Edison International 2001 Retention Incentives Terms and Conditions Agreement

 EDISON INTERNATIONAL 2001 Retention Incentives Terms and Conditions Retention Incentives for the year 2001 for eligible persons (Holders) at Edison International (EIX) and its participating affiliates (the Companies, or individually, the Company) are (a) deferred stock units (DSUs) payable as stock grants under the Equity Compensation Plan (ECP), and/or (b) cash paid outside of the ECP. The Retention Incentives are subject to the following terms and conditions: 1. GRANT The amount of DSUs and/or cash comprising the Retention Incentives awarded to Holder will be specified in an EIX written award certificate. 2. VESTING (a) The Retention Incentives will vest and become payable on the payment dates specified in Section 3. (b) If, during the Retention Period (defined in Section 3), Holder (i) terminates employment on or after (A) attaining age 65 or (B) attaining age 55 with five "years of service," as defined in the Southern California Edison Company Retirement Plan, or (C) such earlier date that qualifies the Holder for retirement under any Company retirement plan, or (ii) terminates employment while on leave with a permanent and total disability, (iii) dies while employed by the Company, or (iv) is involuntarily terminated by the Company without cause, then the Retention Incentives remaining unpaid at that time will vest in full and will be payable to Holder. (c) If termination of employment occurs during the Retention Period for any reason other than those specified in Section 2(b), the Retention Incentives remaining unpaid at that time will be forfeited. (d) Notwithstanding the foregoing, in the event of a "Change in Control of EIX" as defined in Appendix A hereto, the Retention Incentives remaining unpaid at that time will vest and be payable to holder. 3. RETENTION INCENTIVE PAYMENT (a) The DSU portion of the Retention Incentive, if any, is payable on the earlier of (i) two years after the date of grant, or (ii) on the later of (A) the date the average closing price for a share of EIX Common Stock as reported in the Western Edition of The Wall Street Journal for the New York Stock Exchange Composite Transactions for at least 20 consecutive trading days has equaled or exceeded $20, or (B) the first anniversary of the date of grant. The Retention Period for the DSU portion of the Retention Incentive is the period beginning on March 12, 2001 and ending on March 12, 2003, or such shorter period if payment is accelerated because the stock price appreciation requirement has been met. Page 1 (b) The cash portion of the Retention Incentive, if any, is payable in four equal quarterly installments on the following dates: June 12, 2001, September 12, 2001, December 12, 2001 and March 12, 2002. No interest accrues. Holders eligible to participate in the Executive Deferred Compensation Plan may elect, in the manner prescribed by EIX, to defer the cash portion of the Retention Incentive subject to the terms of that plan. The Retention Period for the cash portion of the Retention Incentive is the period beginning on March 12, 2001 and ending on March 12, 2002. (c) Except as provided in Section 2(b), the Retention Incentive payments are conditioned upon Holder remaining employed by the Company through the applicable payment dates. (d) Each DSU is equivalent to one share of EIX Common Stock and will be paid in EIX Common Stock as a Stock Payment under the ECP. No interest or dividend equivalents accrue. The shares of EIX Common Stock payable will be delivered within 30 days following the payment date specified in 3(a). Cash Payments will be made on the specified payment dates, or as soon thereafter as practicable. 4. TRANSFER AND BENEFICIARY The Retention Incentives will not be transferable by Holder. During the lifetime of Holder, the Retention Incentives will be payable only to him or her. Except as provided in the following sentence, Holder's spouse is the beneficiary, and upon the death of Holder, will be entitled to receive payment of the Retention Incentives remaining unpaid at that time. With the written consent of the spouse on form designated by EIX for that purpose, Holder may designate a different beneficiary. 5. TERMINATION OF RETENTION INCENTIVES In the event of termination of the employment of Holder for any reason other than those specified in Section 2(b), the Retention Incentives will be forfeited. In addition, the DSUs may be terminated if EIX elects to substitute cash awards as provided under Section 9. 6. TAXES EIX will have the right to retain and withhold the amount of taxes required by any government to be withheld or otherwise deducted and remitted with respect to payment of the Retention Incentives. In its discretion, EIX may require Holder to reimburse EIX for any such taxes required to be remitted by EIX and may withhold any distribution in whole or in part until EIX is so reimbursed. In lieu thereof, EIX will have the right to withhold from any other cash amounts due from EIX to Holder an amount equal to such taxes required to be withheld by EIX, or to retain and withhold a number of shares of EIX Common Stock having a market value equal to such taxes and cancel (in whole or in part) the shares, or to repurchase such shares from Holder within six months after the shares of Common Stock were acquired by Holder. Shares withheld or repurchased to reimburse EIX for federal and state income and payroll taxes shall be limited to the number of shares which have a fair market value on the date of withholding or repurchase (based on the closing price of EIX Common Stock on that date) equal to the aggregate amount of such tax liabilities based on the minimum statutory withholding rates that are applicable to such supplemental taxable income. Page 2 7. CONTINUED EMPLOYMENT Nothing in the award certificate or this Statement of Terms and Conditions will be deemed to confer on Holder any right to continue in the employ of EIX or an EIX affiliate or interfere in any way with the right of the employer to terminate his or her employment at any time. 8. NOTICE OF DISPOSITION OF SHARES AND SECTION 16 (a) Holder agrees that if he or she should dispose of any shares of stock acquired upon payment of the DSUs, including a disposition by sale, exchange, gift or transfer of legal title within six months from the date such shares are transferred to Holder, Holder will notify EIX promptly of such disposition. (b) If DSUs are granted to a person who later becomes subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended (Section 16), the DSUs will immediately and automatically become subject to the requirements of Rule 16b-3(d)(3) (Rule) and may not be paid until the Rule has been satisfied. In its sole discretion, the Administrator may take any action to assure compliance with the requirements of the Rule, including withholding delivery to Holder (or any other person) of any security or of any other payment in any form until the requirements of the Rule have been satisfied. The Secretary of Edison International may waive compliance with the requirements of the Rule if he or she determines the transaction to be exempt from the provisions of paragraph (b) of Section 16. 9. AMENDMENT The DSUs are subject to the terms of the ECP as amended from time to time. EIX reserves the right to substitute cash awards substantially equivalent in value to the DSUs. The DSUs may not otherwise be restricted or limited by any ECP amendment or termination approved after the date of the award without Holder's consent. 10. FORCE AND EFFECT The various provisions herein are severable in their entirety. Any determination of invalidity or unenforceability of any one provision will have no effect on the continuing force and effect of the remaining provisions. 11. GOVERNING LAW The terms and conditions of the Retention Incentives will be construed under the laws of the State of California. 12. NOTICE Unless waived by EIX, any notice required under or relating to the Retention Incentives must be in writing, with postage prepaid, addressed to: Edison International, Attn: Corporate Secretary, P.O. Box 800, Rosemead, CA 91770. EDISON INTERNATIONAL [Beverly P. Ryder] - ---------------------------- Beverly P. Ryder Page 3 APPENDIX A 2001 RETENTION INCENTIVES TERMS AND CONDITIONS Change In Control "Change in Control of EIX" shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: (a) Any Person (other than a trustee or other fiduciary holding securities under an employee benefit plan of EIX) becomes the Beneficial Owner, directly or indirectly, of securities of EIX representing thirty percent (30%) or more of the combined voting power of the EIX's then outstanding securities. For purposes of this clause, "Person" shall not include one or more underwriters acquiring newly-issued voting securities (or securities convertible into voting securities) directly from EIX with a view towards distribution. (b) On any day after the date of grant (the "Measurement Date") Continuing Directors cease for any reason to constitute a majority of the Board. A director is a "Continuing Director" if he or she either: (i) was a member of the Board on the applicable Initial Date (an "Initial Director"); or (ii) was elected to the Board, or was nominated for election by EIX's shareholders, by a vote of at least two-thirds (2/3) of the Initial Directors then in office. A member of the Board who was not a Director on the applicable Initial Date shall be deemed to be an Initial Director for purposes of clause (B) above if his or her election, or nomination for election by EIX's shareholders, was approved by a vote of at least two-thirds (2/3) of the Initial Directors (including directors elected after the applicable Initial Date who are deemed to be Initial Directors by application of this provision) then in office. "Initial Date" means the later of (A) the date of grant or (B) the date that is two (2) years before the Measurement Date. (c) EIX is liquidated; all or substantially all of EIX's assets are sold in one or a series of related transactions; or EIX is merged, consolidated, or reorganized with or involving any other corporation, other than a merger, consolidation, or reorganization that results in the voting securities of EIX outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of EIX (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. Notwithstanding the foregoing, a bankruptcy of EIX or a sale or spin-off of an Edison International Affiliate (short of a dissolution of EIX or a liquidation of substantially all of EIX's assets, determined on an aggregate basis) will not constitute a Change in Control of EIX. (d) The consummation of such other transaction that the Board may, in its discretion in the circumstances, declare to be a Change in Control of EIX for purposes of this Plan.