EXHIBIT 10.5
AMENDED AND RESTATED SERVICES AND
RISK MANAGEMENT AGREEMENT
THIS AMENDED AND RESTATED SERVICES AND RISK MANAGEMENT AGREEMENT (this
"Agreement"), dated as of March 30, 2001 (the "Effective Date"), is by and
between MIRANT AMERICAS ENERGY MARKETING L.P. (formerly known as Southern
Company Energy Marketing L.P.), a Delaware limited partnership ("MAEM"), and
MIRANT MID-ATLANTIC, LLC (formerly known as Southern Energy Mid-Atlantic, LLC),
a Delaware limited liability company ("MIRMA").
RECITALS
WHEREAS, MIRMA owns or leases (a) certain electric generation
facilities and associated facilities located in Xxxxxxx County, Maryland (the
"Morgantown Station"), and (b) certain electric generation facilities and
associated facilities located in Upper Xxxxxxxxxx County, Maryland (the
"Xxxxxxxxx Station;" and, collectively with the Morgantown Station, the
"Generating Stations"); and
WHEREAS, MAEM is an energy marketer which has contracted to purchase
electricity and related energy products from MIRMA, Mirant Chalk Point, LLC
("Chalk Point"), Mirant Potomac River, LLC ("Potomac River"), and Mirant Peaker,
LLC ("Peaker", and collectively with MIRMA, Chalk Point and Potomac River, the
"MIRMA Group"); and
WHEREAS, MAEM is obligated to procure electricity and related energy
products under certain power purchase agreements with Ohio Edison Company and
Pennsylvania Power Company for 450MW, Panda-Brandywine or Panda for
approximately 230MW, Northeast Maryland Waste Disposal for 50MW, and one other
agreement for 2.6MW; and
WHEREAS, MAEM and MIRMA entered into that certain Services and Risk
Management Agreement dated December 18, 2000 (the "Existing SRMA"), pursuant to
which the Parties contracted for the provision of certain services by MAEM to
MIRMA; and
WHEREAS, the Parties have agreed to amend and restate the Existing SRMA
in its entirety as more particularly set forth herein; and
WHEREAS, because (a) Chalk Point is a subsidiary of MIRMA, and (b)
MIRMA will receive cash payments and distributions from Potomac River and Peaker
pursuant to notes payable to MIRMA by Potomac River and Peaker and a capital
contribution agreement by Southern Energy, Inc. d/b/a Mirant Corporation as the
sole member of each of Potomac River and Xxxxxx, XXXXX will derive substantial
benefit from the services to be provided by MAEM to the MIRMA Group.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Parties, the
Parties hereby agree as follows:
ARTICLE 1.
DEFINITIONS
The following capitalized terms, whether used in the singular or
plural, shall be defined as provided in this Article 1.
"AGENCY PERIOD" has the meaning set forth in SECTION 3.2(b)(i).
"ANCILLARY AND FREQUENCY RESPONSE SERVICE" shall have the meaning
assigned to that term from time to time by the PJM.
"BANKRUPTCY PROCEEDING" means, with respect to a Party, that Party (a)
is dissolved (other than pursuant to a consolidation, amalgamation or merger),
(b) makes an assignment or any general arrangement for the benefit of creditors,
(c) institutes or has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or insolvency
or other law affecting creditors' rights and, in the case of any such proceeding
or petition instituted or presented against it, such proceeding or petition (i)
results in a judgment of insolvency or bankruptcy or the entry of an order for
its winding-up or liquidation or (ii) is not withdrawn, dismissed or discharged
within sixty (60) days after the institution or presentation thereof, (d)
otherwise becomes bankrupt or insolvent (however evidenced), (e) has a secured
party take possession of all or substantially all of its assets or has an action
or proceeding taken or levied against all or substantially all of its assets and
such secured party maintains possession, or any such action or proceeding is not
dismissed, in either case for thirty (30) days thereafter, or (f) is unable to
pay its debts or admits in writing its inability generally to pay its debts as
they become due.
"BID" or "BIDDING" means the nomination or bidding of the output of the
Generating Stations in the PJM.
"CAPACITY RESOURCES" shall have the meaning assigned to that term from
time to time by the PJM.
"XXXXXXXXX STATION" has the meaning set forth in the recitals to this
Agreement.
"DISPATCH" means the scheduling of the delivery of PJM Products.
"EMISSION ALLOWANCES" means authorizations under state or federal (as
applicable) air quality regulations to emit either one ton of nitrogen oxides
("NOx") or sulfur dioxide ("SO2"), in the former case between May 1 through
September 30 of any given year, and in the latter case at any time during any
applicable calendar year.
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"ENERGY" means electric energy as defined by PJM.
"FACILITY LEASE AGREEMENTS" means those certain Facility Lease
Agreements, each dated as of December 18, 2000, between MIRMA and the owners of
the assets leased by MIRMA at the Generating Stations.
"FORCE MAJEURE" means an event which is not within the reasonable
control of a Party which causes such Party to be delayed in or prevented from
performing or carrying out any of its obligations under this Agreement and which
by the exercise of due diligence in accordance with Good Utility Practices, such
Party is unable to overcome or avoid or cause to be avoided, including, without
limitation, acts of God; fire; ice; earthquake; lightning; tornado; hurricane,
or other severe weather condition; civil disturbance; labor dispute; labor or
material shortage; sabotage; acts of terrorism; acts of a public enemy;
uprising; insurrection; civil unrest; war or rebellion; explosions; breakage or
accident to machinery or equipment, action or restraint by court order or public
or governmental authority or lawfully established civilian authorities, provided
that a Force Majeure shall not include lack of finances or change in market
conditions, and provided further that any failure of any supplier or
subcontractor of a Party to perform any obligation to such Party will not
constitute a Force Majeure unless such subcontractor or supplier is unable to
perform such obligations for reasons that would constitute a "Force Majeure"
hereunder.
"FUEL" means fuel oil, natural gas, or coal, as dictated by context.
"GENERATING STATIONS" has the meaning provided in the recitals.
"GOOD UTILITY PRACTICES" mean any of the practices, methods or acts
engaged in or approved by a significant portion of the electric energy industry
with respect to similar facilities during the relevant time period which in each
case, in the exercise of reasonable judgment in light of the facts known or that
should have been known at the time a decision was made, could have been expected
to accomplish the desired result at reasonable cost consistent with good
business practices, reliability, safety, law, regulation, environmental
protection and expedition. Good Utility Practices are not intended to be limited
to the optimum practices, methods or acts to the exclusion of all others, but
rather to delineate the acceptable practices, methods or acts generally accepted
in such industry.
"INTEREST RATE" means, for any date, two percent (2%) over the per
annum rate of interest equal to the prime lending rate as may from time to time
be published in the Wall Street Journal under "Money Rates"; provided that the
Interest Rate shall never exceed the maximum interest rate permitted by
applicable law.
"MIRMA ASSET BOOK" has the meaning set forth in SECTION 4.1.
"MIRMA GROUP" has the meaning set forth in the recitals.
"MORGANTOWN STATION" has the meaning set forth in the recitals to this
Agreement.
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"OPERATING RESERVES" shall have the meaning assigned to that term from
time to time by the PJM.
"PARTICIPATION AGREEMENTS" means those certain Participation Agreements
dated as of December 18, 2000 among MIRMA, the owners of the leased assets at
the Generating Stations, Wilmington Trust Company, and State Street Bank and
Trust Company of Connecticut, National Association.
"PARTY" means any of MAEM or MIRMA. In the context where MAEM is
referenced as a "Party," a reference to the "other Party" shall mean MIRMA. In
the context where MIRMA is referenced as a "Party," a reference to the "other
Party" shall mean MAEM. References to "either Party" or the "Parties" shall have
comparable meanings.
"PJM" means the Pennsylvania - New Jersey - Maryland Power Pool.
"PJM PRODUCTS" means Energy, Operating Reserves, Capacity Resources and
Ancillary and Frequency Response Service, as well as any other products and
ancillary services which become commercially recognized in the PJM market during
the term of this Agreement.
ARTICLE 2.
TERM
The initial term of this Agreement shall commence as of the Effective
Date and shall continue, unless earlier terminated pursuant to its terms, until
December 31, 2001. The Agreement will automatically renew for successive
one-year terms unless one Party gives the other Party notice of such Party's
intent to terminate this Agreement at least three (3) months prior to the
expiration of any such term.
ARTICLE 3.
SERVICES TO BE PROVIDED BY MAEM
3.1 BIDDING AND DISPATCH INTO THE PJM. MAEM shall be responsible for
the Bidding and Dispatch of the output of the Generating Stations. Without
limitation, MAEM's Bidding and Dispatch strategies shall be consistent with:
(i) the operating parameters and limitations of the Generating
Stations;
(ii) MIRMA's maintenance plans;
(iii) the availability of the Generating Stations (including Fuel
handling and storage facilities), as communicated by MIRMA to
MAEM;
(iv) PJM rules and procedures in effect from time to time;
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(v) other applicable transmission provider requirements; and
(vi) Fuel availability.
3.2 FUEL SERVICES; AGENCY PERIOD. (a) MAEM will provide all Fuel
necessary for the operation of the Generating Facilities at MAEM's cost, which
shall be calculated as MAEM's actual cost for transportation, inventory and
related costs, as adjusted for any gains or losses on fuel xxxxxx and trading
activities. MAEM will enter into arrangements for the purchase and procurement
of Fuel meeting the specifications for the Generating Stations, coordinate the
scheduling, loading, unloading and storage of Fuel deliveries, maintain Fuel
inventory levels, and perform such other Fuel-related services as MIRMA may
request from time to time, in each case in accordance with Good Utility
Practices.
(b)(i) If, at any time, MAEM determines that the
creditworthiness of MIRMA is impaired, MAEM may, at its sole discretion
and upon written notice to MIRMA, elect to suspend Fuel procurement
under SECTION 3.2(a) for a period until such creditworthiness is
restored (each such period, an "Agency Period"). During any such Agency
Period, MAEM shall act solely as agent to MIRMA under this Agreement in
taking the actions set forth in this SECTION 3.2(b).
(ii) During any Agency Period, MAEM's sole obligation shall be
to use commercially reasonable efforts to procure Fuel as agent of and
for the account of MIRMA, and MAEM shall have no obligation to provide
credit enhancement to any supplier of MIRMA. MAEM shall have no
liability to MIRMA if Fuel suppliers do not agree to supply Fuel to
MIRMA due to a lack of creditworthiness of MIRMA. As agent, MAEM shall
neither directly purchase or contract for the purchase of, nor take
title to or possession and control of, any Fuel procured for the
account of MIRMA, and MAEM shall have no liability to any Fuel supplier
or MIRMA for nonpayment for or nondelivery of procured Fuels, as
appropriate. During any Agency Period, as between MAEM and MIRMA, MIRMA
shall be deemed to have title, exclusive possession and control of all
procured Fuel at all times, and any risk of loss associated with any
such procured Fuel shall be born by MIRMA.
(iii) Each Agency Period shall continue until MIRMA can
demonstrate to MAEM that MIRMA's creditworthiness has been restored, as
reasonably determined by MAEM. After a positive determination as to
such creditworthiness, the applicable Agency Period shall be terminated
by MAEM by written notice to MIRMA, and MAEM shall resume procuring
Fuel for MIRMA under SECTION 3.2(A).
3.3 EMISSIONS PLANNING AND RELATED RESPONSIBILITIES. MAEM shall provide
MIRMA emissions planning, in consultation with MIRMA, to assist in the
compliance of the Generating Stations at all times and on an ongoing basis with
all currently effective emissions requirements, permits and regulations. MAEM
will procure all Emission Allowances necessary for the operation of the
Generating Stations, and dispose of excess Emission Allowances, which are not
needed for the operation of any other generating stations in the MIRMA Asset
Book. MAEM
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will charge MAEM's actual cost of acquiring the Emission Allowances and remit
the proceeds of any Emission Allowances sales to MIRMA, as adjusted for any
gains or losses on emission xxxxxx and trading activities.
3.4 INSURANCE. MAEM will procure or assist MIRMA in procuring business
interruption insurance and forced outage insurance covering the Generating
Stations. The costs of such insurance will be charged to MIRMA.
3.5 FINANCIAL PRODUCTS. MAEM will enter into financial products
(including but not limited to, swaps, contracts for differences, options and
weather derivatives) purchased for MIRMA. The gains and losses arising from such
financial products will be borne by MIRMA, and therefore the costs, including
without limitation third party broker costs and transaction fees, and revenues
related to such financial products will be charged to or paid to MIRMA.
3.6 POWER MARKET TRANSACTIONS. MAEM will enter into third party
bilateral contracts, forward sales, xxxxxx and other transactions for the
benefit of MIRMA. The gains and losses arising from such transactions will be
borne by MIRMA, and therefore the costs of such transactions, including without
limitation, purchased power costs, transmission costs, third party broker costs,
transaction fees and incremental credit costs, and revenues related to such
activities will be charged to or paid to MIRMA.
ARTICLE 4.
BONUS, BILLING AND PAYMENT
4.1 MIRMA ASSET BOOK. MAEM will establish and maintain an asset
management book (the "MIRMA Asset Book") to track and measure the financial
performance of the MIRMA Group assets. The MIRMA Asset Book will be separate
from any MAEM trading book or any other asset book maintained by MAEM for power
resources owned or managed by MAEM.
4.2 SERVICE FEE. For services rendered by MAEM pursuant to the MIRMA
Group, the fee shall be $604,666.67 per month.
4.3 BONUS. MAEM will be entitled to a bonus from MIRMA equal to 50% of
the amount by which the Net Market Revenues in any year exceeds the Threshold
Amount for such year, determined as follows:
"Net Market Revenues" means Gross Revenues MINUS Expenses. Net Market
Revenues shall be calculated in accordance with GAAP.
"Gross Revenues" means all revenues for a given year attributed to the
MIRMA Asset Book, including, without limitation, revenues from (a)
sales of all PJM Products from the Generating Stations, (b) other sales
of PJM Products, (c) Fuel sales, (d) sales or trades of excess
Emissions Allowances from the Generating Stations, (e) financial
products (including, but not limited to, swaps, contracts for
differences, options and weather
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derivatives) purchased for the MIRMA Asset Book, and (f) forced outage
insurance and business interruption insurance proceeds.
"Expenses" means all costs attributed to the MIRMA Asset Book for such
year, including (a) costs reimbursed to MAEM for actual costs in
performing the services including costs for (i) Fuel, (ii) Emissions
Allowances, (iii) financial products (including, but not limited to,
swaps, contracts for differences, options, and weather derivatives)
purchased for the MIRMA Asset Book, (iv) broker and/or transaction
fees, (v) transmission congestion contracts for sales from the
Generating Stations, (vi) forced outage insurance costs, (vii)
incremental credit costs for transactions in the MIRMA Asset Book, and
(vii) other actual costs in connection with the services described in
ARTICLE 3 hereof, and (b) the service fee payable to MAEM in accordance
with SECTION 4.2 hereof.
"Threshold Amount" means the $896,179,000.00 for the 2001 calendar
year. The Threshold Amount for subsequent years shall be determined by
joint agreement between MAEM and the MIRMA Group as a reasonable amount
based on upon assumptions consistent in all material respects with
relevant contracts and agreements, historical operations, and the
parties' good faith projections of future revenues and projections of
operating expenses for the MIRMA Group in light of the then existing or
reasonably expected regulatory and market environments in the markets
in which the facilities or other assets owned by the MIRMA Group will
be operated.
The bonus shall not be payable until the Threshold Amount is reached.
Upon reaching the Threshold Amount, such bonus will be paid on a monthly basis
in accordance with SECTION 4.4 hereof. MAEM acknowledges that any bonus payments
to be made hereunder shall be subordinated, pursuant to Sections 6.6 and 6.8 of
the Participation Agreements, to MIRMA's payment obligations under the Facility
Lease Agreements.
4.4 BILLING AND PAYMENT. MAEM shall pay MIRMA any Net Market Revenues
due for the prior month by wire transfer to the payment address provided by
MIRMA on or before the twentieth (20th) day of each month, or if such day is not
a business day, the immediately following business day. At the time of each
monthly payment, MAEM shall render to MIRMA a statement detailing the Net Market
Revenues for the prior month, and shall provide MIRMA with reasonable supporting
documentation for each such monthly statement, identifying with reasonable
specificity calculations underlying such Net Market Revenues. All payments
between MAEM and MIRMA will be netted so that MAEM pays MIRMA the Net Market
Revenues minus any bonus payable pursuant to SECTION 4.3. MAEM will pay MIRMA
the Net Market Revenues (net of any bonus), and MIRMA will then distribute such
revenues in accordance with the provision of the Agency Agreement dated of even
date herewith between the members of the MIRMA Group.
4.5 REPORTS. MIRMA and MAEM will cooperate to provide monthly reports
in reasonable detail showing the calculation of the Net Market Revenues, with
appropriate breakdown by generating unit and station, to enable MIRMA to
allocate Net Market Revenues and bonus payments to MAEM, if any, among the
members of the MIRMA Group. MIRMA and
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the other members of the MIRMA Group will have the right, upon reasonable
notice, to examine and/or audit the MIRMA Asset Book from time to time.
4.6 INTEREST AND DISPUTED AMOUNTS. If either Party fails to make any
payment on or before the applicable payment due date, such overdue amounts shall
accrue interest at the Interest Rate from, and including, the applicable payment
due date to, but excluding, the date of payment. Any disputed invoiced amounts,
except amounts which are manifestly inaccurate, shall be paid in full on the
applicable payment due date, subject to later return together with interest
accrued at the Interest Rate. Overpayments or underpayments identified by the
Parties shall be returned or credited, together with interest accrued at the
Interest Rate, to their rightful owners in the first following month.
ARTICLE 5.
DEFAULTS AND REMEDIES
5.1 EVENTS OF DEFAULT. Any one or more of the following shall
constitute an "Event of Default" hereunder with respect to a Party:
(a) default shall occur in the payment of any amounts due from such
Party hereunder which shall continue for more than ten (10) days after written
notice from the other Party;
(b) other than as provided in SECTION 5.1(a) above, default shall occur
in the performance of any covenant or condition to be performed by such Party
under this Agreement and such default shall continue unremedied for a period of
thirty (30) days after written notice from the other Party specifying the nature
of such default;
(c) a Bankruptcy Proceeding has occurred with respect to such Party; or
(d) a representation or warranty made by such Party herein shall have
been false or misleading in any material respect when made; provided, however,
if such representation or warranty is capable of being corrected, no Event of
Default shall have occurred if such Party is diligently pursuing such correction
and such representation or warranty is corrected within thirty (30) days of such
Party obtaining knowledge of the false and misleading nature of the statement.
5.2 REMEDIES. The Parties shall have the following remedies available
to them hereunder:
(a) Upon the occurrence of an Event of Default by either Party
hereunder, the non-defaulting Party shall have the right (i) to collect all
amounts then or thereafter due to it from the defaulting Party hereunder, and
(ii) upon written notice to the other Party, to terminate this Agreement at any
time during the continuation of such Event of Default. The terminating Party
shall have all rights and remedies available to it under applicable law, subject
to the limitations set forth in SECTION 7.7.
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(b) Without limiting the foregoing, any unexcused breach of this
Agreement or failure of either Party to perform its obligations hereunder shall
subject such Party to the payment of actual damages to the other Party,
regardless of any cure period.
ARTICLE 6.
FORCE MAJEURE
If either Party is rendered wholly or partly unable to perform its
obligations under this Agreement because of a Force Majeure event, that Party
will be excused from whatever performance is 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 the occurrence of the Force Majeure event, gives
the other Party written notice describing the particulars of the occurrence; (b)
the suspension of performance is of no greater scope and of no longer duration
than is reasonably required by the Force Majeure event; (c) the non-performing
Party uses commercially reasonable efforts to overcome or mitigate the effects
of such occurrence; and (d) when the non-performing Party is able to resume
performance of its obligations hereunder, that Party shall give the other Party
written notice to that effect and shall promptly resume such performance.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
7.1 ASSIGNMENT; SUCCESSORS AND ASSIGNS. No assignment or delegation by
either Party (or any successor or assignee thereof) of this Agreement, in whole
or in part, shall be made or become effective without 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
as to assure that such Party's obligations under this Agreement will be honored
fully and timely by any succeeding party.
7.2 NOTICES. All notices, requests and other communications hereunder
(herein collectively a "notice" or "notices") shall be deemed to have been duly
delivered, given or made to or upon any Party hereto if in writing and delivered
by hand against receipt, or by certified or registered mail, postage pre-paid,
return receipt requested, or to a courier who guarantees next business day
delivery or sent by telecopy (with confirmation) to such Party at its address
set forth below or to such other address as such Party may at any time, or from
time to time, direct by notice given in accordance with this SECTION 7.2.
IF TO MIRMA: Mirant Mid-Atlantic, LLC,
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: President and Chief Executive Officer
IF TO MAEM: Mirant Americas Energy Marketing L.P.
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Vice President, Mid-Atlantic Region
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The date of delivery of any such notice, request or other communication shall be
the earlier of (i) the date of actual receipt or (ii) three (3) business days
after such notice, request or other communication is sent by certified or
registered mail, (iii) if sent by courier who guarantees next business day
delivery, the business day next following the day of such notice, request or
other communication is actually delivered to the courier or (iv) the day
actually telecopied.
7.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW THAT WOULD OTHERWISE CAUSE THE LAW OF ANY STATE OTHER THAN NEW
YORK TO APPLY.
7.4 COMPLIANCE WITH LAWS. At all times during the term of this
Agreement, the Parties shall comply with all laws, rules, regulations, and codes
of all governmental authorities having jurisdiction over each of their
respective businesses which are now applicable, or may be applicable hereafter,
including without limitation, all special laws, policies, ordinances, or
regulations now in force, as amended or hereafter enacted. The Parties hereto
shall maintain all licenses, permits and other consents from all governmental
authorities having jurisdiction for the necessary use and operation of their
respective business. Nothing herein shall be deemed a waiver of the Parties'
right to challenge the validity of any such law, rule or regulation.
7.5 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the Parties with respect to the subject matter herein and takes precedence over
all prior understandings. This Agreement may not be amended except by a writing
signed by the Parties.
7.6 SEVERABILITY. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the other provisions hereof. If any provision
of this Agreement is held to be invalid, such provisions shall not be severed
from this Agreement; instead, the scope of the rights and duties created thereby
shall be reduced by the smallest extent necessary to conform such provision to
the applicable law, preserving to the greatest extent the intent of the Parties
to create such rights and duties as set out herein. If necessary to preserve the
intent of the Parties hereto, the Parties shall negotiate in good faith to amend
this Agreement, adopting a substitute provision for the one deemed invalid or
unenforceable that is legally binding and enforceable and which restores to the
two Parties to the greatest extent possible the benefit of their respective
bargains on the Effective Date.
7.7 LIMITATION ON DAMAGES. NEITHER PARTY SHALL BE ENTITLED TO RECOVER
SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES HEREUNDER.
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IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Parties hereto have caused this Agreement to be duly executed as an instrument
under seal by their respective duly authorized officers as of the date and year
first above written.
MIRANT AMERICAS ENERGY MIRANT MID-ATLANTIC, LLC
MARKETING L.P.
By MIRANT AMERICAS
DEVELOPMENT, INC.,
its General Partner
By: ______________________________ By: _____________________________
Name: _____________________________ Name:____________________________
Title: ____________________________ Title: __________________________
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