EXHIBIT 10(a)102


                                     FORM OF

                          TAX INDEMNIFICATION AGREEMENT

                                  BY AND AMONG

                              THE SOUTHERN COMPANY

                          AND ITS AFFILIATED COMPANIES

                                       AND

                              SOUTHERN ENERGY, INC.

                          AND ITS AFFILIATED COMPANIES

                                TABLE OF CONTENTS



<PAGE>



                                TABLE OF CONTENTS



<TABLE>
<S>                                                                                                              <C>
RECITALS..........................................................................................................1
SECTION 1.  DEFINITIONS...........................................................................................2
SECTION 2. PREPARATION AND FILING OF TAX RETURNS..................................................................6
   2.1 In General.................................................................................................6
   2.2 Information and Cooperation................................................................................7
   2.3 Manner of Filing Tax Returns...............................................................................7
   2.4 Agent......................................................................................................8
SECTION 3. REPRESENTATIONS AND COVENANTS..........................................................................8
   3.1 Southern Energy Representations and Covenants..............................................................8
   3.2 Southern Representations and Covenants.....................................................................9
SECTION 4. TAX SHARING AND PAYMENTS...............................................................................9
   4.1 In General.................................................................................................9
   4.2 Payments..................................................................................................10
SECTION 5. ALLOCATION OF CERTAIN TAX ITEMS.......................................................................10
   5.1 Liability for Restructuring Taxes and Deconsolidation.....................................................10
   5.2 Carryforwards and Carrybacks..............................................................................10
   5.3 Refunds...................................................................................................11
   5.4 Allocation of Tax Items...................................................................................11
   5.5 Continuing Covenants......................................................................................11
SECTION 6. INDEMNIFICATION PROVISIONS............................................................................11
   6.1 General Indemnification...................................................................................11
   6.2 Spinoff Indemnification...................................................................................12
   6.3 Indemnified Liability.....................................................................................13
   6.4 Amount of Indemnified Liability for Income Taxes..........................................................13
   6.5 Indemnity Amount..........................................................................................14
   6.6 Alternate Remedy..........................................................................................14
   6.7 Payments..................................................................................................14
   6.8 Prompt Performance........................................................................................15
   6.9 Interest..................................................................................................15
   6.10 Tax Records..............................................................................................15
SECTION 7. AUDITS AND CONTEST RIGHTS.............................................................................15
   7.1 In General................................................................................................15
   7.2 Notice....................................................................................................16
   7.3 Contests..................................................................................................16
   7.4 Limitations...............................................................................................17
   7.5 Failure to Notify, Etc....................................................................................18
   7.6 Remedies..................................................................................................18
SECTION 8. STOCK OPTIONS.........................................................................................19
   8.1 In General................................................................................................19
   8.2 Notices, Withholding, Reporting...........................................................................19
   8.3 Adjustments...............................................................................................19
SECTION 9. MISCELLANEOUS.........................................................................................19
   9.1 Effectiveness.............................................................................................19
   9.2 Notices...................................................................................................19
</TABLE>


<PAGE>


<TABLE>
<S>                                                                                                             <C>
   9.3 Changes in Law............................................................................................20
   9.4 Confidentiality...........................................................................................20
   9.5 Successors................................................................................................21
   9.6 Affiliated Companies......................................................................................21
   9.7 Authorization, Etc........................................................................................21
   9.8 Entire Agreement..........................................................................................21
   9.9 Governing Law; Jurisdiction...............................................................................21
   9.10 Dispute Resolution.......................................................................................21
   9.11 Counterparts.............................................................................................21
   9.12 Severability.............................................................................................21
   9.13 No Third Party Beneficiaries.............................................................................22
   9.14 Waivers, Etc.............................................................................................22
   9.15 Setoff...................................................................................................22
</TABLE>




                                       ii

<PAGE>

                          TAX INDEMNIFICATION AGREEMENT


         THIS TAX INDEMNIFICATION AGREEMENT (this "Agreement"), dated as of
September 1, 2000, by and among The Southern Company ("Southern"), a Delaware
corporation and each Southern Affiliated Company, and Southern Energy, Inc.
("Southern Energy"), a Delaware corporation and currently a direct, wholly owned
subsidiary of Southern, and each Southern Energy Affiliated Company is entered
into in connection with the Spinoff (as defined below).


                                    RECITALS

         WHEREAS, Southern is the common parent of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), which currently files a consolidated federal
income tax return, and which, together with Southern Energy and other affiliated
corporations, is party to the Tax Allocation Agreement (as defined below);


         WHEREAS, as set forth in the Master Separation and Distribution
Agreement dated as of September 1, 2000 (the "Separation Agreement"), and
subject to the terms and conditions thereof, Southern and Southern Energy have
determined it would be appropriate and desirable for Southern to separate the
Southern Energy Group from the Southern Group, and in connection with such
separation (as more fully discussed in the Separation Agreement), for Southern
to acquire HoldCo (as defined below) from Southern Energy (the "HoldCo
Transaction");



         WHEREAS, Southern and Southern Energy contemplate that in addition to
the HoldCo Transaction, Southern Energy will make an initial public offering
(the "IPO") of Southern Energy common stock that will reduce Southern's
ownership of Southern Energy on a fully-diluted basis to not less than 80.1
percent;


         WHEREAS, subsequent to the IPO, Southern intends to distribute all of
its shares of Southern Energy common stock, on a pro rata basis, to the holders
of the common stock of Southern, subject to the terms and conditions of the
Separation Agreement (the "Distribution");

         WHEREAS, the Distribution is intended to qualify as a tax free
distribution under Section 355 of the Code;

         WHEREAS, upon the Distribution, Southern Energy will cease to be a
member of the Southern Consolidated Group for federal income tax purposes; and

         WHEREAS, in contemplation of the Distribution pursuant to which
Southern Energy and its domestic subsidiaries will cease to be members of the
Southern Group (as defined below), the parties hereto have determined to enter
into this Agreement, setting forth their agreement with respect to certain Tax
matters.

<PAGE>

         NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1.  DEFINITIONS

         1.1 In General. As used in this Agreement, the following capitalized
terms shall have the following meanings:

         "Adequate Assurances" means posting a bond or providing a letter of
credit reasonably acceptable to the Indemnitee; provided, however, if the
Indemnifying Party fails to post such bond or provide such letter of credit, the
Indemnifying Party shall provide cash equal to the Indemnity Amount to the
Indemnitee not less than thirty (30) days prior to the date on which such Tax
would become due and payable by the Indemnitee.

         "Affiliated Company" means, for income tax purposes, any entity in
which a common parent holds 80% or more of the voting power and value of such
corporation. In the case of Southern, such term shall exclude Southern Energy
and any Southern Energy Affiliated Company.

         "Audit" includes any audit, assessment of Taxes, other examination by
any Tax Authority, proceeding, or appeal of such a proceeding relating to Taxes,
whether administrative or judicial, including proceedings relating to competent
authority determinations.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Consolidated Group" means a group of one or more corporations
connected through stock ownership with a common parent in which the common
parent owns at least 80% of the total voting power and value of such corporation
and that files a Consolidated Return.

         "Consolidated Return" means any Tax Return with respect to Federal
Income Taxes filed on a consolidated basis wherein Southern Energy or any
Affiliated Company joins in the filing of such Tax Return (for any taxable
period) with Southern or one more Southern Affiliated Companies.

         "Consolidated Return Year" means any taxable year for which a
Consolidated Return is filed.

         "Control" means stock representing 50% or more of the total combined
voting power of all classes of stock entitled to vote or at least 50% of the
total value of shares of all classes of stock.

         "Distribution" has the meaning set forth in the Recitals to this
Agreement.

         "Distribution Date" means the date on which the Distribution is
effective.



                                       2


<PAGE>

         "Federal Income Tax" means any Tax imposed under Subtitle A of the Code
(including the Taxes imposed by Sections 11, 55, and 1201(a) of the Code), and
any interest, additions to Tax or penalties applicable or related thereto, and
any other income-based U.S. federal Tax which is hereinafter imposed upon
corporations.

         "Filing Party" has the meaning set forth in Section 2.3(b) of this
Agreement.


         "Final Determination" means with respect to any issue (i) a decision,
judgment, decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final and not subject to
further appeal, (ii) a closing agreement (whether or not entered into under
Section 7121 of the Code) or any other binding settlement agreement (whether or
not with the IRS) entered into in connection with or in contemplation of an
administrative or judicial proceeding, or (iii) the completion of the highest
level of administrative proceedings if a judicial contest is not or is no longer
available.


         "HoldCo" means the entity created by Southern Energy that will own all
of the stock of SE Finance Capital Corporation and Southern Company Capital
Funding, Inc. and will be merged with Southern Company Energy Solutions, Inc.

         "HoldCo Transaction" has the meaning set forth in the Recitals of this
Agreement.

         "Income Taxes" means (1) any tax based upon, measured by, or calculated
with respect to (A) net income or profits (including any capital gains tax,
minimum tax and any tax on items of Tax preference, but not including sales,
use, real or personal property, gross or net receipts, transfer or similar
taxes) or (B) multiple bases if one or more of the bases upon which such tax may
be based, measured by, or calculated with respect to, is described in clause (A)
above, or (2) any U.S., state or local franchise tax.

         "Indemnified Liability" has the meaning set forth in Section 6.3.

         "Indemnifying Party" has the meaning set forth in Section 6.2(d) of
this Agreement.

         "Indemnitee" has the meaning set forth in Section 6.2(d) of this
Agreement.

         "Indemnity Amount" has the meaning set forth in Section 6.5.

         "Initial Private Letter Ruling" means the first private letter ruling
issued by the Service to Southern in connection with the Spinoff.

         "Non-Filing Party" has the meaning set forth in Section 2.3(c) of this
Agreement.

         "Option" means an option to acquire common stock, or other equity-based
incentives the economic value of which is designed to mirror that of an option,
including non-qualified stock options, discounted non-qualified stock options,
cliff options to the extent stock is issued or issuable (as opposed to cash
compensation), and tandem stock options to the extent stock is issued or
issuable (as opposed to cash compensation).



                                       3


<PAGE>


         "Post-Distribution Period" means any taxable period or portion thereof
beginning after the Distribution Date.



         "Pre-Distribution Period" means any taxable period or portion thereof
ending on or prior to the Distribution Date.


         "Prohibited Act" has the meaning set forth in Section 6.2(c).

         "Restricted Period" means the period beginning two years before the
date of the Distribution and ending two years after the Distribution Date.


         "Restructuring" means the transactions undertaken by Southern and
Southern Energy (and their respective Affiliated Companies) designed to
accomplish the HoldCo Transaction.


         "Restructuring Tax" means any Tax imposed as a result of the
transactions contemplated by the Restructuring.

         "Ruling Documents" means (1) the request for a ruling under Section 355
and various other Sections of the Code, filed with the Service in connection
with the Spinoff, together with any supplemental filings or ruling requests or
other materials subsequently submitted on behalf of Southern, its subsidiaries
and shareholders to the Service, the appendices and exhibits thereto, and any
rulings issued by the Service to Southern in connection with the Spinoff or (2)
any similar filings submitted to, or rulings issued by, any other Tax Authority
in connection with the Spinoff.

         "Separate Tax" means any Tax incurred by an entity that is not a
Federal Income Tax arising from the filing of the Consolidated Return.

         "Separate Return" means any Tax Return filed by any entity that is not
part of the Consolidated Tax Return.

         "Separation Agreement" has the meaning set forth in the Recitals to
this Agreement.

         "Service" means the Internal Revenue Service.

         "Southern Energy Group" means Southern Energy and any Southern Energy
Affiliated Company of which Southern Energy would be the common parent
corporation after the HoldCo Transaction.

         "Southern Energy Historic Group" means Southern Energy or any Southern
Energy Affiliated Company, including SE Finance Capital Corporation, in
existence prior to the creation and transfer of HoldCo.


                                       4


<PAGE>

         "Southern Group" means Southern, any Southern Affiliated Company or
other entity of which Southern is the common parent corporation, and any
corporation or other entity which may be, or may become a member of such group
from time to time after the HoldCo Transaction. Southern Company Energy
Solutions, Inc., shall at all times remain a member of the Southern Group
notwithstanding any merger into HoldCo.


         "Southern Historic Group" means Southern or any Southern Affiliated
Company (other than Southern Energy or any Southern Energy Affiliated Company)
that was part of Southern's Consolidated Group prior to the HoldCo Transaction,
including Southern Company Energy Solutions, Inc.


         "Spinoff" means the separation of the Southern Energy Group from the
Southern Group through the Distribution.

         "Tax" includes any charges, fees, levies, imposts, duties, or other
assessments of a similar nature, including income, alternative or add-on
minimum, gross receipts, profits, lease, service, service use, wage, wage
withholding, employment, workers compensation, business occupation, occupation,
premiums, environmental, estimated, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
withholding, social security, unemployment, disability, ad valorem, estimated,
highway use, commercial rent, capital stock, paid up capital, recording,
registration, property, real property gains, value added, business license,
custom duties, or other tax or governmental fee of any kind whatsoever, imposed
or required to be withheld by any Tax Authority including any interest,
additions to tax, or penalties applicable or related thereto.

         "Tax Allocation Agreement" means the Income Tax Allocation Agreement
entered into by and among Southern and all the members of its Consolidated Group
dated December 29, 1981, as amended, pursuant to which the parties agreed upon
the allocation of Tax Items relating to the Consolidated Group and the
Consolidated Return.

         "Tax Authority" means any governmental authority or any subdivision,
agency, commission or authority thereof or any quasi-governmental or private
body having jurisdiction over the assessment, determination, collection or
imposition of any Tax (including the Service).

         "Tax Benefit" means a reduction in the Tax liability of a taxpayer (or
of the affiliated group of which it is a member) for any taxable period. Except
as otherwise provided in this Agreement, a Tax Benefit shall be deemed to have
been realized or received from a Tax Item in a taxable period only if and to the
extent that the Tax liability of the taxpayer (or of the affiliated group of
which it is a member) for such period, after taking into account the effect of
the Tax Item on the Tax liability of such taxpayer in the current period and all
prior periods, is less than it would have been if such Tax liability were
determined without regard to such Tax Item.

         "Tax Detriment" means an increase in the Tax liability of a taxpayer
(or of the affiliated group of which it is a member) for any taxable period.
Except as otherwise provided in this Agreement, a Tax Detriment shall be deemed
to have been realized or received from a Tax Item in a taxable period only if
and to the extent that the Tax liability of the taxpayer (or of the



                                       5

<PAGE>
affiliated group of which it is a member) for such period, after taking into
account the effect of the Tax Item on the Tax liability of such taxpayer in the
current period and all prior periods, is more than it would have been if such
Tax liability were determined without regard to such Tax Item.

         "Tax Item" means any item of income, gain, loss, deduction or credit,
or other attribute that may have the effect of increasing or decreasing any Tax.


         "Tax Law" means any federal, state, local or foreign law with respect
to Taxes, including the Code and Treasury Regulations.


         "Tax Return" means any return, report, certificate, form or similar
statement or document (including, any related or supporting information or
schedule attached thereto and any information return, amended Tax return, claim
for refund or declaration of estimated Tax) required to be supplied to, or filed
with, a Tax Authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.

         "Treasury Regulations" means the final, temporary and proposed income
Tax regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).

         1.2 Construction Principles. As used in this Agreement, the singular
shall be deemed to include the plural and vice versa, and the captions and
section headings are inserted for convenience of reference only and are not
intended to have any significance for the interpretation of, or construction of,
the provisions of this Agreement. It is intended that this Agreement shall
comply with the Public Utility Holding Company Act of 1935, Rule 45(c), to the
extent relevant, and all ambiguities shall be interpreted and resolved
accordingly.

              SECTION 2. PREPARATION AND FILING OF TAX RETURNS.

         2.1 In General.

         (a) During the Pre-Distribution Period, Southern shall timely file or
cause to be filed all Tax Returns that are filed on a consolidated, combined or
unitary basis and include any member of the Southern Energy Group or Southern
Energy Historic Group as provided in the Tax Allocation Agreement. Each entity
required to file a Separate Return shall timely file or cause to be filed all
such Separate Returns for any Pre-Distribution Period. Notwithstanding the
foregoing, Southern shall timely file or cause to be filed all Tax Returns with
respect to HoldCo.

         (b) Southern shall timely file or cause to be filed any Tax Return
related to the Southern Group for any Post-Distribution Period. Southern Energy
shall timely file or cause to be filed any Tax Return related to the Southern
Energy Group for any Post-Distribution Period.


                                       6


<PAGE>

         2.2 Information and Cooperation.

         (a) Southern and Southern Energy shall provide each other all documents
and information, and make available employees and officers of Southern and
Southern Energy, as reasonably requested by the other party, on a mutually
convenient basis during normal business hours, to aid the other party in
preparing any Tax Return described in Section 2.1 of this Agreement to the
extent that such Tax Return relates to any Pre-Distribution Period or to contest
any Audit of any such Tax Return.


         (b) In the case of any Tax Return for a Pre-Distribution Period
described in Section 2.1 of this Agreement, Southern will provide Southern
Energy with a copy of that portion of each such Tax Return to the extent it
relates to Southern Energy or any Southern Energy Affiliated Company, together
with all related tax accounting work papers, not later than five (5) days after
the receipt of a written request therefor. In addition, Southern will provide to
employees of Southern Energy responsible for preparing its Tax Returns with
access to any private letter rulings, together with any requests therefor and
related documents and any other relevant information, as it relates to Southern
Energy for any period prior to the Distribution Date, and will provide Southern
Energy with a copy of such rulings or documents to the extent that the issues
discussed therein are relevant to Southern Energy or a Southern Energy
Affiliated Company, not later than five (5) days after the receipt of a written
request therefor.



         (c) Notwithstanding any other provision of this Agreement, neither
Southern nor any Southern Affiliated Company shall be required to provide
Southern Energy or any Southern Energy Affiliated Company access to or copies of
any information that relate to Southern or any Southern Affiliated Company
unless it also relates to Southern Energy or a Southern Energy Affiliated
Company. In addition, in the event that Southern determines that the provision
of any information to Southern Energy or any Southern Energy Affiliated Company
could be commercially detrimental, violate any law or agreement or waive any
privilege that may be asserted under applicable law including, any privilege
arising under or relating to the attorney-client relationship (including the
attorney-client and work product privileges), the accountant-client privilege,
and any privilege relating to internal evaluation processes, the parties shall
take all reasonable measures to permit the compliance with such obligations in a
manner that avoids any such harm or consequence. In the event that Southern
Energy determines that the provision of any information to Southern or any
Southern Affiliated Company could be commercially detrimental, violate any law
or agreement or waive any privilege that may be asserted under applicable law
including, any privilege arising under or relating to the attorney-client
relationship (including the attorney-client and work product privileges), the
accountant-client privilege, and any privilege relating to internal evaluation
processes, the parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence.


         2.3 Manner of Filing Tax Returns.


         (a) Southern (for itself and the Southern Affiliated Companies) and
Southern Energy (for itself and the Southern Energy Affiliated Companies) agree
to file all Tax Returns for any Pre-Distribution Period, and to take all other
actions in a manner consistent with the position that


                                       7

<PAGE>


Southern Energy and the Southern Energy Affiliated Companies are part of the
Southern Consolidated Group for all periods through and including the
Distribution Date.



         (b) Except as otherwise provided in this Section 2.3 of this Agreement,
the party that is required to file a return under Section 2.1 of this Agreement
(the "Filing Party") shall have the exclusive right to determine (1) the manner
in which such Tax Return shall be prepared and filed, including the elections,
methods of accounting, positions, conventions and principles of taxation to be
used and the manner in which any Tax Item shall be reported, (2) whether any
extensions may be requested, (3) the elections that will be made in such Tax
Return, (4) whether any amended Tax Returns shall be filed, (5) whether any
claims for refund shall be made, (6) whether any refunds shall be paid by way of
refund or credited against any liability for the related Tax, and (7) whether to
retain outside specialists to prepare such Tax Return, whom to retain for such
purpose and the scope of any such retainer. Notwithstanding the foregoing, if
Southern Energy requests Southern to make a particular determination under this
Section 2.3(b) with respect to a Tax Return of Southern Energy or a Southern
Energy Affiliated Company, Southern shall not unreasonably withhold its consent
to such request.


         (c) Any Tax Return described in Section 2.1(a) of this Agreement (but
only with respect to Tax Items of Southern Energy or an Southern Energy
Affiliated Company), which Tax Return is filed after the date of this Agreement,
shall be prepared on a basis consistent with the elections, methods of
accounting, positions, conventions and principles of taxation and the manner in
which any Tax Item or other information is reported as reflected on the most
recently filed prior Tax Returns involving similar matters. The preceding
sentence shall not apply if the Filing Party obtains the prior written consent
(which consent shall not be unreasonably withheld) of the other party (the
"Non-Filing Party").

         2.4 Agent. Southern Energy hereby irrevocably designates, and agrees to
cause each Southern Energy Affiliated Company to so designate, Southern as its
sole and exclusive agent and attorney-in-fact to take such action (including
execution of documents) as Southern, in its sole discretion, may deem
appropriate in any and all matters (including Audits) relating to any
Consolidated Return described in Section 2.1(a) of this Agreement; provided,
however, that Southern shall not exercise its rights as agent and
attorney-in-fact in any manner that is inconsistent with the rights granted to
Southern Energy under this Agreement, and nothing in this Section 2.4 shall
limit the rights granted to Southern Energy under this Agreement.

         SECTION 3. REPRESENTATIONS AND COVENANTS.

         3.1 Southern Energy Representations and Covenants. Southern Energy, for
itself and the Southern Energy Affiliated Companies, hereby represents, warrants
and covenants that:

         (a) Southern Energy has reviewed the information and representations
made in the Ruling Documents submitted to the Service prior to the date of this
Agreement and, to Southern Energy's knowledge, all of such information or
representations that relate to Southern Energy or any Southern Energy Affiliated
Company, or the business or operations of either, are true, correct and
complete.



                                       8


<PAGE>

         (b) Southern Energy will not, and will cause each Southern Energy
Affiliated Company not to, take any action, or fail or omit to take any action,
that would cause any of the information or representations made in the Ruling
Documents that relate to Southern Energy, the Southern Energy Historic Group, or
any Southern Energy Affiliated Company or the business or operations of each, to
be untrue, regardless of whether such information or representations were
included in the Initial Private Letter Ruling (or any supplemental ruling).

         3.2 Southern Representations and Covenants. Southern, for itself and
the Southern Affiliated Companies, hereby represents, warrants and covenants
that:


         (a) Southern has reviewed the information and representations made in
the Ruling Documents submitted to the Service prior to the date of this
Agreement, and, to its knowledge, all of such information or representations
that relate to Southern or any Southern Affiliated Company or the business or
operations of either, are true, correct and complete.


         (b) Southern will not, and will cause each Southern Affiliated Company
not to, take any action, or fail or omit to take any action, that would cause
any of the information or representations made in the Ruling Documents to be
untrue, regardless of whether such information or representations were included
in the Initial Private Letter Ruling.

                 SECTION 4. TAX SHARING AND PAYMENTS.

         4.1 In General. Except to the extent specifically modified or
supplemented herein, the Tax Allocation Agreement shall continue in full force
and effect. Consequently, for example, for taxable periods ending on or before
the Distribution Date, payments to Southern or Southern Energy, as the case may
be, shall continue to be made in accordance with past practices. The provisions
of the Tax Allocation Agreement shall fix the rights and obligations of the
parties as to the matters covered thereby. Notwithstanding any other provision
of this Agreement, the Tax Allocation Agreement shall not apply to any
Post-Distribution Period of Southern Energy and the Southern Energy Group,
except as provided in Section 5.2(b) of this Agreement.

         (a) Southern Energy shall be responsible for, and shall indemnify and
hold harmless Southern against, any and all Taxes incurred by Southern Energy,
the Southern Energy Group, or the Southern Energy Historic Group (except as
provided below) for any Pre-Distribution Period in accordance with past
practices and the principles set forth in the Tax Allocation Agreement other
than any Restructuring Taxes for which Southern or any Southern Affiliated
Company is liable under Section 5 of this Agreement. Southern shall be
responsible for, and shall indemnify and hold harmless Southern Energy against,
any and all Taxes incurred by Southern or any Southern Affiliated Company (other
than Taxes attributable to Southern Energy or any Southern Energy Affiliated
Company) for any Pre-Distribution Period (except as provided below) in
accordance with past practices and the principles set forth in the Tax
Allocation Agreement other than any Restructuring Taxes for which Southern
Energy or any Southern Energy Affiliated Company is liable under Section 5 of
this Agreement.



                                       9


<PAGE>

         (b) Southern shall be responsible for, and shall indemnify and hold
harmless Southern Energy against, any and all Taxes incurred by HoldCo and its
Affiliated Companies for any tax period.

         (c) Southern Energy shall be responsible for all Taxes that relate to
the Southern Energy Group with respect to any Post-Distribution Period. Southern
shall be responsible for all Taxes that relate to the Southern Group with
respect to any Post-Distribution Period.


         4.2 Payments.


         (a) Federal Income Taxes. Southern shall pay (or cause to paid) to the
Service all Federal Income Taxes, if any, of any Consolidated Group due and
payable for all Pre-Distribution Periods.


         (b) Separate Taxes. Southern shall pay (or cause to be paid) to the
appropriate Tax Authorities all Separate Taxes, if any, that relate to Southern,
the Southern Historic Group, or the Southern Group. Southern Energy shall pay
(or cause to be paid) to the appropriate Tax Authorities all Separate Taxes, if
any, that relate to Southern Energy, the Southern Energy Historic Group or the
Southern Energy Group.


                SECTION 5. ALLOCATION OF CERTAIN TAX ITEMS.


         5.1 Liability for Restructuring Taxes and Deconsolidation.



         (a) Southern shall be responsible for, and shall indemnify and hold
harmless Southern Energy against any and all Restructuring Taxes relating to
HoldCo Transaction.


         (b) Except as otherwise provided by this Agreement, all Taxes arising
from the deconsolidation of the Southern Energy Group from the Southern Group
shall be the obligation of the entity that is liable for such Taxes under
applicable Tax Law.

         5.2 Carryforwards and Carrybacks.

         (a) Southern shall notify Southern Energy after the Distribution Date
of any consolidated carryover item which may be partially or totally attributed
to and carried over by a Southern Energy Affiliated Company and will notify
Southern Energy of subsequent adjustments which may affect such carryover item.


         (b) Notwithstanding any other provision of this Agreement, Southern
Energy shall not be required to make any election under Section 172(b)(3) of the
Code and, to the extent feasible, any similar provision of any state or local
Tax Law, to relinquish any right to carryback net operating losses. Upon a
request by Southern Energy, Southern shall be required to include on an amended
Consolidated Return any net operating losses of Southern Energy arising in a
Post-Distribution Period to the extent allowed under the Code; provided, that if
Southern incurs a Tax



                                       10
<PAGE>


Detriment related to the inclusion of such net operating losses on the
Consolidated Return, Southern Energy shall indemnify Southern for the amount of
such Tax Detriment.



         5.3 Refunds. Any refund of Taxes received in a Pre-Distribution Period
will be allocated in a manner consistent with the existing Tax Allocation
Agreement. Any refund of Taxes received in a Post-Distribution Period resulting
from an adjustment made to a Tax Return filed for a Pre-Distribution Period will
be allocated to the party whose Return resulted in such refund, including any
refund relating to the carryback of a net operating loss pursuant to Section
5.2(b).


         5.4 Allocation of Tax Items.

         (a) All Tax computations (1) ending on the Distribution Date and (2)
the immediate following Tax period of Southern Energy or any Southern Energy
Affiliated Company, shall be made pursuant to the principles of Section
1.1502-76(b) of the Treasury Regulations or of a corresponding provision under
the laws of other jurisdictions, as determined by Southern, taking into account
all reasonable suggestions made by Southern Energy with respect thereto.


         (b) Earnings and Profits. Southern will advise Southern Energy in
writing of the decrease in Southern earnings and profits attributable to the
Distribution under Section 312(h) of the Code as a result of the Spin-Off not
later than November 15, 2002, with respect to transactions completed during
fiscal year 2001; provided, however, that Southern shall provide Southern Energy
with estimates of such amounts (determined in accordance with past practice) as
reasonably requested by Southern Energy.


         5.5 Continuing Covenants. Southern (for itself and each Southern
Affiliated Company) and Southern Energy (for itself and each Southern Energy
Affiliated Company) agree (1) not to take any action reasonably expected to
result in an increased Tax Detriment to the other party or a reduction in a Tax
Benefit of the other party under this Agreement, and (2) to take any action
reasonably requested by the other party that would reasonably be expected to
result in a Tax Benefit or avoid a Tax Detriment to the other party, provided
that such action does not result in any additional cost not fully compensated
for by the requesting party. The parties hereby acknowledge that the preceding
sentence is not intended to limit, and therefore shall not apply to, the rights
of the parties with respect to matters otherwise covered by this Agreement.


                SECTION 6. INDEMNIFICATION PROVISIONS.


         6.1 General Indemnification.


         (a) In General. Southern Energy and each Southern Energy Affiliated
Company shall jointly and severally indemnify Southern, each Southern Affiliated
Company and their respective directors, officers and employees, and hold them
harmless from and against any and all Taxes for which Southern Energy or any
Southern Energy Affiliated Company is liable under this Agreement and any loss,
cost, damage or expense, including reasonable attorneys' fees and costs, that is
attributable to, or results from, the failure of Southern Energy, any Southern
Energy Affiliated Company or any director, officer, or employee to make any
payment required to be made under this Agreement. Southern and each Southern
Affiliated Company shall jointly and



                                       11
<PAGE>


severally indemnify Southern Energy, each Southern Energy Affiliated Company and
their respective directors, officers and employees, and hold them harmless from
and against any and all Taxes for which Southern or any Southern Affiliated
Company is liable under this Agreement and any loss, cost, damage or expense,
including reasonable attorneys' fees and costs, that is attributable to, or
results from the failure of Southern any Southern Affiliated Company or any
director, officer or employee to make any payment required to be made under this
Agreement.



         (b) Inaccurate or Incomplete Information. Southern Energy and each
Southern Energy Affiliated Company shall jointly and severally indemnify
Southern, each Southern Affiliated Company and their respective directors,
officers and employees, and hold them harmless from and against any cost, fine,
penalty, or other expenses of any kind attributable to the negligence of
Southern Energy or any Southern Energy Affiliated Company in supplying Southern
or any Southern Affiliated Company with inaccurate or incomplete information, in
connection with the preparation of any Tax Return. Southern and each Southern
Affiliated Company shall jointly and severally indemnify Southern Energy, each
Southern Energy Affiliated Company and their respective directors, officers and
employees, and hold them harmless from and against any cost, fine, penalty, or
other expense of any kind attributable to the negligence of Southern or any
Southern Affiliated Company in supplying Southern Energy or any Southern Energy
Affiliated Company with inaccurate or incomplete information, in connection with
the preparation of any Tax Return.



6.2 Spinoff Indemnification.


         (a) In General. Notwithstanding anything herein or in the Tax
Allocation Agreement to the contrary, the provisions of this Section 6 shall
govern all matters among the parties hereto related to an Indemnified Liability
(as defined in Section 6.3 below) and an Indemnity Amount (as defined in Section
6.5 below).


         (b) Continued Conduct of Business. During the Restricted Period, each
of Southern and Southern Energy agrees that it will not cease the active conduct
of its trade or business within the meaning of Section 355(b) of the Code nor
cause or permit to be caused a change in its Control (other than the
Distribution).


         (c) Ruling Requirement for Major Transactions Undertaken by Southern
Energy during the Restricted Period. During the Restricted Period, Southern and
Southern Energy will not enter into any of the following transactions, or enter
into any other transaction which, by itself or in the aggregate, may cause the
Distribution to be treated as part of a plan pursuant to which one or more
persons acquire directly or indirectly stock representing Control of Southern or
Southern Energy, as the case may be, within the meaning of Code Section 355(e):

                  (i)   merge or consolidate with or into any other corporation;

                  (ii)  liquidate or partially liquidate (within the meaning of
         such terms as defined in Section 346 and Section 302, respectively, of
         the Code);



                                       12

<PAGE>


                  (iii) sell or transfer all or substantially all its assets
         (within the meaning of Rev. Proc. 77-37, 1977 - 2 C.B. 568) in a single
         transaction or series of related transactions;

                  (iv)  redeem or otherwise repurchase any of Southern or
         Southern Energy's capital stock; or


                  (v)   make any change in its equity structure (including stock
         issuances, pursuant to the exercise of options or otherwise, option
         grants, the adoption of, or authorization of shares under a stock
         option plan, capital contributions or acquisition but not including the
         Distribution), (actions (i), (ii), (iii), (iv) and (v) are referred to
         as the "Prohibited Acts"), unless Southern or Southern Energy first
         obtains, and permits the other party to review, a supplemental ruling
         from the Service, that such transaction, and any transaction related
         thereto, will not affect the qualification of the Spin-Off under
         Section 355 of the Code.



         (d) Indemnification. If Southern or Southern Energy breaches any
representations set forth in Section 3 of this Agreement or takes any action or
enters into any agreement to take any action, including, without limitation, any
breach of Sections 6.2(b) and (c), and the Spin-Off shall fail to qualify under
Section 355 of the Code as a result of such action or actions, then such party
(the "Indemnifying Party") shall indemnify and hold harmless the other party
against any and all federal, state and local taxes, interest, penalties and
additions to Tax imposed upon or incurred by Southern, the Southern Group, any
shareholder of Southern, Southern Energy or the Southern Energy Group, as the
case may be, (each such party an "Indemnitee") as a result of the failure of the
Spin-Off to so qualify to the extent provided herein. For purposes of this
Agreement, the failure of the Spin-Off to qualify under Section 355 of the Code
shall include, without limitation, the imposition of any Tax upon any Indemnitee
under Code Section 355(e).


         6.3 Indemnified Liability. For purposes of this Agreement, the term
"Indemnified Liability" means any liability imposed upon or incurred by (1)
Southern, any member of the Southern Group, or Southern shareholder for which
Southern, any other member of the Southern Group or Southern shareholder is
indemnified and held harmless under Section 6.4, or (2) Southern Energy or any
member of the Southern Energy Group, for which Southern Energy or any other
member of the Southern Energy Group is indemnified and held harmless under
Section 6.4, but shall not refer to the amount of such liability.


         6.4 Amount of Indemnified Liability for Income Taxes. The amount of an
Indemnified Liability for a federal or state Tax incurred by an Indemnitee based
on or determined with reference to income shall be deemed to be the amount of
Tax computed by multiplying (i) the taxing jurisdiction's highest effective Tax
rate applicable to Indemnitee of the character subject to Tax as a result of the
failure of the Spin-Off to qualify under Section 355 of the Code for the taxable
period in which the Spin-Off occurs, times (ii) the gain or income of Indemnitee
which is subject to Tax in the taxing jurisdiction as a result of the failure of
the Spin-Off to qualify under Section 355 of the Code, and (iii) in the case of
a state, times the percentage representing the extent to which such gain or
income is apportioned or allocated to such state; provided, however, that in the
case of a state Tax determined as a percentage of Federal Income Tax liability,
the amount of Indemnified Liability shall be deemed to be the amount of Tax
computed by



                                       13
<PAGE>


multiplying (i) that state's highest effective rate applicable to Indemnitee of
the character subject to Tax as a result of the failure of the Spin-Off to
qualify under Section 355 of the Code for taxable period in which the Spin-Off
occurs, times (ii) the amount of deemed Federal Income Tax (whether or not
incurred) imposed upon Indemnitee from the failure of the Spin-Off to qualify
under Section 355 of the Code computed in accordance with this Section 6.6,
times (iii) the percentage representing the extent to which the gain or income
required to be recognized on the Spin-Off is apportioned to such state.



         6.5 Indemnity Amount. With respect to any Indemnified Liability, the
amount which the Indemnifying Party shall pay to Indemnitee as indemnification
(the "Indemnity Amount") shall be the sum of (i) the amount of the Indemnified
Liability, as determined under Section 6.4, (ii) any penalties and interest
imposed with respect to the Indemnified Liability and (iii) an amount such that
when the sum of the amounts set forth in clauses (i), (ii) and this clause (iii)
of this Section 6.5 are reduced by all Taxes imposed as a result of the receipt
of such sum, (taking into account any related current credits or deductions
payable by the Indemnitee or any of its Affiliated Companies under any law or
governmental authority) the reduced amount is equal to the sum of the amounts
set forth in clauses (i) and (ii) of this Section 6.5 .


         6.6 Alternate Remedy. Southern and Southern Energy, respectively,
recognize that any failure by it or any Affiliated Company to comply with their
obligations under this Section 6 may result in additional Taxes which could
cause irreparable harm to Southern and its shareholders, the Southern Affiliated
Companies, and/or Southern Energy and the Southern Energy Affiliated Companies,
and that such entities may be inadequately compensated by monetary damages for
such failure. Accordingly, if (A) (1) either party shall fail to comply with any
obligation under this Section 6 which would be reasonably foreseeable to result
in any additional Taxes, and (2) such party shall fail to provide the other
party with a written opinion of a nationally recognized tax attorney, or a tax
accountant that is a member of a nationally recognized law firm or accounting
firm that the failure to comply with such obligation will not result in any
increase in Taxes of Southern and its shareholders, any Southern Affiliated
Company, Southern Energy or any Southern Energy Affiliated Company, as the case
may be, and such opinion is provided to such party for its review and approval,
which approval will not be unreasonably withheld, or (B) if it is probable that
the failure by such party to comply with any such obligation under this Section
6 will result in an Indemnified Liability under this Agreement and the
Indemnifying Party fails to provide Adequate Assurances to the Indemnitee of its
ability to pay the Indemnity Amount under this Agreement, then Southern or
Southern Energy, as the case may be, shall be entitled to injunctive relief in
addition to all other remedies.

         6.7 Payments.


         (a) In General. Except as otherwise provided under this Agreement, to
the extent that any party has an indemnification or payment obligation to
another party pursuant to this Agreement, the indemnitee shall provide the
indemnifying party with its calculation of the amount of such indemnification
payment. Such calculation shall provide sufficient detail to permit the
indemnifying party to reasonably understand the calculations. All
indemnification payments shall be made to such indemnitee or to the appropriate
Tax Authority as specified by the indemnitee within the time prescribed for
payment in this Agreement, or if no period is prescribed, within




                                       14


<PAGE>


thirty (30) days after delivery by the indemnitee to the indemnifying party of
written notice of a payment or if such liability is contested pursuant to
Section 7.3 of this Agreement, within thirty (30) days of the incurrence of such
an amount based on a Final Determination, together with a computation of the
amounts due. Any disputes with respect to indemnification payments shall be
resolved in accordance with Section 9.10 below.


         (b) Electronic Payments. Any payment required under this Agreement in
an amount in excess of one million dollars ($1,000,000.00) shall be made by
electronic funds transfer of immediately available funds.

         6.8 Prompt Performance. All actions required to be taken by any party
under this Agreement shall be performed within the time prescribed for
performance in this Agreement, or if no period is prescribed, such actions shall
be performed promptly.


         6.9 Interest. Payments pursuant to this Agreement that are not made
within the period prescribed in this Section 6.7(a) shall bear interest for the
period from and including the date immediately following the last date of the
period through and including the date of payment at a per annum rate equal to
the prime rate as published in The Wall Street Journal on the date of
determination, plus two percent (2%). Such interest will be payable at the same
time as the payment to which it relates and shall be calculated on the basis of
a year of 365 days and the actual number of days for which due.


         6.10 Tax Records. The parties to this Agreement hereby agree to retain
and provide on proper demand by any Taxing Authority (subject to any applicable
privileges) the books, records, documentation and other information relating to
any Tax Return until the later of (a) the expiration of the applicable statute
of limitations (giving effect to any extension, waiver or mitigation thereof)
and (b) in the event any claim is made under this Agreement for which such
information is relevant, until a Final Determination with respect to such claim.

                  SECTION 7. AUDITS AND CONTEST RIGHTS.

         7.1 In General. Upon the termination of Southern Energy and the
Southern Energy Group as members of the Southern Consolidated Group, the Tax
Allocation Agreement shall apply with respect to any period in which the income
of the terminating member is included in the Consolidated Return. The
terminating member shall remain liable to Southern for payments required under
the Tax Allocation Agreement, including, but not limited to, payments of Tax and
estimated Tax for periods in which the member's income is included in the
Southern Consolidated Return. Subject to Section 2.2(c) of this Agreement, the
terminating member shall cooperate and provide reasonable access to books,
records and other information needed in connection with Audits, administrative
proceedings, litigation and other similar matters related to periods in which
the member was a member of the Southern Consolidated Group. Notwithstanding the
foregoing, Southern Energy and the Southern Energy Group will not be required
under the Tax Allocation Agreement to pay more on a combined or consolidated
basis than that which it would have been required to pay had Southern Energy or
a member of the Southern Energy Group filed a separate Federal Income Tax
Return.



                                       15


<PAGE>


         (b) Except as otherwise provided in this Agreement, the respective
Filing Party shall have the right to control, contest, and represent the
interests of Southern, any Southern Affiliated Company, Southern Energy or any
Southern Energy Affiliated Company in any Audit relating to any Tax Return that
the Filing Party is responsible for filing under Section 2.1 of this Agreement
and to resolve, settle or agree to any deficiency, claim or adjustment proposed,
asserted or assessed in connection with or as a result of any such Audit. The
Filing Party's rights shall extend to any matter pertaining to the management
and control of an Audit, including execution of waivers, choice of forum,
scheduling of conferences and the resolution of any Tax Item.



         7.2 Notice. If, after the date of this Agreement, Southern (or any
Southern Affiliated Company) or Southern Energy (or any Southern Energy
Affiliated Company) receives written notice of, or relating to, an Audit from a
Tax Authority that asserts, proposes or recommends a deficiency, claim or
adjustment that, if sustained, could result in Taxes for which the other party
is responsible under this Agreement, then the party receiving such notice shall
provide a copy of such notice to such other party within ten (10) days of
receipt thereof.


         7.3 Contests.

         (a) If any Tax Authority asserts, proposes or recommends a deficiency,
claim or adjustment that, if sustained, could result in Taxes for which the
Non-Filing Party is responsible under this Agreement, then upon request by the
Non-Filing Party, the Filing Party shall contest, or continue to contest, any
deficiency, claim or adjustment and the Filing Party shall keep the Non-Filing
Party informed in a timely manner reasonably in advance of all actions taken or
proposed to be taken by the Filing Party in connection with such deficiency,
claim or adjustment.

         (b) In the case of an Audit with respect to any Tax Item, the Filing
Party shall:

                  (1) in the case of any material correspondence or filing
submitted to the Tax Authority or any judicial authority that relates to the
merits of such deficiency, claim or adjustment (i) reasonably in advance of such
submission, but subject to applicable time constraints imposed by such Tax
Authority or judicial authority, provide the Non-Filing Party with a draft copy
of the portion of such correspondence or filing that relates to such deficiency,
claim or adjustment, (ii) incorporate, subject to applicable time constraints
imposed by such Tax Authority or judicial authority, the Non-Filing Party's
comments and changes on such draft copy of such correspondence or filing, and
(iii) provide the Non-Filing Party with a final copy of the portion of such
correspondence or filing that relates to such deficiency, claim or adjustment;

                  (2) provide the Non-Filing Party with notice reasonably in
advance of, and the Non-Filing Party shall have the right to attend, any
meetings with the Tax Authority (including meetings with examiners) or hearings
or proceedings before any judicial authority to the extent they relate to such
deficiency, claim or adjustment; and

                  (3) at the Filing Party's reasonable request (or upon the
Filing Party's consent to a request by the Non-Filing Party, which consent shall
not be unreasonably withheld), the Non-Filing Party shall assume responsibility
for (i) contesting and presenting the merits with respect to any deficiency,
claim or adjustment that, if sustained, would result in Taxes for which the



                                       16


<PAGE>

Non-Filing Party is responsible under this Agreement, or (ii) resolving,
settling or agreeing to any such deficiency, claim or adjustment. Any such
request (or consent) by the Filing Party shall be subject to the Non-Filing
Party's continued compliance with the conditions of Section 7.4 of this
Agreement and to such other conditions as the Filing Party and Non-Filing Party
reasonably agree.

         7.4 Limitations.

         (a) In General. The Filing Party shall have no obligation to contest,
or to continue to contest, any deficiency, claim or adjustment in accordance
with Section 7.3, and the Non-Filing Party shall have no right to control or
participate under Section 7.3 of this Agreement unless:


                  (1) within thirty (30) days of a reasonable request by the
Filing Party, the Non-Filing Party shall deliver to the Filing Party a written
opinion of a nationally recognized tax attorney or tax accountant that is a
member of a recognized law firm or accounting firm, to the effect that the
Non-Filing Party's position with respect to such deficiency, claim or adjustment
is supported by a reasonable basis (within the meaning of Treasury Regulations
Section 1.6662-3(b)(3));


                  (2) the Non-Filing Party shall have agreed to be bound by a
Final Determination of such deficiency, claim or adjustment;

                  (3) the Non-Filing Party shall have agreed to pay, and shall
be currently paying, all reasonable out of pocket costs and expenses incurred by
the Filing Party to contest such deficiency, claim or assessment including
reasonable outside attorneys', accountants' and investigatory fees and
disbursements;

                  (4) the Non-Filing Party shall have advanced to the Filing
Party, on an interest-free basis (and with no additional net after-tax cost to
the Filing Party), the amount of Tax in controversy (but not in excess of the
lesser of (A) the amount of Tax for which the Non-Filing Party could be liable
under this Agreement or (B) the amounts actually expended by the Filing Party
for this item) to the extent necessary for the contest to proceed in the forum
selected by the Filing Party;

                  (5) the Non-Filing Party shall have provided to the Filing
Party all documents and information, and shall have made available employees and
officers of the Non-Filing Party, as may be necessary, useful or reasonably
required by the Filing Party in contesting such deficiency, claim or adjustment;
and

                  (6) the contest of such deficiency, claim or adjustment shall
involve no material danger of the sale, forfeiture or loss of, or the creation
of any lien on, any asset of the Filing Party (except if the Non-Filing Party
shall have adequately bonded such lien or otherwise made provision to protect
the interests of the Filing Party in a manner reasonably satisfactory to the
Filing Party).



                                       17


<PAGE>


         (b) Settlement. Notwithstanding Section 7.4(a), the Filing Party may
resolve, settle or agree to any deficiency, claim or adjustment proposed,
asserted or assessed in connection with any Audit of any Tax Return that it is
responsible for filing under Section 2.1 of this Agreement if the Filing Party
has provided the Non-Filing Party with a reasonable opportunity to review a copy
of that portion of the settlement or compromise proposal which relates to the
claim for which the Filing Party is seeking indemnification hereunder; provided,
that if (a) the Filing Party fails to provide the Non-Filing Party such a
reasonable opportunity to review such portion of such proposal, or (b) after
such reasonable opportunity to review such proposal the Non-Filing Party in
writing reasonably withholds its consent to all or part of such settlement or
compromise proposal, then, unless the Filing Party was not required to continue
the applicable contest under the terms of Section 7.4(a), the Non-Filing Party
shall not be obligated to indemnify the Filing Party hereunder to the extent of
the amount attributable to the loss to which such settlement or compromise
relates as to which the Non-Filing Party has reasonably withheld its consent, or
with respect to any other loss for which a successful contest is foreclosed
because of such settlement or compromise as to which the Non-Filing Party has
reasonably withheld its consent. If the Filing Party effects a settlement or
compromise of such contest, notwithstanding that the Non-Filing Party has
reasonably withheld its consent thereto, the Filing Party shall repay to the
Non-Filing Party such amounts that the Non-Filing Party advanced pursuant to
clause (a)(4) of this Section 7.4 hereof as relate to such claim, to the extent
that the Non-Filing Party has reasonably withheld its consent to the settlement
or compromise thereof (together with interest at the prime rate as published in
the Wall Street Journal on any such amount paid by the Non-Filing Party from the
date paid by Lessee to the date repaid by the Filing Party).


         (c) Waiver. Notwithstanding any other provision of this Section 7.4,
the Filing Party may resolve, settle, or agree to any deficiency, claim or
adjustment for any taxable period if the Filing Party waives it right to
indemnity with respect to such Tax Item. In such event, the Filing Party shall
promptly reimburse the Non-Filing Party for all amounts previously advanced by
the Non-Filing Party to the Filing Party in connection with such deficiency,
claim or adjustment under Section 7.4(a)(4) of this Agreement. In addition, the
Filing Party shall reimburse the Non-Filing Party for any Tax Detriment that
directly results from the settlement of such deficiency, claim or adjustment. No
waiver by the Filing Party under this Section 7.4(c) with respect to any
deficiency, claim or adjustment relating to any single Tax Item, position, issue
or transaction or relating to any single Tax for any one taxable period shall
operate as a waiver with respect to any other deficiency, claim or adjustment.

         7.5 Failure to Notify, Etc. The failure of the Filing Party promptly to
notify the Non-Filing Party of any matter relating to a particular Tax for a
taxable period or to take any action specified in Section 7.3 of this Agreement
shall not relieve the Non-Filing Party of any liability and/or obligation which
it may have to the Filing Party under this Agreement with respect to such Tax
for such taxable period except to the extent that the Non-Filing Party's rights
hereunder are materially prejudiced by such failure and in no event shall such
failure relieve the Non-Filing Party of any other liability and/or obligation
which it may have to the Filing Party.


         7.6 Remedies. Except as otherwise provided in this Agreement, the
parties hereby agree that the sole and exclusive remedy for a breach by the
Filing Party of the Filing Party's obligations to the Non-Filing Party with
respect to a deficiency, claim or adjustment relating to



                                       18

<PAGE>


the redetermination of a Tax Item of the Non-Filing Party for a taxable period
shall first be a reduction in the amount that would otherwise be payable by the
Non-Filing Party for such taxable period and then an increase in amount that
would otherwise be payable by the Filing Party for such taxable period, in
either case because of the breach. The parties further agree that no claim
against the Filing Party and no defense to the Non-Filing Party's liabilities to
the Filing Party under this Agreement shall arise from the resolution by the
Filing Party of any deficiency, claim or adjustment relating to the
redetermination of any Tax Item of the Filing Party.



                            SECTION 8. STOCK OPTIONS.



         8.1 In General. The parties hereto agree that Southern shall be
entitled to any Tax Benefit arising by reason of exercises of Options to
purchase shares of Southern stock, and that Southern Energy shall be entitled to
any Tax Benefit arising by reason of exercises of Options to purchase shares of
Southern Energy stock. The parties hereto agree to report all Tax deductions
with respect to stock options and other equity issued to their employees
consistently with this Section 8.1, to the extent permitted by the Tax Law.


         8.2 Notices, Withholding, Reporting. Southern shall promptly notify
Southern Energy of any Post-Separation Date event giving rise to income to any
Southern Energy Group employees or former employees in connection with exercises
of options to purchase shares of Southern stock. If required by the Tax Law,
Southern Energy shall withhold applicable Taxes and satisfy applicable Tax
reporting obligations in connection therewith.

         8.3 Adjustments. If Southern Energy or any Southern Energy Affiliated
Company receives any Tax Benefit to which Southern is entitled under Section 8.1
of this Agreement, Southern Energy shall pay the amount of such Tax Benefit to
Southern. If Southern or any Southern Affiliated Company receives any Tax
Benefit to which Southern Energy is entitled under Section 8.1 of this
Agreement, Southern shall pay the amount of such Tax Benefit to Southern Energy.

                            SECTION 9. MISCELLANEOUS


         9.1 Effectiveness. This Agreement shall become effective as of the date
hereof. In the event Southern does not effect the Distribution as contemplated
by the Separation Agreement but Southern Energy and the Southern Energy Group
cease to be members of the Southern Consolidated Group for any reason (a
"Deconsolidation Event"), this Agreement shall continue in full force and effect
subject to the following exceptions: (i) Sections 3, 5.4(b), and 6.2 - 6.6
hereof shall no longer be effective, (ii) the definition of "Distribution Date"
shall mean the date on which a Deconsolidation Event is effective, (iii) the
definition of "Post-Distribution Period" shall mean any taxable period or
portion thereof beginning after the date of the Deconsolidation Event, and (iv)
the definition of "Pre-Distribution Period" shall mean any taxable period or
portion thereof ending on or prior to the date of the Deconsolidation Event.


         9.2 Notices. Any notice, request, instruction or other document to be
given or delivered under this Agreement by any party to another party shall be
in writing and shall be deemed to have been duly given or delivered when (a)
delivered in person, (b) deposited in the United



                                       19


<PAGE>

States mail, postage prepaid and sent certified mail, return receipt requested
or (c) delivered to Federal Express or similar service for overnight delivery to
the address of the party set forth below:

         If to Southern or any Southern Affiliated Company, to W. Dean Hudson,
with a copy to the General Counsel of Southern, at:

                  The Southern Company
                  270 Peachtree Street
                  Atlanta, Georgia  30303

         If to Southern Energy or any Southern Energy Affiliated Company, to
James A. Ward, with a copy to the General Counsel of Southern Energy:

                  Southern Energy, Inc.
                  900 Ashwood Parkway
                  Suite 500
                  Atlanta, Georgia  30338

Any party may, by written notice to the other parties, change the address or the
party to which any notice, request, instruction or other document is to be
delivered.


9.3 Changes in Law.


         (a) Any reference to a provision of the Code or a law of another
jurisdiction shall include a reference to any applicable successor provision or
law.

         (b) If, due to any change in applicable law or regulations or their
interpretation by any court of law or other governing body having jurisdiction
subsequent to the date of this Agreement, performance of any provision of this
Agreement or any transaction contemplated thereby shall become impracticable or
impossible, the parties hereto shall use their commercially reasonable efforts
to find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such provision.

         9.4 Confidentiality. For a period of three years, commencing on the
date of this Agreement, each party shall hold and cause its directors, officers,
employees, advisors and consultants to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all information (other than any
such information relating solely to the business or affairs of such party)
concerning the other parties hereto furnished it by such other party or its
representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (a) in the public domain through no fault
of such party or (b) later lawfully acquired from other sources not under a duty
of confidentiality by the party to which it was furnished), and each party shall
not release or disclose such information to any other person, except its
directors, officers, employees, auditors, attorneys, financial advisors, bankers
and other consultants who shall be advised of and agree to be bound by the
provisions of this Section 9.4. Each party shall be deemed to have satisfied its




                                       20


<PAGE>

obligation to hold confidential information concerning or supplied by the other
party if it exercises the same care as it takes to preserve confidentiality for
its own similar information.

         9.5 Successors. This Agreement shall be binding on and inure to the
benefit and detriment of any successor, by merger, acquisition of assets or
otherwise, to any of the parties hereto, to the same extent as if such successor
had been an original party.

         9.6 Affiliated Companies. Southern shall cause to be performed, and
hereby guarantees the performance of, all actions, agreements and obligations
set forth herein to be performed by any Southern Affiliated Company, and
Southern Energy shall cause to be performed, and hereby guarantees the
performance of, all actions, agreements and obligations set forth herein to be
performed by any Southern Energy Affiliated Company.

         9.7 Authorization, Etc. Each of the parties hereto hereby represents
and warrants that it has the power and authority to execute, deliver and perform
this Agreement, that this Agreement has been duly authorized by all necessary
corporate action on the part of such party, that this Agreement constitutes a
legal, valid and binding obligation of each such party and that the execution,
delivery and performance of this Agreement by such party does not contravene or
conflict with any provision of law or of its charter or bylaws or any agreement,
instrument or order binding on such party.

         9.8 Entire Agreement. This Agreement and the Tax Allocation Agreement
contains the entire agreement among the parties hereto with respect to the
subject matter hereof.


         9.9 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Georgia
as to all matters regardless of the law that might otherwise govern under the
principles of conflicts of law applicable thereto.



         9.10 Dispute Resolution. The resolution of any and all disputes arising
from or in connection with this Agreement shall be governed by and settled in
accordance with the provisions of Section 5.7 of the Separation Agreement;
provided, however, that at the request of Southern or Southern Energy, a
nationally recognized tax attorney or tax accountant that is a member of a
nationally recognized law firm or accounting firm, which firm is independent of
both parties, will be appointed for purposes of the non-binding mediation
procedures described in Section 5.7(b) of the Separation Agreement.


         9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.

         9.12 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction (or an arbitrator or
arbitration panel) to be invalid, void, or unenforceable, the remainder of the
terms, provisions, covenants, and restrictions set forth herein shall remain in
full force and effect, and shall in no way be affected, impaired, or
invalidated. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants, and restrictions without including any



                                       21


<PAGE>

of such which may be hereafter declared invalid, void, or unenforceable. In the
event that any such term, provision, covenant or restriction is held to be
invalid, void or unenforceable, the parties hereto shall use their best efforts
to find and employ an alternate means to achieve the same or substantially the
same result as that contemplated by such terms, provisions, covenant, or
restriction.

         9.13 No Third Party Beneficiaries. This Agreement is solely for the
benefit of Southern, the Southern Affiliated Companies, Southern Energy and the
Southern Energy Affiliated Companies. This Agreement should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, cause of
action or other rights in excess of those existing without this Agreement.

         9.14 Waivers, Etc. No failure or delay on the part of the parties in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power. No modification or waiver of any provision of this Agreement nor consent
to any departure by the parties therefrom shall in any event be effective unless
the same shall be in writing.


         9.15 Setoff. All payments to be made by any party under this Agreement
may be netted against payments due to such party under this Agreement, but
otherwise shall be made without setoff, counterclaim or withholding, all of
which are hereby expressly waived.



                                       22
<PAGE>


         IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer as of the date first above
written.

                    THE SOUTHERN COMPANY
                    on behalf of itself and the Southern Affiliated Companies


                    By:
                       ---------------------------------------------------------
                          Name:   H. Allen Franklin
                          Title:  President and Chief Operating Officer


                    SOUTHERN ENERGY, INC.
                    on behalf of itself and the Southern Energy
                    Affiliated Companies


                    By:
                       ---------------------------------------------------------
                          Name:   S. Marce Fuller
                          Title:  President and Chief Executive Officer




                                       23