Document:

<PAGE>   1
                                                                    EXHIBIT 10.7

                                     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>   2

                                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>

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<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>

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<PAGE>   4

                          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.

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         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.

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         "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).

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         "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>   8

         "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

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<PAGE>   9
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.

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<PAGE>   10

         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

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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.

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<PAGE>   12

         (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.

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         (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

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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>   15

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>   16

                  (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>   17

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>   18

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>   19

         (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>   20

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>   21

         (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>   22

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>   23

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>   24

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>   25

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>   26

         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<PAGE>   1
                                                                    EXHIBIT 10.8

                                     FORM OF
                          REGISTRATION RIGHTS AGREEMENT

         This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made and
entered into as of September 1, 2000, between The Southern Company, a Delaware
corporation ("Southern"), and Southern Energy, Inc., a Delaware corporation and
a wholly owned subsidiary of Southern (the "Company").

         WHEREAS, Southern and the Company have entered into a Master Separation
and Distribution Agreement and certain ancillary agreements, each effective as
of September 1, 2000, pursuant to which Southern and Southern Energy have agreed
to take certain actions to separate the Southern Energy Group from the Southern
Group (each as defined in the Master Separation and Distribution Agreement),
and, in connection with such separation, for Southern Energy to acquire certain
assets from Southern, and for Southern to acquire certain entities currently
associated with the Southern Energy Business from Southern Energy; and

         WHEREAS, Southern currently owns all of the issued and outstanding
shares of the Company's common stock (the "Common Stock"); and

         WHEREAS, the Company intends to offer and sell to the public (the
"IPO") by means of a Registration Statement (File No. 333-35390) initially filed
with the Securities and Exchange Commission (the "SEC") on Form S-1 on April 21,
2000 (the "Registration Statement") shares of its Common Stock; and

         WHEREAS, immediately following the consummation of the IPO, Southern is
expected to own in excess of 80% of the outstanding shares of Common Stock; and

         WHEREAS, Southern currently contemplates that, several months following
the IPO, Southern will distribute to the holders of its common stock, by means
of a pro rata distribution, all of the shares of Southern Energy common stock
then owned by Southern (the "Distribution"); and

         WHEREAS, Southern and the Company intend that the Distribution will be
tax-free to Southern and its stockholders under Section 355 of the Code; and

         WHEREAS, if Southern determines not to complete the Distribution, or
the Distribution is abandoned without Southern divesting itself of 100% of the
Common Stock it owns, Southern and the Company desire to make certain
arrangements to provide Southern with registration rights with respect to shares
of Common Stock it then holds;

         NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is

<PAGE>   2

hereby acknowledged and intending to be legally bound hereby, the parties hereby
agree as follows:

         Section 1. Effectiveness of Agreement; Term.

         1.1      Effective Date. This Agreement shall become effective upon the
date that Southern provides to the Company written notice (the "Abandonment
Notice") that it no longer intends to proceed with or complete the Distribution
(the "Effective Date").

         1.2      Shares Covered. This Agreement covers those shares of Common
Stock that are held by Southern immediately following the IPO and continue to be
held by Southern as of the date of the Abandonment Notice (subject to the
provisions of Section 7, the "Shares"). The "Shares" shall include any
securities issued or issuable with respect to the Shares by way of a stock
dividend or a stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Except as set
forth in the immediately preceding sentence, the "Shares" shall not include any
shares of Common Stock acquired by Southern after the completion of the IPO.

         Southern and any Permitted Transferees (as defined in Section 2.5) are
each referred to herein as a "Holder" and collectively as the "Holders" and the
Holders of Shares proposed to be included in any registration under this
Agreement are each referred to herein as a "Selling Holder" and collectively as
the "Selling Holders."

         Section 2.  Demand Registration.

         2.1      Notice. Upon the terms and subject to the conditions set forth
herein, upon written notice of any Holder requesting that the Company effect the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of any or all of the Shares held by it, which notice shall specify the
intended method or methods of disposition of such Shares (which methods may
include, without limitation, a Shelf Registration, a Convertible Registration or
an Exchange Registration (as such terms are defined in Section 2.6)), the
Company will promptly give written notice of the proposed registration to all
other Holders and will use its best efforts to effect (at the earliest
reasonable date) the registration under the Securities Act of such Shares (and
the Shares of any other Holders joining in such request as are specified in a
written notice received by the Company within 20 days after receipt of the
Company's written notice of the proposed registration) for disposition in
accordance with the intended method or methods of disposition stated in such
request (each registration request pursuant to this Section 2.1 is sometimes
referred to herein as a "Demand Registration"); provided, however, that:

         (a)      the Company shall not be obligated to effect registration with
respect to Shares pursuant to this Section 2 within 90 days after the effective
date of a previous registration, other than a Shelf Registration, effected with
respect to Shares pursuant to this Section 2;

         (b)      if, while a registration request is pending pursuant to this
Section 2, the Company determines in the good faith judgment of the general
counsel of the Company that such registration (i) would reasonably be expected
to have a material adverse effect on any existing

                                       2
<PAGE>   3

proposal or plans by the Company or any of its subsidiaries to engage in any
material acquisition, merger, consolidation, tender offer, other business
combination, reorganization, securities offering or other material transaction
or, (ii) would require disclosure of material information, the disclosure of
which would have a material adverse effect on the Company, the Company may
postpone for up to 90 days the filing or effectiveness of such registration;
provided, however, that the Company may delay a Demand Registration hereunder
only two times in any 12 month period, reduced by the number of times during
such 12 month period that notice of a Sales Blackout Period (as herein defined)
has been given.

         (c)      except in the case of a Convertible Registration or an
Exchange Registration, any Demand Registration requested hereunder shall request
the registration of Shares representing at least 10% of the then-outstanding
shares of Common Stock, based on the number of such shares outstanding as
reported by the Company in its most recent annual or quarterly report filed with
the SEC under the Securities Exchange Act of 1934, as amended; and

         (d)      if a Demand Registration is an underwritten offering and the
managing underwriters advise the Company in writing that in their opinion the
number of Shares requested to be included in such offering exceeds the number of
Shares which can be sold in an orderly manner in such offering within a price
range acceptable to the Holders of a majority of the Shares initially requesting
such registration or without materially adversely affecting the market for the
Common Stock, the Company shall include in such registration the number of
Shares requested to be included therein which in the opinion of such
underwriters can be sold in an orderly manner within the price range of such
offering and without materially adversely affecting the market for the Common
Stock, pro rata among the respective Holders thereof on the basis of the amount
of Shares owned by each Holder requesting inclusion of Shares in such
registration.

         2.2      Registration Expenses. The Company shall pay 20% of all
Registration Expenses (as defined in Section 8) for any registration requested
pursuant to this Section 2 (including any registration that is delayed or
withdrawn), and the balance of such Registration Expenses shall be paid by the
Holders requesting such registration, pro rata on the basis of the amount of
Shares owned by each Holder and requested to be included in such registration.

         2.3      Selection of Professionals. The Holders of a majority of the
Shares included in any Demand Registration shall have the right to select the
investment banker(s) and manager(s) to administer the offering; provided,
however, that if such Holders select an investment banker or manager that was
not one of the lead managers of the IPO, such investment banker or manager shall
not administer such offering if the Company reasonably objects thereto. The
Holders of a majority of the Shares included in any Demand Registration shall
have the right to select the financial printer, the solicitation and/or exchange
agent (if any) and one counsel for the Selling Holders. The Company shall select
its own outside counsel and independent auditors. The Company also shall be
entitled to designate any broker or other agent through whom the Holders shall
sell into the public market any Shares pursuant to a Shelf Registration that is
not an underwritten offering.

         2.4      Third Person Shares. The Company shall have the right to cause
the registration of securities for sale for the account of any Person (including
the Company) other than the Selling

                                       3
<PAGE>   4

Holders (the "Third Person Shares") in any registration of the Shares requested
pursuant to this Section 2 so long as the Third Person Shares are disposed of in
accordance with the intended method or methods of disposition requested pursuant
to this Section 2; provided, however, that the Company shall not have the right
to cause the registration of such securities of such other Persons if the
registration requested pursuant to this Section 2 is a Convertible Registration
or an Exchange Registration.

         If a Demand Registration in which the Company proposes to include Third
Person Shares is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Shares and Third
Person Shares requested to be included in such offering exceeds the number of
Shares and Third Person Shares which can be sold in an orderly manner in such
offering within a price range acceptable to the Holders of a majority of the
Shares initially requesting such registration or without materially adversely
affecting the market for the Common Stock, the Company shall not include in such
registration any Third Person Shares unless all of the Shares initially
requested to be included therein are so included.

         2.5      Permitted Transferees. As used in this Agreement, "Permitted
Transferees" shall mean any transferee, whether direct or indirect, of Shares so
designated by Southern (or a subsequent holder) in a written notice to the
Company as provided for in Section 9.7, provided that such transferee either (a)
at the time of such transfer, is an affiliate of Southern within the meaning of
Rule 501 under the Securities Act or any successor provision, or (b) after
giving effect to such transfer, will be the Holder of at least 10% of the
Shares. Any Permitted Transferees of the Shares shall be subject to and bound by
all of the terms and conditions herein applicable to Holders. The notice
required by this Section 2.5 shall be signed by both the transferring Holder and
the Permitted Transferees so designated and shall include an undertaking by the
Permitted Transferees to comply with the terms and conditions of this Agreement
applicable to Holders. In the event of a transfer of any of the Shares to a
transferee that is not a Permitted Transferee, the Shares so transferred shall
no longer be subject to this Agreement.

         2.6      Shelf Registration; Convertible Registration; Exchange
Registration. With respect to any Demand Registration, the requesting Holders
may request the Company to effect a registration of the Shares (a) under a
registration statement pursuant to Rule 415 under the Securities Act (or any
successor rule) (a "Shelf Registration"); (b) in connection with such Holders'
registration under the Securities Act of securities (the "Convertible
Securities") convertible into, exercisable for or otherwise related to the
Shares (a "Convertible Registration"); or (c) in connection with such Holders'
offer to exchange the Shares for any debt or equity securities of such Holders,
a subsidiary or affiliate thereof or any other Person (an "Exchange
Registration").

         2.7      SEC Form. The Company shall use its best efforts to cause
Demand Registrations to be registered on Form S-3 (or any successor form), and
if the Company is not then eligible under the Securities Act to use Form S-3,
Demand Registrations shall be registered on Form S-1 (or any successor form). If
a Demand Registration is a Convertible Registration or an Exchange Registration,
the Company shall effect such registration on the appropriate Form under the
Securities Act for such registrations. The Company shall use its best efforts to
become eligible to

                                       4
<PAGE>   5

use Form S-3 and, after becoming eligible to use Form S-3, shall use its best
efforts to remain so eligible.

         2.8      Other Registration Rights. The Company shall not grant to any
Persons the right to request the Company to register any equity securities of
the Company, or any securities convertible or exchangeable into or exercisable
for such securities unless such rights are consistent with the rights granted
under this Agreement.

         Section 3. Piggyback Registrations.

         3.1      Notice and Registration. If the Company proposes to register
any of its securities for public sale under the Securities Act (whether proposed
to be offered for sale by the Company or any other Person), on a form and in a
manner which would permit registration of the Shares for sale to the public
under the Securities Act (a "Piggyback Registration"), it will give prompt
written notice to the Holders of its intention to do so, and upon the written
request of any or all of the Holders delivered to the Company within 20 days
after the giving of any such notice (which request shall specify the Shares
intended to be disposed of by such Holders), the Company will use its best
efforts to effect, in connection with the registration of such other securities,
the registration under the Securities Act of all of the Shares which the Company
has been so requested to register by such Holders (which shall then become
Selling Holders), to the extent required to permit the disposition (in
accordance with the same method of disposition as the Company proposes to use to
dispose of the other securities) of the Shares to be so registered; provided,
however, that:

         (a)      if, at any time after giving such written notice of its
intention to register any of its other securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such other
securities, the Company may, at its election, give written notice of such
determination to the Selling Holders (or, if prior to delivery of the Holders'
written request described above in this Section 3.1, the Holders) and thereupon
the Company shall be relieved of its obligation to register such Shares in
connection with the registration of such other securities (but not from its
obligation to pay Registration Expenses to the extent incurred in connection
therewith as provided in Section 3.3), without prejudice, however, to the rights
(if any) of any Selling Holders immediately to request (subject to the terms and
conditions of Section 2) that such registration be effected as a registration
under Section 2;

         (b)      the Company shall not be required to effect any registration
of the Shares under this Section 3 incidental to the registration of any of its
securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
employee benefit plans of the Company;

         (c)      if a Piggyback Registration is an underwritten primary
registration on behalf of the Company and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without materially adversely affecting the marketability of the
offering or the market for the Common Stock, the Company shall include in such
registration (i) first, the

                                       5
<PAGE>   6

securities the Company proposes to sell, (ii) second, the Shares requested to be
included in such registration, pro rata among the Holders of such Shares on the
basis of the number of Shares owned by each such Holder, and (iii) third, any
other securities requested to be included in such registration; and

         (d)      if a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities entitled to demand
registration thereof and the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
materially adversely affecting the marketability of the offering or the market
for the Common Stock, the Company shall include in such registration (i) first,
the securities requested to be included therein by the holders requesting such
registration and the Shares requested to be included in such registration, pro
rata among the holders of such securities on the basis of the number of
securities owned by each such holder, and (ii) second, any other securities
requested to be included in such registration. No registration of the Shares
effected under this Section 3 shall relieve the Company of its obligation to
effect a registration of Shares pursuant to Section 2.

         3.2      Selection of Professionals. If any Piggyback Registration is
an underwritten offering and any of the investment banker(s) or manager(s)
selected to administer the offering was not one of the managers of the IPO, such
investment banker or manager shall not administer such offering if the Holders
of a majority of the Shares included in such Piggyback Registration reasonably
object thereto. The Holders of a majority of the Shares included in any
Piggyback Registration shall have the right to select one counsel for the
Selling Holders. The Company shall select its own outside counsel and
independent auditors.

         3.3      Registration Expenses. The Company will pay all of the
Registration Expenses in connection with any registration pursuant to this
Section 3 except that the Holders of any Shares included in any such
registration shall pay the registration fee for such Shares.

         Section 4. Registration Procedures.

         4.1      Registration and Qualification. If and whenever the Company is
required to use its best efforts to effect the registration of any of the Shares
under the Securities Act as provided in Sections 2 and 3, including an
underwritten offering pursuant to a Shelf Registration, the Company will as
promptly as is practicable:

         (a)      prepare and file with the SEC a registration statement with
respect to such Shares and use its best efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplement thereto, the Company
shall furnish to the counsel selected by the Holders of a majority of the Shares
covered by such registration statement copies of all such documents proposed to
be filed (which documents shall be subject to the review and comment of such
counsel);

         (b)      except in the case of a Shelf Registration, Convertible
Registration or Exchange Registration, prepare and file with the SEC such
amendments and supplements to such

                                       6
<PAGE>   7

registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all of the
Shares until the earlier of (i) such time as all of such Shares have been
disposed of in accordance with the intended methods of disposition set forth in
such registration statement or (ii) the expiration of nine months after such
registration statement becomes effective;

         (c)      in the case of a Shelf Registration (but not including any
Convertible Registration), prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Shares subject thereto for a period ending on the earlier of
(i) 18 months after the effective date of such registration statement and (ii)
the date on which all the Shares subject thereto have been sold pursuant to such
registration statement (the "Shelf Effective Period");

         (d)      in the case of a Convertible Registration or an Exchange
Registration, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
of the Shares subject thereto until such time as the rules, regulations and
requirements of the Securities Act and the terms of the Convertible Securities
no longer require such Shares to be registered under the Securities Act (the
"Convertible Effective Period");

         (e)      furnish to the Selling Holders and to any underwriter of such
Shares such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and such
other documents as the Selling Holders or such underwriter may reasonably
request;

         (f)      use its best efforts to register or qualify all of the Shares
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as the Selling Holders or any underwriter of such
Shares shall reasonably request, and do any and all other acts and things which
may be necessary or advisable to enable the Selling Holders or any underwriter
to consummate the disposition in such jurisdictions of the Shares covered by
such registration statement, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction where it is not so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of process
in any such jurisdiction;

         (g)      (i) furnish to the Selling Holders, addressed to them, an
opinion of counsel for the Company and (ii) use its best efforts to furnish to
the Selling Holders, addressed to them, a "cold comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included in such registration statement, covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in

                                       7
<PAGE>   8

the case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities and such other matters as the
Selling Holders may reasonably request, in each case, in form and substance and
as of the dates reasonably satisfactory to the Selling Holders;

         (h)      immediately notify the Selling Holders, at any time when a
prospectus relating to a registration pursuant to Section 2 or 3 is required to
be delivered under the Securities Act, of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and at the request of the Selling Holders prepare and furnish to the
Selling Holders a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.

         (i)      permit any Selling Holder which Selling Holder, in its sole
and exclusive judgment, might be deemed to be an underwriter or a controlling
person of the Company, to participate in the preparation of such registration or
comparable statement and to require the insertion therein of material, furnished
to the Company in writing, which in the reasonable judgment of such Holder and
its counsel should be included;

         (j)      to make available members of management of the Company, as
selected by the Holders of a majority of the Shares included in such
registration, for assistance in the selling effort relating to the Shares
covered by such registration, including, but not limited to, the participation
of such members of the Company's management in road show presentations.

         (k)      in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company shall use it best efforts promptly to obtain the
withdrawal of such order; and

         (l)      use its best efforts to cause Shares covered by such
registration statement to be registered with or approved by such other
government agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Shares.

         The Company may require the Selling Holders to furnish the Company with
such information regarding the Selling Holders and the distribution of such
Shares as the Company may from time to time reasonably request in writing and as
shall be required by law, the SEC or any securities exchange on which any shares
of Common Stock are then listed for trading in connection with any registration.

                                       8
<PAGE>   9

         4.2      Underwriting. If requested by the underwriters for any
underwritten offering in connection with a registration requested hereunder
(including any registration under Section 3 which involves, in whole or in part,
an underwritten offering), the Company will enter into an underwriting agreement
with such underwriters for such offering, such agreement to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities to the
effect and to the extent provided in Section 6 and the provision of opinions of
counsel and accountants' letters to the effect and to the extent provided in
Section 4.1(g). The Company may require that the Shares requested to be
registered pursuant to Section 3 be included in such underwriting on the same
terms and conditions as shall be applicable to the Other Securities being sold
through underwriters under such registration; provided, however, that no Selling
Holder shall be required to make any representations or warranties to the
Company or the underwriters (other than representations and warranties regarding
such Holder and such Holder's intended method of distribution) or to undertake
any indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in Section 6 hereof. The Selling Holders
shall be parties to any such underwriting agreement, and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such Selling Holders.

         4.3      Blackout Periods for Shelf Registrations.

         (a)      At any time when a Shelf Registration effected pursuant to
Section 2 relating to the Shares is effective, upon written notice from the
Company to the Selling Holders that the Company determines in the good faith
judgment of the general counsel of the Company that the Selling Holders' sale of
the Shares pursuant to the Shelf Registration (i) would reasonably be expected
to have a material adverse effect on any existing proposal or plans by the
Company or any of its subsidiaries to engage in any material acquisition,
merger, consolidation, tender offer, other business combination, reorganization,
securities offering or other material transaction, or (ii) would require
disclosure of material information, the disclosure of which would have a
material adverse effect on the Company (an "Information Blackout"), the Selling
Holders shall suspend sales of the Shares pursuant to such Shelf Registration
until the earlier of (i) the date upon which such material information is
disclosed to the public or ceases to be material, (ii) 90 days after the general
counsel of the Company makes such good faith determination or (iii) such time as
the Company notifies the Selling Holders that sales pursuant to such Shelf
Registration may be resumed (the number of days from such suspension of sales of
the Selling Holders until the day when such sales may be resumed hereunder is
hereinafter called a "Sales Blackout Period"); provided that the Company shall
not be permitted to impose a Sales Blackout Period for more than two times in
any 12 month period, reduced by the number of times during such 12 month period
that the filing or effectiveness of a registration has been postponed pursuant
to Section 2.1(b) hereof.

         (b)      If there is an Information Blackout and the Selling Holders do
not notify the Company in writing of their desire to cancel such Shelf
Registration, the period set forth in Section 4.1(c)(i) shall be extended for a
number of days equal to the number of days in the Sales Blackout Period.

                                       9
<PAGE>   10

         4.4      Listing. In connection with the registration of any offering
of the Shares pursuant to this Agreement, the Company agrees to use its best
efforts to effect the listing of such Shares on any securities exchange on which
any shares of the Common Stock are then listed or otherwise facilitate the
public trading of such Shares.

         4.5      Holdback Agreements.

         (a)      The Company shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any registration statement in
connection with a Demand Registration (other than a Shelf Registration) or a
Piggyback Registration, except pursuant to registrations on Form S-8 or any
successor form or unless the underwriters managing any such public offering
otherwise agree.

         (b)      If the Holders of Shares notify the Company in writing that
they intend to effect an underwritten sale of Shares registered pursuant to a
Shelf Registration pursuant to Section 2 hereof, the Company shall not effect
any public sale or distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for its equity securities,
during the seven days prior to and during the 90-day period beginning on the
date such notice is received, except pursuant to registrations on Form S-8 or
any successor form or unless the underwriters managing any such public offering
otherwise agree.

         (c)      If the Company completes an underwritten registration with
respect to any of its securities (whether offered for sale by the Company or any
other Person) on a form and in a manner that would have permitted registration
of the Shares and no Holder requested the inclusion of any Shares in such
registration, the Holders shall not effect any public sales or distributions of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, until the termination of the
holdback period required from the Company by any underwriters in connection with
such previous registration, but in no event more than 90 days from the effective
date of such registration.

         Section 5. Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement registering the
Shares under the Securities Act and each sale of the Shares thereunder, the
Company will give the Selling Holders and the underwriters, if any, and their
respective counsel and accountants, access to its financial and other records,
pertinent corporate documents and properties of the Company and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of the Selling Holders and such underwriters
or their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.

         Section 6. Indemnification.

         (a)      In the event of any registration of any of the Shares
hereunder, the Company will enter into customary indemnification arrangements to
indemnify and hold harmless each of the Selling Holders, each of their
respective directors and officers, each Person (as defined in (e) below) who

                                       10
<PAGE>   11

participates as an underwriter in the offering or sale of such securities, each
officer and director of each underwriter, and each Person, if any, who controls
each such Selling Holder or any such underwriter within the meaning of the
Securities Act (collectively, the "Covered Persons") against any losses, claims,
damages, liabilities and expenses, joint or several, to which such Person may be
subject under the Securities Act or otherwise insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of are based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in any related registration statement filed under
the Securities Act, any preliminary prospectus or final prospectus included
therein, or any amendment or supplement thereto, or any document incorporated by
reference therein, or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse each such Covered Person,
as incurred, for any legal or any other expenses reasonably incurred by such
Covered Person in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus or final prospectus, amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by such
Selling Holder or such underwriter specifically for use in the preparation
thereof. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any such Covered Person and shall survive
the transfer of such securities by the Selling Holders.

         (b)      Each of the Selling Holders, by virtue of exercising its
respective registration rights hereunder, agree and undertake to enter into
customary indemnification arrangements to indemnify and hold harmless (in the
same manner and to the same extent as set forth in clause (a) of this Section 6)
the Company, its directors and officers, each Person who participates as an
underwriter in the offering or sale of such securities, each officer and
director of each underwriter, and each Person, if any, who controls the Company
or any such underwriter within the meaning of the Securities Act, with respect
to any statement in or omission from such registration statement, any
preliminary prospectus or final prospectus included therein, or any amendment or
supplement thereto, if such statement or omission is contained in written
information furnished by such Selling Holder to the Company specifically for
inclusion in such registration statement or prospectus; provided, however, that
the obligation to indemnify shall be individual, not joint and several, for each
Selling Holder and shall be limited to the net amount of proceeds received by
such Selling Holder from the sale of Shares pursuant to such registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or Person and shall survive the transfer of the registered securities by
the Selling Holders.

         (c)      Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided, however, that the failure to give
prompt notice shall not impair any Person's rights to indemnification hereunder
to the extent such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
between

                                       11
<PAGE>   12

such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.

         (d)      Indemnification similar to that specified in the preceding
subdivisions of this Section 6 (with appropriate modifications) shall be given
by the Company and the Selling Holders with respect to any required registration
or other qualification of such Shares under any federal or state law or
regulation of governmental authority other than the Securities Act.

         (e)      "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 7. Benefits and Termination of Registration Rights. The Holders
may exercise the registration rights granted hereunder in such manner and
proportions as they shall agree among themselves. The registration rights
hereunder shall cease to apply to any particular Shares and such securities
shall cease to be Shares when: (a) a registration statement with respect to the
sale of such Shares shall have become effective under the Securities Act and
such Shares shall have been disposed of in accordance with such registration
statement; (b) such Shares shall have been sold to the public pursuant to Rule
144 under the Securities Act (or any successor provision); (c) such Shares shall
have been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force; (d) such Shares shall have ceased to be outstanding and (e) in the case
of Shares held by a Permitted Transferee, when such Shares become eligible for
sale pursuant to Rule 144(k) under the Securities Act (or any successor
provision).

         Section 8. Registration Expenses. As used in this Agreement, the term
"Registration Expenses" means all expenses incident to the Company's performance
of or compliance with the registration requirements set forth in this Agreement
including, without limitation, the following: (a) all registration and filing
fees; (b) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Shares to be disposed of
under the Securities Act; (c) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering document and amendments and supplements
thereto and the mailing and delivering of copies thereof to the underwriters and
dealers and directly to securityholders in the case of an Exchange Registration;
(d) the cost of printing and producing any agreements among underwriters,
underwriting agreements, and blue sky or legal investment memoranda, any selling
agreements

                                       12
<PAGE>   13

and any amendments thereto or other documents in connection with the offering,
sale or delivery of the Shares to be disposed of; (e) all expenses in connection
with the qualification of the Shares to be disposed of for offering and sale
under state securities laws, including the fees and disbursements of counsel for
the underwriters in connection with such qualification and in connection with
any blue sky and legal investment surveys; (f) the filing fees incident to
securing any required review by the New York Stock Exchange and any other
securities exchange on which the Common Stock is then traded or listed of the
terms of the sale of the Shares to be disposed of and the trading or listing of
all such Shares on each such exchange; (g) the costs of preparing stock
certificates; (h) the costs and charges of the Company's transfer agent and
registrar; and (i) the fees and disbursements of any custodians, solicitation
agents, information agents and/or exchange agents. Registration Expenses shall
not include underwriting discounts and underwriters' commissions attributable to
the Shares being registered for sale on behalf of the Selling Holders, which
shall be paid by the Selling Holders.

         Section 9. Miscellaneous.

         9.1      No Inconsistent Agreements. The Company shall not on or after
the date of this Agreement enter into any agreement with respect to its
securities that violates or subordinates the rights expressly granted to the
Holders in this Agreement. The Company shall not take any action, or permit any
change to occur, with respect to its securities which would adversely affect the
ability of the Holders of Shares to include such Shares in a registration
undertaken pursuant to this Agreement.

         9.2      Complete Agreement. Except as otherwise set forth in this
Agreement, this Agreement shall constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and shall supersede all
prior agreements and understandings, whether written or oral, between the
parties with respect to such subject matter.

         9.3      Authority. Each of the parties hereto represents to the other
that (i) it has the corporate power and authority to execute, deliver and
perform this Agreement, (ii) the execution, delivery and performance of this
Agreement by it has been duly authorized by all necessary corporate action,
(iii) it has duly and validly executed and delivered this Agreement, and (iv)
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.

         9.4      Assignment. This Agreement shall be binding on and inure to
the benefit of and be enforceable by the parties hereto and with respect to the
Company, its respective successors and assigns, and any Permitted Transferees.

         9.5      Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia (other than the
laws regarding conflicts of laws) as to all matters of validity, construction,
effect, performance and remedies, executed in and to be performed in that State.

                                       13
<PAGE>   14

         9.6      Severability. In the event that any part of this Agreement is
declared by a court or other judicial or administrative body to be null, void or
unenforceable, said provision shall survive to the extent it is not so declared,
and all of the other provisions of this Agreement shall remain in full force and
effect.

         9.7      Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given: (i) on the date of service if served personally on the
party to whom notice is to be given; (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission;
(iii) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service maintained by the United States Postal Service; or
(iv) on the fifth day after mailing, if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows:

         If to Southern:

         The Southern Company
         270 Peachtree Street
         Atlanta, Georgia 30303
         Attn:  General Counsel

         If to any other Holder, the address indicated for such Holder in the
Company's stock transfer records with a copy, so long as Southern owns any
Shares, to Southern at the above address.

         If to the Company:

         Southern Energy, Inc.
         900 Ashwood Parkway
         Suite 500
         Atlanta, Georgia 30338
         Attn:  General Counsel

         Any party may change its address for the purpose of this Section 9.7 by
giving the other party written notice of its new address in the manner set forth
above.

         9.8      Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         9.9      Remedies. Each of Southern and the Company shall be entitled
to enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provision of this Agreement and to exercise all other rights

                                       14
<PAGE>   15

existing in its favor. Each of Southern and the Company acknowledges and agrees
that under certain circumstances the breach by Southern or any of its affiliates
or the Company or any of its affiliates of a term or provision of this Agreement
will materially and irreparably harm the other party, that money damages will
accordingly not be an adequate remedy for such breach and that the
non-defaulting party, in its sole discretion and in addition to its rights under
this Agreement and any other remedies it may have at law or in equity, may apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any breach of the provisions of this Agreement.

         9.10     Waivers. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in writing signed by the Company and the Holders of a
majority of the Shares. Unless otherwise expressly provided in this Agreement,
no delay or omission on the part of any party in exercising any right or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any right or privilege under this Agreement
operate as a waiver of any other right or privilege under this Agreement nor
shall any single or partial exercise of any right or privilege preclude any
other or further exercise thereof or the exercise of any other right or
privilege under this Agreement. No failure by either party to take any action or
assert any right or privilege hereunder shall be deemed to be a waiver of such
right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.

         9.11     Amendment and Modification. This Agreement may not be amended
or modified in any respect except by a written agreement signed by the Company
and the Holders of a majority of the Shares.

         9.12     Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only, are not part of the
agreement of the parties hereto, and shall not affect the meaning or
interpretation of this Agreement. All references to days or months shall be
deemed references to calendar days or months. Unless the context otherwise
requires, any reference to a "Section" shall be deemed to refer to a section of
this Agreement. The words "hereof," "herein" and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, unless
otherwise specifically provided, they shall be deemed to be followed by the
words "without limitation." This Agreement shall be construed without regard to
any presumption or rule requiring construction or interpretation against the
party drafting or causing the document to be drafted.

         9.13     Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature.

                                       15
<PAGE>   16

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date and year first written above.

                                    THE SOUTHERN COMPANY

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

                                    SOUTHERN ENERGY, INC.

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

                                       16

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