EXHIBIT 10(a)101

                                    FORM OF

                INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT

                                    BETWEEN

                              THE SOUTHERN COMPANY

                                      AND

                             SOUTHERN ENERGY, INC.


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                               TABLE OF CONTENTS


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                                                                                                          Page
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ARTICLE I  MUTUAL RELEASES; INDEMNIFICATION.............................................................     1
   Section 1.1. Release of Pre-Closing Claims...........................................................     1
   Section 1.2. Indemnification by Southern Energy......................................................     2
   Section 1.3. Indemnification by Southern.............................................................     3
   Section 1.4. Procedures for Defense, Settlement and Indemnification of Third Party
                Claims..................................................................................     3
   Section 1.5. Additional Matters......................................................................     5
   Section 1.6. Survival of Indemnities.................................................................     6
ARTICLE II  INSURANCE MATTERS...........................................................................     6
   Section 2.1. Southern Energy Insurance Coverage During the Transition Period.........................     6
   Section 2.2. Cooperation and Agreement Not to Release Carriers.......................................     7
   Section 2.3. Southern Energy Insurance Coverage After the Insurance Transition
                 Period.................................................................................     7
   Section 2.4. Responsibilities for Self-insured Obligations...........................................     8
   Section 2.5. Procedures With Respect to Insured Southern Energy Liabilities..........................     8
   Section 2.6. Insufficient Limits of Liability for Southern Liabilities and Southern
                 Energy Liabilities.....................................................................     9
   Section 2.7. Cooperation.............................................................................    10
   Section 2.8. No Assignment or Waiver.................................................................    10
   Section 2.9. No Liability............................................................................    10
   Section 2.10. No Restrictions........................................................................    10
   Section 2.12. Further Agreements.....................................................................    10
   Section 2.13. Matters Governed by Employee Matters Agreement.........................................    10
ARTICLE III  MISCELLANEOUS..............................................................................    11
   Section 3.1. Entire Agreement........................................................................    11
   Section 3.2. Governing Law...........................................................................    11
   Section 3.3. Notices.................................................................................    11
   Section 3.4. Parties in Interest.....................................................................    11
   Section 3.5. Other Agreements Evidencing Indemnification Obligations.................................    11
   Section 3.6. Counterparts............................................................................    11
   Section 3.7. Assignment..............................................................................    11
   Section 3.8. Severability............................................................................    12
   Section 3.9. Failure or Indulgence Not Waiver........................................................    12
   Section 3.10. Amendment..............................................................................    12
   Section 3.11. Authority..............................................................................    12
   Section 3.12. Interpretation.........................................................................    12
   Section 3.13. Governmental Approvals.................................................................    12
ARTICLE IV  DEFINITIONS.................................................................................    13
   Section 4.1. Action..................................................................................    13
   Section 4.2. Affiliated Company......................................................................    13
   Section 4.3. Claims Committee........................................................................    13
   Section 4.4. Commingled Claims.......................................................................    13
   Section 4.5. Coverage Amount.........................................................................    13
   Section 4.6. Credit Support Arrangements.............................................................    13
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   Section 4.7. Employee Matters Agreement..............................................................    13
   Section 4.8. Employment Liabilities..................................................................    13
   Section 4.9. Environmental Claim.....................................................................    14
   Section 4.10. HoldCo Transaction.....................................................................    14
   Section 4.11. Indemnitee.............................................................................    14
   Section 4.12. Insurance Policies.....................................................................    14
   Section 4.13. Insurance Transition Period............................................................    14
   Section 4.13. Insurance Transition Period............................................................    14
   Section 4.14. Insured Southern Energy Liability......................................................    14
   Section 4.15. Intercompany Agreements................................................................    14
   Section 4.16. IPO Registration Statement.............................................................    14
   Section 4.17. Liabilities............................................................................    14
   Section 4.18. Person.................................................................................    15
   Section 4.19. Separation.............................................................................    15
   Section 4.20. Separation Agreement...................................................................    15
   Section 4.21. Separation Date........................................................................    15
   Section 4.22. Southern Business......................................................................    15
   Section 4.23. Southern Energy Business...............................................................    15
   Section 4.24. Southern Energy Covered Parties........................................................    15
   Section 4.25. Southern Energy Group..................................................................    15
   Section 4.26. Southern Energy Indemnitees............................................................    15
   Section 4.27. Southern Energy Liabilities............................................................    15
   Section 4.28. Southern Group.........................................................................    15
   Section 4.29. Southern Indemnitees...................................................................    16
   Section 4.30. Subsidiary.............................................................................    16
   Section 4.31. Tax Indemnification Agreement..........................................................    16
   Section 4.32. Taxes..................................................................................    16
   Section 4.33. Third Party Claim......................................................................    16
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                INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT


         THIS INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT (this
"Agreement") is entered into as of September 1, 2000, between The Southern
Company, a Delaware corporation ("Southern"), and Southern Energy, Inc., a
Delaware corporation ("Southern Energy"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Article IV below.


                                    RECITALS

         WHEREAS, the Board of Directors of Southern has determined that it is
in the best interest of Southern and its stockholders to separate Southern's
existing businesses into two independent businesses;


         WHEREAS, as part of the foregoing, Southern and Southern Energy have
agreed, pursuant to the Master Separation and Distribution Agreement dated as
of September 1, 2000 (the "Separation Agreement"), which provides, among other
things, the initial public offering of Southern Energy stock, the distribution
of such stock and the execution and delivery of certain other agreements in
order to facilitate and provide for the foregoing; and


         WHEREAS, the parties desire to set forth certain agreements regarding
indemnification and insurance.

         NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth below, the parties hereto agree as follows:

                                   ARTICLE I

                        MUTUAL RELEASES; INDEMNIFICATION

         Section 1.1. Release of Pre-Closing Claims.

         (a)        Southern Energy Release. Except as provided in Section
1.1(c), effective as of the Separation Date, Southern Energy does hereby, for
itself and as agent for each member of the Southern Energy Group, remise,
release and forever discharge the Southern Indemnitees from any and all
Liabilities whatsoever, whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by operation of
law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the Separation
Date, including any such acts, events or conditions on or before the Separation
Date in connection with the transactions and all other activities to implement
any of the Separation, the IPO and the Distribution.


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         (b)      Southern Release. Except as provided in Section 1.1(c),
effective as of the Separation Date, Southern does hereby, for itself and as
agent for each member of the Southern Group, remise, release and forever
discharge the Southern Energy Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Separation Date, including
any such acts, events or conditions on or before the Separation Date in
connection with the transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.


         (c)      Excluded Liabilities; No Impairment. Nothing contained in
Section 1.1(a) or (b) shall release any claims under, or impair any right of
any Person to enforce, the Separation Agreement, any Ancillary Agreement
(including this Agreement), or any Intercompany Agreement, in each case in
accordance with its terms.

         (d)      No Actions as to Released Claims. Southern Energy agrees, for
itself and as agent for each member of the Southern Energy Group, not to make
any claim or demand, or commence any Action asserting any claim or demand,
including any claim of contribution or any indemnification, against Southern or
any member of the Southern Group, or any other Person released pursuant to
Section 1.1(a), with respect to any Liabilities released pursuant to Section
1.1(a). Southern agrees, for itself and as agent for each member of the
Southern Group, not to make any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any
indemnification, against Southern Energy or any member of the Southern Energy
Group, or any other Person released pursuant to Section 1.1(b), with respect to
any Liabilities released pursuant to Section 1.1(b).

         (e)      Further Instruments. At any time, at the request of any other
party, each party shall cause each member of its respective Group to execute
and deliver releases reflecting the provisions hereof.

         Section 1.2.      Indemnification by Southern Energy. Except as
otherwise provided in this Agreement, Southern Energy shall, for itself and as
agent for each member of the Southern Energy Group, indemnify, defend (or,
where applicable, pay the defense costs for) and hold harmless the Southern
Indemnitees from and against any and all Liabilities that any third party seeks
to impose upon the Southern Indemnitees, or which are imposed upon the Southern
Indemnitees, if and to the extent such Liabilities relate to, arise out of or
result from any of the following items (without duplication):

                  (i)      any acts or omission or alleged acts or omissions by
         or on behalf of any member of the Southern Energy Group in the conduct
         of the Southern Energy Business or in connection with the IPO or the
         Distribution;


                  (ii)     any breach by Southern Energy or any member of the
         Southern Energy



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         Group of the Separation Agreement or any of the Ancillary Agreements
         (including this Agreement); and



                  (iii)    any Southern Energy Liability.


         In the event that any member of the Southern Energy Group makes a
payment to the Southern Indemnitees hereunder, and any of the Southern
Indemnitees subsequently diminishes the Liabilities on account of which such
payment was made, either directly or through a third-party recovery, Southern
will promptly repay (or will procure a Southern Indemnitee to promptly repay)
such member of the Southern Energy Group the amount by which the payment made
by such member of the Southern Energy Group exceeds the actual cost of the
associated indemnified Liability.

         Section 1.3.      Indemnification by Southern. Except as otherwise
provided in this Agreement, Southern shall, for itself and as agent for each
member of the Southern Group, indemnify, defend (or, where applicable, pay the
defense costs for) and hold harmless the Southern Energy Indemnitees from and
against any and all Liabilities that any third party seeks to impose upon the
Southern Energy Indemnitees, or which are imposed upon the Southern Energy
Indemnitees, if and to the extent such Liabilities relate to, arise out of or
result from any of the following items (without duplication):

                  (i)      any acts or omissions or alleged acts or omissions by
         or on behalf of any member of the Southern Group in the conduct of the
         Southern Business or in connection with the IPO or the Distribution;

                  (ii)     any breach by Southern or any member of the Southern
         Group of the Separation Agreement or any of the Ancillary Agreements
         (including this Agreement); and

                  (iii)    any Liabilities of the Southern Group other than the
         Credit Support Arrangements.

         In the event that any member of the Southern Group makes a payment to
the Southern Energy Indemnitees hereunder, and any of the Southern Energy
Indemnitees subsequently diminishes the Liabilities on account of which such
payment was made, either directly or through a third-party recovery, Southern
Energy will promptly repay (or will procure a Southern Energy Indemnitee to
promptly repay) such member of the Southern Group the amount by which the
payment made by such member of the Southern Group exceeds the actual cost of
the indemnified Liabilities.

         Section 1.4.      Procedures for Defense, Settlement and
Indemnification of Third Party Claims.


         (a)      Notice of Claims. If a Southern Indemnitee or a Southern
Energy Indemnitee (as applicable) (an "Indemnitee") shall receive notice or
otherwise learn of the assertion by a Person (including any Governmental
Authority) who is not a member of



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the Southern Group or the Southern Energy Group of any claim or of the
commencement by any such Person of any Action (collectively, a "Third Party
Claim") with respect to which a party (an "Indemnifying Party") may be
obligated to provide indemnification to such Indemnitee pursuant to Section 1.2
or 1.3, or any other section of the Separation Agreement or any Ancillary
Agreement (including this Agreement), Southern and Southern Energy (as
applicable) will ensure that such Indemnitee shall give such Indemnifying Party
written notice thereof within thirty (30) days after becoming aware of such
Third Party Claim. Any such notice shall describe the Third Party Claim in
reasonable detail. Notwithstanding the foregoing, the delay or failure of any
Indemnitee or other Person to give notice as provided in this Section 1.4(a)
shall not relieve the related Indemnifying Party of its obligations under this
Article I, except to the extent that such Indemnifying Party is actually and
substantially prejudiced by such delay or failure to give notice.



         (b)      Claims Committee. Any of the parties may refer any dispute
regarding the provisions of this Agreement to the Claims Committee for
resolution. All determinations of the Claims Committee, if unanimous, shall be
binding on all of the parties and their respective successors and assigns. The
Claims Committee shall reach a resolution that minimizes expenses for all
parties and seeks to avoid hiring multiple counsel. In the event a Liability
arises from both an event, act or omission relating primarily to the Southern
Energy Business and an event, act or omission relating primarily to the
Southern Business, the Claims Committee shall apportion the Liability in
accordance with comparative fault, and it may re-apportion the Liability as it
learns of additional facts bearing on that assessment. In the event that the
Claims Committee cannot reach a unanimous determination as to the nature,
status or handling of any such claims within thirty (30) days after such
referral (unless the Claims Committee unanimously agrees to a longer time
period), the issue will be submitted for resolution pursuant to the procedures
set forth in the dispute resolution provisions contained in Section 5.7 of the
Separation Agreement; provided, that the provisions of this Section 1.4(b)
shall supercede the requirements of the second sentence of Section 5.7(a) of
the Separation Agreement.


         (c)      Defense of Commingled Claims. With respect to any Commingled
Claim, the Claims Committee shall determine which party shall manage the
defense of, and may seek to settle or compromise, such Commingled Claim based
upon the specific facts of such claim.

         (d)      Defense By Indemnifying Party. Other than in the case of a
Commingled Claim, an Indemnifying Party will manage the defense of and (unless
the Indemnifying Party has specified any reservations or exceptions to the
obligation to manage the defense or to indemnify that have been referred to,
but not resolved by, the Claims Committee) may settle or compromise any Third
Party Claim. Within thirty (30) days after the receipt of notice from an
Indemnitee in accordance with Section 1.4(a) (or sooner, if the nature of such
Third Party Claim so requires), the Indemnifying Party shall notify the
Indemnitee that the Indemnifying Party will assume responsibility for managing
the defense of such Third Party Claim, which notice shall specify any
reservations or exceptions.



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         (e)      Defense By Indemnitee. If an Indemnifying Party fails to
assume responsibility for managing the defense of a Third Party Claim, or fails
to notify an Indemnitee that it will assume responsibility as provided in
Section 1.4(d), such Indemnitee may manage the defense of such Third Party
Claim.


         (f)      No Settlement By Indemnitee Without Consent. Unless the
Indemnifying Party has failed to manage the defense of the Third Party Claim in
accordance with the terms of this Agreement, no Indemnitee may settle or
compromise any Third Party Claim without the consent of the Indemnifying Party.

         (g)      No Consent to Certain Judgments or Settlements Without
Consent. Notwithstanding Section 1.4(d) above, no party shall consent to entry
of any judgment or enter into any settlement of a Third Party Claim without the
consent of the other party (such consent not to be unreasonably withheld) if
the effect of such judgment or settlement is to (A) permit any injunction,
declaratory judgment, other order or other nonmonetary relief to be entered,
directly or indirectly, against the other party or (B) materially affect the
other party due to the allocation of Liabilities and related indemnities set
forth in the Separation Agreement, this Agreement or any other Ancillary
Agreement.

         Section 1.5. Additional Matters.

         (a)      Cooperation in Defense and Settlement. With respect to any
Third Party Claim that implicates both Southern Energy and Southern in a
material fashion due to the allocation of Liabilities, responsibilities for
management of defense and related indemnities set forth in the Separation
Agreement, this Agreement or any of the Ancillary Agreements, the parties agree
to cooperate fully and maintain a joint defense (in a manner that will preserve
the attorney-client privilege with respect thereto) so as to minimize such
Liabilities and defense costs associated therewith. The party that is not
responsible for managing the defense of such Third Party Claims shall, upon
reasonable request, be consulted with respect to significant matters relating
thereto and may, if necessary or helpful, associate counsel to assist in the
defense of such claims.

         (b)      Substitution. In the event of an Action in which the
Indemnifying Party is not a named defendant, if either the Indemnitee or the
Indemnifying Party shall so request, the parties shall endeavor to substitute
the Indemnifying Party for the named defendant. If such substitution or
addition cannot be achieved for any reason or is not requested, the rights and
obligations of the parties regarding indemnification and the management of the
defense of claims as set forth in this Article I shall not be altered.

         (c)      Subrogation. In the event of payment by or on behalf of any
Indemnifying Party to or on behalf of any Indemnitee in connection with any
Third Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee, in whole or in part based upon whether
the Indemnifying Party has paid all or only part of the Indemnitee's Liability,
as to any events or circumstances in respect of which such Indemnitee may have
any right, defense or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other



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person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.


         (d)      Not Applicable to Taxes or Employment Liabilities. This
Agreement shall not apply to Taxes (which are covered by the Tax
Indemnification Agreement) or Employment Liabilities (which are covered by the
Employee Matters Agreement).


         Section 1.6. Survival of Indemnities. Subject to Section 3.7, the
rights and obligations of the members of the Southern Group and the Southern
Energy Group under this Article I shall survive the sale or other transfer by
any party of any assets or businesses or the assignment by it of any
Liabilities or the sale by any member of the Southern Group or the Southern
Energy Group of the capital stock or other equity interests of any Subsidiary
to any Person.

                                   ARTICLE II

                               INSURANCE MATTERS

         Section 2.1. Southern Energy Insurance Coverage During the Transition
Period.


         (a)      Maintain Comparable Insurance. Throughout the period beginning
on the Separation Date and ending on the Insurance Transition End Date (the
"Insurance Transition Period"), Southern shall, subject to insurance market
conditions and other factors beyond its control, maintain policies of
insurance, including for the benefit of Southern Energy or any of its
Subsidiaries, directors, officers, employees or other covered parties
(collectively, the "Southern Energy Covered Parties") which are comparable to
those maintained generally by Southern; provided, however, if Southern
determines that (i) the amount or scope of such coverage will be reduced during
the Insurance Transition Period to a level materially inferior to the level of
coverage in existence immediately prior to the Insurance Transition Period, or
(ii) the retention or deductible level applicable to such coverage, if any,
will be increased during the Insurance Transition Period to a level materially
greater than the levels in existence immediately prior to the Insurance
Transition Period, Southern shall give Southern Energy notice of such
determination as promptly as practicable. Upon notice of such determination,
Southern Energy shall be entitled to no less than sixty (60) days to evaluate
its options regarding continuance of coverage hereunder and may cancel its
interest in all or any portion of such coverage as of any day within such sixty
(60) day period. Except as provided below, during the Insurance Transition
Period, such policies of insurance shall cover Southern Energy Covered Parties
for liabilities and losses insured prior to the Insurance Transition End Date.



         (b)      Directors & Officers ("D&O") Insurance Coverage. With effect
from August 1, 2000, Southern shall obtain, subject to market availability and
favorable pricing, $200 million in D&O insurance coverage limits (in addition
to Southern's current D&O insurance coverage), with an option for a six-year
extended reporting period (the



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"Additional D&O Insurance;" and, together with Southern's current D&O insurance
coverage, the "D&O Insurance"). The D&O Insurance shall cover Southern and
Southern Energy individually and collectively. The Additional D&O Insurance
shall be maintained in force for a one-year period, unless the parties shall
mutually agree to renew it for a further period. Upon policy expiration,
Southern will exercise the option for the six-year extended reporting period.
At the end of the extended reporting period, either party may request a further
extension of the reporting period in respect of both parties. Upon such
request, Southern shall effect such extension, subject to market availability.
The cost of the Additional D&O Insurance, including any extended reporting
period option, shall be shared equally between Southern and Southern Energy.



         (c)      Reimbursement for Premiums. Southern Energy shall promptly pay
or reimburse Southern, as the case may be, for premium expenses, and Southern
Energy Covered Parties shall promptly pay or reimburse Southern for any costs
and expenses which Southern may incur in connection with the insurance
coverages maintained pursuant to this Section 2.1, including but not limited to
any subsequent premium adjustments. All payments and reimbursements by Southern
Energy and Southern Energy Covered Parties to Southern shall be made within
fifteen (15) days after Southern Energy's receipt of an invoice from Southern.



         Section 2.2. Cooperation and Agreement Not to Release Carriers. Each
of Southern and Southern Energy will share such information as is reasonably
necessary in order to permit the other to manage and conduct its insurance
matters in an orderly fashion. Each of Southern and Southern Energy, at the
request of the other, shall cooperate with and use commercially reasonable
efforts to assist the other in recoveries for claims made under any insurance
policy for the benefit of any insured party, and neither Southern nor Southern
Energy, nor any of their Subsidiaries, shall take any action which would
intentionally jeopardize or otherwise interfere with either party's ability to
collect any proceeds payable pursuant to any insurance policy. Except as
otherwise contemplated by the Separation Agreement, this Agreement or any
Ancillary Agreement, after the Separation Date, neither Southern nor Southern
Energy shall (and shall ensure that no member of their respective Groups
shall), without the consent of the other, provide any insurance carrier with a
release, or amend, modify or waive any rights under any such policy or
agreement, if such release, amendment, modification or waiver would adversely
affect any rights or potential rights of any member of the other Group
thereunder. However, nothing in this Section 2.2 shall (A) preclude any member
of any Group from presenting any claim or from exhausting any policy limit, (B)
require any member of any Group to pay any premium or other amount or to incur
any Liability, (C) require any member of any Group to renew, extend or continue
any policy in force or (D) except as otherwise provided in Section 2.12, apply
to Southern in connection with rights to coverage for Environmental Actions
under Insurance Policies in effect prior to the Separation Date.



         Section 2.3. Southern Energy Insurance Coverage After the Insurance
Transition Period.



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         (a)      Except as otherwise set forth herein, from and after the
Insurance Transition End Date, Southern Energy, and Southern Energy alone,
shall be responsible for obtaining and maintaining insurance programs for its
risk of loss and such insurance arrangements shall be separate and apart from
Southern's insurance programs. Notwithstanding the foregoing, Southern, upon
the request of Southern Energy, shall use all commercially reasonable efforts
to assist Southern Energy in the transition to its own separate insurance
programs from and after the Insurance Transition Period, and shall provide
Southern Energy with any information that is in the possession of Southern and
is reasonably available and necessary to either obtain insurance coverages for
Southern Energy or to assist Southern Energy in preventing unintended
self-insurance, in whatever form.



         (b)      D&O Insurance Coverage. After the Insurance Transition End
Date, Southern will endeavor to maintain, subject to market availability, a
minimum of $200 million D&O coverage insuring both Southern and Southern Energy
under Southern's policy for all activities prior to the Insurance Transition
End Date. With respect to Southern Energy, such coverage shall apply solely to
Southern Energy's wrongful act(s) or alleged wrongful act(s) occurring prior to
the Insurance Transition End Date.



         Section 2.4 Maintenance of D&O Insurance Limits. It is the intent of
Southern and Southern Energy that the D&O Insurance shall be maintained in an
amount sufficient to provide at least $100 million of coverage (the "Minimum
D&O Coverage") to each of the parties for claims arising during the policy
period which are unrelated to the IPO, the Distribution, the Separation or any
other actions contemplated by the Separation Agreement and this Agreement
("Unrelated Claims"). In the event that either party should experience claims
which, in the aggregate, are likely to erode D&O Insurance coverage limits
available to the other party to below $100 million, then Southern shall arrange
with its insurers, subject to market availability, for a reinstatement of
coverage limits sufficient to maintain $100 million of D&O Insurance coverage
for such other party's Unrelated Claims. Unless the parties shall mutually
agree otherwise, determination of the eroded coverage amount to be reinstated
shall be based on claims paid and reserves established by the insurers
underwriting the applicable D&O Insurance. The cost to reinstate policy limits
shall be borne by the party incurring the Unrelated Claims which have eroded
the other party's Minimum D&O Coverage.



         Section 2.5. Responsibilities for Self-insured Obligations. Southern
Energy will reimburse Southern for all amounts necessary to exhaust or
otherwise satisfy all applicable self-insured retentions, amounts for fronted
policies, deductibles and retrospective premium adjustments and similar amounts
not covered by Insurance Policies in connection with Southern Energy
Liabilities and Insured Southern Energy Liabilities.



         Section 2.6. Procedures With Respect to Insured Southern Energy
Liabilities.



         (a)      Reimbursement. Southern Energy will reimburse Southern for all
amounts incurred to pursue insurance recoveries from Insurance Policies for
Insured Southern



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 Energy Liabilities.



         (b)      Management of Claims. The defense of claims, suits or actions
giving rise to potential or actual Insured Southern Energy Liabilities will be
managed (in conjunction with Southern's insurers, as appropriate) by the party
that would have had responsibility for managing such claims, suits or actions
had such Insured Southern Energy Liabilities been Southern Energy Liabilities.



         Section 2.7. Insufficient Limits of Liability for Southern Liabilities
and Southern Energy Liabilities. In the event that there are insufficient
limits of liability available under Southern's Insurance Policies provided in
Sections 2.1(b), 2.3(b), 2.4 or other applicable polices in effect prior to the
Insurance Transition End Date to cover the Liabilities of Southern and/or
Southern Energy that would otherwise be covered by such Insurance Policies,
then to the extent that other insurance is not available to Southern and/or
Southern Energy for such Liabilities an adjustment will be made in accordance
with the following procedures:



                  (i)      Each party will be allocated an amount equal to their
         proportional share of any Liabilities (which Liabilities would
         otherwise be covered under Southern's Insurance Policies) in excess of
         the Coverage Amount. Each party's proportional share of such excess
         Liabilities shall be calculated by multiplying (A) the aggregate
         amount of all Liabilities (net of any deductible) of both parties
         which are eligible for coverage under a Southern Insurance Policy in
         the coverage period applicable to such policy, less the Coverage
         Amount applicable to such policy, by (B) a fraction, the numerator of
         which is the amount of such Liabilities attributable to such party,
         and the denominator of which is the aggregate amount of all such
         Liabilities of both parties. Any dispute between the parties in
         determining the proper allocation of liabilities pursuant to this
         section shall be resolved pursuant to the procedures set forth in
         Section 1.4(b) hereof.



                  (ii)     A party who receives more than its share of the
         Coverage Amount (the "Overallocated Party") agrees to reimburse the
         other party (the "Underallocated Party") to the extent that the
         Liabilities of the Underallocated Party that would have been covered
         under such Insurance Policies (subject to the limitations of Section
         2.12) is less than the Underallocated Party's share of the Coverage
         Amount.



                  (iii)    In addition to and without limiting the foregoing,
         Southern and Southern Energy shall cooperate and use their reasonable
         best efforts to maintain such general liability or other applicable
         shared coverage levels for both parties as are in existence on the
         Separation Date. To that effect, in the event that the coverage under
         any general liability or other applicable shared policy is eroded to
         less than 50% of the applicable level of coverage as of the Separation
         Date, the parties shall cooperate in equitably determining the
         appropriate allocation of the costs of and responsibility for the
         reinstatement, subject to market availability, of coverage under such
         policies to its original level. Additionally, Southern shall maintain
         Southern Energy's coverage for claims relating to Liabilities arising
         prior to the




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         Separation Date until such time as Southern Energy shall have arranged
         for "prior acts" coverage for such Liabilities; provided, that
         Southern Energy shall use commercially reasonable efforts to obtain
         such coverage as soon as practicable upon the reasonable request of
         Southern, and Southern shall, subject to market availability, use
         commercially reasonable efforts to assist Southern Energy in obtaining
         such coverage.



         Section 2.8.      Cooperation. Southern and Southern Energy will
cooperate with each other in all respects, and they shall execute any
additional documents which are reasonably necessary, to effectuate the
provisions of this Article II.



         Section 2.9.      No Assignment or Waiver. This Agreement shall not be
considered as an attempted assignment of any policy of insurance or as a
contract of insurance and shall not be construed to waive any right or remedy
of any member of the Southern Group in respect of any Insurance Policy or any
other contract or policy of insurance.



         Section 2.10.     No Liability. Southern Energy does hereby, for itself
and as agent for each other member of the Southern Energy Group, agree that no
member of the Southern Group or any Southern Indemnitee shall have any
Liability whatsoever as a result of the insurance policies and practices of
Southern and its Subsidiaries as in effect at any time prior to the Insurance
Transition End Date, including as a result of the level or scope of any such
insurance, the creditworthiness of any insurance carrier, the terms and
conditions of any policy, the adequacy or timeliness of any notice to any
insurance carrier with respect to any claim or potential claim or otherwise.



         Section 2.11.     No Restrictions. Nothing in this Agreement shall be
deemed to restrict any member of the Southern Energy Group from acquiring at
its own expense any other insurance policy in respect of any Liabilities or
covering any period.



         Section 2.12.     Further Agreements. The Parties acknowledge that they
intend to allocate financial obligations without violating any laws regarding
insurance, self-insurance or other financial responsibility. If it is
determined that any action undertaken pursuant to the Separation Agreement,
this Agreement or any Ancillary Agreement is violative of any insurance,
self-insurance or related financial responsibility law or regulation, the
parties agree to work together to do whatever is necessary to comply with such
law or regulation while trying to accomplish, as much as possible, the
allocation of financial obligations as intended in the Separation Agreement,
this Agreement and any Ancillary Agreement.


         Section 2.13.     Matters Governed by Employee Matters Agreement. This
Article II shall not apply to any insurance policies that are the subject of
the Employee Matters Agreement.



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                                  ARTICLE III

                                 MISCELLANEOUS

         Section 3.1.      Entire Agreement. This Agreement, the Master
Separation Agreement, the other Ancillary Agreements and the Exhibits and
Schedules attached hereto and thereto, constitutes the entire agreement between
the parties with respect to the subject matter hereof and shall supersede all
prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.


         Section 3.2.      Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia as to all
matters regardless of the laws that might otherwise govern under principles of
conflicts of laws applicable thereto.


         Section 3.3.      Notices. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the attention of
the party's General Counsel at the address of its principal executive office or
such other address as a party may request by notifying the other in writing.

         Section 3.4.      Parties in Interest. This Agreement, including the
Schedules and Exhibits hereto, and the other documents referred to herein,
shall be binding upon Southern, Southern's Subsidiaries, Southern Energy and
Southern Energy's Subsidiaries and inure solely to the benefit of the Southern
Energy Indemnitees and the Southern Indemnitees and their respective permitted
assigns, and nothing in this Agreement, express or implied, is intended to
confer upon any other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.

         Section 3.5.      Other Agreements Evidencing Indemnification
Obligations. Southern hereby agrees to execute, for the benefit of any Southern
Energy Indemnitee, such documents as may be reasonably requested by such
Southern Energy Indemnitee, evidencing Southern's agreement that the
indemnification obligations of Southern set forth in this Agreement inure to
the benefit of and are enforceable by such Southern Energy Indemnitee. Southern
Energy hereby agrees to execute, for the benefit of any Southern Indemnitee,
such documents as may be reasonably requested by such Southern Indemnitee,
evidencing Southern Energy's agreement that the indemnification obligations of
Southern Energy set forth in this Agreement inure to the benefit of and are
enforceable by such Southern Indemnitee.

         Section 3.6.      Counterparts. This Agreement, including the Schedules
and Exhibits hereto, and the other documents referred to herein, may be
executed in counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.

         Section 3.7.      Assignment. The rights and obligations in this
Agreement may not be



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<PAGE>


assigned or delegated by any party hereto, in whole or in part, without the
express prior written consent of the other party hereto.

         Section 3.8.      Severability. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.


         Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.


         Section 3.9.      Failure or Indulgence Not Waiver. No failure or delay
on the part of either party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right.

         Section 3.10.     Amendment.  No change or amendment will be made to
this Agreement except by an instrument in writing signed on behalf of each of
the parties to this Agreement.

         Section 3.11.     Authority. Each of the parties hereto represents to
the other that (a) it has the corporate or other requisite power and authority
to execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other action, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding
obligation, enforceable against it in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and general equity principles.

         Section 3.12.     Interpretation. The headings contained in this
Agreement, in any Exhibit or Schedule hereto and in the table or contents to
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Any capitalized term used in
any Schedule or Exhibit but not otherwise defined therein, shall have the
meaning assigned to such term in this Agreement. When a reference is made in
this Agreement to an Article or a Section, Exhibit or Schedule, such reference
shall be to an Article or Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated.

         Section 3.13.     Governmental Approvals. The parties acknowledge that
certain of the



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<PAGE>


provisions of this Agreement may be subject to certain conditions established
by applicable government regulations, orders, and approvals ("Existing
Authority"). The parties intend to implement this Agreement consistent with and
to the extent permitted by Existing Authority and to cooperate toward obtaining
and maintaining in effect such governmental agency consents, orders or
approvals as may be required in order to implement this Agreement as fully as
possible in accordance with its terms.

                                   ARTICLE IV

                                  DEFINITIONS

         Section 4.1.      Action. "Action" means any demand, action, suit,
countersuit, arbitration, inquiry, proceeding or investigation by or before any
federal, state, local, foreign or international governmental authority or any
arbitration or mediation tribunal.

         Section 4.2.      Affiliated Company. "Affiliated Company" has the
meaning set forth in the Separation Agreement.


         Section 4.3.      Claims Committee. "Claims Committee" means a
committee composed of (i) either the General Counsel or an Associate General
Counsel of Southern and (ii) either the General Counsel or an Associate General
Counsel of Southern Energy.


         Section 4.4.      Commingled Claims. "Commingled Claims" means,
collectively, any Third Party Claims (i) which involve an employee, consultant
or contractor that was employed by both the Southern Energy Business and the
Southern Business, (ii) in which both Southern and Southern Energy are named,
or (iii) involving both the Southern Energy Business and the Southern Business.


         Section 4.5.      Coverage Amount. "Coverage Amount" means the lesser
of (A) the available limits of liability under Southern's Insurance Policies in
effect prior to the Insurance Transition End Date, net of uncollectible amounts
attributable to insurer insolvencies, and (B) the proceeds received from
Southern's Insurance Policies if any Liabilities are the subject of disputed
coverage claims and, following consultation with each other, Southern and/or
Southern Energy agree to accept less than full policy limits from Southern's
and Southern Energy's insurers.


         Section 4.6.      Credit Support Arrangements. "Credit Support
Arrangements" has the meaning set forth in Section 5.13 of the Separation
Agreement.

         Section 4.7.      Employee Matters Agreement. "Employee Matters
Agreement" means the Employee Matters Agreement attached as an exhibit to the
Separation Agreement.

         Section 4.8.      Employment Liabilities. "Employment Liabilities" has
the meaning set forth in Schedule 2.01 to the Employee Matters Agreement.



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<PAGE>


         Section 4.9.      Environmental Claim. "Environmental Claim" means any
and all administrative or judicial actions, suits, orders, claims, liens,
notices of violation, investigations, complaints, requests for information,
proceedings or other written communication, whether criminal or civil, by any
Person based upon, alleging, asserting, or claiming any (a) violation of, or
liability under any environmental law, (b) violation of any permit, or (c)
liability for investigatory costs, cleanup costs, removal costs, remedial
costs, response costs, natural resource damages, property damage, personal
injury, fines, or penalties arising out of, based upon, resulting from or
related to, the presence, release, or threatened release into the environment
of any hazardous materials or any other environmental condition.

         Section 4.10.     HoldCo Transaction. "HoldCo Transaction" has the
meaning set forth in the Separation Agreement.

         Section 4.11.     Indemnitee. "Indemnitee" has the meaning set forth in
Section 1.4(a) hereof.

         Section 4.12.     Insurance Policies. "Insurance Policies" means
insurance policies pursuant to which a Person makes a true risk transfer to an
insurer.


         Section 4.13.     Insurance Transition End Date. "Insurance Transition
End Date" means the earlier of (i) the Distribution Date, or (ii) the first
date on which Southern owns less than 50% of the common stock of Southern
Energy then outstanding.



         Section 4.14.     Insurance Transition Period. "Insurance Transition
Period" has the meaning set forth in Section 2.1 of this Agreement.



         Section 4.15.     Insured Southern Energy Liability. "Insured Southern
Energy Liability" means any Southern Energy Liability to the extent that (i) it
is covered under the terms of Southern's Insurance Policies in effect prior to
the Insurance Transition End Date and (ii) Southern Energy is not a named
insured under, or otherwise entitled to the benefits of, such Insurance
Policies.



         Section 4.16.     Intercompany Agreements. "Intercompany Agreements"
means any written agreement between Southern or any of its Subsidiaries or
Affiliated Companies and Southern Energy or any of its Subsidiaries or
Affiliated Companies which is in effect prior to the Separation Date.



         Section 4.17.     IPO Registration Statement. "IPO Registration
Statement" means the registration statement on Form S-1 pursuant to the
Securities Act to be filed with the SEC registering the shares of common stock
of Southern Energy to be issued in the IPO, together with all amendments
thereto.



         Section 4.18.     Liabilities. "Liabilities" means all debts,
liabilities, guarantees, assurances, commitments and obligations, whether
fixed, contingent or absolute, asserted or unasserted, matured or unmatured,
liquidated or unliquidated, accrued or not accrued,



                                      14
<PAGE>



known or unknown, due or to become due, whenever or however arising (including,
without limitation, whether arising out of any contract or tort based on
negligence or strict liability) and whether or not the same would be required
by generally accepted principles and accounting policies to be reflected in
financial statements or disclosed in the notes thereto. For purposes of any
indemnification hereunder, "Liabilities" shall be deemed also to include any
and all damages, claims, suits, judgments, fines, penalties, costs and expenses
of any kind or character, including attorney's fees.



         Section 4.19.     Person. "Person" means an individual, a partnership,
a corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.



         Section 4.20.     Separation. "Separation" has the meaning set forth in
the Separation Agreement.



         Section 4.21.     Separation Agreement. "Separation Agreement" means
the Master Separation and Distribution Agreement dated as of September 1, 2000,
of which this is an exhibit thereto.




         Section 4.22.     Separation Date. "Separation Date" means as of 12:01
a.m., Eastern Standard Time, September 1, 2000, or such date as may be fixed by
the Board of Directors of Southern.




         Section 4.23.     Southern Business. "Southern Business" has the
meaning set forth in the Separation Agreement.



         Section 4.24.     Southern Energy Business. "Southern Energy Business"
has the meaning set forth in the Separation Agreement.



         Section 4.25.     Southern Energy Covered Parties. "Southern Energy
Covered Parties" shall have the meaning set forth in Section 2.1(a) of this
Agreement.



         Section 4.26.     Southern Energy Group. "Southern Energy Group" has
the meaning set forth in the Separation Agreement.



         Section 4.27.     Southern Energy Indemnitees. "Southern Energy
Indemnitees" means Southern Energy, each member of the Southern Energy Group
and each of their respective directors, officers and employees.



         Section 4.28.     Southern Energy Liabilities. "Southern Energy
Liabilities" means (i) all Liabilities of the Southern Energy Group, and (ii)
the Credit Support Arrangements.



         Section 4.29.     Southern Group. "Southern Group" has the meaning set
forth in the Separation Agreement.



                                      15
<PAGE>



         Section 4.30.     Southern Indemnitees. "Southern Indemnitees" means
Southern, each member of the Southern Group and each of their respective
directors, officers and employees.



         Section 4.31.     Subsidiary. "Subsidiary" has the meaning set forth in
the Separation Agreement.



         Section 4.32.     Tax Indemnification Agreement. "Tax Indemnification
Agreement" means the Tax Indemnification Agreement attached as an exhibit to
the Separation Agreement.



         Section 4.33.     Taxes. "Taxes" has the meaning set forth in the Tax
Indemnification Agreement.



         Section 4.34.     Third Party Claim. "Third Party Claim" has the
meaning set forth in Section 1.4(a) of this Agreement.



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