EDISON INTERNATIONAL
2002 Long-Term Incentives
Terms and Conditions
Long-term incentives (LTI) for the year 2002 for eligible persons (Holders) at Edison International (EIX) or its
participating affiliates (the Companies, or individually, the Company) include EIX nonqualified stock options to
purchase EIX common stock (EIX Options) to be awarded under the Equity Compensation Plan (ECP) or the 2000 Equity
Plan (collectively, the Plans) and contingent EIX Performance Shares, 50% of which will be payable as Stock
Grants under the ECP and 50% of which will be payable in cash outside of the Plans. The LTI are subject to the
following terms and conditions:
1. PRICE
The exercise price of an EIX Option stated in the award certificate is the average of the high and low sales
prices of EIX Common Stock on the New York Stock Exchange for the date of the award.
2. VESTING
(a) Subject to the provisions of Section 3, EIX Options may only be exercised or paid to the extent vested. The
EIX Options vest over a four-year period as described in this Section 2 (Option Vesting Period). The initial
vesting date will be May 30th of the year following the date of the grant, or six months after the date of the
grant, whichever date is later. The EIX Options will vest as follows:
o On the initial vesting date, one-fourth of the EIX Options will vest.
o On May 30th of the following year, an additional one-fourth of the EIX Options will vest.
o On May 30th of the following year, an additional one-fourth of the EIX Options will vest
o On May 30th of the fourth year following the date of grant, the balance of the EIX Options will vest.
(b) The vested portions of the EIX Options will accumulate to the extent not exercised, and be exercisable by the
Holder subject to the provisions of Section 3, in whole or in part, in any subsequent period but not later than
the May 30th of the 10th calendar year following the date of the award.
(c) The Performance Shares will vest and become payable to the extent earned at the end of the Performance Period
(defined in Section 4).
(d) If, during the Option Vesting Period or the Performance Period, the 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, (ii) terminates employment while on leave with a permanent and total
disability, or (iii) dies while employed by the Company, then the vesting and exercise provisions of this Section
2(d) will apply. The EIX Options will vest to the extent necessary to cause the aggregate number of shares
subject to vested EIX Options (including any shares acquired pursuant to previously exercised EIX Options) to
equal the product of 1/48th of the number of shares granted multiplied by the number of full months of service
the Holder has completed during the Option Vesting Period. The Performance Shares will vest to the extent
necessary to cause the number of vested Performance Shares to equal the product of 1/36th of the number of
Performance Shares granted multiplied by the number of full months of service the Holder has completed during the
Performance Period. Performance Shares will be payable to the Holder on such pro rata basis on the payment date
to the extent of the EIX total shareholder return (TSR) ranking achieved as specified in Section 4.
Notwithstanding the foregoing, the LTI of a Holder who served as a member of the Southern California Edison
Company Management Committee (which was dissolved in 1993) will fully vest upon his or her retirement or death,
or upon employment termination while on leave of absence with a permanent and total disability.
(e) Upon involuntary termination of employment not for cause during the Option Vesting Period or Performance
Period (unless the termination takes place as part of a sale or spin-off of the Holder's company and there is no
executed agreement with the Holder specifying that this Section 2(e) shall apply) the provisions of this Section
2(e) shall apply. The EIX Options will be vested on a pro-rata basis as
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described in Section 2(d), except that an additional year of vesting credit will apply, and the Holder will have
one year following the date of termination in which to exercise the EIX Option, or until the end of the option
term, whichever occurs earlier. The Performance Shares will be vested pro rata for the portion of the
Performance Period through the date of termination plus one year. Performance Shares will be payable to the
Holder on such pro rata basis on the payment date specified in Section 4(c) to the extent of the EIX total
shareholder return ranking achieved as specified in Section 4.
(f) Upon termination of employment during the EIX Option term for any reason other than those specified in
Section 2(d) or 2(e), only those EIX Options that have vested as of the prior vesting date may be exercised, and
they will be forfeited unless they are exercised within 180 days following the date of termination or by the end
of the applicable EIX Option term, if that date is earlier. If such termination occurs during the Performance
Period, all Performance Shares will be forfeited.
(g) Notwithstanding the foregoing, in the event of a "Change in Control of EIX" as defined in Appendix A hereto,
outstanding EIX Options will vest. The EIX Options will remain exercisable for a period of 2 years if EIX Common
Stock remains outstanding after the Change in Control of EIX. If EIX Common Stock does not remain outstanding
after the Change in Control of EIX, and the EIX Options are not replaced by new owners, cash payout for
unexercised EIX Options will occur. Upon a Change in Control of EIX, all outstanding Performance Shares will
vest and be paid in cash. The amount of the Performance Share payment will equal the greater of (i) the value of
the target number of shares under the award, or (ii) the value of the number of shares that would be paid
assuming the Performance Period ended on the date of the Change in Control of EIX and based on actual performance
through that date.
3. EIX OPTION EXERCISE
(a) The Holder may exercise an EIX Option by providing written notice to EIX on the form prescribed by EIX for
this purpose accompanied by full payment of the applicable exercise price. Payment must be in cash, or its
equivalent acceptable to EIX, including EIX Common Stock valued on the exercise date at a per share price equal
to the average of the high and low sales prices of EIX Common Stock on the New York Stock Exchange. A
broker-assisted "cashless" exercise may be accommodated for EIX Options at the discretion of EIX. Until payment
is accepted, the Holder will have no rights in the optioned stock. EIX Options may be exercised at any time
after they have vested through May 30th of the 10th calendar year following the date of the award except as
otherwise provided in Sections 2(d), 2(e), 2(f), 2(g) and 8.
(b) The Holder agrees that any securities acquired by him or her hereunder are being acquired for his or her own
account for investment and not with a view to or for sale in connection with any distribution thereof and that he
or she understands that such securities may not be sold, transferred, pledged, hypothecated, alienated, or
otherwise assigned or disposed of without either registration under the Securities Act of 1933 or compliance with
the exemption provided by Rule 144 or another applicable exemption under such act.
(c) The Holder will have no right or claim to any specific funds, property or assets of EIX as a result of the
award.
4. PERFORMANCE SHARES
(a) Performance Shares are EIX stock-based units subject to a performance measure based on the percentile ranking
of EIX total shareholder return (TSR) compared to the TSR for each stock comprising the Philadelphia Utility
Index, deleting AES Corporation and adding Sempra Energy, over all the three-calendar-year period commencing on
January 1st of the year the Performance Shares are granted ("Performance Period"). TSR is calculated using a
20-day trading average on the measurement date. A target number of contingent Performance Shares will be
awarded. The actual amount of Performance Shares to be paid will depend on the EIX TSR percentile ranking on the
measurement date. The target number of Performance Shares will be paid if the EIX TSR rank is at the 50th
percentile. Payment may range from nothing if the EIX TSR is below the 40th percentile to three times the target
number of Performance Shares if the EIX TSR percentile ranking is at the 90th percentile or higher. The payment
multiples for the various EIX TSR rankings are as follows:
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Performance Share Payment
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EIX TSR Rank Payment Multiple(1)
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Above 90th Percentile 3 times
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75th to 89th Percentile Between 2 and 3 times
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50th to 74th Percentile Between 1 and 2 times
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40th to 49th Percentile Between 0.25 and 1 times
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Below 40th Percentile 0 times
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(1) The multiple is interpolated for performance between
the points indicated.
(b) There will be one performance measurement date for the three-year Performance Period. The measurement date
will be the last business day of the Performance Period. The applicable target multiple earned as provided in
the table above for the Performance Shares will be paid for the Performance Period to the extent of the EIX TSR
percentile ranking achieved on the date of measurement.
(c) Each Performance Share earned will be worth one share of EIX Common Stock. One-half of the earned
Performance Shares will be paid in EIX Common Stock as a Stock Payment under the ECP. The remaining one-half of
the earned Performance Shares will be paid in cash and the value of each Performance Share will be equal to the
average of the high and low sales prices per share of EIX Common Stock on the New York Stock Exchange for the
measurement date. The shares of EIX Common Stock and the cash payable for the earned Performance Shares will be
delivered within 30 days following the end of the Performance Period described in Section 4(b).
5. DELAYED PAYMENT OR DELIVERY OF LTI GAINS
Notwithstanding the terms of any LTI, Holders who are eligible to defer salary under the EIX Executive Deferred
Compensation Plan (EDCP) may irrevocably elect to alternatively exercise all or part of any vested EIX Option
pursuant to the terms of the Option Gain Deferral Program (OGDP), and/or may irrevocably elect to defer receipt
of all or a part of the cash portion of any Performance Shares pursuant to the terms of the EDCP. To make such
an election, the Holder must submit a signed agreement in the form approved by the Administrator at least six
months prior to the expiration date of the EIX Option, or the payment date of a Performance Share. An EIX Option
may not be exercised for six months thereafter except under the limited circumstances specified in the OGDP. Any
subsequent exercises or payments will be subject to the terms, conditions and restrictions of the OGDP or the
EDCP, as applicable.
6. TRANSFER AND BENEFICIARY
(a) The LTI will not be transferable by the Holder. During the lifetime of the Holder, the LTI will be
exercisable only by him or her. The Holder may designate a beneficiary who, upon the death of the Holder, will
be entitled to exercise the then vested portion of the LTI during the remaining term subject to the provisions of
the Plans and these terms and conditions. To the extent an LTI is ordered paid to a third party pursuant to
court order, a cash award will be substituted by EIX for any award otherwise payable in EIX stock.
(b) Notwithstanding the foregoing, EIX Options of the CEOs of EIX, Edison Mission Energy, Edison Capital, and
Southern California Edison Company, and the EVPs of EIX are transferable to a spouse, children or grandchildren,
or trusts or other vehicles established exclusively for their benefit. Any transfer request must specifically be
authorized by EIX in writing and shall be subject to any conditions, restrictions or requirements as the
administrator may determine.
8. TERMINATION OF LONG TERM INCENTIVES
(a) In the event of termination of the employment of the Holder for any reason other than those specified in
Section 2(d) or 2(e), EIX Options will terminate 180 days from the date on which such employment terminated, and
Performance Shares will be forfeited. In addition, the LTI may be terminated if EIX elects to substitute cash
awards as provided under Section 13.
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(b) If a Holder's employment terminates for a reason identified in Section 2(d), (i) the Holder's unvested EIX
Options (after application of the vesting provisions of Section 2(d)) will terminate on the date of such
termination, and (ii) the Holder's vested EIX Options will terminate on May 30th of the 10th calendar year
following the date of the award.
(c) Notwithstanding the foregoing provisions of this Section 8, no EIX Option may remain outstanding after May
30th of the 10th calendar year following the date of the award, each EIX Option is subject to the terms and
conditions of Appendix A hereto, and each EIX Option may be terminated if EIX elects to substitute a cash award
as provided under Section 13.
9. ENGAGING IN COMPETITION WITH EIX OR ITS AFFILIATES
In the event that a Holder who is at the level of Senior Vice President or above "competes" (as defined below)
with any of the Companies prior to, or during the six-month period following, any exercise of an EIX Option, the
Committee, in its sole discretion, may rescind such exercise within two years thereafter. In the event of any
such rescission, the Holder shall pay to EIX, or the Company by which Holder is or was last employed, the amount
of any gain realized as a result of the rescinded exercise in such manner and on such terms and conditions as the
Committee may require, and EIX or such Company shall be entitled to set-off the amount of any such gain against
any amount owed to the Holder by EIX or such Company. For purposes of this Section 9, "compete" shall mean the
Holder's rendering of services for any organization, or engaging directly or indirectly in any business, that
competes with the business of EIX or any of the Companies without the prior written consent of the General
Counsel of EIX.
10 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 the exercise of any LTI. In its discretion, EIX may require the
Holder to reimburse EIX for any such taxes required to be withheld 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 the 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 the Holder within six months after the shares
of Common Stock were acquired by the 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 equal to the aggregate amount of such tax liabilities based on the minimum
statutory withholding rates that are applicable to such supplemental taxable income.
11. CONTINUED EMPLOYMENT
Nothing in the award certificate or these Terms and Conditions will be deemed to confer on the 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.
12. NOTICE OF DISPOSITION OF SHARES AND SECTION 16
(a) Holder agrees that if he or she should dispose of any shares of stock acquired on the exercise of EIX
Options, including a disposition by sale, exchange, gift or transfer of legal title within six months from the
date such shares are transferred to the Holder, the Holder will notify EIX promptly of such disposition.
(b) If an LTI is 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 LTI will immediately and automatically become subject to the
requirements of Rule 16b-3(d)(3) (Rule) and may not be exercised, paid or transferred 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 EIX 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.
13. AMENDMENT
The LTI are subject to the terms of the Plans as amended from time to time. EIX reserves the right to substitute
cash awards substantially equivalent in value to the LTI. The LTI may not otherwise be restricted or limited by
any Plan amendment or termination approved after the date of the award without the Holder's consent.
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14. 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.
15. GOVERNING LAW
The terms and conditions of the LTI will be construed under the laws of the State of California.
16. NOTICE
Unless waived by EIX, any notice required under or relating to the LTI must be in writing, with postage prepaid,
addressed to: Edison International, Attn: Corporate Secretary, P.O. Box 800, Rosemead, CA 91770.
EDISON INTERNATIONAL
/s/ Beverly P. Ryder
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Beverly P. Ryder
APPENDIX A
2002 LONG-TERM 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 "Reference 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 Reference 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
EIX 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 the Plans.
