EDISON INTERNATIONAL
2003 Long-Term Incentives
Terms and Conditions
Long-term incentives (LTI) for the year 2003 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), dividend equivalents to be awarded under the ECP payable in cash credited for the
number of shares of EIX Common Stock covered by the EIX Options awarded (Dividend Equivalents) and contingent EIX
performance units, 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 (Performance Shares). 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 effective date of the award.
2. VESTING
(a) The EIX Options and Dividend Equivalents vest over a four-year period as described in this Section 2 (Vesting
Period). The initial vesting date will be January 2nd 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 and Dividend Equivalents will vest as
follows:
o On the initial vesting date, one-fourth will vest.
o On January 2, 2005, an additional one-fourth will vest.
o On January 2, 2006, an additional one-fourth will vest.
o On January 2, 2007, the balance 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
January 2, 2013. The vested portions of the Dividend Equivalents will accumulate to the extent not exercised,
and be paid as provided in Section 4.
(c) The Performance Shares will vest and become payable to the extent earned as determined at the end of the
three-calendar-year period commencing on January 1, 2003 and ending December 31, 2005 (Performance Period)
subject to the provisions of Section 5.
(d) If, during the 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 that term is defined in the Edison
401(k) Savings 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. Such vested options will be exercisable for the full original term. The Dividend
Equivalents will vest to the extent necessary to cause the aggregate number of vested Dividend Equivalents
(including any previously paid) to equal the product of 1/48th of the number of Dividend Equivalents granted
multiplied by the number of full months of service the Holder has completed during the Vesting Period. Such
vested Dividend Equivalents will remain exercisable as provided in Section 4. 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
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payment date to the extent of the EIX total shareholder return (TSR) ranking achieved as specified in Section
5(a). Any fractional EIX Options or Performance Shares will be rounded to the next whole number.
Notwithstanding the foregoing, the LTI of a Holder who served as a member of the Southern California Edison
Company Management Committee prior to 1994 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 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 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 Dividend Equivalents will be vested on a pro-rata basis as described in Section 2(d), except that an
additional year of vesting credit will apply, and the Dividend Equivalents will be paid one year after the
termination date or at the end of the original five-year 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
5(c) to the extent of the EIX total shareholder return ranking achieved as specified in Section 5(a). Any
fractional EIX Options or Performance Shares will be rounded up to the next whole share.
(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 may only be 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 while Dividend Equivalents remain outstanding,
any Dividend Equivalents vested as of the prior vesting date remaining unpaid on the termination date will be
paid within 30 days following the date of termination. If such termination occurs during the Performance Period,
none of the Performance Shares will vest. Any fractional EIX Options or Performance Shares will be rounded up to
the next whole share.
(g) Notwithstanding the foregoing, in the event of a "Change in Control of EIX" as defined in Appendix A hereto,
outstanding EIX Options and Dividend Equivalents will vest. The EIX Options and Dividend Equivalents will remain
exercisable for a period of 2 years if EIX Common Stock remains outstanding after the Change in Control of EIX,
or until the end of their respective terms if earlier. If EIX Common Stock does not remain outstanding after the
Change in Control of EIX, and the EIX Options and Dividend Equivalents are not replaced by new owners, cash
payout for unexercised EIX Options and Dividend Equivalents 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. Any fractional EIX Options or Performance Shares will be
rounded up to the next whole share.
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. At the discretion of the holder, 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 may be used to pay the exercise price, provided the Company can comply with any legal requirements. 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 January 2, 2013, 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.
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(c) The Holder will have no right or claim to any specific funds, property or assets of the Companies as a result
of the award.
4. DIVIDEND EQUIVALENTS
A Dividend Equivalents account will be established on behalf of the Holder. During the five-year period
commencing January 1, 2003, for each dividend paid on EIX Common Stock after the date of grant, this account will
be credited with the amount of dividends that would have been paid on the number of shares of EIX Common Stock
covered by the Holder's corresponding EIX Option award except as provided below. The Dividend Equivalents will
be credited on the ex-dividend date for EIX Options held as of the record date unless the Dividend Equivalent has
previously been paid or terminated. Dividend Equivalents will accumulate in this account without interest. Once
vested, the Dividend Equivalents will be paid in cash upon the earlier of (i) the request of the Holder at any
time prior to January 2, 2007, regardless of whether the corresponding EIX Option is exercised, (ii) the exercise
or termination of the corresponding EIX Option, or (iii) January 2, 2008. Upon payment or termination of the
Dividend Equivalent, no further Dividend Equivalents will accrue as to the corresponding EIX Option, even if the
EIX Option remains outstanding and exercisable. The Dividend Equivalents are subject to termination and other
conditions specified in Sections 2(d), 2(e), 2(f), 2(g) and 8.
5. 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 of the 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
EIX TSR Rank Payment Multiple(1)
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Above 90th Percentile 3 times
75th to 89th Percentile Between 2 and 3 times
50th to 74th Percentile Between 1 and 2 times
40th to 49th Percentile Between 0.25 and 1 times
Below 40th Percentile 0 times
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(1) The multiple is interpolated for performance between
the points indicated on a straight-line basis.
(b) There will be one performance measurement date for the 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, and any fractional share
will be in cash. 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
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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 5(b). The Performance Shares are subject to termination and other conditions
specified in Sections 2(d), 2(e), 2(f), 2(g) and 8.
6. 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 Dividend Equivalents or 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
Dividend Equivalent or Performance Share. An EIX Option or Dividend Equivalent may not be exercised for six
months thereafter except under the limited circumstances specified in the OGDP or the EDCP. Any subsequent
exercises or payments will be subject to the terms, conditions and restrictions of the OGDP or the EDCP, as
applicable.
7. 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, or any portion thereof, is ordered paid to a
third party pursuant to court order, levy, or any other assessment imposed by legal authority, a cash award will
be substituted by EIX for such portion otherwise payable in EIX stock, rounded up to the next whole share.
(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), (i) the Holder's unvested EIX Options and Dividend Equivalents will terminate for no value
on the date such employment terminates, (ii) the Holder's vested EIX Options will terminate for no value 180 days
from the date on which such employment terminated, and (iii) the Holder's Performance Shares will be forfeited
for no value. In addition, the LTI, or any portion thereof, may be terminated if EIX elects to substitute cash
awards as provided under Section 13 or in conjunction with a change in control as described in Section 2(g).
(b) If a Holder's employment terminates for a reason identified in Section 2(d) or 2(e), the Holder's unvested
EIX Options, Dividend Equivalents and Performance Shares (after application of the vesting provisions of Section
2(d) or 2(e)) will terminate for no value on the date of such employment termination.
(c) Any EIX Option remaining outstanding on January 2, 2013 will terminate for no value.
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 after such exercise. 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
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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 or payment of any LTI. EIX has elected to
substitute a cash award for the lowest number of whole shares of Common Stock otherwise issuable pursuant to the
LTI having a fair market value on the payment date equal to the fair market value of the LTI multiplied by the
applicable federal and state tax withholding rates, less any cash received and not deferred from payment of the
LTI on the payment date.
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) and/or 16b-3(e) (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.
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
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APPENDIX A
2003 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 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.
