Exhibit 10.40

Amendment Number Two to Employment Agreement

Between Mirant Corporation and S. Linn Williams

This Amendment is made as of July 17, 2007 between Mirant Corporation (the
“Company”), Mirant Services, LLC (“Services”) and S. Linn Williams
(“Executive”).

Whereas, the Company, Services and Executive desire to amend the Employment
Agreement between the Company, Services and Executive dated as of November 3,
2005, as amended as of August 11, 2006 (the “Employment Agreement”) to comply
with requirements of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”);

In consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, Services and Executive agree to amend the Employment
Agreement as follows:

1. Section 3(b) of the Employment Agreement is amended by adding the following
sentence to the end of such section:

The amount of reasonable business expenses eligible for reimbursement in any
taxable year of Executive shall not affect the amount of reasonable business
expenses eligible for reimbursement in any other taxable year of Executive.

2. Sections 5(a) through 5(g) of the Employment Agreement are deleted and the
provisions below are substituted for such sections of the Employment Agreement:

5. Severance.

(a) Termination Without Cause, Non-Renewal or for Good Reason. In the event of
Executive’s termination of employment with the Company (1) by the Company
without Cause (as defined herein), (2) by reason of the failure of the Company
to offer to renew the Agreement on terms and conditions at least equal to the
terms and conditions set forth in the Employment Agreement executed on
November 3, 2005, which shall be deemed to include a Base Salary and Target
Bonus at least equal to the Executive’s Base Salary and Target Bonus at such
time, or (3) by Executive for Good Reason (as defined herein), subject to
execution of a Release substantially in the form attached as Exhibit D within 30
days following Executive’s termination of employment with the Company, Executive
shall be entitled to the benefits set forth below in this Section 5(a).

(i) The Company shall pay Executive an amount equal to the sum of (A) 1.5 times
Executive’s Base Salary, plus (B) 1.5 times Executive’s Target Bonus (as in
effect on the date of Executive’s termination), plus (C) 2.0 times the Company’s
annual cost for life insurance and long-term disability

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insurance provided to Executive immediately prior to his termination of
employment (calculated by multiplying the monthly cost for such coverage at the
time of Executive’s termination of employment by 12), plus (D) 2.0 times the sum
of (1) the annual matching contribution which Executive received under the
Employee Savings Plan and Supplemental Benefit Plan for the year immediately
preceding the year in which Executive’s employment with the Company terminates,
plus (2) the fixed profit sharing and discretionary profit sharing contributions
which Executive received under the Employee Savings Plan and Supplemental
Benefit Plan for the year immediately preceding the year in which Executive’s
employment with the Company terminates. The severance amount described in the
previous sentence shall be paid in a lump sum on the date that is six months and
one day after Executive experiences a “separation from service” (within the
meaning of Section 409A(a)(2)(A)(i) of the Code) with the Company.

(ii) The Executive LTIP shall be governed by the terms of the applicable LTIP
Award Agreements.

(iii) The Company shall pay Executive the amounts described in Section 5(e)
within 14 days after the date of termination of Executive’s employment. In
addition, the Company shall pay Executive a pro rata portion of Executive’s
Target Bonus for the fiscal year in which Executive’s termination of employment
occurs, based on the number of days in such fiscal year during which Executive
was employed. The pro rata bonus payment described in the previous sentence
shall be paid in a lump sum on the date that is six months and one day after
Executive experiences a “separation from service” with the Company.

(iv) During the period of 18 months following Executive’s termination of
employment in accordance with Section 5(a), the Company shall provide to
Executive continued coverage under the medical, dental and other group health
benefits and plans in effect for senior executives of the Company, as in effect
on the date of Executive’s termination of employment (or substantially
comparable coverage) for Executive and, where applicable, Executive’s spouse,
dependents and beneficiaries, at the same contribution or premium rate as may be
charged from time to time to senior executives of the Company generally, as if
Executive had continued in employment during such period.

(v) The Company shall pay Executive a lump sum amount equal to the cost of an
additional six months of coverage under the medical, dental and vision plans in
which Executive participates on the date his employment terminates. The cost of
coverage for each month shall equal the excess of COBRA premiums charged for
medical, dental and vision benefits, less the employee monthly contributions for
such benefits paid by active senior executive employees of the Company. For
purposes of calculating the COBRA premiums and the monthly employee premiums,
the six months of coverage shall be deemed to begin at the end of the 18 month
period described in subsection (iv), and shall be calculated using assumed
annual inflation factors of 10% for medical benefits,

 

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7% for dental benefits and 3% for vision benefits, which will be applied to each
succeeding calendar year (or portion of a calendar year) for which the lump sum
payment applies. The lump sum amount described in this subsection (v) shall be
paid on the date that is six months and one day after Executive experiences a
“separation from service” with the Company.

(vi) The Company shall provide a release substantially in the form attached
hereto as Exhibit G. If the Company does not provide the release required
pursuant to this subsection (vi), the Release by the Executive shall be null,
void and without effect, and Executive shall still receive all of the payments
and benefits described in subsections (i) through (v) above.

(b) Termination for Cause or Voluntary Resignation. In the event that
Executive’s employment with the Company is terminated (i) by the Board for Cause
or (ii) by Executive’s resignation from the Company for any reason other than
Good Reason or Disability (as defined herein), subject to applicable law, the
Company agrees to the following:

(i) The Executive LTIP shall be governed by the terms of the applicable LTIP
Award Agreements.

(ii) The Company shall pay Executive the amounts described in Section 5(e)
within 14 days after the date of termination of Executive’s employment.

For purposes of this Agreement, Executive’s retirement shall be considered
Executive’s resignation from the Company without Good Reason.

(c) Death. In the event that Executive’s employment with the Company is
terminated as a result of Executive’s death, the Company agrees to the
following:

(i) The Company shall pay Executive’s estate a lump sum amount equal to his
target Annual Bonus for the year of termination prorated for the number of days
during such year that Executive was employed by the Company. Such payment shall
be made 30 days after termination of Executive’s employment as a result of
Executive’s death or, if such day is not a business day, on the first business
day of the Company which is at least 30 days after Executive’s death.

(ii) The Executive LTIP shall be governed by the terms of the applicable LTIP
Award Agreements.

(iii) The Company shall pay Executive’s estate the amounts described in
Section 5(e) within 14 days after the date of Executive’s death.

(d) Disability. In the event that Executive’s employment with the Company is
terminated as a result of Executive’s Disability, the Company agrees to the
following:

 

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(i) The Company shall pay Executive (or his legal representative, if applicable)
in a lump sum payment an amount equal to his target Annual Bonus for the year of
termination prorated for the number of days during such year that Executive was
employed by the Company. Such payment shall be made on the date that is six
months and one day after Executive experiences a “separation from service” with
the Company.

(ii) The Executive LTIP shall be governed by the terms of the applicable LTIP
Award Agreements.

(iii) The Company shall pay Executive the amounts described in
Section 5(e) within 14 days after the date of termination of Executive’s
employment.

(e) Earned But Unpaid Compensation. In the case of any termination of
Executive’s employment with the Company, Executive or his estate or legal
representative shall be entitled to receive, to the extent permitted by
applicable law, from the Company (i) Executive’s Base Salary through the date of
termination to the extent not previously paid, (ii) to the extent not previously
paid, the amount of any bonus, incentive compensation, and other compensation
earned and payable to Executive as of the date of Executive’s termination of
employment under any compensation and benefit plans, programs or arrangements
maintained in force by the Company (for this purpose, Executive’s Annual Bonus,
if any, for any fiscal year of the Company ended prior to the year of
termination that is then unpaid, shall be deemed to be earned and payable to
Executive) and (iii) any vacation pay, expense reimbursements and other cash
entitlements due and owing to Executive, in accordance with Company policy, as
of the date of termination to the extent not previously paid.

(f) Equity Awards and Other Plans. Any Restricted Stock Units, Stock Options and
other equity awards outstanding under any Company long term incentive plans or
arrangements (other than the Executive LTIP) shall be paid in accordance with
the terms of the plans or arrangements under which such awards were granted. All
benefits accrued by Executive under all benefit plans and qualified and
nonqualified retirement, pension, 401(k) and similar plans and arrangements of
the Company shall be paid in such manner and at such times as are provided under
the terms of such plans and arrangements.

(g) Termination Without Cause, Non-Renewal or for Good Reason as a Result of a
Change of Control. In the event of Executive’s termination of employment with
the Company following a Change of Control (1) by the Company without Cause,
(2) as a result of the failure of the Company to offer to renew the Agreement on
terms that are consistent with competitive practices for companies of comparable
size and standing in the same industry, or (3) by Executive for Good Reason, in
any case, during the period beginning six months before and ending two years
following a Change of Control (as defined herein) of the Company, subject to
execution of a Release

 

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substantially in the form attached as Exhibit D within 30 days following
Executive’s termination of employment with the Company, Executive shall be
entitled to the benefits set forth below in this Section 5(g), and such benefits
shall be in lieu of, and not in addition to any benefits the Executive would
otherwise be entitled to under Section 5(a).

(i) The Company shall pay Executive the payments set forth in Section 5(a)(i)
except the applicable multiplier shall be 3.0 (rather than 1.5 or 2.0, as
applicable); provided, however, that in determining the amount of payment due
under Section 5(a)(i), Executive’s actual Annual Bonus for the year preceding
the Change of Control shall be used, if higher than his Target Bonus. The
severance amount described in the previous sentence shall be paid in a lump sum
on the date that is six months and one day after Executive experiences a
“separation from service” with the Company.

(ii) The Company shall provide the benefits set forth in Section 5(a)(iv). In
addition, the Company shall pay Executive a lump sum amount equal to the cost of
an additional 18 months of coverage under the medical, dental and vision plans
in which Executive participates on the date his employment terminates. The cost
of coverage for each month shall equal the excess of COBRA premiums charged for
medical, dental and vision benefits, less the employee monthly contributions for
such benefits paid by active senior executive employees of the Company. For
purposes of calculating the COBRA premiums and the monthly employee premiums,
the 18 months of coverage shall be deemed to begin at the end of the 18 month
period described in Section 5(a)(iv), and shall be calculated using assumed
annual inflation factors of 10% for medical benefits, 7% for dental benefits and
3% for vision benefits, which will be applied to each succeeding calendar year
(or portion of a calendar year) for which the lump sum payment applies. The lump
sum amount described in this subsection (ii) shall be paid on the date that is
six months and one day after Executive experiences a “separation from service”
with the Company.

(iii) The Executive LTIP shall fully vest, to the extent not already vested, and
otherwise be governed by the terms of the applicable LTIP Award Agreements.

(iv) The Company shall pay Executive the amounts described in Section 5(e)
within 14 days of the date of termination of Executive’s employment.

(v) The Company shall provide a release substantially in the form attached
hereto as Exhibit G. If the Company does not provide the release required
pursuant to this subsection (v), the Release by the Executive shall be null,
void and without effect, and Executive shall still receive all of the payments
and benefits described in subsections (i) through (iv) above.

 

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(h) Excess Parachute Payments.

(i) In the event any payment granted to Executive pursuant to the terms of this
Agreement or otherwise (a “Payment”) is determined to be subject to any excise
tax (“Excise Tax”) imposed by Section 4999 of the Code (or any successor to such
Section), the Company shall pay to Executive an additional amount (a “Gross-Up
Payment”) which, after the imposition of all income, employment, excise and
other taxes, penalties and interest thereon, is equal to the sum of (A) the
Excise Tax on such Payment plus (B) any penalty and interest assessments
associated with such Excise Tax; provided, however, that the amount of the Gross
Up Payment shall not exceed $2 million. The Gross-Up Payment described in the
previous sentence shall be paid in a lump sum on the date that is six months and
one day after Executive experiences a “separation from service” with the
Company.

(ii) The determinations to be made with respect to this Section 5(h) shall be
made by a certified public accounting firm designated by the Company and
reasonably acceptable to Executive and Executive may rely on such determination
in making payments to the Internal Revenue Service.

(i) No Other Payments. Except as expressly provided in this Section 5, all of
Executive’s rights to salary, bonuses, employee benefits and other compensation
hereunder which would have accrued or become payable after the termination or
expiration of the Employment Period shall cease upon such termination or
expiration, other than those expressly required under applicable law. Any period
during which benefits are provided to Executive or his spouse or dependants
under Section 5(a)(iv) or Section 5(g)(ii) shall count towards the period for
which Executive or his spouse or dependants are eligible for continuation
coverage under Code Section 4980B or Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended, or other applicable law.

3. Sections 5(h) and 5(i) of the Employment Agreement are renumbered as Sections
5(j) and 5(k) and the last paragraph of Section 5(k) is amended to read as
follows:

Notwithstanding the foregoing, Executive agrees that he shall not be entitled to
terminate his employment for Good Reason in the event he is subject to any
unintended or adverse tax consequences under Section 409A of the Code, the
Company amends this Agreement or the terms of any employee benefit plan, program
arrangement or agreement to avoid such adverse tax consequences or he is
required to forfeit incentive or other compensation pursuant to Section 304 of
SOX. For purposes of this Agreement, Executive is not entitled to assert that
his termination is for Good Reason unless Executive gives the CEO written notice
describing the event or events which are the basis for such termination within
ninety (90) days after the event or events occur and such grounds for
termination (if susceptible to correction) are not corrected by the Company
within 30 days of the Company’s receipt of such notice to the reasonable, good
faith satisfaction of Executive.

 

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4. Section 19 of the Employment Agreement is amended to read as follows:

19. Compliance with Section 409A of the Code. To the extent this Agreement is
subject to Section 409A of Code, the Company, Services and Executive intend all
payments under this Agreement to comply with the requirements of such section,
and this Agreement shall, to the extent reasonably practicable, be operated and
administered to effectuate such intent. To the extent necessary to avoid adverse
tax consequences under Section 409A of the Code, the timing of any payment under
this Agreement shall be delayed by six months and one day in a manner consistent
with Section 409A(a)(2)(B)(i) of the Code.

5. Except as amended by this Amendment Number Two, the Employment Agreement
remains in effect as originally executed.

 

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IN WITNESS WHEREOF, the parties have executed this Amendment Number Two to the
Employment Agreement as of the date first set forth above.

 

MIRANT CORPORATION   By:  

 

  Its:  Senior Vice President, Administration   MIRANT SERVICES, LLC   By:  

 

 

Its:  Senior Vice President, Administration

 

 

S. Linn Williams

 

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