business Days' prior notice of any Mandatory Prepayment Trigger Event to the Administrative Agent, which notice shall be irrevocable, specify the date the prepayment in connection with such Mandatory Prepayment Trigger Event will be made (the "Mandatory Prepayment Date") (such date to be on or prior to the date three (3) Business Days after the occurrence of such Mandatory Prepayment Trigger Event) and the maximum principal amount of the prepayment available to be made in connection therewith if all of the Term Loan Lenders elect such prepayment (such notice, an "Optional Prepayment Notice"). Each Term Loan Lender electing not to receive the mandatory prepayment offered in the Optional Prepayment Notice shall notify the Administrative Agent five (5) days prior to the Mandatory Prepayment Date. Each Term Loan Lender that does not notify the Administrative Agent five (5) days prior to the Mandatory Prepayment Date will be deemed to have elected to receive the prepayment specified in the Optional Prepayment Notice. The Administrative Agent shall notify the Borrower three (3) days prior to the Mandatory Prepayment

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Date of each of the Term Loan Lenders that have elected (or deemed to have elected) to receive prepayment of its portion of the amount specified in the Optional Prepayment Notice based on each such Term Loan Lender's pro rata portion of the Term Loans (such Lenders, the "Prepayment Lenders").

        (d)   At any time that the (i) maximum principal amount of the prepayment available to be made in connection with a Mandatory Prepayment Trigger Event as set forth in the Optional Prepayment Notice exceeds the principal and interest due and payable on outstanding Term Loans or (ii) the prepayment available under Section 3.1.2(b) exceeds the principal and interest due and payable on outstanding Term Loans, the Borrower shall, to the extent of such excess, first, repay any outstanding Revolver Loans as set forth in Section 3.1.2(e) and second, apply the remainder of such excess (if any) to Cash Collateralize any outstanding Letters of Credit.

        (e)   Prepayments of Loans under Section 3.1.2(a)—(d) shall be applied pro rata among (i) the Prepayment Lenders, in the case of prepayment pursuant to Section 3.1.2(a), (ii) all Term Loan Lenders, in the case of the portion of the prepayment pursuant to Section 3.1.2(b) to be applied to the Term Loans and (iii) the Revolver Lenders, in the case of prepayment pursuant to Section 3.1.2(d), in each case, in accordance with the respective unpaid principal amounts of the Loans held by such Lenders provided, that: (A) any such prepayment made shall be applied first pro rata among Base Rate Loans and (B) any such prepayment made shall be applied second pro rata among LIBO Rate Loans and, if applicable, having the same Interest Period.

        (f)    The Borrower shall repay 100% of the principal amount of Revolver Loans and LC Disbursements, in each case, on the Revolver Prepayment Date (or on the next succeeding Business Day if the Revolver Prepayment Date is not a Business Day) plus accrued and unpaid interest and any other amounts owing hereunder to each Revolver Lender electing such repayment pursuant to this Section 3.1.2(f). Each Revolver Lender electing repayment shall deliver its written notice of its election to require the Borrower to repay its Revolver Loans and LC Disbursements and to permanently reduce its Revolver Commitments pursuant to this Section 3.1.2(f) no more than thirty (30) Business Days and no fewer than ten (10) Business Days prior to the Revolver Prepayment Date. The Revolver Commitments of each Revolver Lender electing a prepayment and commitment reduction under this Section 3.1.2(f) shall be permanently reduced to zero on the Revolver Prepayment Date.

        SECTION 3.1.3    Acceleration; Penalty.    

        (a)   The Borrower shall immediately upon any acceleration of any Loans pursuant to Section 8.2 or Section 8.3, repay all Loans, unless, pursuant to Section 8.3, only a portion of all Loans is so accelerated (in which event the Borrower shall repay the portion of the Loans so accelerated).

        (b)   Each prepayment of Loans made pursuant to Section 3.1 shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid, but shall be without premium or penalty, except as may be required by Section 4.5. Prepayment of principal of any Term Loan pursuant to Section 3.1 shall cause a permanent reduction in such Term Loan prepaid.

        SECTION 3.2    Interest Provisions.    Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2.

        SECTION 3.2.1    Rates.    

        (a)   Pursuant to an appropriately delivered Borrowing Request or Continuation/ Conversion Notice, the Borrower may elect that the Loans or a portion of the Loans pursuant to Section 2.3 accrue interest at a rate per annum:

        (i)    on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin for Base Rate Loans from time to time in effect; and

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        (ii)   on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate for such Interest Period plus the Applicable Margin for LIBO Rate Loans from time to time in effect.

        (b)   All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan.

        SECTION 3.2.2    Default Rates.    Upon the occurrence and during the continuance of any Event of Default, the Borrower shall pay, but only to the extent permitted by law, in addition to the applicable Alternate Base Rate or LIBO Rate plus the Applicable Margin on each such Loan, then payable on the Loans, additional interest (after as well as before judgment) on the Loans at 2% per annum until such Event of Default is cured.

        SECTION 3.2.3    Payment Dates.    Interest accrued on each Loan shall be payable, without duplication:

        (a)   in the case of Term Loans, on the Term Loan Maturity Date and, in the case of Revolver Loans, on the Revolver Commitment Termination Date;

        (b)   on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan and, in the case of Revolver Loans, upon the termination of the Revolver Commitments, provided, that upon a payment or prepayment in part, only the interest accrued on such portion shall be payable;

        (c)   with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the Closing Date;

        (d)   with respect to LIBO Rate Loans, the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the day three months after such Loan is made or continued); and

        (e)   on that portion of any Loans which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration.

        Interest accrued on Loans or other monetary Obligations arising under any Loan Document after the date such amount is due and payable (whether on the related maturity date, upon acceleration or otherwise) shall be payable upon demand.

        SECTION 3.2.4    Interest Rate Determination.    The Administrative Agent shall determine the interest rate applicable to Loans and shall give prompt notice to the Borrower and the Lenders of such determination, and its determination thereof shall be conclusive in the absence of manifest error.

        SECTION 3.3    Fees.    

        SECTION 3.3.1    Commitment Fee.    The Borrower agrees to pay to the Administrative Agent for the ratable account of each Revolver Lender a commitment fee which shall accrue on the average daily unused amount of the Revolver Commitment of such Revolver Lender during the period from and including the Closing Date to but excluding the earlier of the date such Revolver Commitment terminates and the Revolver Commitment Termination Date at the rate per annum for the Revolver Loans based on the Debt Rating for such day determined as provided in the Pricing Grid. Accrued commitment fees shall be payable on each Quarterly Payment Date and on the earlier of the date the Revolver Commitments terminate and the Revolver Commitment Termination Date commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees, the Revolver Commitment of a

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Revolver Lender shall be deemed to be used to the extent of the outstanding Revolver Loans and LC Exposure of such Revolver Lender.

        SECTION 3.3.2    Letter of Credit Fees.    The Borrower agrees to pay:

        (a)   to the Administrative Agent for the account of each Revolver Lender a participation fee (a "Participation Fee") with respect to its participations in Letters of Credit, which shall accrue at a rate per annum based on the Borrower's Debt Rating for such day determined as provided in the Pricing Grid on the average daily amount of such Revolver Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Closing Date to but excluding the later of the date on which such Revolver Lender's Revolver Commitment terminates and the date on which such Revolver Lender ceases to have any LC Exposure; and

        (b)   to each Issuing Lender a fronting fee, which shall accrue at the rate of 0.125% per annum (or such lesser amount as shall have been agreed from time to time between the Borrower and an Issuing Lender) on the average daily amount of the LC Exposure of each such Issuing Lender (excluding any portion thereof attributable to unreimbursed LC Disbursements), during the period from and including the Closing Date to but excluding the later of the date of termination of the Revolver Commitments and the date on which there ceases to be any LC Exposure as well as each such Issuing Lender's standard fees with respect to the Issuance of any Letter of Credit or processing of drawings thereunder.

        Participation Fees and fronting fees accrued through and including each Quarterly Payment Date shall be payable on such Quarterly Payment Date, commencing on the first such date to occur after the Closing Date; provided that all such fees with respect to LC Exposure shall be payable on the date on which the Revolver Commitments terminate and any such fees accruing after the date on which the Revolver Commitments terminate shall be payable on demand. Any other fees payable to an Issuing Lender pursuant to this paragraph shall be payable within ten (10) days after demand. All Participation Fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

        SECTION 3.3.3    Other Fees.    The Borrower agrees to pay to the Administrative Agent, for (a) its own account, (b) the account of CNAI and (c) the account of the Issuing Lenders, the respective fees as agreed to in the Fee Letters.

        SECTION 3.3.4    Payment of Fees.    All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Lenders, in the case of fees payable to it) for distribution, in the case of facility fees and Participation Fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.

ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS

        SECTION 4.1    LIBO Rate Lending Unlawful.    If any Lender shall reasonably determine (which determination shall, upon notice thereof to the Borrower and the Administrative Agent, be conclusive and binding on the Borrower absent manifest error) that the introduction of or any change in or in the interpretation of any law, rule or regulation makes it unlawful, or any central bank or other Governmental Authority or comparable agency asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make, continue, maintain or convert any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans of such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion.

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        SECTION 4.2    Inability to Determine Rates.    If the Administrative Agent shall have determined that by reason of circumstances affecting the Administrative Agent's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.

        SECTION 4.3    Increased LIBO Rate Loan Costs.    If after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its LIBOR Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall increase the cost to such Lender of, or result in any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans, then the Borrower agrees to pay to the Administrative Agent for the account of such Lender the amount of any such increase or reduction. Such Lender shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required to compensate fully such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within ten (10) Business Days of its receipt of such notice, and such notice shall be binding on the Borrower absent clear and convincing evidence to the contrary.

        SECTION 4.4    Obligation to Mitigate.    Each Lender agrees that as promptly as practicable after it becomes aware of the occurrence of an event that would entitle it to give notice pursuant to Section 4.1, 4.3 or 4.6 or to receive additional amounts pursuant to Section 4.7, and in any event if so requested by the Borrower, such Lender shall use reasonable efforts to make, fund or maintain its affected Loans through another lending office if as a result thereof the increased costs would be avoided or materially reduced or the illegality would thereby cease to exist and if, in the reasonable opinion of such Lender, the making, funding or maintaining of such Loans through such other lending office would not in any material respect be disadvantageous to such Lender, contrary to such Lender's normal banking practices or violate any applicable law or regulation. No change by a Lender in its Domestic Office or LIBOR Office made for such Lender's convenience shall result in any increased cost to the Borrower. The Borrower shall not be obligated to compensate any Lender for the amount of any additional amount pursuant to Section 4.1, 4.3 or 4.6 accruing prior to the date which is ninety (90) days before the date on which such Lender first notifies the Borrower that it intends to claim such compensation; it being understood that the calculation of the actual amounts may not be possible within such period and that such Lender may provide such calculation as soon as reasonably practicable thereafter without affecting or limiting the Borrower's payment obligation thereunder. If any Lender demands compensation pursuant to Section 4.1, 4.3 or 4.6 with respect to any LIBO Rate Loan, the Borrower may, at any time upon at least one (1) Business Day's prior notice to such Lender through the Administrative Agent, elect to convert such Loan into a Base Rate Loan. Thereafter, unless and until such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, all such LIBO Rate Loans by such Lender shall bear interest as Base Rate Loans, notwithstanding any prior election by the Borrower to the contrary. If such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, the Borrower may elect that the principal amount of each such Loan again bear interest as LIBO Rate Loans in accordance with this Agreement, on the first day of the next succeeding Interest Period applicable to the related LIBO Rate Loans of other Lenders. Additionally, the Borrower may, at its option, upon at least five (5) Business Days' prior notice to such Lender, elect to prepay in full, without premium or penalty,

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such Lender's affected LIBO Rate Loans. If the Borrower elects to prepay any Loans pursuant to this Section 4.4, the Borrower shall pay within ten (10) Business Days after written demand any additional increased costs of such Lender accruing for the period prior to such date of prepayment. If such conversion or prepayment is made on a day other than the last day of the current Interest Period for such affected LIBO Rate Loans, such Lender shall be entitled to make a request for, and the Borrower shall pay, compensation under Section 4.5.

        SECTION 4.5    Funding Losses.    In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of:

        (a)   any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; or

        (b)   any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor;

then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within ten (10) Business Days of its receipt thereof, pay to the Administrative Agent for the account of such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall be binding on the Borrower absent manifest error.

        SECTION 4.6    Increased Capital Costs.    If after the date hereof any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any applicable law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority affects the amount of capital required to be maintained by any Lender or any Issuing Lender, and such Lender or such Issuing Lender reasonably determines that the rate of return on its capital as a consequence of its Loans or participating in issuing or maintaining any Letters of Credit as the case may be, made by such Lender or such Issuing Lender is reduced in a material amount to a level below that which such Lender or such Issuing Lender could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender or such Issuing Lender to the Borrower, the Borrower shall pay within ten (10) Business Days after such demand directly to such Lender or such Issuing Lender additional amounts sufficient to compensate such Lender or such Issuing Lender for such reduction in rate of return. A statement of such Lender or such Issuing Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall be binding on the Borrower absent manifest error.

        SECTION 4.7    Taxes.    

        (a)   Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Issuing Lender or Lender as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

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        (b)   Payment of Other Taxes by the Borrower. In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

        (c)   Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Issuing Lender and each Lender, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Issuing Lender or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, by an Issuing Lender or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Lender, shall be conclusive absent manifest error.

        (d)   Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

        (e)   Foreign Lenders. Each Lender that is not a United States Person (a "Non-U.S. Lender"), to the extent that it is legally able to do so, shall deliver to the Borrower and the Administrative Agent two copies of U.S. Internal Revenue Service Form W-8ECI, Form W-8BEN or Form W-8IMY (with supporting documentation), or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments of interest by the Borrower under the Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement. In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose).

        SECTION 4.8    Payments, Computations.    Unless otherwise expressly provided, all payments by the Borrower pursuant to any Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 Noon, New York City time, on the date due, in immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower; provided that such payment shall be deemed made timely if made by wire transfer and by such time as an Authorized Representative has advised the Administrative Agent of the applicable Federal Reserve System wire transfer confirmation number. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in immediately available funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (a) of the definition of the term "Interest Period" with respect to LIBO Rate Loans) be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment.

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        SECTION 4.9    Sharing of Payments.    If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan or LC Disbursement (other than pursuant to the terms of Sections 4.3, 4.4, 4.5, 4.6, 4.7 and 4.11) in excess of its pro rata share of payments then or therewith obtained by all Lenders holding Loans of such type, such Lender shall purchase from the other Lenders such participations in Loans and LC Disbursements made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation in any Loan or LC Disbursement to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 4.9 may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.10) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.

        If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 4.9 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.9 to share in the benefits of any recovery on such secured claim.

        SECTION 4.10    Setoff.    Each of the Lenders and the Issuing Lenders shall, upon the occurrence of any Event of Default described in clause (a) or (b) of Section 8.1.6 and, upon the occurrence of any Default described in clauses (c) and (d) of Section 8.1.6 or, with the consent of the Required Lenders, upon the occurrence and continuance beyond the expiration of the applicable grace period, if any, of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due) under the Loan Documents; provided, however, that any such appropriation and application shall be subject to the provisions of Section 4.9.

        Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application.

        The rights of each Lender under this Section 4.10 are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have.

        SECTION 4.11    Replacement of Lender.    The Borrower shall be permitted to replace (with one or more replacement Lenders) any Lender: (a) that does not consent to a waiver, amendment or modification pursuant to Section 10.1 that requires a vote of holders of 100% of the Lenders (provided, that, such replacement Lender consents to such waiver, amendment or modification) or (b) which requests reimbursement for, or is otherwise entitled to, amounts owing pursuant to Section 4.1, 4.3, 4.6 or 4.7; provided that (i) such replacement does not conflict with any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to the Borrower or such Lender or to which the Borrower or such Lender or any of their respective property is subject, (ii) no Default or Event of Default shall have occurred and be continuing at the time of such replacement (other than, in the case of a replacement predicated upon clause (a) above, the Default or Event of Default that is the subject of the vote referred to in clause (a) above), (iii) the replacement bank or institution shall purchase, at par all Loans and other amounts owing to such replaced Lender prior to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under Section 4.5 if any LIBO Rate Loan owing to such replaced Lender shall be prepaid (or

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purchased) other than on the last day of the Interest Period relating thereto, (v) the replacement (A) Term Loan Lender, if not already a Term Loan Lender, shall be reasonably satisfactory to the Administrative Agent and (B) Revolver Lender shall be reasonably satisfactory to the Administrative Agent and the Issuing Lenders, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 10.11.1 (provided that the Borrower or replacement Lender shall be obligated to pay the registration and processing fee), (vii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 4.1, 4.3, 4.6 or 4.7, as the case may be, (viii) any such replacement shall not be deemed to be a waiver of any rights which the Borrower, the Administrative Agent, any Issuing Lender or any other Lender shall have against the replaced Lender, (ix) if such replacement bank or institution is not already a Lender, the Borrower shall pay to the Administrative Agent an administrative fee of $3,500 and (x) in the case of a replacement predicated upon clause (a) above, for the related vote referred to in clause (a) above, no more Lenders than Lenders holding 20% or more of the aggregate outstanding principal amount of the Loans shall be replaced by the Borrower (provided that the Borrower may replace a single Lender holding greater than 20% of the aggregate outstanding principal amount of the Loans).

ARTICLE V
CONDITIONS TO LOANS

        SECTION 5.1    Conditions to Effectiveness.    This Agreement shall become effective, as between all parties hereto, upon the satisfaction of each of the conditions precedent set forth in this Section 5.1.

        SECTION 5.1.1    Delivery of Loan Documents.    The Administrative Agent shall have received:

        (a)   this Agreement, duly executed and delivered by an Authorized Representative of the Borrower, with a counterpart for each Lender party hereto on the Closing Date;

        (b)   the Communications Agreement, duly executed and delivered by an Authorized Representative of the Borrower;

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        (c)   a copy, certified by an Authorized Representative of the Borrower, of each of the following documents, each such document shall have been duly executed and delivered by each of the intended parties thereto:

        (i)    the Borrower Security Agreement;

        (ii)   each Pledge Agreement;

        (iii)  the EMMT Security Agreement;

        (iv)  the Collateral Trust Agreement; and

        (v)   the Mortgaged Facility Mortgages.

        SECTION 5.1.2    Officer's Certificates.    The Administrative Agent shall have received:

        (a)   a certificate from an Authorized Representative of the Borrower (i) certifying that all representations and warranties made by it in this Agreement and the Borrower Security Agreement are true and correct in all material respects on and as of the Closing Date (except with respect to representations and warranties made as of a prior specific date), before and after giving effect to the Borrowing on the date hereof and to the application of the proceeds therefrom, (ii) certifying that no Default or Event of Default, has occurred and is continuing, or would result from such Borrowing and (iii) calculating the Secured Leverage Ratio and the Consolidated Interest Coverage Ratio as of September 30, 2005 (after giving effect to such Borrowing and the application of the proceeds thereof as if they had occurred on such date) for the immediately preceding four full Fiscal Quarters; and

        (b)   a certificate of an Authorized Representative of (i) EMMT certifying that all representations and warranties made by it in the EMMT Security Agreement are true and correct in all material respects on and as of the Closing Date (except with respect to representations and warranties made as of a prior specific date), before and after giving effect to such Borrowing and to the application of the proceeds therefrom and (ii) each Midwest Related Party certifying that all representations and warranties made by it in the Pledge Agreement to which it is a party are true and correct in all material respects on and as of the Closing Date (except with respect to representations and warranties made as of a prior specific date), before and after giving effect to such Borrowing and to the application of the proceeds therefrom.

        SECTION 5.1.3    Resolutions.    The Administrative Agent shall have received from the Borrower, EMMT and each of the Midwest Related Parties a certificate dated the Closing Date of its Secretary, Assistant Secretary or Authorized Representative as to:

        (a)   resolutions of its Board of Directors or managing members, as the case may be, then in full force and effect authorizing the execution, delivery and performance of each Loan Document to be executed by it on the Closing Date;

        (b)   the incumbency and signatures of those of its officers and representatives authorized to act with respect to each Loan Document executed by it on the Closing Date; and

        (c)   such Person's Organic Documents.

        The Administrative Agent and each Lender may conclusively rely upon such certificate until it shall have received a further certificate of the Secretary, Assistant Secretary or other Authorized Representative of such Person canceling or amending such prior certificate.

        SECTION 5.1.4    Opinions of Counsel.    The Administrative Agent shall have received opinions, dated the Closing Date and addressed to the Administrative Agent and the Lenders, from counsel to the Borrower reasonably acceptable to the Administrative Agent, substantially in the forms of Exhibit F-1 through Exhibit F-6 hereto.

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        SECTION 5.1.5    Closing Fees, Expenses.    The Administrative Agent shall have received (a) for the account of the Existing Lenders and the Issuing Lender with respect to the Existing Credit Agreement, in each case, all accrued fees through the Closing Date and all fees otherwise payable to the Existing Lenders and such Issuing Lender pursuant to Section 3.3 of the Existing Credit Agreement, (b) for the account of the Existing Lenders, all amounts payable to the Existing Lenders through the Closing Date pursuant to Section 4.5 of the Existing Credit Agreement (after giving effect to the termination of the Interest Periods (as defined in the Existing Credit Agreement) applicable to the Revolver B Loans under (and as defined in) the Existing Credit Agreement on the Closing Date, and the Borrower hereby acknowledges such termination of such Interest Periods), and (c) for its own account, or for the account of each Lender and CNAI, as the case may be, all fees due and payable pursuant to Sections 3.3 and 10.3, and all other costs and expenses for which invoices have been presented.

        SECTION 5.1.6    Financial Statements.    The Administrative Agent shall have received:

        (a)   an audited consolidated balance sheet of the Borrower and its Subsidiaries at December 31, 2004; and

        (b)   an audited consolidated income statement of the Borrower and its Subsidiaries for the year ended December 31, 2004.

        SECTION 5.1.7    Funds Flow Undertaking.    The Administrative Agent shall have received (a) the Funds Flow Undertaking executed by an Authorized Representative of the Borrower which shall demonstrate that the proceeds of the Revolver Loans shall be applied in accordance with Section 7.1.10 and (b) any other documents from the Borrower and its Affiliates necessary for the Borrower to comply with Section 7.1.10.

        SECTION 5.1.8    Lien Search; Recordings and Filings.    

        (a)   The Administrative Agent shall have received results of a recent search by a Person satisfactory to the Administrative Agent that there are no UCC or Tax lien filings on any of the assets of any of the Borrower, its Subsidiaries, EMMT or any Midwest Related Party party to a Security Document in each relevant jurisdiction except for (i) Liens pursuant to the Loan Documents and (ii) Permitted Liens.

        (b)   Arrangements reasonably satisfactory to the Administrative Agent and the Collateral Trustee shall have been made for the execution, reaffirmation, filing, registration or recordation of all financing statements and all other documents required to be executed, reaffirmed, filed, registered or recorded in order to create, in favor of the Collateral Trustee for the benefit of the Priority Lien Secured Parties, a perfected, first priority lien in each office in each jurisdiction in which such executions, reaffirmations, filings, registrations and recordations are required to perfect the security interests created by the Security Documents, and any other action required in the judgment of the Administrative Agent or the Collateral Trustee to perfect such security interests as such first priority liens.

        SECTION 5.1.9    Collateral Trust Agreement.    

        (a)   The Collateral Trustee shall have received a Collateral Trust Joinder duly executed and delivered by the Administrative Agent;

        (b)   The Administrative Agent, each Secured Debt Representative (as defined in the Collateral Trust Agreement) and the Collateral Trustee shall have received an Officer's Certificate (as defined in the Collateral Trust Agreement) stating that the Borrower intends to secure additional Secured Debt (as defined in the Collateral Trust Agreement) consisting of all Obligations of the Borrower under this Agreement which will be Priority Lien Debt (as defined in the Collateral Trust Agreement) permitted by each applicable Secured Debt Document (as defined in the Collateral Trust Agreement) to be secured on a pari passu basis with all previously existing Priority Lien Debt (as so defined) and that all other requirements set forth in the Collateral Trust Agreement as to the confirmation, grant or

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perfection of the Collateral Trustee's Lien to secure such Indebtedness or Obligations in respect thereof have been satisfied; and

        (c)   The Collateral Trustee shall have received written notice from the Borrower specifying the name and address of the Administrative Agent for purposes of Section 7.7 of the Collateral Trust Agreement.

        SECTION 5.1.10    Title Policies.    The Administrative Agent shall have received date-down endorsements to the Title Policies redating the Title Policies and all endorsements thereto as of the Closing Date.

        SECTION 5.1.11    [Reserved].    

        SECTION 5.1.12    Approvals.    

        (a)   (i) All Governmental Approvals required to have been obtained on or prior to the Closing Date in connection with the transactions contemplated by the Loan Documents and (ii) all material Governmental Approvals required to have been obtained on or prior to the Closing Date in connection with the conduct of the business of the Borrower (except, in each case, additional filings contemplated by Section 5.1.8) shall have been obtained or made, be in full force and effect and, be final and any period for the filing of notice of rehearing or application for judicial review of the issuance of each such Governmental Approval shall have expired without any such notice or application having been given or made. No such Governmental Approval shall be the subject of any pending or threatened judicial or administrative proceeding.

        (b)   All consents and approvals required to be obtained from Persons other than Governmental Authorities in connection with the transactions contemplated by the Loan Documents shall have been obtained and shall be in full force and effect, other than such consents or approvals, the failure of which to obtain, would not, individually or in the aggregate, cause a Material Adverse Effect.

        SECTION 5.1.13    Ratings.    The Administrative Agent shall have received ratings letters indicating the Borrower's Debt Ratings.

        SECTION 5.1.14    Energy Trading Risk Management.    The Administrative Agent shall have received a copy of the Energy and Fuel Risk Management Policies and the Energy Management Agreements.

        SECTION 5.1.15    Insurance.    The Administrative Agent shall have received evidence that the Collateral Trustee is named as loss payee under the insurance policies of the Borrower to be maintained pursuant to Section 7.1.5 (other than insurance policies maintained with respect to the Powerton Facility and the Joliet Leased Facility to the extent required by the Powerton/Joliet Lease Operative Documents).

        SECTION 5.2    Credit Extensions.    The obligation of each Lender and each Issuing Lender to make any Credit Extension (including the initial Credit Extension) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.2.

        SECTION 5.2.1    Representations and Warranties; No Default.    Both before and after giving effect to any Credit Extension (but, if any Default of the nature referred to in Section 8.1.5 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds of such Credit Extension), the following statements shall be true and correct:

        (a)   the representations and warranties set forth in Article VI shall be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date);

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        (b)   except as otherwise disclosed in public filings of the Borrower with the Securities and Exchange Commission prior to the Closing Date, no event or condition has occurred since December 31, 2004 having a Material Adverse Effect as of the date of such Credit Extension; and

        (c)   no Default or Event of Default has occurred and is continuing or would result from such Credit Extension.

        SECTION 5.2.2    Borrowing or Letter of Credit Request.    The Administrative Agent shall have received, in the case of Revolver Loans, a Borrowing Request for such Borrowing or, in the case of a Letter of Credit, a Letter of Credit Application for such Credit Extension. Each of the delivery of a Borrowing Request or Letter of Credit Application and the acceptance by the Borrower of the proceeds of a Credit Extension shall constitute a representation and warranty by the Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct.

        SECTION 5.3    Satisfactory Legal Form.    All documents executed or submitted pursuant hereto by or on behalf of the Borrower or its Subsidiaries shall be satisfactory in form and substance to the Administrative Agent and its counsel.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

        In order to induce the Administrative Agent and each Lender to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants with respect to itself and its Subsidiaries unto the Administrative Agent and each Lender as set forth in this Article VI.

        SECTION 6.1    Financial Information.    The most recent consolidated balance sheet of the Borrower and the related consolidated statements of income and cash flows of the Borrower, copies of which have been furnished to the Administrative Agent pursuant to Section 7.1.1(a) have been prepared in accordance with GAAP consistently applied, and present fairly in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as at the dates thereof and the results of their operations for the periods then ended.

        SECTION 6.2    Organization; Power.    Each of the Borrower and its Subsidiaries (a) is a corporation, limited liability company or partnership validly organized and existing and in good standing under the laws of the state of its incorporation or formation, as the case may be, (b) is duly qualified to do business and is in good standing as a corporation, limited liability company or partnership in each jurisdiction where the nature of its business requires such qualification and (c) has all requisite corporate, company or partnership power and authority to enter into and perform its Obligations under this Agreement and each other Loan Document to which it is a party and, in the case of the Borrower, to conduct the business of owning, leasing and operating the Facilities and the sale and marketing of wholesale electric power and other products and services related thereto, except, with respect to clauses (b) and (c) above, where the failure to be so qualified or be in good standing would not, individually or in the aggregate, cause a Material Adverse Effect.

        SECTION 6.3    Due Authorization; Non-Contravention.    The execution of each Loan Document executed as of Closing Date and the delivery and performance by the Borrower and its Subsidiaries of each Loan Document to which it is a party do not:

        (a)   contravene the Borrower's or its Subsidiaries' Organic Documents;

        (b)   contravene any Requirement of Law or Contractual Obligation, binding on or affecting Borrower or any Subsidiary, except where such contravention would not result in a Material Adverse Effect; or

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        (c)   result in, or require the creation or imposition of, any Lien (other than Permitted Liens) on any of the properties of the Borrower or any of its Subsidiaries.

        SECTION 6.4    Approvals.    

        (a)   As of the Closing Date, all Governmental Approvals required in connection with the transactions contemplated by the Loan Documents and the conduct of the business of each of the Borrower and its Subsidiaries have been duly obtained or made and are in full force and effect other than (i) as may be required under existing Requirements of Law to be obtained, given or renewed at any time after the Closing Date or from time to time after the Closing Date in connection with the transactions contemplated by the Loan Documents and (ii) which are routine in nature and which cannot be obtained and such failure to obtain would not result in a Material Adverse Effect, or are not normally applied for, prior to the time they are required, and which the Borrower has no reason to believe will not be timely obtained. All Governmental Approvals that have been obtained pursuant to clause (a) of this Section 6.4 are final and any period for the filing of notice of rehearing or application for judicial review of the issuance of each such Governmental Approval has expired without any such notice or application having been made. No such Governmental Approval is the subject of any pending or threatened judicial or administrative proceeding.

        (b)   As of the Closing Date, all consents and approvals required to be obtained from Persons other than Governmental Authorities in connection with the transactions contemplated by the Loan Documents have been obtained and are in full force and effect, other than such consents or approvals, the failure of which to obtain, would not, individually or in the aggregate, cause a Material Adverse Effect.

        SECTION 6.5    Accuracy of Information.    

        (a)   All material factual information furnished by the Borrower and its Affiliates in writing prior to the Closing Date to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby (other than projections and other "forward-looking" information) is true and materially accurate in every material respect on the date as of which such information is dated or certified, and to the knowledge of the Borrower as of the Closing Date such information is not incomplete by omitting to state any material fact necessary in order to make such information not materially misleading.

        (b)   All projections and other "forward-looking" information heretofore or contemporaneously furnished by the Borrower and its Affiliates in writing to the Administrative Agent or any Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby were prepared in good faith and are based on reasonable assumptions.

        SECTION 6.6    Validity.    Each Loan Document to which the Borrower or any of its Subsidiaries is a party constitutes, or, upon the due execution and delivery thereof by the Borrower or such Subsidiary, will constitute, the legal, valid and binding obligation of the Borrower or such Subsidiary enforceable in accordance with its terms except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity.

        SECTION 6.7    Compliance with Law and Contractual Obligations.    Each of the Borrower and its Subsidiaries is in compliance with all Requirements of Law and Contractual Obligations applicable to it, except to the extent that the failure to comply therewith would not have a Material Adverse Effect.

        SECTION 6.8    Regulations T, U and X.    Neither the Borrower nor its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation T, U or X. Terms for which meanings are provided in F.R.S. Board Regulation T, U

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or X or any regulations substituted therefor, as from time to time in effect, are used in this Section 6.8 with such meanings.

        SECTION 6.9    Litigation.    There is no pending or, to the knowledge of the Borrower, threatened litigation, action, proceeding, investigation or labor controversy against the Borrower or any of its Subsidiaries or any of their properties, businesses, assets or revenues or affecting any Governmental Approval required to be in full force and effect by Section 6.4, which, if adversely determined (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without any reservations), would have a Material Adverse Effect.

        SECTION 6.10    Ownership of Properties.    

        (a)   Each of Borrower and its Subsidiaries owns good and marketable title to, or a valid leasehold in or other enforceable interest in, all properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights) purported to be owned, leased or held by it, free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.2.2.

        (b)   As of the Closing Date, the Borrower owns and has good marketable title to a 100% interest in the Mortgaged Facilities, free and clear of all Liens other than Permitted Liens. The Borrower owns and (to the extent applicable) has good and marketable title to the Collateral (other than the Mortgaged Facilities and the after-acquired property contemplated by the Security Documents) purported to be covered by the Security Documents to which it is a party free and clear of all Liens other than Permitted Liens. The Borrower is lawfully possessed of a valid and subsisting estate in and to any and all easements (except for easements that, the absence of which, would not have a material adverse effect on the operation of a Mortgaged Facility) necessary for the ownership, leasing, occupation, construction, repair, operation, maintenance, use and financing (collectively, "Operation") of the Mortgaged Facilities free and clear of all Liens other than Permitted Liens, and has obtained all licenses and permits required by applicable Requirements of Law and all easements and access rights necessary (except for easements and access rights that, the absence of which, would not have a material adverse effect on the operation of a Mortgaged Facility) for the Operation of the Mortgaged Facilities and enjoys peaceful and undisturbed possession of all of the "Mortgaged Property" (as defined in the relevant Mortgaged Facility Mortgage) (subject only to Permitted Liens) in each of the foregoing cases to the extent that is necessary for the current state of Operation of the Mortgaged Facilities.

        SECTION 6.11    Taxes.    Each of the Borrower and its Subsidiaries has filed all Tax Returns and reports required by law to have been filed by it and has paid all Taxes thereby shown to be owing, except any such Taxes which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.

        SECTION 6.12    Investment Company Act; Public Utility Holding Company Act; Other Regulations.    

        (a)   Neither the Borrower nor its Subsidiaries is subject to any regulation as an "investment company" under the Investment Company Act of 1940, as amended.

        (b)   As of the Closing Date, the Borrower (i) is an "exempt wholesale generator" under PUHCA, (ii) is not a "public utility company" required to register under PUHCA, (iii) is not subject to regulation as an alternative retail electric supplier under the laws of the State of Illinois, (iv) is interconnected with the high voltage network and has access to transmission services and ancillary services to sell wholesale electric power and (v) has the authority to sell wholesale electric power at market-based rates.

        (c)   As of the Closing Date, neither the Borrower nor any Subsidiary of the Borrower is subject to regulation as a "holding company", or a "subsidiary company" or an "affiliate" of a "holding company"

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under PUHCA or is or will be subject to regulation as a "public utility" under the laws of the State of Illinois.

        SECTION 6.13    Environmental Warranties.    Except as could not, individually, or would not, in the aggregate, be reasonably expected to have a Material Adverse Effect:

        (a)   (i) All facilities and property owned, leased or operated by each of the Borrower and its Subsidiaries have been, and continue to be, owned, leased or operated by the Borrower or such Subsidiary in compliance with all applicable Environmental Laws and (ii) each of the Borrower and its Subsidiaries is, and within the period of all applicable statutes of limitation has been, in compliance with all applicable Environmental Laws.

        (b)   Except as otherwise disclosed in public filings of the Borrower with the Securities and Exchange Commission prior to the Closing Date, there are no pending or, to the knowledge of the Borrower, threatened (i) claims, complaints, notices or requests for information received by the Borrower or any of its Subsidiaries with respect to any alleged violation by the Borrower or any of its Subsidiaries of any applicable Environmental Law, or (ii) complaints, notices or inquiries to the Borrower or any of its Subsidiaries regarding potential liability under any applicable Environmental Law.

        (c)   Each of the Borrower and its Subsidiaries has obtained and is in compliance with all Governmental Approvals required, other than those that will be obtained in due course promptly after the Closing Date, under any Environmental Law necessary for the Borrower's or its Subsidiaries' business.

        (d)   No property now or previously owned, leased or operated by the Borrower or any of its Subsidiaries is listed or, to the knowledge of the Borrower, is proposed for listing on the National Priorities List pursuant to any Environmental Law, on the CERCLIS or on any similar state or local list of sites requiring investigation or clean-up.

        (e)   To the knowledge of the Borrower, no conditions exist at, on, under or about any property now or previously owned or leased by the Borrower or its Subsidiaries or at any other location (including any location to which Hazardous Materials have been sent for re-use or for recycling or for treatment, storage or disposal) which, with the passage of time, or the giving of notice or both, would give rise to liability under any applicable Environmental Law.

        SECTION 6.14    The Obligations.    The Loans and all other Obligations under the Loan Documents are senior secured Indebtedness of the Borrower and its Subsidiaries ranking at least pari passu with all other senior secured Indebtedness of the Borrower and its Subsidiaries.

        SECTION 6.15    Pension and Welfare Plans.    During the consecutive twelve-month period prior to each date as of which the following representations are made or deemed made, and prior to the date of any Borrowing hereunder, no steps have been taken to terminate any Pension Plan; no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA or Section 412 of the Code; no condition exists or event or transaction has occurred with respect to any Pension Plan which could reasonably be expected to result in the incurrence by the Borrower or any of its Subsidiaries or any member of the Controlled Group of any material liability (other than liabilities incurred in the ordinary course of maintaining the Pension Plan), fine or penalty and none of the following events or conditions, either individually or in the aggregate, has resulted or is reasonably likely to result in a material liability to the Borrower or any of its Subsidiaries or any member of the Controlled Group: (i) a Reportable Event; (ii) a complete or partial withdrawal from any Multiemployer Plan by the Borrower or any of its Subsidiaries or any member of the Controlled Group; (iii) any liability of the Borrower or any of its Subsidiaries or any member of the Controlled Group under ERISA if the Borrower or any of its Subsidiaries or any member of the Controlled Group were to withdraw completely from all Multiemployer Plans as of the annual

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valuation date most closely preceding the date on which this representation is made or deemed made; or (iv) the Reorganization or Insolvency of any Multiemployer Plan. None the Borrower or any of its Subsidiaries or any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan which could reasonably be expected to have a Material Adverse Effect, other than liability for continuation coverage described in Part 6 of Title I of ERISA.

        SECTION 6.16    Solvency.    The Borrower, together with its respective Subsidiaries, taken as a whole, will be Solvent as of the Closing Date after giving effect to the Borrowing and to the application of the proceeds therefrom.

        SECTION 6.17    Subsidiaries.    On the Closing Date, the Borrower has no Subsidiaries other than Midwest Finance.

ARTICLE VII
COVENANTS

        SECTION 7.1    Affirmative Covenants.    The Borrower agrees with the Administrative Agent and each Lender that, until the Commitments have terminated and all Loans and all other Obligations under the Loan Documents have been paid and performed in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower shall, and shall cause each of its Subsidiaries to, perform the obligations set forth in this Section 7.1.

        SECTION 7.1.1    Financial Information, Reports, Notices.    The Borrower shall furnish, or shall cause to be furnished, to the Administrative Agent copies of the following financial statements, reports, notices and information:

        (a)   as soon as available and in any event within sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, consolidated balance sheets of the Borrower (which will include results for its Consolidated Subsidiaries) as of the end of such Fiscal Quarter and consolidated statements of income and cash flows of the Borrower (which will include results for its Consolidated Subsidiaries) for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by an Authorized Representative of the Borrower with responsibility for financial matters;

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        (b)   as soon as available and in any event within 120 days after the end of each Fiscal Year of the Borrower, commencing with the 2005 Fiscal Year, a copy of the annual audit report for such Fiscal Year for the Borrower (which will include results for its Consolidated Subsidiaries), including therein consolidated balance sheets of the Borrower (which will include results for its Consolidated Subsidiaries) as of the end of such Fiscal Year and consolidated statements of income and cash flows of the Borrower (which will include results for its Consolidated Subsidiaries) for such Fiscal Year, and accompanied by the unqualified opinion of Pricewaterhouse Coopers LLP or other internationally recognized independent auditors selected by the Borrower to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

        (c)   as soon as possible after the end of the first and third Fiscal Quarters of each Fiscal Year, an officer's certificate stating the outstanding principal amounts of each of the Powerton/Joliet Lease Intercompany Notes and a statement of transactions reconciling such amounts to the last day of the immediately preceding Fiscal Quarter;

        (d)   prior to the commencement of each Fiscal Year of the Borrower, an operating budget for the Facilities for the ensuing Fiscal Year, based upon good faith, reasonable assumptions, together with an "income statement variance report" showing the actual experience for the current Fiscal Year (or portion thereof) against the income statement projections for the current Fiscal Year (or portion thereof);

        (e)   concurrently with the delivery of the financial statements referred to in Section 7.1.1(b), and within sixty (60) days after each Quarterly Payment Date, a certificate, executed by an Authorized Representative of the Borrower with responsibility for financial matters, showing (i) the Consolidated Interest Coverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter, (ii) the Secured Leverage Ratio as at the last day of the immediately preceding Fiscal Quarter, (iii) Excess Cashflow for the period beginning on the Original Effective Date and ending on the last day of the immediately preceding Fiscal Quarter, (iv) Free Cashflow for the three (3) month period ended on the last day of the immediately preceding Fiscal Quarter and (v) all Special Capital Contributions made to the Borrower and all Reimbursement Restricted Payments made by the Borrower, in each case, in reasonable detail with appropriate calculations and computations;

        (f)    as soon as possible and in any event within five (5) Business Days after any Authorized Representative of the Borrower obtains knowledge of the occurrence of (i) each Default under this Agreement and (ii) any default under any other material agreement to which the Borrower, any of its Subsidiaries, EMMT or any Midwest Related Party is a party or any termination thereof together with a statement of such Authorized Representative setting forth details of such Default, default or termination and the action which the Borrower, such Subsidiary, EMMT or such Midwest Related Party has taken and proposes to take with respect thereto;

        (g)   as soon as possible and in any event within five (5) Business Days after the commencement of, or the occurrence of any material adverse development with respect to, any litigation, action, proceeding, or labor controversy of the type described in Section 6.9, notice thereof and, upon request of the Administrative Agent, copies of all documentation relating thereto (other than documentation subject to the attorney-client privilege);

        (h)   promptly after the sending or filing thereof, copies of all reports and registration statements which the Borrower files with the Securities and Exchange Commission or any national securities exchange;

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        (i)    immediately upon becoming aware of the institution of any steps by the Borrower, any of its Subsidiaries or any other Person to terminate any Pension Plan (other than a standard termination under ERISA Section 4041(b)), or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA or Section 412 of the Code, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower or any member of the Controlled Group of any material liability (other than liabilities incurred in the ordinary course of maintaining the Pension Plan), fine or penalty, or any increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit the occurrence or expected occurrence of any Reportable Event or the termination, Reorganization or Insolvency of any Multiemployer Plan or the complete or partial withdrawal by the Borrower or any member of the Controlled Group from a Multiemployer Plan, notice thereof and copies of all documentation relating thereto;

        (j)    within ten (10) Business Days after each anniversary of the Original Effective Date, a certificate from the Borrower's insurers or insurance agents setting forth, in reasonable detail, each of the Borrower's insurance policies currently in place and confirming that such insurance policies satisfy the requirements of Section 7.1.5(b);

        (k)   as soon as possible and in any event within five (5) Business Days after any Authorized Representative of the Borrower obtains (i) knowledge of the occurrence thereof, notice of any casualty, damage or loss to the Facilities, whether or not insured, through fire, theft, other hazard or casualty, involving a probable loss of $5,000,000 or more; or (ii) knowledge of (A) the occurrence, notice of any cancellation, notice of threatened or potential cancellation or (B) any material change in the terms, coverage or amounts of any policy of insurance which would result in such policy deviating from Prudent Industry Practice;

        (l)    as soon as possible and in any event within five (5) Business Days after any Authorized Representative of the Borrower obtains knowledge of the occurrence thereof, notice that any Governmental Authority may revoke, or refuse to grant or renew, or materially modify, any material Governmental Approval then required to be in full force and effect, as contemplated by Section 6.4;

        (m)  within thirty (30) days of delivery to the Borrower, updates (to the extent the Borrower, in its sole discretion, has determined to have such updates prepared) to the Environmental Reports; and

        (n)   from time to time, with reasonable promptness, such other information regarding the Borrower, its Subsidiaries, EMMT or any Midwest Related Party (to the extent reasonably available to the Borrower and its Subsidiaries) as the Administrative Agent or any Lender may reasonably request.

        SECTION 7.1.2    Continuation of Business and Maintenance of Existence.    The Borrower shall continue to engage in the business of owning, leasing and operating the Facilities and the sale and marketing of wholesale electric power and other products and services related thereto. The Borrower shall not, and shall cause its Subsidiaries to not, engage in any business other than owning, leasing and operating electrical generating assets and selling and marketing wholesale electric power and other products and services related thereto. The Borrower shall, and shall cause each of its Subsidiaries to, preserve, renew and keep in full force and effect its corporate, limited liability company or partnership existence and take all reasonable action to maintain all material rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.2.3.

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        Notwithstanding the preceding, nothing contained in this Section 7.1.2 shall prevent the Borrower from mothballing, decommissioning, or otherwise removing from productive service or use (a) the Collins Facility or (b) any Non-Core Facility (if the Borrower has determined that such Non-Core Facility is economically or technologically obsolete or otherwise surplus to the Borrower's needs or is no longer useful in its trade or business).

        SECTION 7.1.3    Compliance with Requirements of Law and Contractual Obligations.    The Borrower shall, and shall cause its Subsidiaries to, comply with all Requirements of Law (including all applicable zoning, use, subdivision or similar law, rule or regulation) and Contractual Obligations, such compliance to include the payment, before the same become delinquent, of all taxes, assessments and governmental charges or levies, except to the extent non-compliance would not have a Material Adverse Effect.

        SECTION 7.1.4    Maintenance of Facilities.    The Borrower shall (a) maintain the Maintained Facilities in all material respects (i) in good condition, repair and working order (ordinary wear and tear excepted), except where the failure so to do would not have a Material Adverse Effect, (ii) in accordance with Prudent Industry Practice and (iii) in accordance with the terms of all insurance policies required to be maintained pursuant to Section 7.1.5, and (b) make such repairs, renewals, replacements, betterments and improvements to the Maintained Facilities as in the reasonable judgment of the Borrower are necessary so that the Maintained Facilities may be operated in accordance with their intended purpose.

        Notwithstanding the preceding, nothing contained in this Section 7.1.4 shall (a) prevent the Borrower from mothballing, decommissioning, or otherwise removing from productive service or use or (b) require the Borrower to comply with this Section 7.1.4 with respect to any Non-Core Facility (if the Borrower has determined that such Non-Core Facility is economically or technologically obsolete or otherwise surplus to the Borrower's needs or is no longer useful in its trade or business).

        SECTION 7.1.5    Insurance.    

        (a)   The Borrower shall maintain or cause to be maintained with financially sound and reputable insurance companies, insurance for such amounts against such risks, loss, damage and liability as are customarily insured against by other enterprises of like size and type as that of the Facilities, subject to the availability of such coverage, including the deductible and tenor for business interruption insurance referred to below, on commercially reasonable terms, all on terms and conditions which are in accordance with Prudent Industry Practice and shall include business interruption insurance with a deductible not to exceed sixty (60) days and a tenor no shorter than one year;

        (b)   All such policies of casualty, third party liability and business interruption insurance shall:

        (i)    provide that, with respect to third party liability insurance, the Secured Parties shall be named as additional insureds;

        (ii)   name the Collateral Trustee as a loss payee (other than insurance policies maintained with respect to the Powerton Facility and the Joliet Leased Facility to the extent required by the Powerton/Joliet Lease Operative Documents);

        (iii)  provide that (x) no cancellation or termination of such insurance and (y) no reduction in the limits of liability of such insurance shall be effective until thirty (30) days after written notice is given by the insurers to the Administrative Agent and the Collateral Trustee of such cancellation, termination, reduction or change;

        (iv)  waive all claims for insurance premiums or commissions or additional premiums or assessments against the Secured Parties; and

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        (v)   waive any right of the insurers to setoff or counterclaim or to make any other deductions, whether by way of attachment or otherwise, as against the Secured Parties.

        Notwithstanding the preceding, with respect to the Collins Facility and any Non-Core Facility that the Borrower has determined is economically or technologically obsolete or otherwise surplus to the Borrower's needs or no longer useful in its trade or business, the Borrower shall not be required to maintain casualty or business interruption insurance for such facilities.

        SECTION 7.1.6    Books and Records.    The Borrower shall, and shall cause its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Administrative Agent and each Lender (at such Lender's expense) or any of their respective representatives, at reasonable times and intervals upon reasonable prior notice, to visit all of its offices and sites and, to discuss its financial matters with its officers and independent public accountant. The Borrower shall, at any reasonable time and from time to time upon reasonable prior notice, permit the Administrative Agent and the Lenders or any of their respective agents or representatives to examine and make copies of and abstracts from the records and books of account of the Borrower and its Subsidiaries; provided that by virtue of this Section 7.1.6 the Borrower shall not be deemed to have waived any right to confidential treatment of the information obtained, subject to the provisions of applicable law or court order.

        SECTION 7.1.7    Environmental Covenant.    The Borrower shall, and shall cause its Subsidiaries to, and, with respect to clause (a) below, shall take all reasonable efforts to ensure that all of its tenants, subtenants, contractors, subcontractors and invitees shall:

        (a)   comply with all applicable Environmental Laws and obtain, comply with and maintain all necessary Governmental Approvals required under any applicable Environmental Law, in each case, except where such noncompliance or failure, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect;

        (b)   promptly upon the Administrative Agent's request if there has been an Event of Default which has not been fully and timely cured, permit an environmental consultant whom the Administrative Agent in its discretion designates to perform an environmental assessment (including, reviewing documents; interviewing knowledgeable employees and representatives of the Borrower or its Subsidiaries; and sampling and analyzing soil, air, surface water, groundwater, and/or other media in or about property owned or leased by the Borrower or its Subsidiaries, or on which operations of the Borrower or its Subsidiaries otherwise take place). Such environmental assessment shall be in form, scope and substance reasonably satisfactory to the Administrative Agent. The Borrower shall, and shall cause its Subsidiaries to, cooperate fully in the conduct of such environmental assessment upon written demand by the Administrative Agent. The Administrative Agent shall perform, or cause its agents and representatives to perform, the environmental assessment in such a manner as to minimize to the extent practicable any disruption with the conduct of operations of the involved property. Pursuant to this Section 7.1.7(b), the Administrative Agent shall have the right, but shall not have any duty, to request and/or obtain such environmental assessment; and

        (c)   provide copies of information to evidence compliance with this Section 7.1.7 to the extent reasonably requested by the Administrative Agent from time to time.

        SECTION 7.1.8    Further Assurances.    

        (a)   Upon written request of the Administrative Agent, the Borrower shall, and shall cause its Subsidiaries to, promptly perform or cause to be performed any and all acts and execute or cause to be executed any and all documents (including, financing statements and continuation statements) for filing under the provisions of the UCC or any other Requirement of Law which are necessary or advisable to

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maintain in favor of the Collateral Trustee, for the benefit of the Secured Parties, Liens on the Collateral that are duly perfected in accordance with all applicable Requirements of Law.

        (b)   If the Borrower or any of its Subsidiaries shall at any time acquire any material interest in all real and personal property not covered by the Security Documents (to the extent that any such property is of a type that has been expressly included in the Security Documents), the Borrower shall, and shall cause its Subsidiaries to, promptly, upon such acquisition, execute, deliver and record a supplement to the relevant Security Documents or other documentation (including mortgages, security documents, financing statements, opinions, title insurance, surveys and other documents), reasonably satisfactory in form and substance to the Collateral Trustee, subjecting such interests to the security interests created by such Security Documents and ensuring that the security interest in such interest will be a valid and an effective interest on terms comparable to the security interest of the Collateral Trustee in the Collateral; provided, that this clause (b) shall not require, at any time, the granting of a mortgage or other lien to the Collateral Trustee on the Collins Facility.

        (c)   The Borrower shall (i) promptly deliver to the Collateral Trustee a copy of any notice it receives in connection with the foreclosure of any mortgage permitted to exist pursuant to Section 7.2.2, which foreclosure would adversely effect the Borrower's right to use any portion of the Mortgaged Facilities, and (ii) redeem the portion of the Mortgaged Facilities affected by such foreclosure, prior to it being foreclosed; provided, that the Collateral Trustee may redeem such portion to the extent the Lenders may deem necessary or advisable.

        (d)   If the Borrower or any of its Subsidiaries acquires or creates another Subsidiary after the Closing Date, that newly acquired or created Subsidiary will become a guarantor of the Priority Lien Debt and the Parity Lien Debt by executing and delivering to the Priority Debt Lien Representative and the Collateral Trustee, a Subsidiary Guarantee within ten (10) days of the date on which such Subsidiary was acquired or created.

        (e)   The Borrower shall make all commercially reasonable efforts to provide for the inclusion of customary assignment provisions for the benefit of the Secured Parties in any material contracts exceeding six (6) months in duration entered into in connection with the Facilities (other than the Powerton Facility and the Joliet Leased Facility).

        SECTION 7.1.9    Financial Covenants.    The Borrower shall maintain (a) at the end of each of its Fiscal Quarters, the Consolidated Interest Coverage Ratio for the immediately preceding four consecutive Fiscal Quarters of the Borrower of at least 1.40 to 1.00 and (b) a Secured Leverage Ratio for the 12-month period ended on the last day of the immediately preceding Fiscal Quarter no greater than 7.25 to 1.00.

        SECTION 7.1.10    Use of Proceeds.    The proceeds of the Closing Date Borrowing of Revolver Loans will be deposited into the account specified in the Funds Flow Undertaking on the Closing Date and will be used on the Closing Date by the Borrower for the repayment in full of the Revolver B Loans under (and as defined in) the Existing Credit Agreement, and thereafter will be used by the Borrower for general corporate and working capital purposes. The Term Loans under (and as defined in) the Existing Credit Agreement, as assigned pursuant to Section 10.11.1(f), will be maintained as Term Loans.

        SECTION 7.1.11    Recovery Events.    Not more than thirty (30) days after the occurrence of any Recovery Event, the Borrower shall give written notice thereof to the Administrative Agent and the Collateral Trustee and follow the procedures indicated below as applicable:

        (a)   if the settlement or payment related to such Recovery Event is under $100,000,000, the Borrower shall apply the Net Cash Proceeds of such Recovery Event to the payment of the cost of restoration or replacement of the asset or assets in respect of which such Recovery Event occurred within 12 months from the date of receipt of such proceeds, provided that the Administrative

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Agent and the Collateral Trustee receive from the Borrower, within forty-five (45) days of the Recovery Event, a written notice (a "Reinvestment Notice") executed by an Authorized Representative of the Borrower (i) setting forth in reasonable detail the nature of such restoration or replacement and the estimated cost and time to complete such restoration or replacement and (ii) stating that (A) no Default or Event of Default has occurred and is continuing, (B) such restoration or replacement is technologically and economically feasible, (C) the Net Cash Proceeds of such Recovery Event, together with other resources available to the Borrower, are sufficient to pay the estimated cost of completing such restoration or replacement and (D) the Borrower has sufficient resources (through business interruption insurance or otherwise) to pay all Cash Disbursements and other fixed charges projected to become due and payable prior to the completion of such restoration or replacement; or

        (b)   if the settlement or payment related to such Recovery Event is $100,000,000 or more, then no later than six months following such occurrence, the Borrower shall either:

        (i)    make a prepayment of all Net Cash Proceeds of such Recovery Event pursuant to Section 3.1.2(b); or

        (ii)   deliver to the Administrative Agent and the Collateral Trustee: (A) a Reinvestment Notice confirming the Borrower's decision to apply the Net Cash Proceeds of such Recovery Event to the payment of the cost of restoration or replacement of the asset or assets in respect of which such Recovery Event occurred; and (B) a report of an independent engineer, such engineer and such report to be satisfactory to the Administrative Agent, confirming the information set forth in Section 7.1.11(a)(i) and (ii)(B) above.

        SECTION 7.1.12    Separateness.    The Borrower will:

        (a)   act solely in its name and through its duly authorized officers or agents in the conduct of its business;

        (b)   conduct its business solely in its own name, in a manner not misleading to other persons as to its identity (without limiting the generality of the foregoing, all oral and written communications (if any), including letters, invoices, purchase orders, contracts, statements, and applications are made and shall continue to be made solely in the name of the Borrower, if related to the Borrower);

        (c)   provide for the payment of its own operating expenses and liabilities from its own funds; and

        (d)   obtain proper authorization from its directors or member(s), as required by its Organic Documents for all company actions of the Borrower.

        SECTION 7.2    Negative Covenants.    The Borrower agrees with the Administrative Agent and each Lender that, until the Commitments have terminated and all Loans and all other Obligations under the Loan Documents have been paid and performed in full, the Borrower will, and will cause its Subsidiaries to, perform the obligations set forth in this Section 7.2.

        SECTION 7.2.1    Restrictions on Indebtedness.    The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness in addition to Indebtedness under this Agreement and the other Loan Documents, other than:

        (a)   Indebtedness of the Borrower and its Subsidiaries of any kind whatsoever existing on the Original Effective Date (including the Midwest Finance Note Guarantee);

        (b)   Priority Lien Debt and Parity Lien Debt;

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        (c)   (i) Capitalized Lease Liabilities and Operating Lease Liabilities outstanding on December 31, 2004 and set forth on Schedule 7.2.1(c) and (ii) Capitalized Lease Liabilities and Operating Lease Liabilities entered into in the ordinary course of business not to exceed at any time an aggregate notional principal amount of $100,000,000, including in the case of each of clause (i) and clause (ii) above, Capitalized Lease Liabilities and Operating Lease Liabilities entered into in the ordinary course of business to replace or refinance Capitalized Lease Liabilities or Operating Lease Liabilities permitted pursuant to this Section 7.2.1(c);

        (d)   Indebtedness of the Borrower under Interest Rate Hedging Transactions;

        (e)   Subject to Section 7.2.8, Indebtedness of the Borrower incurred to finance the acquisition, construction or improvement of any fixed or capital assets in accordance with and subject to Schedule 7.2.1(e)hereto;

        (f)    Indebtedness consisting of (i) reimbursement obligations of the Borrower with respect to letters of credit, surety bonds and performance bonds used by the Borrower in the ordinary course of business in an aggregate amount not to exceed $40,000,000 at any time and (ii) workers' compensation claims, self-insurance obligations and bankers' acceptances;

        (g)   unsecured Indebtedness in respect of obligations of the Borrower or any of its Subsidiaries to pay the deferred purchase price of goods and services or progress payments in connection with such goods and services; provided, that such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms (which require that all such payments be made within sixty (60) days of the incurrence of the related Indebtedness) in the ordinary course of business and not in connection with the borrowing of money;

        (h)   Indebtedness in the form of subordinated, unsecured intercompany loans between the Borrower and its Subsidiaries;

        (i)    Indebtedness in the form of Guarantees made by and reimbursement obligations with respect to stand-by letters of credit issued for the account of the Borrower (including, in each case, Permitted Marketing Support) in the ordinary course of business related to the Facilities in connection with Permitted Trading Activities conducted by or for the benefit of the Borrower, whether directly with unaffiliated third parties or with EMMT;

        (j)    Subject to Section 3.1.2, other Indebtedness of the Borrower; provided, that no Default or Event of Default has occurred or would occur after giving effect to the incurrence or issuance of such Indebtedness;

        (k)   Indebtedness incurred to finance Necessary Capital Expenditures;

        (l)    Environmental CapEx Debt; provided, that, prior to the incurrence of any Environmental CapEx Debt, the Borrower shall deliver to the Administrative Agent an Officer's Certificate designating such Indebtedness as Environmental CapEx Debt; and

        (m)  the incurrence by the Borrower or any of its Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five (5) Business Days.

        SECTION 7.2.2    Liens.    The Borrower shall not, and shall not permit its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except:

        (a)   any Lien existing on the property of the Borrower or its Subsidiaries on the Original Effective Date (including (i) the Joliet Shared Facilities Agreements and (ii) any easements, rights of way, reservations, restrictions, covenants, party-wall agreements, agreements for joint or

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common use, landlord's rights of distraint and other similar imperfections in title on real estate set forth as an exception in the Title Policies; provided, that such easements and imperfections are not incurred in connection with any Indebtedness); provided, that such Liens do not materially (individually or in the aggregate) (i) interfere with the use of the property and assets of the Borrower or (ii) affect the operation or value of the Mortgaged Facilities or the interest of the Secured Parties in the Collateral;

        (b)   Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or thereafter payable without penalty or which are being contested in good faith by appropriate proceedings promptly instituted and diligently prosecuted and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

        (c)   Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

        (d)   Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits;

        (e)   Liens granted as security for the performance of bids, tenders, statutory obligations, operating leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds;

        (f)    judgment Liens in existence less than thirty (30) days after the entry thereof so long as no enforcement, levy, collection or foreclosure proceeding has commenced or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies;

        (g)   extensions or renewals of any Lien otherwise permitted to be incurred under this Section 7.2.2 securing Indebtedness (including Permitted Refinancing Indebtedness) in an amount not exceeding the principal amount of, and accrued interest on, the Indebtedness secured by such Lien as so extended or renewed at the time of such extension or renewal; provided that such Lien shall apply only to the same property theretofore previously securing such Indebtedness;

        (h)   Liens to secure Environmental CapEx Debt that encumber only the assets purchased, installed or otherwise acquired with the proceeds of such Environmental CapEx Debt;

        (i)    purchase money Liens securing Indebtedness permitted by Section 7.2.1(e); providedthat such Liens do not encumber any assets other than those acquired or constructed with the proceeds of such Indebtedness;

        (j)    Liens on cash collateral securing investments and Guarantee obligations permitted by Section 7.2.1(e) or (i);

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        (k)   Liens created pursuant to the Powerton/Joliet Lease Operative Documents;

        (l)    easements, rights of way, reservations, restrictions, covenants, party-wall agreements, agreements for joint or common use, landlord's rights of distraint and other similar imperfections in title on real estate; provided that such easements and imperfections are not incurred in connection with any Indebtedness, do not materially (individually or in the aggregate) (i) interfere with the use of the property and assets of the Borrower or (ii) affect the operation or value of the Mortgaged Facilities or the interest of the Secured Parties in the Collateral;

        (m)  Liens for the benefit of the holders of Priority Lien Debt in accordance with the Collateral Trust Agreement securing Priority Lien Debt;

        (n)   Liens for the benefit of the holders of Parity Lien Debt in accordance with the Collateral Trust Agreement securing Parity Lien Debt; and

        (o)   Liens on cash and short-term investments (i) deposited by the Borrower or any of its Subsidiaries in margin accounts with or on behalf of futures contract brokers or paid over to other counterparties or (ii) pledged or deposited as collateral to a contract counterparty or issuer of surety bonds by the Borrower or any of its Subsidiaries, in the case of clause (i) or (ii), to secure obligations with respect to Permitted Trading Activities.

        SECTION 7.2.3    Consolidation, Merger.    The Borrower shall not directly or indirectly, (a) consolidate or merge with or into another Person (whether or not the Borrower is the surviving entity), (b) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Borrower or its Subsidiaries taken as a whole, in one or more related transactions, to another Person or (c) lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person; provided, that the Borrower may (i) merge with an Affiliate solely for purposes of reconstituting the Borrower in another jurisdiction or (ii) reorganize as either (x) a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia or (ii) a partnership or limited liability company organized or existing under the laws of the United States, any state thereof or the District of Columbia that has at least one Subsidiary that is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia.

        Notwithstanding anything in this Section 7.2.3 to the contrary, the Borrower shall be permitted to reorganize as a corporation, so long as such reorganization is not adverse to the Lenders (it being recognized that such reorganization shall not be deemed adverse to the Lenders solely because (i) of the accrual of deferred tax liabilities resulting from such entity or (ii) the successor surviving corporation (x) is subject to income tax as a corporate entity or (y) is considered to be an "includable corporation" of an affiliated group of corporations within the meaning of the Code or any similar state or local law).

        SECTION 7.2.4    Asset Sales.    The Borrower shall not, and shall not permit its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, any part of its assets (including accounts receivable and capital stock of or other ownership interests in Subsidiaries) to any Person (each such event, an "Asset Sale"), unless:

        (a)   such Asset Sale is to an unaffiliated third party on an arm's-length basis;

        (b)   at least 75% of the consideration to be received is paid in cash or Cash Equivalent Investments and such remaining 25% is not a debt instrument of the Borrower or any of its Affiliates (provided that for purposes of this provision, (i) any amounts deposited into an escrow or other type of holdback account and any consideration in the form of readily marketable securities shall be deemed to be cash, (ii) customary purchase price adjustments may be settled on a

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non-cash basis and (iii) the assumption of Indebtedness relating to the asset being disposed shall be disregarded for the purposes of this provision); and

        (c)   the Net Cash Proceeds of any such Asset Sale received by the Borrower are applied in accordance with Section 3.1.2.

        Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales:

        (i)    a disposition resulting from the exercise by a Governmental Authority of its claimed or actual power of eminent domain, in each case without compensation;

        (ii)   the sale or other disposition of cash or Cash Equivalent Investments;

        (iii)  any single transaction or series of related transactions that involves assets having a fair market value of less than $15,000,000; provided, that, the aggregate value of all such transactions since the Original Effective Date shall not exceed $50,000,000; and

        (iv)  any sale or transfer of fuel or other related assets, including assets related to trading activities.

        SECTION 7.2.5    Investments.    The Borrower shall not, and shall not permits its Subsidiaries to, create or acquire, make, incur, assume or suffer to exist any Investment in any other Person, except:

        (a)   Investments existing on the Original Effective Date;

        (b)   cash, Cash Equivalent Investments or Permitted Investments under, and as defined in, the Borrower Security Agreement (in each case, held in Bank Accounts or securities accounts in which the Borrower shall have granted a security interest as Collateral and which security interest shall constitute a first priority perfected security interest);

        (c)   Investments evidenced by the Powerton/Joliet Lease Intercompany Notes;

        (d)   Investments in new Subsidiaries acquired or created in accordance with Section 7.1.8;

        (e)   any Permitted Tax Payments; and

        (f)    Investments in connection with the provision of Permitted Marketing Support.

        SECTION 7.2.6    Transactions with Affiliates.    

        (a)   The Borrower shall not, and shall not permit its Subsidiaries to, enter into or suffer or permit to exist, any Transaction with an Affiliate unless such arrangement or contract is fair and reasonable to the Borrower or such Subsidiary and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower or such Subsidiary with a Person which is not one of its Affiliates.

        (b)   The Borrower shall not, and shall not permit any of its Affiliates to terminate or amend, supplement, otherwise modify or waive any term of the Energy Management Agreements in (i) any manner materially adverse with respect to their payment terms or (ii) otherwise in a manner which would result or could reasonably be expected to result in a Material Adverse Effect without the written consent of the Required Lenders which consent shall not be unreasonably withheld or delayed.

        Notwithstanding the preceding, (I) the Powerton/Joliet Lease Transaction and the transactions contemplated by the Powerton/Joliet Lease Operative Documents, (II) Permitted Trading Activities conducted by or for the benefit of the Borrower, whether directly with unaffiliated third parties or with EMMT, and the provision of Permitted Marketing Support and (III) any Permitted Tax Payment (or agreement pursuant to which a Permitted Tax Payment is made or required to be made) shall be deemed not to be a Transaction with an Affiliate for the purposes of this Section 7.2.6.

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        SECTION 7.2.7    Restricted Payments.    The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly (all such payments and other actions set forth in clauses (a) through (e)below, collectively, "Restricted Payments"):

        (a)   declare or pay any dividend or make any other payment or distribution on account of the Borrower's Equity Interests (including any payment in connection with any merger or consolidation involving the Borrower) or to the direct or indirect holders of the Borrower's Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests of the Borrower or dividends or distributions payable to the Borrower);

        (b)   purchase, redeem or otherwise acquire or retire for value (including in connection with any merger or consolidation involving the Borrower) any Equity Interests of the Borrower;

        (c)   make any payment on or with respect to, or make any transfer to or for the benefit of, or purchase, redeem, defease or otherwise acquire or retire for value any Affiliated Indebtedness of the Borrower or any of its Subsidiaries (excluding any intercompany Indebtedness between or among the Borrower and any of its Subsidiaries);

        (d)   make any payment on or with respect to, or make any transfer to or for the benefit of, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Indebtedness, except a payment of interest or principal at the stated maturity thereof; or

        (e)   make any Investments not otherwise permitted pursuant to Section 7.2.5;

provided that, the Borrower and its Subsidiaries may make (i) at any time after April 18, 2005, the Special Restricted Payment to the extent that such payment is permitted under the terms of the MWG Indenture and (ii) Restricted Payments on, or within thirty (30) days after, any Quarterly Payment Date in an amount equal to (after giving effect to all Restricted Payments made since the Original Effective Date but excluding the Special Restricted Payment) (A) (1) up to 75% of Excess Cashflow generated since the Original Effective Date to the most recently ended Fiscal Quarter; plus (2) to the extent of Excess Cashflow generated since the Original Effective Date and available for such payments, Reimbursement Restricted Payments and (B) at any time the Borrower is Investment Grade, 100% of Excess Cashflow generated after the date the Borrower becomes Investment Grade to the most recently ended Fiscal Quarter; provided, further, that no Default or Event of Default has occurred and is continuing or would occur as a after giving effect to such Restricted Payment (other than any Default or Event of Default that is cured as a result of such Restricted Payment).

        Notwithstanding anything in this Section 7.2.7 to the contrary, the Borrower may repurchase, redeem, defease or otherwise acquire or retire for value Subordinated Indebtedness of the Borrower or any of its Subsidiaries with the Net Cash Proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness; provided, that, no Default or Event of Default has occurred and is continuing or would occur as a result of, or after giving effect to, the foregoing.

        SECTION 7.2.8    Capital Expenditures.    The Borrower shall not, and shall not permit any Subsidiary to, make any capital expenditures, except Environmental Capital Expenditures or Necessary Capital Expenditures.

        SECTION 7.2.9    Restrictive Agreements.    The Borrower shall not, and shall not permit any Subsidiary to, enter into any agreement (excluding any Loan Document and any agreement governing any Indebtedness permitted by clause (e) of Section 7.2.1 as to the assets financed with the proceeds of such Indebtedness):

        (a)   expressly restricting the ability of the Borrower or such Subsidiary to amend or otherwise modify any Loan Document;

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        (b)   restricting the ability of any Affiliate of the Borrower to make any payments, directly or indirectly, to the Borrower by way of dividends or make distributions on its capital stock or member or other ownership interests or to pay any Indebtedness owed to the Borrower; or

        (c)   restricting the ability of the Borrower or such Subsidiary to make loans or advances to the Borrower or any other Subsidiary.

        SECTION 7.2.10    Limitation on Lines of Business.    The Borrower shall not, and shall not permit any Subsidiary to, change its legal form or Organic Documents except as permitted by Section 7.2.3, change its Fiscal Year or engage in any business other than the construction, ownership, maintenance and operation of the Facilities, the sale of wholesale electric power therefrom and related products and services and such other business as may be reasonably incidental thereto.

        SECTION 7.2.11    Limitation on Electricity Market Risk Exposure.    The Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, engage in transactions for (or incur Indebtedness under Section 7.2.1(i)in connection with) any speculative purpose, including speculative transactions relating to (a) fuel procurement or sales, (b) purchases, sales or exchanges related to capacity and energy from the Facilities or financial instruments related thereto or (c) purchases, sales or exchanges of energy or emissions credits.

        SECTION 7.2.12    Energy and Fuel Risk Management Policies.    The Borrower shall not, and shall not permit any of its Affiliates to, amend, supplement or otherwise modify the Energy and Fuel Risk Management Policies in a manner which would result or could reasonably be expected to result in a Material Adverse Effect without the written consent of the Required Lenders, which consent shall not be unreasonably withheld or delayed.

        SECTION 7.2.13    Amendment, Modification or Waiver of Certain Documents.    The Borrower shall not agree or consent to any termination, amendment, modification or waiver of (a) Section 18.19 of each of the Powerton/Joliet Lease Participation Agreements, (b) the definition of "Free Cashflow" set forth in the Powerton/Joliet Lease Operative Documents, (c) the Powerton/Joliet Lease Intercompany Notes or (d) or any other provision of the Powerton/Joliet Lease Operative Documents that increases or is reasonably likely to increase the liability, or the obligations, of the Borrower (or decreases or is reasonably likely to decrease the liability, or the obligations, of EME) with respect to the Powerton/Joliet Lease Operative Documents in any material respect.

ARTICLE VIII
EVENTS OF DEFAULT

        SECTION 8.1    Listing of Events of Default.    Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default".

        SECTION 8.1.1    Non-Payment of Obligations.    The Borrower shall default in (a) the payment or mandatory prepayment of any principal of any Loan or any reimbursement obligation in respect of any LC Exposure or the Borrower shall fail to Cash Collateralize its LC Exposure when due or (b) the payment of interest on any Loan or LC Exposure, any fees pursuant to Section 3.3 or any other Obligations under the Loan Documents, within five (5) Business Days after any such interest or other amount becomes due in accordance with the terms thereof or hereof.

        SECTION 8.1.2    Breach of Warranty.    Any representation or warranty of the Borrower, any of its Subsidiaries, EMMT or any Midwest Related Party made or deemed to be restated or remade in any Loan Document to which it is a party or any other writing or certificate furnished by or on behalf of the Borrower, such Subsidiary, EMMT or such Midwest Related Party to the Administrative Agent, the Collateral Trustee or any Lender for the purposes of or in connection with any such Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made or deemed made in any material respect.

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        SECTION 8.1.3    Non-Performance of Certain Covenants and Obligations.    The Borrower shall default in the due performance and observance of any of its obligations under Section 7.1.1(f)(i), 7.1.2, 7.1.5 (solely with respect to the Mortgaged Facilities), 7.1.9 or 7.2.

        SECTION 8.1.4    Non-Performance of Other Covenants and Obligations    The Borrower, any of its Subsidiaries, EMMT or any Midwest Related Party shall default in the due performance and observance of any other covenant or agreement contained in any Loan Document to which it is a party, and such default shall continue unremedied for a period of thirty (30) days after written notice thereof shall have been given to the Borrower by the Administrative Agent.

        SECTION 8.1.5    Default on other Indebtedness; Payment Default under EMMT Agreements.    

        (a)   A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of (i) any Indebtedness (other than Indebtedness described in Section 8.1.1 and Powerton/Joliet Lease Liabilities) of the Borrower, any of its Subsidiaries or any Midwest Related Party or (ii) any EMMT Indebtedness, in either case, having a principal amount, individually or in the aggregate, of at least $20,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness or EMMT Indebtedness, as applicable, if the effect of such default is to accelerate the maturity of any such Indebtedness or EMMT Indebtedness, as applicable, or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness or EMMT Indebtedness, as applicable, or any trustee or agent for such holders, to cause such Indebtedness or EMMT Indebtedness, as applicable, to become due and payable prior to its expressed maturity.

        (b)   A default shall occur in the payment or reimbursement when due by EMMT of any amount in excess of $2,000,000 owed to the Borrower under any Energy Management Agreement and such default shall continue unremedied for a period of thirty (30) days. Notwithstanding the foregoing, any such failure to pay or reimburse the Borrower shall not constitute a default (and such period of thirty (30) days shall not begin to toll) for purposes of this clause (b) until EMMT shall have received the corresponding payment or reimbursement from the counterparty under the applicable Back-to-Back Transaction; provided, that (i) EMMT shall have used commercially reasonable efforts to obtain payment from such counterparty, (ii) such counterparty was, at the time such Back-to-Back Transaction was entered into, Investment Grade and (iii) to the extent of any offsets between EMMT and such counterparty (unrelated to Back-to-Back Transactions with the Borrower) that reduce such counterparty's obligation to make payment to EMMT with respect to such Back-to-Back Transaction, EMMT shall be required to make payment to the Borrower in the amount of such offset or reduction.

        (c)   A default shall occur in the payment when due by EMMT of any amount in excess of $2,000,000 owed to EME under an EME Trading Revolver and EME shall have commenced remedies to enforce payment thereunder and such default shall continue unremedied for a period of thirty (30) days.

        SECTION 8.1.6    Bankruptcy, Insolvency.    The Borrower, any of its Subsidiaries, EMMT, any Midwest Related Party or EME shall:

        (a)   become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due;

        (b)   apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestration or other custodian for itself or a substantial portion of a its property, or make a general assignment for the benefit of creditors;

        (c)   in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestration or other custodian for itself or for a substantial part of its property, and such trustee, receiver, sequestration or other custodian shall not be

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discharged within sixty (60) days, provided that nothing in the Loan Documents shall prohibit or restrict any right the Administrative Agent, the Collateral Trustee or any Lender may have under applicable law to appear in any court conducting any relevant proceeding during such sixty (60) day period to preserve, protect and defend its rights under the Loan Documents (and the Borrower shall not object to any such appearance);

        (d)   permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, and, if any such case or proceeding is not commenced by the Borrower, such case or proceeding shall be consented to or acquiesced in by the Borrower or shall result in the entry of an order for relief or shall remain for sixty (60) days undismissed, provided that nothing in the Loan Documents shall prohibit or restrict any right the Administrative Agent, Collateral Trustee or any Lender may have under applicable law to appear in any court conducting any such case or proceeding during such sixty (60) day period to preserve, protect and defend its rights under the Loan Documents (and the Borrower shall not object to any such appearance); or

        (e)   take any corporate action authorizing, or in furtherance of, any of the foregoing.

        SECTION 8.1.7    Pension Plans.    Any of the following events shall occur with respect to any Pension Plan:

        (a)   the institution of any steps by the Borrower, any member of the Controlled Group or any other Person to terminate a Pension Plan or the occurrence of any other event or condition with respect to any Pension Plan, Welfare Plan or Multiemployer Plan if, as a result of such termination or such other event or condition, together with all other such terminations, events or conditions, if any, the Borrower or any Controlled Group member could reasonably expect to incur, individually or in the aggregate, a liability or obligation in excess of $20,000,000; or

        (b)   a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA or Section 412 of the Code.

        SECTION 8.1.8    Judgments.    Any judgment or order for the payment of money in excess of $20,000,000 individually or in the aggregate (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) shall be rendered against Borrower and such judgments or decrees shall not have been vacated, discharged or effectively stayed or bonded within sixty (60) days from the entry thereof.

        SECTION 8.1.9    Regulatory Violation.    Any Regulatory Violation shall have occurred and be continuing.

        SECTION 8.1.10    Loan Documentation.    This Agreement or any Loan Document is declared unenforceable or is terminated or any Lien securing Indebtedness under this Agreement purported to be created by any Security Document shall at any time fail to constitute a valid and first priority, perfected Lien on the Collateral intended to be covered thereby in favor of the Collateral Trustee, free and clear of all other Liens (other than Permitted Liens), or the Borrower, any of its Subsidiaries, EMMT or any Midwest Related Party shall assert that such Lien is not a valid and first priority, perfected Lien or any of the Security Documents to which it is a party shall no longer be in full force and effect.

        SECTION 8.1.11    Change-In-Control.    Any Change-In-Control shall have occurred and be continuing.

        SECTION 8.1.12    Powerton/Joliet Leases.    Any of the Powerton/Joliet Lease Trusts (or the related Lease Indenture Trustee) (under, and as defined in the related, Powerton/Joliet Lease Operative Documents) shall have commenced to exercise remedies in accordance with Section 17 of each of the

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Powerton/Joliet Leases to terminate any of the Powerton/Joliet Leases and repossess any of the Powerton/Joliet Lease Assets.

        SECTION 8.1.13    EME Obligations.    EME shall fail to make payment or fail to perform its obligations under any Powerton/Joliet Lease Guarantee or any Powerton/Joliet Lease Intercompany Note within five (5) Business Days after any such payment becomes due in accordance with the terms thereof or hereof.

        SECTION 8.1.14    Powerton/Joliet Documentation.    Any of the Powerton/Joliet Lease Guarantees or the Powerton/Joliet Lease Intercompany Notes is declared unenforceable or is terminated, or EME or any Powerton/Joliet Trust shall assert that any of the Powerton/Joliet Lease Guarantees or the Powerton/Joliet Intercompany Notes to which it is a party shall no longer be in full force and effect.

        SECTION 8.1.15    EME Default.    Any one of the following shall occur with respect to Indebtedness of EME having a principal amount, individually or in the aggregate, in excess of $20,000,000:

        (a)   a default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of such Indebtedness of EME; or

        (b)   a default shall occur in the performance or observance of any obligation or condition with respect to Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness.

        SECTION 8.2    Action if Bankruptcy.    If any Event of Default described in clauses (a)through (e) of Section 8.1.6 shall have occurred and be continuing with respect to the Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other monetary Obligations under the Loan Documents shall automatically be and become immediately due and payable, without notice or demand.

        SECTION 8.3    Action if Other Event of Default.    If any Event of Default (other than any Event of Default described in clauses (a) through (e) of Section 8.1.6 with respect to the Borrower) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by written notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other monetary Obligations under the Loan Documents to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other monetary Obligations under the Loan Documents which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate. The rights provided for in the Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising.

        SECTION 8.4    Rescission of Declaration.    Any declaration made pursuant to Section 8.3may, should the Required Lenders in their sole and absolute discretion so elect, be rescinded by written notice to the Borrower at any time after the principal of the Loans shall have become due and payable, but before any judgment or decree for the payment of the monies so due, or any part thereof, shall have been entered; provided that the Borrower shall have paid all arrears of interest upon the Loans and all other amounts then owed to the Administrative Agent and the Lenders including all costs, expenses and liabilities incurred by the Administrative Agent and the Lenders in respect of such declaration and all consequences thereof (except the principal of the Loans which by such declaration shall have become payable) and every other Event of Default shall have been made good, waived or cured; provided that no such rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon.

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ARTICLE IX
THE ADMINISTRATIVE AGENT

        SECTION 9.1    Actions.    

        (a)   Each Lender and each Issuing Lender hereby appoints CNAI as its Administrative Agent under and for purposes of each Loan Document. Each Lender and each Issuing Lender authorizes the Administrative Agent to act on its behalf under each Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in any Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Issuing Lender or any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into any Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

        (b)   Each Lender hereby agrees to indemnify (which indemnity shall survive any termination of this Agreement) the Agent-Related Persons pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent-Related Persons in any way relating to or arising out of any Loan Document, including reasonable attorneys' fees, and as to which the Administrative Agent is not reimbursed by the Borrower; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted from the Agent-Related Person's gross negligence or willful misconduct. No Agent-Related Persons shall be required to take any action under any Loan Document, or to prosecute or defend any suit in respect of or any Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent shall be or become, in its determination, inadequate, the Agent-Related Person may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given.

        SECTION 9.2    Funding Reliance.    Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 12:00 Noon, New York City time, on the Business Day prior to the Closing Date that such Lender will not make available the amount which would constitute its Percentage of the Borrowing on the Closing Date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, may, but shall not be required to, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing; provided, that if such Lender makes available the amount which is its Percentage of the

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Borrowing on or before the next Business Day following the day when due, the interest rate payable on such amount shall be the Federal Funds Effective Rate.

        SECTION 9.3    Exculpation.    No Agent-Related Person shall be liable to any Lender for any action taken or omitted to be taken by it under any Loan Document, or in connection therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of any Loan Document, nor to make any inquiry respecting the performance by the Borrower of its obligations under any Loan Document. Any such inquiry which may be made by the Administrative Agent shall not obligate it to make any further inquiry or to take any action. Each Agent-Related Person shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Administrative Agent believes to be genuine and to have been presented by a proper Person.

        SECTION 9.4    Successor.    The Administrative Agent may resign as such at any time upon at least thirty (30) days' prior notice to the Borrower, all Lenders and all Issuing Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may, within ten (10) days after such notice and with the consent of the Borrower (not to be unreasonably withheld), appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, after notice to and consultation with the Borrower, appoint a successor Administrative Agent, which shall be one of the Lenders or an Assignee, and shall have a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After the effective date of any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of (a) this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and (b) Section 10.3 and Section 10.4 shall continue to inure to its benefit.

        SECTION 9.5    Loans by CNAI.    CNAI shall have the same rights and powers with respect to the Loans made by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Administrative Agent. CNAI and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if CNAI were not the Administrative Agent hereunder.

        SECTION 9.6    Reliance by Administrative Agent.    

        (a)   The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Borrower or any of its Affiliates), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The

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Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any Loan Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

        (b)   For purposes of determining compliance with the conditions specified in Section 5.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender.

        SECTION 9.7    Notice of Default.    The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Article VIII; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

        SECTION 9.8    Credit Decisions.    Each Lender acknowledges that it has, independently of the Agent-Related Person and each other Lender, and based on such Lender's review of the financial information of the Borrower, the Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Administrative Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under any Loan Document.

        SECTION 9.9    Copies.    The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower). The Administrative Agent will distribute to each Lender each document or instrument (including each document or instrument delivered by the Borrower to the Administrative Agent pursuant to Articles V and VII) received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement.

        SECTION 9.10    Collateral.    

        (a)   Each Lender hereby acknowledges and agrees that (i) such Lender's right or interest in the Collateral (or any portion thereof) shall be subject to the terms of the Collateral Trust Agreement and the other Security Documents, including the requisite level of consent by holders of Priority Lien Debt to enforce upon the Collateral and (ii) this acknowledgement and agreement constitutes a Priority Debt Sharing Confirmation (as defined in the Collateral Trust Agreement).

        (b)   The Borrower hereby acknowledges, agrees and confirms that each Lender and the Administrative Agent are entitled to the benefit of the Collateral Trust Agreement and all of the benefits of a Priority Lien Secured Party and the Priority Liens created under (and as defined in) the Collateral Trust Agreement and the other Security Documents.

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ARTICLE X
MISCELLANEOUS PROVISIONS

        SECTION 10.1    Waivers, Amendments.    

        (a)   The provisions of each Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided, however, that no such amendment, modification or waiver shall (i) forgive or reduce the principal amount or extend any payment of principal pursuant to Section 3.1(a) or the final scheduled date of maturity of any Loan or LC Disbursement, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Commitment without the consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section 10.1 or any percentage specified in the definition of "Required Lenders", or consent to the assignment or transfer by the Borrower of any of its rights and obligations under the Loan Documents, in each case without the written consent of all Lenders; (iii) amend, modify or waive any pro rata provision of Section 4.8 or 4.9, or any provision in the Loan Documents which provides for amounts paid in respect of the Obligations to be shared among the Lenders ratably, without the consent of all Lenders; (iv) except as provided in Section 9.10, provide for any material release of Collateral without the consent of all Lenders; or (v) affect the interests, rights or obligations of the Administrative Agent qua the Administrative Agent or the Issuing Lenders qua the Issuing Lenders shall be made without consent of the Administrative Agent or the Issuing Lenders, as the case may be. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent, the Issuing Lenders and all future holders of the Loans. In the case of any waiver, the Borrower and its Subsidiaries, the Lenders and the Administrative Agent shall be restored to their former position and rights and under the Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

        (b)   No failure or delay by the Administrative Agent, any Issuing Lender or any Lender in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right, or any abandonment or discontinuance of steps to enforce such power or right, preclude any other or further exercise thereof or the exercise of any other power or right. The rights and remedies of the Administrative Agent, the Issuing Lenders and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies they would otherwise have. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent, any Issuing Lender, or any Lender under any Loan Document shall, in any event, be effective unless the same is permitted by paragraph (a) of this Section 10.1, and shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.

        Notwithstanding anything in this Agreement to the contrary, no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling the Borrower to satisfy a condition precedent to the making of a Loan of any Class shall be effective against the Lenders of such Class for purposes of the Commitments of such Class unless the Required Lenders of such Class shall have concurred with such waiver or modification, and no waiver or modification of any provision of this Agreement or any other Loan Document that could reasonably be expected to adversely affect the Lenders of any Class in a manner that does not affect all Classes equally shall be effective against the Lenders of such Class unless the Required Lenders of such Class shall have concurred with such waiver or modification.

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        SECTION 10.2    Notices.    All notices and other communications provided to any party hereto under any Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth on the signature pages hereof or Schedule 1.1(a) or set forth in the Administrative Questionnaire of such party or the Assignment Agreement or at such other address or facsimile number as may be designated by such party in a written notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid shall be effective five (5) Business Days after being sent or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted (if confirmed). Each Lender acknowledges and accepts the terms of the Communications Agreement and agrees that Communications (as defined in the Communications Agreement) may be made available to such Lender as provided in the Communications Agreement.

        SECTION 10.3    Payment of Costs and Expenses.    

        (a)   The Borrower agrees to pay promptly on demand all reasonable out-of-pocket costs and expenses of CNAI, the Administrative Agent and the Issuing Lenders and their respective Affiliates (including the reasonable fees and out-of-pocket costs and expenses of special New York counsel and relevant local counsel to the Administrative Agent) in connection with:

        (i)    the negotiation, preparation, execution, delivery and administration of each Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time hereafter be required;

        (ii)   the preparation and review of the form of any document or instrument relevant to any Loan Document; provided, however, that the Borrower shall have no obligation to pay for the cost of the documentation of assignments or participations as provided in Section 10.11 (unless such assignment is made pursuant to Section 4.11); and

        (iii)  in the case of the Issuing Lenders, all out-of-pocket expenses incurred by the any Issuing Lender in connection with the Issuance of any Letter of Credit or any demand for payment thereunder;

in each case, upon presentation of statement of account in reasonable detail, whether or not the transactions contemplated hereby are consummated.

        (b)   Without duplication of the Borrower's obligations under Section 4.7, the Borrower further agrees to pay upon demand, and to save the Administrative Agent, the Issuing Lenders and the Lenders harmless from all liability for all costs, expenses, assessments, or other charges, and any stamp or other similar Taxes which may be payable in connection with the execution, delivery or enforcement of any Loan Document, the Loans or Letter of Credit hereunder or any filing, registration, recording or perfection of any security interest contemplated by any Security Document. The Borrower also agrees to reimburse the Administrative Agent, each Issuing Lender and each Lender, as applicable, promptly upon demand upon presentation of a statement of account in reasonable detail for (i) all reasonable out-of-pocket costs and expenses (including fees and out-of-pocket expenses of counsel) incurred by the Administrative Agent, each Issuing Lender and each Lender in connection with the enforcement or protection of the rights in connection with this Agreement and the other Loan Documents, including its rights under this Section and including the negotiation of any restructuring or work-out, whether or not consummated, of any Obligations under the Loan Documents and (ii) all out-of-pocket costs and expenses (including fees and out-of-pocket costs and expenses of counsel) by the Administrative Agent, each Issuing Lender and each Lender in connection with the enforcement of any Obligations under the Loan Documents after an Event of Default or in connection with any insolvency proceedings; provided that, in either case, the Borrower shall not be obligated to reimburse such costs and expenses that are found in a final judgment by a court of competent jurisdiction to have

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been incurred in an attempt to enforce such rights and remedies that were pursued by such Administrative Agent or Lender in bad faith and without any reasonable basis in fact or law.

        SECTION 10.4    Indemnification.    

        (a)   In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments and the Loans, the Borrower hereby indemnifies, exonerates and holds the Administrative Agent, CNAI, each Issuing Lender and each Lender and each of their respective Affiliates, officers, directors and employees (collectively, the "Indemnified Parties") free and harmless from and against any and all losses, costs, actions, causes of action, suits, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including any amounts paid to any Agent-Related Person pursuant to Section 9.1(b) and reasonable attorneys' fees and disbursements but excluding claims for lost profits (collectively, the "Indemnified Liabilities"), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to:

        (i)    any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or Letter of Credit (including any refusal by any Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit;

        (ii)   the entering into and performance of any Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article V not to fund any Loan);

        (iii)  any investigation, litigation, proceeding, or obligation related to any Environmental Law or other matter in any case arising out of the relationship of the parties under this Agreement; or

        (iv)  the presence, or alleged presence, on or under, or the escape, seepage, leakage, spillage, discharge, emission or release from, any real property owned, leased or operated by the Borrower or any of its Subsidiaries thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), or at any other locations regardless of whether caused by, or within the control of the Borrower, where such claim or liability arises out of the relationship of the parties under this Agreement;

whether or not such investigation, litigation or proceeding is brought by the Borrower or its Affiliates, any of their respective shareholders or creditors, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's (i) gross negligence or willful misconduct or (ii) breach of such Indemnified party's obligations under this Agreement. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

        (b)   To the extent permitted by applicable law, no Indemnified Party shall have any liability to the Borrower or its Affiliates or any of their respective shareholders or creditors under any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, any Loan or the use of the proceeds thereof.

        SECTION 10.5    Survival.    The obligations of the Borrower under Sections 2.6.6, 4.3, 4.5, 4.6, 4.7, 10.3 and 10.4, and the obligations of the Lenders under Sections 9.1 and 2.6.6, shall in each case survive any termination of this Agreement, the payment in full of all Obligations under the Loan Documents

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and the termination of all Commitments, and the obligations of the Borrower to the Retiring Lenders under the correlative provisions of such sections of the Existing Credit Agreement shall, in each case, survive any termination of the Existing Credit Agreement, the payment in full of all Obligations under the Loan Documents and the Existing Credit Agreement and the termination of all Commitments. The representations and warranties made by the Borrower in each Loan Document to which it is a party shall survive the execution and delivery of such Loan Document.

        SECTION 10.6    Severability.    Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.

        SECTION 10.7    Headings.    The various headings and table of contents of each Loan Document are inserted for convenience only and shall not affect the meaning, construction or interpretation of this Agreement or any other Loan Document or any provisions hereof or thereof.

        SECTION 10.8    Execution in Counterparts.    This Agreement may be executed by the parties hereto in several counterparts, each of which shall be executed by the Borrower and the Administrative Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement.

        SECTION 10.9    Governing Law; Entire Agreement.    This Agreement, and the rights and obligations of the parties under this Agreement, shall be governed by, and construed and interpreted in accordance with, the law of the state of New York. The Loan Documents represent the agreement of the Borrower, the Administrative Agent, the Issuing Lenders and the Lenders and supersede any and all prior agreements and understandings, oral or written, relative or with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, any Issuing Lender or any Lender relative to subject matter hereof not expressly set forth or referred to in the Loan Documents.

        SECTION 10.10    Successors and Assigns.    This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that:

        (a)   the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent, all Issuing Lenders and all Lenders; and

        (b)   the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11.

        SECTION 10.11    Sale and Transfer of Loans; Participations in Loans    Each Lender may assign, or sell participations in, its Loans to one or more other Persons in accordance with this Section 10.11.

        SECTION 10.11.1    Assignments.    

        (a)   Any Lender (an "Assignor") may, in accordance with applicable law, at any time and from time to time assign to any Person (an "Assignee"), with the consent of (i) in the case of an assignment of all or portion of a Term Loan, the Administrative Agent (which consent shall not be required in the case of any assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender) and (ii) in the case of an assignment of all or a portion of a Revolver Commitment or any Revolver Lender's obligations in respect of its LC Exposure, (A) each Issuing Lender (B) the Administrative Agent and (C) the Borrower (such consent not to be unreasonably withheld or delayed) (except that the consent of the Borrower shall not be required at any time a Default or Event of Default shall have occurred and be continuing), all or any part of its rights and obligations under this Agreement pursuant to an Assignment Agreement, executed by such Assignee, such Assignor and any other Person whose consent is required pursuant to this paragraph, and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Assignee (other than any Lender or any Affiliate or Approved Fund thereof) shall be in an aggregate principal amount of

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less than (I) in the case of Term Loans, $1,000,000 and (II) in the case of Revolver Commitments or Revolver Loans, $3,000,000 (other than, in each case, an assignment of all of a Lender's interests under this Agreement and treating simultaneous assignments to and from Approved Funds of a single Lender as one assignment), unless otherwise agreed by the Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Revolver Commitment, each Issuing Lender) and; provided, further, that after giving effect to any such assignment the assigning Lender shall have Loans or Commitments remaining of at least (I) in the case of Term Loans, $1,000,000 and (II) in the case of Revolver Commitments or Revolver Loans, $3,000,000 in the aggregate amount (other than, in each case, an assignment of all of a Lender's interests under this Agreement and treating simultaneous assignments to and from Approved Funds of a single Lender as one assignment).

        Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment Agreement, (i) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment Agreement, have the rights and obligations of a Lender hereunder with Loans and Commitments as set forth therein, and (ii) the Assignor thereunder shall, to the extent provided in such Assignment Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto). Any assignment or sale that does not comply with this clause (a) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.11.2.

        (b)   The Administrative Agent shall, on behalf of the Borrower, maintain at its address referred to on Schedule 1.1(a) a copy of each Assignment Agreement and each Accession Agreement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and the principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent, the Issuing Lenders and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans or the Commitments, as the case may be, recorded therein for all purposes of this Agreement notwithstanding notice to the contrary. Any assignment of any Loan or any Commitment shall be effective only upon appropriate entries with respect thereto being made in the Register.

        (c)   Upon its receipt of an Assignment Agreement executed by an Assignor, an Assignee and any other Person whose consent is required by Section 10.11.1(a), together with payment to the Administrative Agent of a registration and processing fee of $3,500 (unless waived by the Administrative Agent in its discretion and provided that only one such fee shall be payable in the case of simultaneous assignments to two or more Approved Funds of a single Lender), the Administrative Agent shall (i) promptly accept such Assignment Agreement and (ii) record the information contained therein in the Register on the effective date determined pursuant thereto.

        (d)   For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section 10.11.1 concerning assignments of Loans and Commitments relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including any pledge or assignment by a Lender of any Loan to any Federal Reserve Bank in accordance with applicable law; provided, that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.

        (e)   Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i)  nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or

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otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Revolver Loan by an SPC hereunder shall utilize the related Revolver Commitment of the Granting Lender to the same extent, and as if, such Revolver Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 10.11.1, any SPC may (A) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (B) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This Section 10.11.1(e) may not be amended without the written consent of each SPC. The Granting Lender, such SPC and any assignee of such SPC shall comply with the requirements of Section 4.7 as Lender.

        SECTION 10.11.2    Participations.    With notice to the Borrower and the Administrative Agent, any Lender may at any time sell to one or more Persons (each of such Persons being herein called a "Participant") participating interests in any of the Loans, Commitments or other interests of such Lender hereunder; provided, however, that:

        (a)   no participation contemplated in this Section 10.11.2 shall relieve such Lender from its Loans, Commitments other obligations under any Loan Document;

        (b)   such Lender shall remain solely responsible for the performance of its Loans, Commitments and such other obligations;

        (c)   the Borrower, the Administrative Agent and the Issuing Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under each of the Loan Documents;

        (d)   no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action under any Loan Document, except as provided in clause (f) of this Section 10.11.2;

        (e)   the Borrower shall not be required to pay any amount under Sections 2.6.6, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 10.3 and 10.4, that is greater than the amount which it would have been required to pay had no participating interest been sold;

        (f)    in no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, extend the due date of such principal, interest or fee payments or increase the amount or extend the Term Loan Maturity Date or the Revolver Commitment Termination Date of such Loans, in each case to the extent subject to such participation;

        (g)   the Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the

85

occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 4.10 as fully as if it were a Lender hereunder; and

        (h)   the Borrower also agrees that each Participant shall be entitled to the benefits of Sections 4.3, 4.6 and 4.7 with respect to its participation in the Loans and the Revolver Commitments outstanding from time to time as if it was a Lender; provided that, in the case of Section 4.7, such Participant shall have complied with the requirements of said Section, as if it were a Lender and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.

        SECTION 10.12    Other Transactions.    Nothing contained herein shall preclude the Administrative Agent, any Issuing Lender or any other Lender from engaging in any transaction, in addition to those contemplated by any Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person.

        SECTION 10.13    Submission To Jurisdiction; Waivers.    Each of the Borrower, the Administrative Agent, the Issuing Lenders and the Lenders hereby irrevocably and unconditionally:

        (a)   submits for itself and its property in any legal action or proceeding relating to the Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

        (b)   consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

        (c)   agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person at its address set forth on Schedule 1.1(a) or at such other address of which the Administrative Agent shall have been notified pursuant to Section 10.2;

        (d)   agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

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

        SECTION 10.14    WAIVERS OF JURY TRIAL.    EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND

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(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

        SECTION 10.15    Non-Recourse Persons.    The Lenders acknowledge that no Non-Recourse Person shall have any responsibility or liability for the Obligations under the Loan Documents.

        SECTION 10.16    Acknowledgments.    The Borrower hereby acknowledges that:

        (a)   it has been advised by counsel in the negotiation, execution and delivery of the Loan Documents;

        (b)   neither the Administrative Agent, any Issuing Lender nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with any of the Loan Documents, and the relationship between Administrative Agent, the Issuing Lenders and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

        (c)   no joint venture is created by any of the Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.

        SECTION 10.17    Confidentiality.    Each of the Administrative Agent, each Issuing Lender and each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement; provided that nothing herein shall prevent the Administrative Agent, any Issuing Lender or any Lender from disclosing any such information (a) to the Administrative Agent, any Issuing Lender any other Lender or any Affiliate of any Lender, (b) to any transferee, prospective transferee or any lender of a Lender that agrees to comply with the provisions of this Section 10.17, (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its Affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy under any Loan Document. Notwithstanding anything herein to the contrary, the Borrower, Administrative Agent, each Issuing Lender and each Lender (and their Affiliates and their respective partners, officers, directors, employees, accountants, attorneys and other advisors, agents and other representatives) may disclose to any and all Persons, without limitation of any kind, any information with respect to the U.S. federal tax treatment and any facts that may be relevant to the U.S. federal tax structure of the transactions contemplated hereby and all materials of any kind (including opinions and other tax analyses) that are provided to any of them relating to such treatment and tax structure; provided, however, that none of them shall disclose any other information, the disclosure of which is otherwise limited, that is not relevant to understanding the U.S. federal tax treatment or U.S. federal tax structure of the transaction (including the identity of any party and information that could lead another to determine the identity of any party), or any other information to the extent that such disclosure could result in a violation of any federal or state securities law.

        SECTION 10.18    USA PATRIOT Act.    Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.

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        SECTION 10.19    EMMH Credit Agreement.    This Agreement constitutes a replacement of the Existing Credit Agreement which constituted a replacement of the EMMH Credit Agreement as contemplated in clause (xv) of the general provisions of Appendix A of each Powerton/Joliet Lease Participation Agreement and as such this Agreement constitutes the "Holdings Credit Agreement" for the purposes of the Powerton/Joliet Lease Operative Documents.

        SECTION 10.20    Retiring Lenders.    Each Retiring Lender shall, as of the Closing Date, cease to be a "Lender" under (and, accordingly, shall cease to be a party to) the Existing Credit Agreement, and the Borrower hereby confirms and agrees that, as of the Closing Date, the Retiring Lenders shall have no obligations or liabilities under this Agreement; provided, that the Retiring Lenders shall be entitled to the benefits of Section 10.5.

        SECTION 10.21    Accession Agreement.    Upon the execution and delivery of an Accession Agreement by an Accession Lender and the acceptance of such Accession Agreement by the Administrative Agent on or prior to the Closing Date, such Accession Lender shall be a party hereto as of the Closing Date and shall have the rights and obligations of a Lender hereunder with Loans as set forth in its Accession Agreement.

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

MIDWEST GENERATION, LLC
By:	/s/ STEVEN D. EISENBERG Name: Steven D. Eisenberg Title: Vice President
Address for Notices:
One Financial Place 440 South LaSalle Street, Suite 3500 Chicago, IL 60605 Telecopier No: (312) 583-6111
Taxpayer Identification Number: 33-0868558

Second Amended and Restated Credit Agreement

CITICORP NORTH AMERICA, INC.,     as Administrative Agent
By:	/s/ DALE R. GONCHER Name: Dale R. Goncher Title: Director
Address for Notices:
2 Penns Way, Suite 110 New Castle, DE 19720 Attention: Sandra Munoz Telecopier No: (212) 991-0961

Second Amended and Restated Credit Agreement

2

CITICORP NORTH AMERICA, INC.,     as Issuing Lender
By:	/s/ DALE R. GONCHER Name: Dale R. Goncher Title: Director
Address for Notices:
388 Greenwich Street, 21st Floor New York, NY 10013 Attention: Sarah Terner Telecopier No: (212) 921-5947

Second Amended and Restated Credit Agreement

3

LENDERS
ALLIED IRISH BANKS, P.L.C.
By:	/s/ AIDAN LANIGAN Name: Aidan Lanigan Title: Vice President
By:	/s/ VAUGHN BUCK Name: Vaughn Buck Title: Director
Address for Notices:
For Credit Matters:
Allied Irish Banks plc. 405 Park Avenue, 4th Floor, New York, NY 10022 Attention: Aidan Lanigan Telecopier No: (212) 339-8325
For Operational Matters:
Allied Irish Bank—Corporate Operations 2nd Floor, Iona House, Shelbourne Road, Ballsbridge, Dublin 4, Ireland Attention: Bernice Ruane Telecopier No: +353 1 608 9795

Second Amended and Restated Credit Agreement

4

CANADIAN IMPERIAL BANK OF COMMERCE,
By:	/s/ JOHN O'DOWD Name: John O'Dowd Title: Authorized Signatory
By:	/s/ MILENA GRGIC Name: Milena Grgic Title: Authorized Signatory
Address for Notices:
CIBC, Corporate Client Support Centre Atrium on Bay 40 Dundas Street West, 5th Floor Toronto, Ontario Canada M5G 2C2 Attention: Helen Ng Telecopier No: (416) 542-4609

Second Amended and Restated Credit Agreement

5

CREDIT SUISSE, Cayman Islands Branch
By:	/s/ THOMAS R. CANTELLO Name: Thomas R. Cantello Title: Vice President
By:	/s/ GREGORY S. RICHARDS Name: Gregory S. Richards Title: Associate
Address for Notices:
Eleven Madison Avenue New York, NY 10010 Attention: Brian Caldwell Telecopier No: (212) 325-8321

Second Amended and Restated Credit Agreement

6

GENERAL ELECTRIC CAPITAL CORPORATION
By:	/s/ SIMON DUNCAN Name: Simon Duncan Title: Authorized Signatory
Address for Notices:
120 Long Ridge Road Stamford, CT 06927 Attention: Cris Matteson Telecopier No: (203) 357-4890

Second Amended and Restated Credit Agreement

7

GOLDMAN SACHS CREDIT PARTNERS L.P.
By:	/s/ WILLIAM ARCHER Name: WILLIAM ARCHER Title: Managing Director
Address for Notices:
Goldman, Sachs & Co. 30 Hudson Street, 17th Floor Jersey City, NJ 07302 Attention: Phillip Green Telecopier No: (212) 357-4597

Second Amended and Restated Credit Agreement

8

JPMORGAN CHASE BANK, N.A.
By:	/s/ THOMAS L. CASEY Name: Thomas L. Casey Title: Vice President
Address for Notices:
270 Park Ave., 4th Floor New York, NY 10017 Attention: Thomas L. Casey Telecopier No: (212) 270-3089

Second Amended and Restated Credit Agreement

9

KBC BANK N.V.
By:	/s/ ERIC RASKIN Name: Erik Raskin Title: Vice President
By:	/s/ ROBERT SNAUFFER Name: Robert Snauffer Title: First Vice President
Address for Notices:
125 West 55th Street New York, NY 10019 Attention: Robert Pacifici Telecopier No: (212) 956-5581

Second Amended and Restated Credit Agreement

10

LEHMAN COMMERCIAL PAPER INC.
By:	/s/ FRANK P. TURNER Name: Frank P. Turner Title: Vice President
Address for Notices:
745 Seventh Avenue, 5th Floor New York, NY 10019 Attention: Frank P. Turner Telecopier No: (646) 758-1986

Second Amended and Restated Credit Agreement

11

MERRILL LYNCH CAPITAL CORPORATION
By:	/s/ CAROL J.E. FEELEY Name: Carol J.E. Feeley Title: Vice President
Address for Notices:
250 Vesey Street, 22nd floor New York, NY 10080 Attention: Brian Buttenmuller Telecopier No: (212) 449-9435

Second Amended and Restated Credit Agreement

12

NEWCOURT CAPITAL USA INC.
By:	/s/ GUY PIAZZA Name: Guy Piazza Title: Managing Director
Address for Notices:
1211 Avenue of the Americas, 22nd Floor New York, NY 10036 Attention: Joe Gyurindak/Nadeira Teekah Telecopier No: (212) 382-9033

Second Amended and Restated Credit Agreement

13

THE ROYAL BANK OF SCOTLAND PLC
By:	/s/ SIMON MOCKFORD Name: Simon Mockford Title: Vice President
By:	/s/ RICH RANDALL Name: Rich Randall Title: Senior Vice President
Address for Notices:
Level 12, 101 Park Avenue New York, NY 10178 Attention: Christine Xu Telecopier No: (212) 401-1494

Second Amended and Restated Credit Agreement

14

UBS LOAN FINANCE
By:	/s/ RICHARD L. TAVROW Name: Richard L. Tavrow Title: Director
By:	/s/ TOBA LUMBANTOBING Name: Toba Lumbantobing Title: Associate Director
Address for Notices:
677 Washington Blvd. Stamford, CT 06901 Attention: Deborah Porter Telecopier No: (203) 719-4176

Second Amended and Restated Credit Agreement

15

UNION BANK OF CALIFORNIA, N.A.
By:	/s/ DENNIS G. BLANK Name: Dennis G. Blank Title: Vice President
Address for Notices:
For Credit Notices:
Union Bank of California, N.A. 445 South Figueroa Street, 15th Floor, Los Angeles, CA 90071 Attention: Dennis Blank Telecopier No: (213) 236-4096
For Operations Notices:
Union Bank of California, N.A. Commercial Loan Operations 1980 Saturn Street Monterey Park, CA 91754 Attention: Ruby Gonzales Telecopier No: (323) 720-2252

Second Amended and Restated Credit Agreement

16

WELLS FARGO BANK, N.A.
By:	/s/ VANESSA MEYER Name: Vanessa Meyer Title: Senior Vice President
Address for Notices:
707 Wilshire Blvd. 16th Floor Los Angeles, CA 90017 Attention: Vanessa Sheh Meyer Telecopier No: (213) 614-2569

Second Amended and Restated Credit Agreement

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WESTLB AG, NEW YORK BRANCH
By:	/s/ FELICIA LAFORGIA Name: Felicia Laforgia Title: Director
By:	/s/ PETER A. RYAN Name: Peter A. Ryan Title: Director
Address for Notices:
Vicky Keung WestLB 1211 Avenue of the Americas, Floor 25 New York, NY 10036 Telephone:: (212) 852-6259 Telecopier No: (212) 302-7946

Second Amended and Restated Credit Agreement

18

Schedule 3.2.1
to Credit Agreement

Midwest Generation, LLC
Pricing Grid

	LEVEL 1 Debt Rating At Least: BB+ By S&P Ba1 By Moody's		LEVEL 2 Debt Rating Less Than Level 1 But At Least: BB By S&P Ba2 By Moody's		LEVEL 3 Debt Rating Less Than Level 2 But At Least: BB- By S&P Ba3 By Moody's		LEVEL 4 Debt Rating Less Than Level 3 But At Least: B+ By S&P B1 By Moody's
BASIS FOR PRICING	Revolver Loans(2)	Term Loans(3)	Revolver Loans(2)	Term Loans(3)	Revolver Loans(2)	Term Loans(3)	Revolver Loans(2)	Term Loans(3)
Commitment Fee(1)	25 bps	N/A	37.5 bps	N/A	37.5 bps	N/A	50 bps	N/A
Applicable Margin for Base Rate Loans	25 bps	50 bps	50 bps	75 bps	75 bps	75 bps	100 bps	75 bps
Applicable Margin for LIBO Rate Loans	125 bps	150 bps	150 bps	175 bps	175 bps	175 bps	200 bps	175 bps
Participation Fee	125 bps	N/A	150 bps	N/A	175 bps	N/A	200 bps	N/A

bps = basis points per annum

(1)

Paid quarterly in arrears on each bank's unused commitment.

(2)

At any time the Debt Ratings for the Borrower are split between S&P and Moody's, the pricing level in which the lower rating falls shall govern.

(3)

At any time the Debt Ratings for the Borrower are split between S&P and Moody's, the pricing level in which the higher rating falls (the "High Level") shall govern; provided that if such Debt Ratings by either S&P or Moody's are two or more grades lower than the level set forth in the High Level, the next lower pricing level shall govern.

Second Amended and Restated Credit Agreement

19

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TABLE OF CONTENTS
RECITALS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
ARTICLE II COMMITMENTS AND BORROWING PROCEDURES
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS
ARTICLE V CONDITIONS TO LOANS
ARTICLE VI REPRESENTATIONS AND WARRANTIES
ARTICLE VII COVENANTS
ARTICLE VIII EVENTS OF DEFAULT
ARTICLE IX THE ADMINISTRATIVE AGENT
ARTICLE X MISCELLANEOUS PROVISIONS
Midwest Generation, LLC Pricing Grid

EX-10.7.1

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Exhibit 10.7.1

ACCESSION AGREEMENT

Reference is made to the Second Amended and Restated Credit Agreement dated as of December 15, 2005 (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "Credit Agreement"), among Midwest Generation, LLC, Citicorp North America, Inc., as administrative agent (the "Administrative Agent"), the various financial institutions as are, or shall from time to time become, parties thereunder, and the Issuing Lenders party thereto. Capitalized terms used and not defined herein shall have the meanings given to them in the Credit Agreement.

In accordance with Section 10.21 of the Credit Agreement, the financial institution listed under the heading "ACCESSION LENDER" on the signature page hereto (the "Accession Lender") is to become a party to the Credit Agreement as a Lender. Accordingly, the Accession Lender hereby agrees as follows:

Section 1.    Addition of Accession Lender.    Upon the execution and delivery by the Accession Lender and the acceptance of this Agreement by the Administrative Agent on or prior to the Closing Date, this Agreement shall become effective as of the Closing Date and the Accession Lender (a) shall be deemed automatically to have become a party to the Credit Agreement and have all the rights and obligations of a "Lender" under the Credit Agreement (with the principal amount of Term Loans as of the Closing Date set forth in a notice to the Accession Lender from the Administrative Agent on the Closing Date) and the other Loan Documents as if it were an original signatory thereto and (b) agrees to be bound by the terms and conditions set forth in the Credit Agreement and the other Loan Documents as if it were an original signatory thereto.

Section 2.    Administrative Matters.    The Accession Lender hereby requests the Administrative Agent to acknowledge receipt of this Agreement. The Assignee agrees to furnish the tax form required by paragraph (e) of Section 4.7 (if so required) of the Credit Agreement no later than the date of acceptance hereof by the Administrative Agent.

Section 3.    Miscellaneous.    Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

IN WITNESS WHEREOF, the Accession Lender has caused this Agreement to be executed by its officer thereunto duly authorized as of December , 2005.

		ACCESSION LENDER [Insert Name of Accession Lender]
		By:
			Name: Title:
Accepted and Acknowledged this    day of December, 2005
CITICORP NORTH AMERICA, INC., as Administrative Agent
By:
	Name: Title:

[This caption does not constitute part of the Accession Agreement. The Accession Agreement was executed by various lenders. Midwest Generation, LLC will provide the names of these lenders upon request.]

1

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ACCESSION AGREEMENT

EX-21

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Exhibit 21

MIDWEST GENERATION, LLC
LIST OF SUBSIDIARIES
As of December 31, 2005

Entity	Jurisdiction Of Organization
Midwest Finance Corp.	Delaware

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MIDWEST GENERATION, LLC LIST OF SUBSIDIARIES As of December 31, 2005

EX-31.1

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Exhibit 31.1

CERTIFICATIONS

I, Guy F. Gorney, certify that:

1.

I have reviewed this annual report on Form 10-K of Midwest Generation, LLC (the "annual report");

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(c)

Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 6, 2006 /s/  GUY F. GORNEY Guy F. Gorney
Manager and President

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CERTIFICATIONS

EX-31.2

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Exhibit 31.2

CERTIFICATIONS

I, W. James Scilacci, certify that:

1.

I have reviewed this annual report on Form 10-K of Midwest Generation, LLC (the "annual report");

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(c)

Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 6, 2006 /s/  W. JAMES SCILACCI W. James Scilacci
Manager and Vice President

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CERTIFICATIONS

EX-32

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Exhibit 32

STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K for the year ended December 31, 2005 (the "Annual Report") of Midwest Generation, LLC (the "Company"), and pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies, to the best of his knowledge and belief, that:

1.

The Annual Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

2.

The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  GUY F. GORNEY Guy F. Gorney
Manager and President
Midwest Generation, LLC

/s/  W. JAMES SCILACCI W. James Scilacci
Manager and Vice President
Midwest Generation, LLC

This statement accompanies the Annual Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Midwest Generation, LLC and will be retained by Midwest Generation, LLC and furnished to the Securities and Exchange Commission or its staff upon request.

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STATEMENT PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002