**Exhibit 10.12**

 

**POWERSALE, FUEL SUPPLY AND SERVICES AGREEMENT**

 

**THIS****POWER SALE, FUEL SUPPLY AND SERVICES AGREEMENT**(this“Agreement”), dated as of January 3, 2006 (the “Agreement Date”), is among**MIRANT AMERICAS ENERGY MARKETING, LP**, aDelaware limited partnership (“MAEM”),**MIRANT DELTA, LLC**(“MirantDelta”), a Delaware limited liability company and **MIRANTPOTRERO, LLC**(“Mirant Potrero”), a Delaware limited liabilitycompany (Mirant Delta and Mirant Potrero are referred to individually as “ProjectCompany” and collectively as the “Project Companies”).

 

**RECITALS**

 

WHEREAS, ProjectCompanies own and operate certain electric generating stations as set forth on Exhibit Ahereto (collectively, the “Generating Stations”);

 

WHEREAS, ProjectCompanies may enter into contracts with third parties to sell capacity,electricity, ancillary services and/or other related products generated by, oravailable from, the Generation Stations;

 

WHEREAS, in the absenceof such third party contracts, Project Companies desire to contract herein tosell all or a portion of the capacity, electricity, ancillary services and/orother related products generated by, or available from, the Generating Stationsto MAEM, and MAEM desires to purchase such capacity, electricity, ancillaryservices and/or other related products on the terms and conditions set forthherein; and

 

WHEREAS, ProjectCompanies desire that MAEM perform certain services related to the managementand operation of their Generating Stations, and MAEM desires to perform such services.

 

NOW, THEREFORE, inconsideration of the foregoing and the mutual covenants contained herein, andother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged by the Parties, the Parties hereby agree as follows:

 

**ARTICLE 1.**

**DEFINITIONS**

 

The following capitalizedterms, whether used in the singular or plural, shall be defined as provided inthis Article 1.

 

“Agreement” hasthe meaning set forth in the first paragraph hereof.

 

“Agreement Date”has the meaning set forth in the first paragraph of this Agreement.

 

“Asset Book” hasthe meaning set forth in Section 5.1.

 

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“Asset Companies”means any affiliates of MAEM either directly or indirectly owned by MirantCorporation, other than Mirant Delta or Mirant Potrero, which own electricgenerating stations in the United States.

 

“Claims” means allclaims or actions, threatened or filed, whether groundless, false orfraudulent, that directly or indirectly relate to the subject matter of anindemnity, and the resulting losses, damages, expenses, attorneys’ fees andcourt costs, whether incurred by settlement or otherwise, and whether suchclaims or actions are threatened or filed prior to or after the termination ofthis Agreement.

 

“CollateralCosts” means an amount determined on a monthly basis by MAEM, in goodfaith, as the cost incurred by MAEM or Mirant North America, LLC to postcollateral in the form of cash and/or letters of credit to third parties asrequired under the terms of the transactions attributed to the Asset Book basedon the weighted average of the borrowing rates under the senior creditfacilities, senior notes and other indebtedness for borrowed money of MirantNorth America, LLC.

 

“Delivery Point”means, with respect to Products generated by, or available from, the GeneratingStation, the high side of the generation step-up transformer located at theGenerating Station, where it connects to the Transmission Provider’stransmission system; and, with respect to Products generated by, or availablefrom, sources other than the Generating Station, such other point on theTransmission Provider’s transmission system as MAEM and Project Company maydetermine.

 

“Direct Contracts”has the meaning set forth in Section 4.1.

 

“Emissions Allowances”means authorizations under state or federal (as applicable) air qualityregulations to emit either one ton of nitrogen oxides (“NOx”) or sulfur dioxide(“SO2”) at any time during any applicable calendar year.

 

“Event of Default”has the meaning set forth in Section 9.1.

 

“Expenses” has themeaning set forth in Section 8.2.

 

“FERC” means theFederal Energy Regulatory Commission, or its successor.

 

“Force Majeure”means an event or circumstance whichprevents one Party from performing its obligations, which event or circumstancewas not anticipated as of the date the transaction was agreed to, which is notwithin the reasonable control of, or the result of the negligence of, theclaiming Party, and which, by the exercise of due diligence, the claiming Partyis unable to overcome or avoid or cause to be avoided.  Force Majeure shall not be based on (i) theloss of MAEM’s markets; (ii) MAEM’s inability economically to use orresell the Product purchased hereunder; (iii) the loss or failure ofProject Company’s supply; or (iv) Project Company’s ability to sell theProduct at a price greater than the Contract Price.  Neither Party may raise a claim of ForceMajeure based in whole or in part on curtailment by a Transmission

 

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Providerunless (i) such Party has contracted for firm transmission with aTransmission Provider for the Product to be delivered to or received at theDelivery Point and (ii) such curtailment is due to “force majeure” or “uncontrollableforce” or a similar term as defined under the Transmission Provider’s tariff;provided, however, that existence of the foregoing factors shall not besufficient to conclusively or presumptively prove the existence of a ForceMajeure absent a showing of other facts and circumstances which in theaggregate with such factors establish that a Force Majeure as defined in thefirst sentence hereof has occurred.

 

“Fuel” means FuelOil or natural gas, as dictated by context.

 

“Fuel Delivery Point”means the Fuel Oil Delivery Point and/or the Natural Gas Delivery Point, asapplicable.

 

“Fuel Oil” meansdistillate fuel.

 

“Fuel Oil DeliveryPoint” means the physical location at the Generating Station where MAEMshall deliver Fuel Oil to Project Company.

 

“Generating Stations”has the meaning provided in the recitals.

 

“Good UtilityPractices” mean any of the practices, methods or acts engaged in orapproved by a significant portion of the electric energy industry with respectto similar facilities during the relevant time period which in each case, inthe exercise of reasonable judgment in light of the facts known or that shouldhave been known at the time a decision was made, could have been expected toaccomplish the desired result at reasonable cost consistent with good businesspractices, reliability, safety, law, regulation, environmental protection andexpedition.  Good Utility Practices arenot intended to be limited to the optimum practices, methods or acts to theexclusion of all others, but rather to delineate the acceptable practices,methods or acts generally accepted in such industry.

 

“Gross Revenues”has the meaning set forth in Section 8.2.

 

“Implementation Order”means the Implementing Order Regarding Transfer of Letters of Credit, Guaranteesand Certain Collateral Securing Trading Obligations Transferred Pursuant to thePlan, dated December 9, 2005, issued by the United States Bankruptcy Courtfor the Northern District of Texas, Forth Worth Division in the chapter 11cases of Mirant Corporation and its affiliated debtors, styled as *In re Mirant Corporation, et al.*,Chapter 11 Case No. 03-46590 (DML) Jointly Administered.

 

“Interest Rate”means, for any date, two percent (2%) over the per annum rate of interest equalto the prime lending rate as may from time to time be published in the WallStreet Journal under “Money Rates”; provided that the Interest Rate shall neverexceed the maximum interest rate permitted by applicable law.

 

“ISO” means theCalifornia Independent System Operator Corporation, or its successor.

 

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“ISO FERC Tariff”means the California Independent System Operator Corporation OperatingAgreement and Tariff, as amended from time to time, as on file with andapproved by the FERC.

 

“MAEM” has themeaning set forth in the first paragraph of this Agreement.

 

“MET” has themeaning set forth in Section 11.1(b).

 

“Natural Gas DeliveryPoint” means the meter at the Generating Station where MAEM shall delivernatural gas to Project Company.

 

“Net Market Revenues”has the meaning set forth in Section 8.2.

 

“Offer” has themeaning set forth in Section 2.2(a).

 

“Party” means anyof MAEM or the Project Companies.  In thecontext where MAEM is referenced as a “Party,” a reference to the “other Party”shall mean the Project Companies.  In thecontext where the Project Companies are referenced as a “Party,” a reference tothe “other Party” shall mean MAEM. References to “either Party” or the “Parties” shall have comparablemeanings.

 

“Plan” means theAmended and Restated Second Amended Joint Chapter 11 Plan of Reorganization forMirant Corporation and its Affiliated Debtors, dated September 30, 2005,confirmed by the United States Bankruptcy Court for the Northern District ofTexas, Forth Worth Division, on December 9, 2005, in the chapter 11 casesof Mirant Corporation and its affiliated debtors, styled as *In re Mirant Corporation, et al.*,Chapter 11 Case No. 03-46590 (DML) Jointly Administered.

 

“Products” meanselectric capacity, energy, ancillary services and/or any other relatedproducts, which are or may become commercially recognized in the ISO marketsduring the term of this Agreement.

 

“Project Companies”has the meaning set forth in this first paragraph of this Agreement.

 

“Purchased Power”has the meaning set forth in Section 4.2.

 

“RMR Agreements”means the Must-Run Service Agreement dated June 1, 1999 between MirantDelta and the ISO for the Pittsburg Power Plant, the Must-Run Service Agreementdated June 1, 1999 between Mirant Delta and the ISO for the Contra CostaPower Plant, and the Must-Run Service Agreement dated June 1, 1999 betweenMirant Potrero and the ISO for the Potrero Power Plant.

 

“SchedulingCoordinator” means the entity designated to perform the responsibilities definedfor a Scheduling Coordinator in the ISO FERC Tariff including, but not limitedto, scheduling energy and ancillary services from the Generating Stations withthe ISO.

 

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“Service Fee” hasthe meaning set forth in Section 8.1.

 

“Third Party Contract”has the meaning set forth in Section 2.2(b).

 

“TransmissionProviders” means the entity or entities transmitting Products on behalf ofProject Company or MAEM to or from the Delivery Point including, but notlimited to, the ISO or a regional transmission organization.

 

“TransportationProviders” means the entity or entities transporting Fuel on behalf ofProject Company or MAEM to or from the Generating Station.

 

“WECC” means theWestern Electricity Coordinating Council, or its successor.

 

“Wrap Agreement”mean the Power Purchase and Sale Agreement (Second Wraparound Agreement), datedJanuary 13, 2005, between the Project Companies and Pacific Gas andElectric Company.

 

**ARTICLE 2.**

**PRODUCTSALES**

 

 2.1                              Intercompany ProductSales.

 

(a)                                  Transactions.  With the exception of any Direct Contracts asdescribed in Section 4.1, Project Company shall sell and deliver, and MAEMshall purchase and receive, or cause to be received, at the Delivery Point, allProducts generated by, and/or available from, the Generating Stations.  MAEM shall resell such Products as describedin Section 2.2.  MAEM shall pay NetMarket Revenues to Project Company, on a monthly basis, for all Productspurchased by MAEM hereunder.  In sellingProducts generated by, or available from, the Generating Stations, MAEM shallattempt to maximize Net Market Revenues for Project Companies.

 

(b)                                 Transmissionand Scheduling.  Project Companyshall be responsible for delivery of Products to the Delivery Point.  MAEM shall arrange and be responsible fortransmission service at and from the Delivery Point.  MAEM shall serve as Scheduling agent onbehalf of Project Company to Schedule and deliver Products with respect toall transaction involving the Generating Station.

 

(c)                                  Title,Risk of Loss and Indemnity. The following provision shall apply to alltransactions involving the Generating Station except for Direct Contracts asdescribed in Section 4.1.  Asbetween the Parties, Project Company shall be deemed to be in exclusivepossession and control (and be responsible for any damages or injury causedthereby) of the Products prior to delivery thereof at the Delivery Point, andMAEM shall be deemed to be in exclusive possession and control (and beresponsible for any damages or injury caused thereby) of the Products at andafter delivery thereof at the Delivery Point. Project Company warrants that it will deliver to MAEM all Products freeand clear of all liens, claims and encumbrances arising prior to delivery thereofat the Delivery Point.  Title to and riskof loss related to delivered Products shall transfer

 

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from Project Company toMAEM at the Delivery Point.  Each Partyshall indemnify, defend and hold harmless each other Party from any Claimsarising from any act or incident occurring during the period when possession,control and title to Products is vested or deemed to be vested in theindemnifying Party, except to the extent such Claims arise from such otherParty’s breach of this Agreement or its gross negligence or willful misconduct.

 

2.2                                 Resaleof Products by MAEM.

 

(a)                                  Offers.MAEM may resell the Products purchased from Project Companies by submittingoffers to sell such Products in the day-ahead and/or real-time marketsadministered by the ISO (“Offers”).

 

(b)                                 ThirdParty Contracts.  In addition tosubmitting Offers, MAEM may resell the Products purchased from ProjectCompanies by entering into bilateral contracts, forward sales, financialtransactions (including, but not limited to, hedges, swaps, contracts fordifferences and options), tolling agreements, power purchase agreements andother transactions (“Third Party Contracts”).

 

(c)                                  Costsand Revenues. All costs and revenues associated with Offers and Third PartyContracts will be charged, or paid, to Project Company as such costs andrevenues are actually incurred or received by MAEM, as further described in thecalculation of Net Market Revenues pursuant to Section 8.2.

 

(d)                                 Strategies.  MAEM’s strategies with respect to all Offers,Third Party Contracts and all Scheduling activities shall be consistent with:

 

(i)                                     theoperating parameters and limitations of the Generating Station, as provided byProject Company to MAEM;

 

(ii)                                  thelimitations imposed by any transmission service reservations for the purpose oftransmitting Products from the Generating Station;

 

(iii)                               ProjectCompany’s scheduled maintenance plans with respect to the Generating Station,as agreed to between the Parties;

 

(iv)                              theavailability of the Generating Station (including Fuel handling and storagefacilities), as communicated by Project Company to MAEM;

 

(v)                                 theISO FERC Tariff and other ISO rules and procedures in effect from time totime;

 

(vi)                              applicablerequirements of any Transmission Provider and/or Transportation Provider;

 

(vii)                           Fuelavailability;

 

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(viii)                        GoodUtility Practices;

 

(ix)                                environmentallimitations applicable to the Generating Stations;

 

(x)                                   operatingprotocols agreed to from time to time by the Parties;

 

(xi)                                WECCrules and procedures in effect from time to time;

 

(xii)                             therequirements of the Generating Station pursuant to an RMR Agreement; and

 

(xiii)                          any FERCimposed must offer obligation.

 

**ARTICLE 3.**

**FUEL SERVICES**

 

3.1                                 AllRequirements Fuel Supply.  With theexception of any Direct Contracts as described in Section 4.1, MAEM shallprocure and supply to Project Companies, on an exclusive basis, all Fuelrequired by the Generating Stations in accordance with Good Utility Practicesand the terms and conditions of this Agreement. The Project Companies shall reimburse MAEM for such Fuel at MAEM’sactual cost.  MAEM has entered into orwill enter into Fuel hedges and trading activities (including, but not limitedto, physical and financial hedges, swaps and options) in connection with MAEM’sFuel supply obligations pursuant to this Section 3.1.  The costs and revenues associated with suchFuel hedging and trading activities will be attributed to the Asset Book andcharged to, or paid to, Project Company as such costs and revenues are actuallyincurred or received by MAEM, as further described in the calculation of NetMarket Revenues pursuant to Section 8.2.

 

3.2                                 Transportationand Scheduling.  MAEM shall schedule orarrange for scheduling services with its Transportation Providers to deliverFuel to the Fuel Delivery Point.  MAEMshall manage Fuel imbalances on behalf of Project Companies and all costs andrevenues associated with Fuel imbalances will be attributed to the Asset Bookand charged to, or paid to, Project Company, as such costs and revenues areactually incurred or received by MAEM.

 

3.3                                 Title,Risk of Loss and Indemnity. As between the Parties, MAEM shall be deemed tobe in exclusive possession and control (and be responsible for any damages orinjury caused thereby) of the Fuel prior to delivery thereof at the FuelDelivery Point, and Project Company shall be deemed to be in exclusivepossession and control (and be responsible for any damages or injury causedthereby) of the Fuel at and after delivery thereof at the Fuel DeliveryPoint.  MAEM warrants that it willdeliver to Project Company all Fuel free and clear of all liens, claims andencumbrances arising prior to delivery thereof at the Fuel Delivery Point.  Title to and risk of loss related todelivered Fuel shall transfer from MAEM to Project Company at the Fuel DeliveryPoint. Each Party shall indemnify, defend and hold harmless each other Partyfrom any Claims arising from any act or incident occurring during the periodwhen possession, control and title to Products is vested or deemed to be vestedin the indemnifying Party, except to the extent 

 

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such Claims arise fromsuch other Party’s breach of this Agreement or its gross negligence or willfulmisconduct.

 

**ARTICLE 4.**

**DIRECTCONTRACTS**

 

4.1                                 DirectContracts.

 

(a)                                  AgencyServices.  Notwithstanding anythingto the contrary in Sections 2.1 or 3.1 of this Agreement, Project Company mayenter into contracts to (i) sell the Products available from theGenerating Station directly to a third party rather than selling such Productsto MAEM and/or (ii) purchase Fuel required by the Generating Stationdirectly from a third party rather than purchasing such Fuel from MAEM(collectively “Direct Contracts”). Project Company hereby appoints MAEM as its agent in administering anyDirect Contract including, but not limited to, Scheduling, billing, settlementswith the ISO (if applicable) and other services required by Project Companypursuant to the terms of such Direct Contract. Project Company shall continue to pay MAEM the Service Fee for theagency services provided by MAEM during the term of a Direct Contract.  As agent, MAEM shall neither directlypurchase or sell, or contract for the purchase or sale, nor take title to orpossession and control of any Products or Fuel. Rather, as between MAEM and Project Company, when MAEM is acting asagent under any Direct Contract, Project Company shall be deemed to have titleand exclusive possession and control of all Products sold to, and all Fuelpurchased from, third parties, and Project Company shall bear the risk of lossassociated with such Products and Fuel.

 

(b)                                 ExistingDirect Contracts.  As of theAgreement Date, Direct Contracts include the RMR Agreements and the WrapAgreement.  Project Company shall havethe right to designate whether the Generating Station shall be run under “Condition1” or “Condition 2” in the RMR Agreements.

 

(c)                                  Costsand Revenues.  The calculation of NetMarket Revenues shall exclude any costs or revenues associated with a DirectContract.  All such costs and revenuesshall be paid and received by Project Company. If a third party customer or other entity pays MAEM any amounts dueProject Company under a Direct Contract, MAEM shall hold such amounts in trustfor the applicable Project Company and remit such funds to Project Company onor before the twentieth (20th) day of each month, or if such day isnot a business day, the immediately following business day.

 

4.2                                 Cooperation.The Parties shall cooperate to fulfill the obligations of Project Companyand/or MAEM as set forth in the Direct Contract and/or Third Party Contract, asapplicable.  Notwithstanding theforegoing, all payment obligations under any Direct Contract shall be the soleresponsibility of Project Company. In an effort to maximize Net MarketRevenues, Project Company agrees that MAEM shall have the right to purchaseProducts from third parties or the market, in lieu of the Generating Stationproducing such Products, for the purpose of meeting the supply obligations ofProject Company or MAEM under any Direct Contract or Third Party Contract (“PurchasedPower”); provided, however, any such purchase should only occur when the

 

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Project Company’s cost togenerate the Products exceeds the prevailing market price for suchProducts.  Project Company and MAEM shallnotify the others promptly if it becomes aware of any dispute under, or anyproposed amendment to, a Direct Contract or Third Party Contract.  Project Company and MAEM acknowledge andagree that certain provisions of this Agreement including, without limitation,MAEM’s scheduling and fuel supply obligations, may not be consistent with theprovisions of a Direct Contract or a Third Party Contract (such as a tollingagreement for example).  In the event ofsuch inconsistency, the provisions of the Direct Contract or Third PartyContract shall control.

 

**ARTICLE 5.**

**ASSETBOOK; ADDITIONAL SERVICES**

 

5.1                                 AssetBook. MAEM will maintain an asset management book for the New York region(the “Asset Book”) to track and measure the financial performance of alltransactions with respect to the Generating Stations including, but not limitedto, (i) the sale of Products generated by, or available from, theGenerating Stations pursuant to any Offers, Third Party Contracts and/or DirectContracts, (ii) Purchased Power, (iii) the purchase of Fuel and anyrelated Fuel hedges and trading activities, (iv) the purchase of EmissionsAllowances and any related emissions hedges and trading activities and (v) thepurchase of transmission and/or transportation capacity.  The Asset Book shall be separate from anyMAEM trading book or any other asset book maintained by MAEM for other AssetCompanies.  Transactions in the AssetBook shall be allocated to individual books that are established for eachProject Company.  Unless otherwisedesignated in writing by Project Companies, transactions in the Asset Book willbe allocated proportionately to each Project Company based on the actualdispatch of the Generating Stations, as provided by Project Companies to MAEM(with the exception of sales of capacity, which shall be allocatedproportionately based on the actual capacity of the generating units).

 

5.2                                 EmissionsPlanning and Related Responsibilities. MAEM shall provide Project Company emissions planning, in consultationwith Project Company, to assist in the compliance of the Generating Station atall times and on an ongoing basis with all currently effective emissionsrequirements, permits and regulations. Upon Project Company’s request, MAEM will procure all EmissionsAllowances necessary for the operation of the Generating Station, and disposeof excess Emissions Allowances, which are not needed for the operation of theGenerating Station.  MAEM will chargeProject Companies MAEM’s actual cost of acquiring the Emissions Allowances andremit the actual proceeds of any Emissions Allowances sales to Project Company,as adjusted for any gains or losses on emission hedges and trading activities.

 

5.3                                 RegulatoryReports.  MAEM will make allquarterly filings to the FERC required for Products generated by, or availablefrom, the Generating Station.

 

**ARTICLE 6.**

**TERM ANDTERMINATION**

 

6.1                                 Term.This Agreement shall become effective on the Agreement Date and shall continuein effect unless terminated pursuant to Section 6.2 or Section 9.2(a).

 

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6.2                                 EarlyTermination Event.

 

(a)                                  Inthe event a Generating Station is no longer partially owned by an affiliate ofMAEM, this Agreement shall automatically terminate with respect to suchGenerating Station, without any further action required by any Party, as of theeffective date of the transfer of ownership of the Generating Station.

 

(b)                                 AnyParty may terminate this Agreement as it relates to such Party upon sixty (60)days written notice to the other Parties.

 

6.3                                 Obligationsupon Termination.

 

(a)                                  Uponany termination of this Agreement pursuant to Section 6.2 hereof, MAEMshall endeavor to (i) terminate any transactions entered into by MAEM inconnection with this Agreement which extend beyond such termination including,but not limited to, Third Party Contracts entered into pursuant to Section 2.2(b),(ii) assign such transactions to the new owner of the GeneratingStation(s) and/or (iii) enter into an agreement with the new owner toallow MAEM to continue to fulfill its obligations under any existingtransactions.  Any such terminationsand/or assignments shall be consummated in such a manner as to fully releaseMAEM and Project Companies from any liability or obligation thereunder as ofthe termination date and/or the assignment effective date of the applicabletransactions.  Any costs or revenuesassociated with termination payments or settlement amounts as a result ofliquidating and terminating any transactions shall be charged to or paid toProject Company as described under Section 2.2(c).

 

(b)                                 Uponany termination of this Agreement pursuant to Section 9.2(a) hereof,the Parties shall transfer or settle any outstanding transactions entered intoby MAEM in connection with this Agreement which extend beyond such terminationincluding, but not limited to, Third Party Contracts entered into pursuant to Section 2.2(b).  Any such transfer or settlement shall beconsummated in such a manner as to assign or convey to Project Companies thefull benefits and obligations of such transactions, and to fully release MAEMfrom any liability or obligation thereunder. To the extent that MAEM’s rights or obligations under any suchtransaction may not be assigned without the consent of a third party, and suchconsent has not or cannot be obtained with the commercially reasonable effortsof the Parties, this provision shall not constitute an agreement to assign thesame if an attempted assignment would constitute a breach thereof or beunlawful, and the Parties, to the maximum extent permitted by law and theapplicable transaction, shall enter into such commercially reasonablearrangements as are necessary to fulfill the intent of this Section 6.3(b).  The Parties further agree to take suchactions, and execute and deliver such agreements, documents, instruments andcertificates, as are necessary to consummate the transactions contemplated bythis Section 6.3(b).

 

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**ARTICLE 7.**

**REPRESENTATIONSAND WARRANTIES**

 

7.1                                 ProjectCompany’s Representations and Warranties. Each Project Company makes the following representations and warrantiesas a basis for its undertakings contained herein:

 

(a)                                  ProjectCompany is a limited liability company duly organized and validly existingunder the laws of the State of Delaware, is qualified to do business in eachforeign jurisdiction in which it transacts business, and is in good standingunder its certificate of formation and the laws of the State of Delaware, hasthe requisite power and authority to own its properties, and to carry on itsbusiness as now being conducted.

 

(b)                                 ProjectCompany has full power and authority to enter this Agreement and perform itsobligations hereunder.  The execution,delivery and performance of this Agreement and the consummation of thetransactions contemplated hereby have been duly authorized by all necessarylimited liability company action and do not and will not contravene itsorganizational documents or conflict with, result in a breach of, or entitleany party (with due notice or lapse of time or both) to terminate, accelerateor declare a default under, any agreement or instrument to which ProjectCompany is a party or by which Project Company is bound.  The execution, delivery and performance byProject Company of this Agreement will not result in any violation by ProjectCompany of any law, rule or regulation applicable to it.  Project Company is not a party to, norsubject to or bound by, any judgment, injunction or decree of any court orother governmental entity which may restrict or interfere with the performanceof this Agreement by it.  This Agreementis Project Company’s legal, valid and binding obligation, enforceable againstProject Company in accordance with its terms, except as (i) suchenforcement may be subject to bankruptcy, insolvency, reorganization,moratorium or other similar laws now or hereafter in effect relating tocreditors’ rights generally, and (ii) the remedy of specific performanceand injunctive relief may be subject to equitable defenses and to thediscretion of the court before which any proceeding therefor may be brought.

 

(c)                                  Noconsent, waiver, order, approval, authorization, permit or order of, orregistration, qualification or filing with, any court or other governmentalagency or authority is required for the execution, delivery and performance byProject Company of this Agreement and the consummation by Project Company ofthe transactions contemplated hereby.

 

(d)                                 ProjectCompany has obtained all necessary governmental authorizations, approvals,consents, waivers, exceptions, licenses, filings, registrations, rulings,permits, tariffs, certifications and exemptions to perform its obligationsunder this Agreement.

 

(e)                                  Thereis not pending or, to its knowledge, threatened against it, any legalproceedings that could materially adversely affect its ability to perform itsobligations under this

 

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Agreement.

 

(f)                                    NoEvent of Default or event which, with the giving of notice or lapse of time, orboth, would constitute an Event of Default with respect to Project Company hasoccurred and is continuing and no such event or circumstance would occur as aresult of its entering into or performing its obligations under this Agreementor any other document relating to this Agreement.

 

6.2                                 MAEM’sRepresentations and Warranties.  MAEMmakes the following representations and warranties as a basis for itsundertakings contained herein:

 

(a)                                  MAEMis a limited partnership duly organized and validly existing under the laws ofthe State of Delaware, is in good standing under its certificate of limitedpartnership and the laws of the State of Delaware, is qualified to do businessin each foreign jurisdiction in which it transacts business, has the requisitepower and authority to own its properties, and to carry on its business as nowbeing conducted.

 

(b)                                 MAEMhas full power and authority to enter this Agreement and perform itsobligations hereunder.  The execution,delivery and performance of this Agreement and the consummation of theTransactions contemplated hereby have been duly authorized by all necessarylimited partnership action by MAEM and do not and will not contravene itsorganizational documents or conflict with, result in a breach of, or entitleany party (with due notice or lapse of time or both) to terminate, accelerateor declare a default under, any agreement or instrument to which MAEM is aparty or by which MAEM is bound.  Theexecution, delivery and performance by MAEM of this Agreement will not resultin any violation by MAEM of any law, rule or regulation applicable to it.MAEM is not a party to, nor subject to or bound by, any judgment, injunction ordecree of any court or other governmental entity which may restrict orinterfere with the performance of this Agreement by it.  This Agreement is MAEM’s legal, valid andbinding obligation, enforceable against MAEM in accordance with its terms,except as (i) such enforcement may be subject to bankruptcy, insolvency,reorganization, moratorium or other similar laws now or hereafter in effectrelating to creditors’ rights generally and (ii) the remedy of specificperformance and injunctive relief may be subject to equitable defenses and tothe discretion of the court before which any proceeding therefor may bebrought.

 

(c)                                  Noconsent, waiver, order, approval, authorization, permit or order of, orregistration, qualification or filing with, any court or other governmentalagency or authority is required for the execution, delivery and performance byMAEM of this Agreement and the consummation by MAEM of the transactionscontemplated hereby.

 

(d)                                 MAEMhas obtained all necessary governmental authorizations, approvals, consents,waivers, exceptions, licenses, filings, registrations, rulings, permits,tariffs, certifications and exemptions to perform its obligations under thisAgreement.

 

(e)                                  Thereis not pending or, to its knowledge, threatened against it, any legalproceedings that could materially adversely affect its ability to perform itsobligations under this Agreement.

 

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(f)                                    NoEvent of Default or event which, with the giving of notice or lapse of time, orboth, would constitute an Event of Default with respect to MAEM has occurredand is continuing and no such event or circumstance would occur as a result ofits entering into or performing its obligations under this Agreement.

 

**ARTICLE 8.**

#### **BILLING AND PAYMENT**

#### ** **

8.1                                 CostAllocation. For services rendered by MAEM to Project Companies under thisAgreement and/or any Direct Contract, each Project Company shall pay MAEM, on amonthly basis, its share of allocated costs including, but not limited to,personnel costs (the “Service Fee”).  Forpurposes of determining Project Company’s share of allocated costs, MAEM shallapply an industry standard methodology which is applied uniformly across theAsset Companies.  Each of MAEM andProject Company acknowledges that the monthly allocations may be adjusted fromtime to time.

 

8.2                                 Billingand Payment.  MAEM shall pay ProjectCompany the positive Net Market Revenues due for the prior month (or, if NetMarket Revenues for such month are negative, Project Company shall pay MAEM anamount equal to such negative balance) by wire transfer to the payment addressprovided by the recipient on or before the twentieth (20th) day ofeach month, or if such day is not a business day, the immediately followingbusiness day.  At the time of eachmonthly payment, MAEM shall render to Project Company a statement detailing theNet Market Revenues for the prior month, and shall provide Project Company withsupporting documentation for each such monthly statement, identifyingcalculations underlying such Net Market Revenues.  If the ISO later adjusts amounts payable byor paid to MAEM with respect to transactions in the Asset Book, such amountswill be credited to, or paid by, Project Company in the month in which MAEMreceives notice of the adjustment.  Thepreceding sentence shall survive termination of this Agreement.  If a third party fails to pay MAEM any amountdue for Products sold to such party, MAEM shall only be required to pay theAsset Company the amount received by MAEM from the third party.  In other words, MAEM shall not be responsiblefor non-payment by a third party customer, and any Gross Revenues shall not beadjusted upward to account for any such non-payment.

 

“Net Market Revenues”means Gross Revenues minus Expenses. Net Market Revenues shall becalculated in accordance with GAAP.

 

**“GrossRevenues” means all revenues attributed to the Asset Book for a certainmonth including, without limitation, the actual revenues received by MAEM from (a) salesof all Products generated by, or available from, the Generating Station, (b) salesof Purchased Power, (c) excess Fuel sales, (d) sales or trades ofexcess Emissions Allowances from the Generating Station and (e) gainsassociated with physical and/or financial products (including, but not limitedto, swaps, contracts for differences and options) purchased for the Asset Bookrelated to hedges and trading activities.**

 

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“Expenses” meansall costs attributed to the Asset Book for a certain month, including costsreimbursed to MAEM for actual costs in performing the services including, butnot limited to, costs for (a) purchases of Fuel, (b) purchases ofEmissions Allowances, (c) losses associated with physical and/or financialproducts (including, but not limited to, swaps, contracts for differences andoptions) purchased for the Asset Book related to hedges and trading activities,(d) broker and/or transaction fees, (e) transmission congestioncontracts for sales from the Generating Station, (f) Collateral Costs, (g) transmissionand/or transportation costs related to delivery of the Products and/or Fuel, (h) PurchasedPower and (i) other actual costs in connection with the services describedin Articles 2, 3 and 4 hereof.

 

8.3                                 MonthlyStatements.  Project Company and MAEMwill cooperate to provide monthly statements in reasonable detail showing thecalculation of the Net Market Revenues, to enable Project Company to track NetMarket Revenues.  Project Company shallhave the right, upon reasonable notice, to examine and/or audit the Asset Bookfrom time to time.

 

8.4                                 Interestand Disputed Amounts.  If eitherParty fails to make any payment on or before the applicable payment due date,such overdue amounts shall accrue interest at the Interest Rate from, andincluding, the applicable payment due date to, but excluding, the date ofpayment.  Any disputed invoiced amounts,except amounts which are manifestly inaccurate, shall be paid in full on theapplicable payment due date, subject to later return together with interestaccrued at the Interest Rate depending on the resolution of the dispute.  Overpayments or underpayments identified bythe Parties shall be returned or credited, together with interest accrued atthe Interest Rate, to their rightful owners in the first following month.

 

8.5                                 FERCRefunds.  In the event MAEM isordered by FERC to refund any payments received by MAEM from third partiesrelated to any transactions in the Asset Book, Project Company agrees to pay,or reimburse MAEM if MAEM has paid, the refund amount to FERC or a thirdparty.  The Project Company’s obligationto pay FERC or a third party, or reimburse MAEM, any refund amount shall bewithout regard to the cause or causes related thereto including, withoutlimitation, the negligence of MAEM.  Anysuch payment to FERC or a third party shall be made within the time periodordered by FERC.

 

**ARTICLE 9.**

**DEFAULTSAND REMEDIES**

 

9.1                                 Eventsof Default.  Any one or more of thefollowing shall constitute an “Event of Default” hereunder with respect to aParty:

 

(a)                                  defaultshall occur if the payment of any amounts due from such Party hereunder shallcontinue unpaid for more than ten (10) days after written notice from theother Party;

 

(b)                                 otherthan as provided in Section 9.1(a) above, default shall occur in theperformance of any covenant or condition to be performed by such Party underthis Agreement

 

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and such default shallcontinue unremedied for a period of thirty (30) days after written notice fromthe other Party specifying the nature of such default; or

 

(c)                                  arepresentation or warranty made by such Party herein shall have been false ormisleading in any material respect when made; provided, however, if suchrepresentation or warranty is capable of being corrected, no Event of Defaultshall have occurred if such Party is diligently pursuing such correction andsuch representation or warranty is corrected within thirty (30) days of suchParty obtaining knowledge of the false and misleading nature of the statement.

 

9.2                                 Remedies.  The Parties shall have the following remediesavailable to them hereunder:

 

(a)                                  Uponthe occurrence of an Event of Default by either Party hereunder, thenon-defaulting Party shall have the right (i) to collect all amounts thenor thereafter due to it from the defaulting Party hereunder, and (ii) uponwritten notice to the other Party, to terminate this Agreement at any timeduring the continuation of such Event of Default.  The terminating Party shall have all rightsand remedies available to it under applicable law, subject to the limitationsset forth in Section 11.8.

 

(b)                                 Withoutlimiting the foregoing, any unexcused breach of this Agreement or failure ofeither Party to perform its obligations hereunder shall subject such Party tothe payment of actual damages to the other Party, regardless of any cureperiod.

 

**ARTICLE 10.**

**FORCEMAJEURE**

 

10.1                           ForceMajeure.  If either Party is renderedwholly or partly unable to perform its obligations under this Agreement becauseof a Force Majeure event, that Party will be excused from whatever performanceis affected by the Force Majeure event to the extent so affected, provided that(a) the non-performing Party, as soon as practical after knowing of theoccurrence of the Force Majeure event, gives the other Party written noticedescribing the particulars of the occurrence; (b) the suspension ofperformance is of no greater scope and of no longer duration than is reasonablyrequired by the Force Majeure event; (c) the non-performing Party usescommercially reasonable efforts to overcome or mitigate the effects of suchoccurrence, provided, however, that this provision shall not require ProjectCompany to deliver, or MAEM to receive, any Products at points other than theDelivery Point; and (d) when the non-performing Party is able to resumeperformance of its obligations hereunder, that Party shall give the other Partywritten notice to that effect and shall promptly resume such performance.

 

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**ARTICLE 11.**

**MISCELLANEOUS PROVISIONS**

 

11.1                           Assignment;Successors and Assigns.

 

(a)                                  Noassignment or delegation by either Party (or any successor or assignee thereof)of this Agreement, in whole or in part, shall be made or become effectivewithout the prior written consent of the other Party in each case obtained,which consent may not be unreasonably withheld. Any assignments or delegations by either Party shall be in such form asto assure that such Party’s obligations under this Agreement will be honoredfully and timely by any succeeding party.

 

(b)                                 NotwithstandingSection 11.1(a), this Agreement shall be assigned from MAEM to MirantEnergy Trading, LLC (“MET”) without any action required by the Parties pursuantto the terms of the Plan and the Implementation Order.  The assignment shall occur on the MAEM/METEffective Date (as such term is defined in the Plan) and thereafter, allreferences to MAEM in this Agreement shall be references to MET.  As of the MAEM/MET Effective Date, Section 7.2(a) shallbe amended to delete “limited partnership” and replace it with “limitedliability company”.

 

11.2                           Notices.  All notices, requests and other communicationshereunder (herein collectively a “notice” or “notices”) shall be deemed to havebeen duly delivered, given or made to or upon any Party hereto if in writingand delivered by hand against receipt, or by certified or registered mail,postage pre-paid, return receipt requested, or to a courier who guarantees nextbusiness day delivery or sent by telecopy (with confirmation) to such Party atits address set forth below or to such other address as such Party may at anytime, or from time to time, direct by notice given in accordance with this Section 10.2.

 
| **IF TO PROJECT** |   |                                  |
|-------------------|--------|---------------------------------------|
| **COMPANIES:**    |   | Mirant Delta, LLC                     |
|              |   | 3201 Wilbur Avenue                    |
|              |   | Antioch, California  94509            |
|              |   | Attention: President                  |
|              |   |                                  |
|              |   | Mirant Potrero, LLC                   |
|              |   | 1201-A Illinois Street                |
|              |   | San Franciso, California  94107       |
|              |   | Attention: President                  |
|              |   |                                  |
| **IF TO MAEM:**   |   | Mirant Americas Energy  Marketing, LP |
|              |   | 1155 Perimeter Center  West           |
|              |   | Atlanta, Georgia 30338                |
|              |   | Attention: Legal  Department          |
|              |   |                                  |
| **IF TO MET:**    |   | Mirant Energy Trading,  LLC           |
|              |   | 1155 Perimeter Center  West           |
|              |   | Atlanta, Georgia 30338                |
|              |   | Attention: Legal  Department          |

 

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The date of delivery ofany such notice, request or other communication shall be the earlier of (i) thedate of actual receipt or (ii) three (3) business days after suchnotice, request or other communication is sent by certified or registered mail,(iii) if sent by courier who guarantees next business day delivery, thebusiness day next following the day of such notice, request or othercommunication is actually delivered to the courier or (iv) the dayactually telecopied.

 

11.3                           GOVERNINGLAW.  THIS AGREEMENT SHALL BEGOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUTGIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW THAT WOULD OTHERWISE CAUSE THELAW OF ANY STATE OTHER THAN NEW YORK TO APPLY.

 

11.4                           ComplianceWith Laws.  At all times during theterm of this Agreement, the Parties shall comply with all laws, rules,regulations, and codes of all governmental authorities having jurisdiction overeach of their respective businesses which are now applicable, or may beapplicable hereafter, including without limitation, all special laws, policies,ordinances, or regulations now in force, as amended or hereafter enacted.  The Parties hereto shall maintain alllicenses, permits and other consents from all governmental authorities havingjurisdiction for the necessary use and operation of their respectivebusiness.  Nothing herein shall be deemeda waiver of the Parties’ right to challenge the validity of any such law, rule orregulation.

 

11.5                           EntireAgreement.  This Agreement sets forththe entire agreement of the Parties with respect to the subject matter hereinand takes precedence over all prior understandings.  This Agreement supersedes and terminates allpreviously executed agreements between the Project Companies and MAEM.

 

11.6                           Amendments.  This Agreement may not be amended except by awriting signed by the Parties.

 

11.7                           Severability.  The invalidity or unenforceability of anyprovisions of this Agreement shall not affect the other provisions hereof.  If any provision of this Agreement is held tobe invalid, such provisions shall not be severed from this Agreement; instead,the scope of the rights and duties created thereby shall be reduced by thesmallest extent necessary to conform such provision to the applicable law,preserving to the greatest extent the intent of the Parties to create suchrights and duties as set out herein.  Ifnecessary to preserve the intent of the Parties hereto, the Parties shallnegotiate in good faith to amend this Agreement, adopting a substituteprovision for the one deemed invalid or unenforceable that is legally bindingand enforceable and which restores to the two Parties to the greatest extentpossible the benefit of their respective bargains on the Agreement Date.

 

11.8                           Limitationon Damages.  NEITHER PARTY SHALL BEENTITLED TO RECOVER SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVEDAMAGES HEREUNDER.

 

11.9                           RiskManagement Policy.  The Parties acknowledgeand agree that this Agreement is subject to the Risk Management Policy approvedby the Parties’ Board of

 

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Directors.  In the event of a conflict between theprovisions of this Agreement and the terms of the Risk Management Policy, theterms of the Risk Management Policy shall govern and control.

 

 

[SIGNATURES APPEARON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, andintending to be legally bound hereby, the Parties hereto have caused thisAgreement to be duly executed as an instrument under seal by their respectiveduly authorized officers as of the date and year first above written.

 
| Mirant Americas Energy  Marketing, LP |
|---------------------------------------|
| By:                                   | Mirant Americas Development,  LLC |
|                                  | Its General Partner |
|                                  |   |
| By:                                   | New MAEM Holdco, LLC |
| Its:                                  | Sole Member |
|                                  |   |
| By:                                   | /s/ J. William Holden  III |   |
| Name:                                 | J. William Holden III |
| Title:                                | Senior Vice President &  Treasurer |
|                                  |   |
| Mirant Delta, LLC                     |
|                                  |   |
| By:                                   | /s/ J. William Holden  III |   |
| Name:                                 | J. William Holden III |
| Title:                                | Senior Vice President &  Treasurer |
|                                  |   |
| Mirant Potrero, LLC                   |
|                                  |   |
| By:                                   | /s/ J. William Holden  III |   |
| Name:                                 | J. William Holden III |
| Title:                                | Senior Vice President &  Treasurer |
|                                  |   |
|                                  |   |
| As of the MAEM/MET  Effective Date:   |
|                                  |   |
| Mirant Energy Trading,  LLC           |
|                                  |   |
| By:                                   | /s/ J. William Holden  III |   |
| Name:                                 | J. William Holden III |
| Title:                                | Senior Vice President,  Chief Financial Officer & Treasurer |

 

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**EXHIBIT A**

#### **GENERATING STATIONS**

#### ** **

**MIRANTDELTA, LLC**

 
| **Unit**       | ** ** | **Location**  | ** ** | **Nameplate  Capacity** | ** ** | **Commercial  Operation Date** | ** ** |
|----------------|------------|---------------|------------|-------------------------|------------|--------------------------------|------------|
|           |       |          |       |                    |       |                           |       |
| Pittsburg 1- 4 |       | Pittsburg, CA |       | 595 MW                  |       | 1954                           |       |
|           |       |          |       |                    |       |                           |       |
| Pittsburg 5    |       | Pittsburg, CA |       | 312 MW                  |       | 1960                           |       |
|           |       |          |       |                    |       |                           |       |
| Pittsburg 6    |       | Pittsburg, CA |       | 317 MW                  |       | 1961                           |       |
|           |       |          |       |                    |       |                           |       |
| Pittsburg 7    |       | Pittsburg, CA |       | 682 MW                  |       | 1972                           |       |
|           |       |          |       |                    |       |                           |       |
| Contra Costa 6 |       | Antioch, CA   |       | 337 MW                  |       | 1964                           |       |
|           |       |          |       |                    |       |                           |       |
| Contra Costa 7 |       | Antioch, CA   |       | 337 MW                  |       | 1964                           |       |

 

**MIRANT POTRERO, LLC**

 
| **Unit**    | ** ** | **Location**      | ** ** | **Nameplate  Capacity** | ** ** | **Commercial  Operation Date** | ** ** |
|-------------|------------|-------------------|------------|-------------------------|------------|--------------------------------|------------|
|        |       |              |       |                    |       |                           |       |
| Potrero 3   |       | San Francisco, CA |       | 206 MW                  |       | 1965                           |       |
|        |       |              |       |                    |       |                           |       |
| Potrero 4-6 |       | San Francisco, CA |       | 156 MW                  |       | 1976                           |       |

 

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