Exhibit 10.4

 

 

 

MIRANT CORPORATION

CHANGE IN CONTROL SEVERANCE PLAN

 

 

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MIRANT CORPORATION

CHANGE IN CONTROL SEVERANCE PLAN

 

 

ARTICLE 1

PURPOSE AND TERM

 

1.1           Purpose.  The Board of Directors of the Company has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of certain key employees,
notwithstanding the possibility, threat or occurrence of a Change in Control of
the Company.  The Board believes it is imperative to diminish the inevitable
distraction of such key employees by virtue of the personal uncertainties and
risks created by a threatened or pending Change in Control, and to encourage the
key employees’ full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the key
employees with compensation and benefits arrangements upon a Change in Control. 
Therefore, in order to accomplish these objectives, the Board has caused the
Company to adopt this Plan.

 

The Plan is intended to qualify under Sections 201(2), 301(a)(3) and 401(a)(1)
of ERISA as an unfunded plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees.

 

1.2           Term.  The Plan shall generally be effective as of the Effective
Date, subject to amendment from time to time in accordance with Section 7.2. 
The Plan shall continue until terminated pursuant to Article 7 of the Plan.

 

ARTICLE 2

DEFINITIONS

 

                As used herein, the following words and phrases shall have the
following meanings:

 

2.1           “Affiliate” means any corporation or other entity (including, but
not limited to, a partnership or a limited liability company) that is affiliated
with the Company through stock or equity ownership or otherwise, and is
designated as an Affiliate for purposes of this Plan by the Committee.

 

2.2           “Base Salary” means the amount a Participant is entitled to
receive as wages or salary on an annualized basis as in effect immediately prior
to a Change in Control or, if greater, at any time thereafter, in each case
without reduction for any pre-tax contributions to benefit plans.  Base Salary
does not include bonuses, commissions, overtime pay or income from stock
options, stock grants or other incentive compensation.

 

2.3           “Board” means the Board of Directors of the Company.

 

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2.4           “Cause” as a reason for a Participant’s termination of employment
means any of the following acts by the Participant, as determined by the Chief
Executive Officer of the Company in the case of Tier II and III Employees and by
the Board in the case of Tier I Employees: gross neglect of duty, prolonged
absence from duty without the consent of the Company, intentionally engaging in
any activity that is in conflict with or adverse to the business or other
interests of the Company, or illegal conduct or willful misconduct, misfeasance
or malfeasance of duty which is reasonably determined to be detrimental to the
Company.

 

2.5           “Change in Control” means the occurrence of any of the following
events:

 

(a)           Any “person” (as that term is used in Sections 13 and 14(d)(2) of
the Securities Exchange Act) becomes the beneficial owner (as that term is used
in Section 13(d) of the Securities Exchange Act), directly or indirectly, of
fifty percent (50%) or more of the Company’s capital stock entitled to vote in
the election of directors;

 

(b)           Persons who, immediately prior to the Effective Date, constitute
the Board (the “Incumbent Directors”) cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority thereof, provided that any person
who becomes a director of the Company subsequent to the Effective Date shall be
considered an Incumbent Director if such person’s election or nomination for
election was approved by a vote of at least two-thirds (2/3) of the Incumbent
Directors; but provided further that any such person whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of members of the Board or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board, including by reason of agreement intended to avoid or settle any such
actual or threatened contest or solicitation, shall not be considered an
Incumbent Director;

 

(c)           Consummation of a reorganization, merger, consolidation, sale or
other disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business
Combination, all or substantially all of the individuals and entities who were
the beneficial owners of outstanding voting securities of the Company
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the company resulting from such Business Combination
(including, without limitation, a company which, as a result of such
transaction, owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination, of the outstanding voting

 

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securities of the Company; and

 

(d)           Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.

 

2.6           “Code” means the Internal Revenue Code of 1986, as amended from
time to time, and includes a reference to the underlying proposed or final
regulations.

 

2.7           “Committee” means the Compensation Committee of the Board.

 

2.8           “Company” means Mirant Corporation, or its successor as provided
in Section 8.7.

 

2.9           “Disability” has the same meaning assigned such term in the
Company’s long-term disability plan, as in effect from time to time, or if no
such plan is in effect, “Disability” means Permanent and Total Disability as
defined in Section 22(e)(3) of the Code.

 

2.10         “Effective Date” means May 8, 2006.

 

2.11         “Employee” means any regular, full-time or part-time employee of
the Company or any Affiliate.  Where the context requires in connection with a
Participant who is employed directly by an Affiliate, the term “Company” as used
herein includes such Affiliate.

 

2.12         “ERISA” means the Employee Retirement Income Security Act of 1974,
as amended.

 

2.13         “Good Reason” means, as a reason for a Participant’s resignation
from employment, the occurrence of any of the following after a Change in
Control:

(a)           a material reduction by the Company in the Participant’s Base
Salary or Target Annual Bonus, as in effect immediately prior to the Change in
Control, as the same may be increased from time to time (it being understood
that a Participant shall not have a basis to resign for Good Reason if (i) such
reduction is part of a less than 5% across-the-board reduction in base salary
rate or target annual bonus opportunity similarly affecting at least 95% of all
Employees of the Company, or (ii) no bonus is paid, or the amount of the bonus
is reduced, as a result of the failure of the Participant or the Company to
achieve applicable performance targets for such bonus);

(b)           Failure by the Company (a) to continue in effect any compensation
plan in which the executive participates that is material to total compensation,
unless an equitable arrangement has been made with respect to such plan, or (b)
to continue the Participant’s participation therein on a basis not materially
less favorable, both in terms of the amount of benefits provided and the level
of the

 

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Participant’s participation relative to other participants

(c)           the assignment to the Participant of duties materially
inconsistent with his or her position, duties or responsibilities as in effect
immediately prior to Change in Control, or any other action by the Company which
results in a material diminution in such position, duties or responsibilities,
excluding for this purpose (i) a change in title or reporting relationship
alone, and (ii) an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Participant;

(d)           the failure of the Company to comply with and satisfy its
obligations under Section 8.7 of this Plan

(e)           a requirement that the Participant move his or her principal place
of business to a location that is (i) more than 50 miles from the location at
which the Participant was stationed immediately prior to a Change in Control,
and (ii) farther from the Participant’s primary residence than was the location
at which the Participant was stationed immediately prior to the Change in
Control.

2.14         “Participant” means any Employee designated by the Committee as a
participant in the Plan.

 

2.15         “Plan” means this Mirant Corporation Change in Control Severance
Plan.

 

2.16         “Severance Benefits” mean the benefits payable in accordance with
Article 4 of the Plan.

 

2.17         “Target Annual Bonus” means, with respect to any Participant, the
higher of (x) the Participant’s target bonus opportunity under the annual bonus
plan applicable to the Participant immediately prior to the Change in Control,
provided that if no target bonus opportunity has been established for such year
under such plan, the year immediately preceding the year in which the Change in
Control occurs, or (y) the Participant’s target bonus opportunity under the
annual bonus plan applicable to the Participant in effect at any time after the
Change in Control.

 

2.18         “Termination Date” means the date of the termination of a
Participant’s employment with the Company as determined in accordance with
Article 6.

 

2.19         “Tier Level” means a Participant’s designation as a Tier I, Tier II
or Tier III Employee, as described in Section 3.1.

 

ARTICLE 3

ELIGIBILITY

 

3.1           Participation.  The Committee or the Board shall designate from
time to time those Employees or classes of Employees who are Participants in the
Plan.  In the

 

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event the Committee or the Board designates certain Participants by job title,
position, function or responsibilities, an Employee who is appointed to such a
position after the Effective Date of this Plan shall be a Participant upon the
date he or she begins his or her duties in such position, unless otherwise
determined by the Committee or the Board.  The Committee or the Board shall
designate each Participant in the Plan as a Tier I, Tier II or Tier III
Employee.  Exhibit A, attached hereto and made a part hereof, sets forth the
initial Participants and their respective Tier Levels, which may be amended by
the Committee or the Board at any time prior to a Change in Control to add or
remove individual Participants or classes of Participants or to change Tier
Level classifications; provided, however, that the removal of individual
Participants or classes of Participants from the Plan, or any change in Tier
Level classification to a lower Tier Level with respect to any individual
Participant or class of Participants shall not be effective for at least 12
months after the date of the Committee or Board action.  If a Change in Control
occurs during such 12-month period, any such action to remove individual
Participants or classes of Participants or to place individual Participants or
classes of Participants in a lower Tier Level shall be null and void.

 

3.2           Duration of Participation.  Subject to Article 4 and Article 7, an
Employee shall cease to be a Participant in the Plan if (i) his or her
employment is terminated under circumstances in which he or she is not entitled
to Severance Benefits under the terms of this Plan, or (ii) prior to a Change in
Control, he or she ceases to be among the class of employees designated by the
Committee or the Board as Participants. Notwithstanding the foregoing, a
Participant who has terminated employment and is entitled to Severance Benefits
under Section 4.1 shall remain a Participant in the Plan until the full amount
of the Severance Benefits and any other amounts payable under the Plan have been
paid to the Participant.

 

ARTICLE 4

SEVERANCE BENEFITS

 

4.1           Right to Severance Benefits.

 

(a)           A Participant shall be entitled to receive from the Company
Severance Benefits in the amount provided in Section 4.2 if, within the two-year
period following a Change in Control, (i) the Participant’s employment with the
Company or any Affiliate is terminated by the Company without Cause (other than
by reason of the Participant’s death or Disability) or (ii) the Participant’s
employment is terminated by the Participant for Good Reason within a period of
90 days after the occurrence of the event giving rise to Good Reason.

 

(b)           If a Change in Control occurs and (i) a Participant’s employment
with the Company or any Affiliate was terminated by the Company without Cause
(other than by reason of the Participant’s death or Disability) prior to the
date of the Change in Control or (ii) an action was taken with respect to the
Participant prior to the date of the Change in Control that would have
constituted Good

 

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Reason if taken after a Change in Control, and the Participant can reasonably
demonstrate that such termination or action, as applicable, occurred at the
request of a third party who had taken steps reasonably calculated to effect the
Change in Control, then the termination or action, as applicable, will be
treated for all purposes of this Plan as having occurred immediately following
the Change in Control and such former Participant shall be entitled to the
benefits of the Plan accordingly.

 

(c)           Notwithstanding anything to the contrary, no Severance Benefits
shall be provided to a Participant unless the Participant has executed and not
revoked a release in substantially the form attached hereto as Exhibit B (the
“Release”).

 

4.2           Amount of Severance Benefits.  If a Participant’s employment is
terminated in circumstances entitling him or her to Severance Benefits as
provided in Section 4.1, then:

 

(a) the Company shall pay to the Participant in a single lump sum cash payment
within 30 days after the Termination Date or such later date as may be required
by Section 4.5 of the Plan, the aggregate of the following amounts:

 

(i)            the sum of (x) the Participant’s Base Salary through the
Termination Date to the extent not theretofore paid, (y) the product of (A) the
Participant’s Target Annual Bonus for the year in which the Termination Date
occurs, and (B) a fraction, the numerator of which is the number of days in the
current fiscal year through the Termination Date, and the denominator of which
is 365, and (z) any accrued vacation pay to the extent not theretofore paid; and

 

(ii)           a severance payment equal to three times, in the case of a Tier I
Employee, or two times, in the case of a Tier II Employee, or one times, in the
case of a Tier III Employee, the sum of (x) the Participant’s Base Salary and
(y) the Target Annual Bonus for the year in which the Termination Date occurs;
and

 

(iii)          a payment equal to the cost to the Company to provide certain
group health benefits sponsored by Company and maintained by the Participant on
the Termination Date.  The amount payable under this Section 4.2(a)(iii) shall
be calculated based on the monthly cost to the Company (exclusive of any portion
of the cost paid by the employee) to provide the same level of coverage of such
group health benefits maintained by the Participant as of the Termination Date
for 36 months, in the case of a Tier I Employee, or 24 months, in the case of a
Tier II Employee, or 12 months, in the case of a Tier III Employee.  For
purposes of this Section 4.2(a)(iii), group health benefits means any of the
following: group medical, dental, vision, and/or prescription drug benefits.

 

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The cost of such group health coverage is based on the monthly premium charged
to the Company for such coverage on the Termination Date by an insurance carrier
if such benefit is provided pursuant to an insurance contract issued by an
insurance carrier to the Company.  If the coverage is self-insured by the
Company, the cost will be the monthly cost as determined by the Company in
accordance with reasonably acceptable means (for self-insured group health, the
cost shall equal the “applicable premium” under COBRA for such benefits for the
year in which the Termination Date occurs).  The Participant will be entitled to
make an election to continue group health benefits in accordance with the terms
of the various group health plans.

 

(b)  all of the Participants stock options and other equity awards in the nature
of rights that may be exercised shall become fully vested and exercisable and
the post-termination exercise period shall be governed by the agreements
evidencing such awards, and all restrictions on any other outstanding equity
awards shall lapse; and

 

(c)  to the extent not theretofore paid or provided, the Company shall timely
pay or provide to the Participant any other amounts or benefits required to be
paid or provided or which the Participant is eligible to receive under any plan,
program, policy or practice or contract or agreement of the Company and its
affiliated companies.

 

4.3           Non-Duplication of Benefits.  This Plan is not intended to
supersede any other plan, program, arrangement or agreement providing a
Participant with severance or related benefits in the case of termination of
employment following a Change in Control.  In the event that a Participant
becomes entitled to receive benefits under this Plan and any such benefit
duplicates a benefit that would otherwise be provided under any other plan,
program, arrangement or agreement as a result of the Participant’s termination
of employment, then the Participant shall be entitled to receive the greater of
the benefit available under the Plan, on the one hand, and the benefit available
under such other plan, program, arrangement or agreement, on the other.

 

4.4           Full Settlement; No Mitigation.  The Company’s obligation to make
the payments provided for under this Plan and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Participant or others.  In no event shall the Participant be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Participant under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Participant
obtains other employment.

 

4.5           Code Section 409A.  Notwithstanding the foregoing provisions of
this Article 4, to the extent required to comply with Section 409A of the Code,
amounts and

 

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benefits to be paid under this Article 4 shall be delayed to the six month
anniversary of the date of the Participant’s separation from service, within the
meaning of Code Section 409A.

 

ARTICLE 5

EFFECT OF SECTIONS 280G AND 4999 OF THE CODE

 

5.1           Certain Additional Payments by the Company.  This Section 6.1
shall be applicable to all Tiers of Employee Participants.

 

(a)           Anything in this Plan to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any benefit,
payment or distribution by the Company to or for the benefit of a Tier I and
Tier II Employee Participant (whether paid or payable or distributed or
distributable pursuant to the terms of this Plan or otherwise, but determined
without regard to any additional payments required under this Section 5.1) (such
benefits, payments or distributions are hereinafter collectively referred to as
“Payments”) would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Participant with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the “Excise Tax”), then
the Participant shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Participant of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Participant retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments with a maximum benefit of $2 million.

 

Notwithstanding the foregoing provisions of this Section 5.1(a), if the
Parachute Value (as defined below) of all Payments does not exceed 110% of the
Participant’s Safe Harbor Amount (as defined below), then the Company shall not
pay the Participant a Gross-Up Payment, and the Payments due under this Plan
shall be reduced so that the Parachute Value of all Payments, in the aggregate,
equals the Safe Harbor Amount; provided, that if even after all Payments due
under this Plan are reduced to zero, the Parachute Value of all Payments would
still exceed the Safe Harbor Amount, then no reduction of any Payments shall be
made and the Gross-Up Payment shall be made.  The reduction of the Payments due
hereunder, if applicable, shall be made in such a manner as to maximize the
economic present value of all Payments actually made to the Participant,
determined by an independent, nationally recognized accounting firm or
compensation consulting firm (the “Determination Firm”) for purposes of Section
280G of the Code using the discount rate required by Section 280G(d)(4) of the
Code.  For purposes of this Section 5.1, the “Parachute Value” of a Payment
means the present value as of the date of the change of control for purposes of

 

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Section 280G of the Code of the portion of such Payment that constitutes a
“parachute payment” under Section 280G(b)(2) of the Code, as determined by the
Determination Firm for purposes of determining whether and to what extent the
Excise Tax will apply to such Payment.  For purposes of this Section 5.1, the
Participant’s “Safe Harbor Amount” means one dollar less than three times the
Participant’s “base amount” within the meaning of Section 280G(b)(3) of the
Code.

 

(b)           Subject to the provisions of Section 5.1(c), all determinations
required to be made under this Section 5.1, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be used in arriving at such determination, shall be made the
Determination Firm which shall provide detailed supporting calculations both to
the Company and the Participant within 15 business days of the receipt of notice
from the Participant that there has been a Payment, or such earlier time as is
requested by the Company.  All fees and expenses of the Determination Firm shall
be borne solely by the Company.  Any Gross-Up Payment, as determined pursuant to
this Section 5.1, shall be paid by the Company to the Participant within five
days of the receipt of the Determination Firm’s determination.  Any
determination by the Determination Firm shall be binding upon the Company and
the Participant; provided that if, the Determination Firm’s initial
determination to the contrary notwithstanding, the Internal Revenue Service (or
other applicable taxing authority) determines that an additional Excise Tax is
due with respect to the Payments, the Determination Firm shall recalculate the
amount of the Gross-Up Payment based upon the determinations made by the
Internal Revenue Service (or other applicable taxing authority) after taking
into account any additional interest and penalties (the “Recalculated Amount”)
and the Company shall pay to the Participant, within 5 days of the receipt of
the Determination Firm’s recalculation the Gross-Up Payment, the excess of the
Recalculated Amount over the Gross-Up Payment initially paid to the
Participant.  As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Determination Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder.  In the event that the Company
exhausts its remedies pursuant to Section 5.1(c) and the Participant thereafter
is required to make a payment of any Excise Tax, subject to the maximum, the
Determination Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Participant, together with interest, from the time of
payment by the Participant of such Excise Tax, at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code.

 

(c)           The Participant shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment.  Such notification shall be given as
soon

 

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as practicable but no later than ten business days after the Participant is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid.  The
Participant shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due).  If the Company notifies the Participant in writing prior to the
expiration of such period that it desires to contest such claim, the Participant
shall:

 

(i)  give the Company any information reasonably requested by the Company
relating to such claim,

 

(ii)  take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company, and designating such attorney as
authorized to act on the Participant’s behalf with respect to such examination,
if necessary, through a power of attorney,

 

(iii)  cooperate with the Company in good faith in order effectively to contest
such claim, and

 

(iv)  permit the Company to participate in any proceedings relating to such
claim;

 

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Participant harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses.  Without limitation of the foregoing provisions
of this Section 5.1(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Participant to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Participant agrees to prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs the Participant
to pay such claim and sue for a refund, the Company shall advance the amount of
such payment to the Participant, on an interest-free basis and shall indemnify
and hold the Participant harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any

 

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extension of the statute of limitations relating to payment of taxes for the
taxable year of the Participant with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.  Furthermore, the
Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Participant shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

 

(d)           If, after the receipt by the Participant of an amount advanced by
the Company pursuant to Section 5.1(c), the Participant becomes entitled to
receive any refund with respect to such claim, the Participant shall (subject to
the Company’s complying with the requirements of Section 5.1(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).  If, after the receipt by the
Participant of an amount advanced by the Company pursuant to Section 5.1(c), a
determination is made that the Participant shall not be entitled to any refund
with respect to such claim and the Company does not notify the Participant in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

 

ARTICLE 6

TERMINATION OF EMPLOYMENT

 

6.1           Written Notice Required.  Any purported termination of employment,
whether by the Company or by the Participant, shall be communicated by written
notice to the other (a “Notice of Termination”).

 

6.2           Termination Date.  In the case of the Participant’s death, the
Participant’s Termination Date shall be his or her date of death.  In all other
cases, the Participant’s Termination Date shall be the date specified in the
Notice of Termination subject to the following:

 

(a)           If the Participant’s employment is terminated by the Company for
Cause or due to Disability, the date specified in the Notice of Termination
shall be at least 30 days from the date the Notice of Termination is given to
the Participant, provided that in the case of Disability, the Participant shall
not have returned to the full-time performance of his or her duties during such
period of at least 30 days; and

 

(b)           If the Participant terminates his or her employment for Good
Reason, the date specified in the Notice of Termination shall not be more than
60 days from the date the Notice of Termination is given to the Company.

 

ARTICLE 7

 

 

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DURATION, AMENDMENT AND TERMINATION, CLAIMS

 

7.1           Duration.  The Plan shall become effective as of the Effective
Date.  The Board may terminate the Plan as of any date that is at least 12
months after the date of the Board’s action.  If a Change in Control occurs
during such 12-month period, this Plan shall continue in full force and effect
and shall not terminate or expire until after all Participants who become
entitled to any payments hereunder shall have received such payments in full.

 

7.2           Amendment and Termination.  Subject to the following sentence, the
Plan may be amended from time to time in any respect by the Board; provided,
however, in the event that a Change in Control occurs within one year following
an amendment to the Plan that would adversely affect the rights or potential
rights of Participants, the amendment will not be effective.  In anticipation of
or on or following a Change in Control, the Plan shall no longer be subject to
amendment, change, substitution, deletion, revocation or termination in any
respect which adversely affects the rights of Participants without the consent
of each Participant so affected.  For the avoidance of doubt, removal of a
Participant as a Participant (other than as a result of the Participant ceasing
to be an Employee) or a decrease in the Participant’s Tier Level shall be deemed
to be an amendment of the Plan which adversely affects the rights of the
Participant.

 

7.3           Form of Amendment.  The form of any amendment or termination of
the Plan shall be a written instrument signed by a duly authorized officer or
officers of the Company, certifying that the amendment or termination has been
approved by the Board. An amendment of the Plan in accordance with the terms
hereof shall automatically effect a corresponding amendment to all Participants’
rights and benefits hereunder. A termination of the Plan shall in accordance
with the terms hereof automatically effect a termination of all Participants’
rights and benefits hereunder.

 

7.4           Claims Procedure.

 

(a)           A Participant may file a claim with respect to amounts asserted to
be due hereunder by filing a written claim with the Committee specifying the
nature of such claim in detail.  The Committee shall notify the claimant within
60 days as to whether the claim is allowed or denied, unless the claimant
receives written notice from the Committee prior to the end of the 60 day period
stating that special circumstances require an extension of time for a decision
on the claim, in which case the period shall be extended by an additional 60
days.  Notice of the Committee’s decision shall be in writing, sent by mail to
the Participant’s last known address and, if the claim is denied, such notice
shall (i) state the specific reasons for denial, (ii) refer to the specific
provisions of the Plan upon which such denial is based, and (iii) if applicable,
describe any additional information or material necessary to perfect the claim,
an explanation of why such information or material is necessary, and an
explanation of the review procedure in Section 7.4(b).

 

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(b)           A claimant is entitled to request a review of any denial of his
claim under Section 7.4(a).  The request for review must be submitted to the
Committee in writing within 60 days of mailing by the Committee of notice of the
denial.  Absent a request for review within the 60 day period, the claim will be
deemed conclusively denied.  The claimant or his representative shall be
entitled to review all pertinent documents, and to submit issues and comments
orally and in writing to the Committee.  The review shall be conducted by the
Committee, which shall afford the claimant a hearing and which shall render a
decision in writing within 60 days of a request for a review, provided that, if
the Committee determines prior to the end of such 60 day review period that
special circumstances require an extension of time for the review and decision
of the denial, the period for review and decision on the denial shall be
extended by an additional 60 days.  The claimant shall receive written notice of
the Committee’s review decision, together with specific reasons for the decision
and reference to the pertinent provisions of the Plan.

 

ARTICLE 8

MISCELLANEOUS

 

8.1           Legal Fees and Expenses.  The Company shall reimburse all legal
fees and related expenses (including the costs of experts, evidence and counsel)
reasonably and in good faith incurred by a Participant if the Participant
prevails on a material issue with respect to his or her claim for relief in an
action by the Participant to obtain or enforce any right or benefit provided by
this Plan.

 

8.2           Employment Status. This Plan does not constitute a contract of
employment or impose on the Participant or the Company any obligation to retain
the Participant as an Employee, to change the status of the Participant’s
employment, or to change the Company’s policies regarding termination of
employment.

 

8.3           Nature of Plan and Benefits.  Participants and any other person
who may have rights hereunder shall be mere unsecured general creditors of the
Company with respect to a Severance Benefits due hereunder, and all amounts
(other than fully insured benefits) shall be payable from the general assets of
the Company.

 

8.4           Withholding of Taxes. The Company may withhold from any amount
payable or benefit provided under this Plan such Federal, state, local, foreign
and other taxes as are required to be withheld pursuant to any applicable law or
regulation.

 

8.5           No Effect on Other Benefits.  Severance Benefits shall not be
counted as compensation for purposes of determining benefits under other benefit
plans, programs, policies and agreements, except to the extent expressly
provided therein or herein.

 

8.6           Validity and Severability. The invalidity or unenforceability of
any provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or

 

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unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

8.7           Successors.  This Plan shall bind any successor of or to the
Company, its assets or its businesses (whether direct or indirect, by purchase,
merger, consolidation or otherwise), in the same manner and to the same extent
that the Company would be obligated under this Plan if no succession had taken
place.  In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, the Company
shall require such successor expressly and unconditionally to assume and agree
to perform the Company’s obligations under this Plan, in the same manner and to
the same extent that the Company would be required to perform if no such
succession had taken place. The term “Company,” as used in this Plan, shall mean
the Company as hereinbefore defined and any successor or assignee to the
business or assets which by reason hereof becomes bound by this Plan.

 

8.8           Assignment.  This Plan shall inure to the benefit of and shall be
enforceable by a Participant’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.  If a
Participant should die while any amount is still payable to the Participant
under this Plan had the Participant continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Plan to the Participant’s estate.  A Participant’s rights under this Plan shall
not otherwise be transferable or subject to lien or attachment.

 

8.9           Enforcement.  This Plan is intended to constitute an enforceable
contract between the Company and each Participant subject to the terms hereof.

 

8.10         Governing Law. To the extent non preempted by ERISA, the validity,
interpretation, construction and performance of the Plan shall in all respects
be governed by the laws of Delaware, without reference to principles of conflict
of law.

 

8.11         Arbitration.  Any dispute or controversy arising under or in
connection with this Plan that cannot be mutually resolved by the Company and a
Participant and their respective advisors and representatives shall be settled
exclusively by arbitration in Atlanta, Georgia in accordance with the rules of
the American Arbitration Association before one arbitrator of exemplary
qualifications and stature, who shall be selected jointly by an individual to be
designated by the Company and an individual to be selected by the Participant,
or if such two individuals cannot agree on the selection of the arbitrator, who
shall be selected by the American Arbitration Association.  The Company shall
reimburse the Participant’s reasonable legal fees if he prevails on a material
issue in arbitration.

 

8.12         Section 409A Savings Clause.  Notwithstanding anything in the Plan
to the contrary, to the extent that any amount or benefit that would constitute
“deferred compensation” for purposes of Section 409A of the Code would otherwise
be payable or distributable under the Plan by reason a Participant’s termination
of employment, such amount or benefit will not be payable or distributable to
the Participant unless (i) such

 

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termination of employment meets the description or definition of “separation
from service” in Section 409A of the Code and applicable proposed or final
regulations, or (ii) the payment or distribution of such amount or benefit would
be exempt from the application of Section 409A of the Code by reason of the
short-term deferral exemption or otherwise.

 

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EXHIBIT A

 

 

Mirant Corporation  Change in Control Severance Plan

 

Tier I Employee Participants:

 

 

All Corporate Executive Officers at Senior Vice President level and above

 

 

Tier II Employee Participants:

 

All elected Corporate Vice Presidents

 

 

Tier III Employee Participants:

 

Corporate  Directors and above with salaries above $175, 000. This would also
include positions with the following titles — which are considered equivalent to
Corporate Directors: Regional VP, Associate General Counsel, certain executives
at international business units.

 

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EXHIBIT B

 

Form of Release

 

This Release is granted effective as of the         day of        , 20   , by
                      (“Employee”) in favor of Mirant Corporation (the
“Company”).  This is the Release referred to that certain Change in Control
Severance Plan adopted by the Company effective as of             , 2006 (the
“Plan”).  Employee gives this Release in consideration of the Company’s promises
and covenants as recited in the Severance Plan, with respect to which this
Release is an integral part.

 

1.             Release of the Company.  Employee, for himself, his successors,
assigns, attorneys, and all those entitled to assert his rights, now and forever
hereby releases and discharges the Company and its respective officers,
directors, stockholders, trustees, employees, agents, parent corporations,
subsidiaries, affiliates, estates, successors, assigns and attorneys (“the
Released Parties”), from any and all claims, actions, causes of action, sums of
money due, suits, debts, liens, covenants, contracts, obligations, costs,
expenses, damages, judgments, agreements, promises, demands, claims for
attorney’s fees and costs, or liabilities whatsoever, in law or in equity, which
Employee ever had or now has against the Released Parties, including, without
limitation, any claims arising by reason of or in any way connected with any
employment relationship which existed between the Company or any of its parents,
subsidiaries, affiliates, or predecessors, and Employee.  It is understood and
agreed that this Release is intended to cover all actions, causes of action,
claims or demands for any damage, loss or injury, whether known or unknown, of
any nature whatsoever, including those which may be traced either directly or
indirectly to the aforesaid employment relationship, or the termination of that
relationship, that Employee has, had or purports to have, from the beginning of
time to the date of this Release, and including but not limited to claims for
employment discrimination under federal or state law, except as provided in
Paragraph 2; claims arising under the Age Discrimination in Employment Act,
29 U.S.C. § 621, et seq., Title VII of the Civil Rights Act, 42 U.S.C.
§ 2000(e), et seq. or the Americans With Disabilities Act, 42 U.S.C. § 12101 et
seq.; claims for statutory or common law wrongful discharge, claims arising
under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq.; claims for
attorney’s fees, expenses and costs; claims for defamation; claims for emotional
distress; claims for wages or vacation pay; claims for benefits or that in any
way relate to the design or administration of any employee benefit program,
including any claims arising under the Employee Retirement Income Security Act,
29 U.S.C. § 1001, et seq.; and claims under any other applicable federal, state
or local laws or legal concepts; provided, however, that nothing herein shall
release the Company of any indemnification obligations to Employee under the
Company’s bylaws, certificate of incorporation, Delaware law or otherwise.

 

2.             Release of Claims Under Age Discrimination in Employment Act. 
Without limiting the generality of the foregoing, Employee agrees that by
executing this Release, he has released and waived any and all claims he has or
may have as of the date of this Release for age discrimination under the Age
Discrimination in Employment Act,

 

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29 U.S.C. § 621, et seq.  Employee acknowledges and agrees that he has been, and
hereby is, advised by the Company to consult with an attorney prior to executing
this Release.  Employee further acknowledges and agrees that the Company has
offered Employee the opportunity, before executing this Release, to consider
this Release for a period of twenty-one (21) calendar days; and that the
consideration he receives for this Release is in addition to amounts to which he
was already entitled.  It is further understood that this Release is not
effective until seven (7) calendar days after the execution of this Release and
that Employee may revoke this Release within seven (7) calendar days from the
date of execution hereof.

 

3.                Confidential Information.  From and after the Termination Date
(as defined in the Severance Plan), Employee agrees that he shall not, without
the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by Employee
during Employee’s employment by the Company or any of its affiliated companies,
to anyone other than the Company and those designated by it.  It is understood,
however, that the obligations of this Paragraph 3 shall not apply to the extent
that the aforesaid matters (i) are disclosed in circumstances where Employee is
legally required to do so or (ii) become generally known to and available for
use by the public other than by acts by Employee or representatives of Employee
in violation of the Severance Plan or this Release.

 

4.                Non-Admission.  It is understood and agreed by Employee that
the payment made to him is not to be construed as an admission of any liability
whatsoever on the part of the Company or any of the other Releasees, by whom
liability is expressly denied.

 

5.             Acknowledgement and Revocation Period.  Employee agrees that he
has carefully read this Release and is signing it voluntarily.  Employee
acknowledges that he has had twenty one (21) days from receipt of this Release
to review it prior to signing or that, if Employee is signing this Release prior
to the expiration of such 21-day period, Employee is waiving his right to review
the Release for such full 21-day period prior to signing it.  Employee has the
right to revoke this release within seven (7) days following the date of its
execution by him.  In order to revoke this Release, Employee must deliver notice
of the revocation in writing to Company’s General Counsel before the expiration
of the seven (7) day period.  However, if Employee revokes this Release within
such seven (7) day period, no severance benefit will be payable to him under the
Severance Plan and he shall return to the Company any such payment received
prior to that date.

 

6.             No Revocation After Seven Days.  Employee acknowledges and agrees
that this Release may not be revoked at any time after the expiration of the
seven (7) day revocation period and that he/she will not institute any suit,
action, or proceeding, whether at law or equity, challenging the enforceability
of this Release.  Employee further acknowledges and agrees that, with the
exception of an action to challenge the waiver of

 

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claims under the ADEA, Employee shall not ever attempt to challenge the terms of
this Release, attempt to obtain an order declaring this Release to be null and
void, or institute litigation against the Company or any other Releasee based
upon a claim that is covered by the terms of the release contained herein,
without first repaying all monies paid to him/her under Article 4 of the
Severance Plan.  Furthermore, with the exception of an action to challenge his
waiver of claims under the ADEA, if Employee does not prevail in an action to
challenge this Release, to obtain an order declaring this Release to be null and
void, or in any action against the Company or any other Releasee based upon a
claim that is covered by the release set forth herein, Employee shall pay to the
Company and/or the appropriate Releasee all their costs and attorneys’ fees
incurred in their defense of Employee’s action.

 

7.            Governing Law and Severability.  This Release and the rights and
obligations of the parties hereto shall be governed and construed in accordance
with the laws of the State of Delaware.  If any provision hereof is
unenforceable or is held to be unenforceable, such provision shall be fully
severable, and this document and its terms shall be construed and enforced as if
such unenforceable provision had never comprised a part hereof, the remaining
provisions hereof shall remain in full force and effect, and the court or
tribunal construing the provisions shall add as a part hereof a provision as
similar in terms and effect to such unenforceable provision as may be
enforceable, in lieu of the unenforceable provision.

 

This document contains all terms of the Release and supersedes and invalidates
any previous agreements or contracts.  No representations, inducements, promises
or agreements, oral or otherwise, which are not embodied herein shall be of any
force or effect.

 

EMPLOYEE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A
GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE
AGE DISCRIMINATION IN EMPLOYMENT ACT.  EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A
FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING
CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE
VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH
CLAIMS.

 

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IN WITNESS WHEREOF, the undersigned acknowledges that he has read these three
pages and he sets his hand and seal this        day of                     ,
20     .

 

 

 

EMPLOYEE:

 

 

 

 

 

 

 

Sworn to and subscribed before me this         day of                       ,
20     .

 

 

 

Notary Public

 

My Commission Expires:

 

 

 

 

 

 

Approved by Mirant Compensation Committee May 8th

 

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