Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.41

COAL TO FUEL GAS CONVERSION AGREEMENT

Between

HOMELAND GASIFICATION, LLC

and

HOMELAND ENERGY SOLUTIONS, LLC

Dated as of November 14, 2007

 

November 14, 2007

 

TABLE OF CONTENTS

	 	 	 	 	 
	 
	 	 	 	 
	SECTION 1 DEFINITIONS AND INTERPRETATION
	 	 	1	 
	1.1 Defined Terms
	 	 	1	 
	1.2 Construction
	 	 	1	 
	SECTION 2 PURCHASE OF SERVICES
	 	 	1	 
	2.1 Fuel Conversion Services
	 	 	1	 
	2.2 Exclusive Nature of Agreement
	 	 	1	 
	SECTION 3 FACILITY AND EQUIPMENT
	 	 	2	 
	3.1 Facility
	 	 	2	 
	3.2 Fuel Gas Metering Equipment
	 	 	2	 
	3.3 Fuel Measurement
	 	 	2	 
	3.4 Testing and Adjustment
	 	 	2	 
	3.5 Access
	 	 	2	 
	SECTION 4 DEMONSTRATED CAPACITY AND CURTAILMENT
	 	 	3	 
	4.1 Determination of the Demonstrated Capacity and Efficiency of the Facility
	 	 	3	 
	4.2 Right to Observe Tests
	 	 	3	 
	4.3 Curtailment of the Facility by HES
	 	 	3	 
	4.4 Fuel Gas Specifications and Delivery
	 	 	3	 
	4.5 Utilization Plan
	 	 	3	 
	4.6 Fuel
	 	 	3	 
	SECTION 5 PRICE AND PAYMENT
	 	 	4	 
	5.1 Fuel Conversion Services Charge
	 	 	4	 
	5.2 Invoicing and Payment
	 	 	4	 
	5.2.1 Monthly Statements
	 	 	4	 
	5.2.2 Payment
	 	 	4	 
	5.2.3 Late Payments and Disputed Invoices
	 	 	5	 
	5.2.4 Interest
	 	 	5	 
	5.3 Adjustments
	 	 	5	 
	5.4 Taxes
	 	 	5	 
	SECTION 6 TITLE AND RISKS ASSOCIATED WITH FUEL AND FUEL GAS
	 	 	5	 
	6.1 Title to Fuel and Fuel Gas
	 	 	5	 

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TABLE OF CONTENTS

	 	 	 	 	 
	6.2 Risk of Loss
	 	 	5	 
	6.3 Risk of Non-Conforming Fuel
	 	 	6	 
	SECTION 7 ROLES OF PARTIES
	 	 	6	 
	7.1 Roles of HES
	 	 	6	 
	7.1.1 Operation and Maintenance Obligations
	 	 	6	 
	7.1.2 Outages
	 	 	6	 
	7.1.3 Access
	 	 	6	 
	7.1.4 Maintenance of Records
	 	 	6	 
	7.1.5 Approvals and Permits
	 	 	6	 
	7.1.6 Waste Product Disposal
	 	 	7	 
	7.2 Roles of Owner
	 	 	7	 
	7.2.1 Plant Manager Responsibilities
	 	 	7	 
	SECTION 8 INDEMNITIES
	 	 	7	 
	8.1 Indemnity for the Parties’ Personnel and Property
	 	 	7	 
	8.2 Indemnity for Operation of the Facility
	 	 	7	 
	8.3 Indemnity for Fuel
	 	 	7	 
	8.4 Indemnity for Fuel Gas
	 	 	7	 
	8.5 Indemnity by Owner
	 	 	8	 
	8.6 Scope of Indemnity; Waiver of Subrogation
	 	 	8	 
	8.7 Indemnification Procedure
	 	 	8	 
	8.8 Survival
	 	 	8	 
	SECTION 9 TERM OF AGREEMENT TERMINATION AND EVENTS OF DEFAULT
	 	 	8	 
	9.1 Term
	 	 	8	 
	9.2 Conditions Precedent
	 	 	9	 
	9.3 Termination for Failure to Satisfy Conditions Precedent
	 	 	9	 
	9.4 Events of Default
	 	 	9	 
	9.4.1 Owner Event of Default
	 	 	9	 
	9.4.2 HES Event of Default
	 	 	10	 
	SECTION 10 LIABILITY
	 	 	10	 
	10.1 Waiver of Consequential Damages
	 	 	10	 

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TABLE OF CONTENTS

	 	 	 	 	 
	10.2 Intent
	 	 	11	 
	10.3 Disclaimer
	 	 	11	 
	SECTION 11 DISPUTE RESOLUTION
	 	 	11	 
	11.1 Negotiation
	 	 	11	 
	SECTION 12 REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	11	 
	12.1 Representations, Warranties and Covenants of Owner
	 	 	11	 
	12.2 Representations, Warranties and Covenants of HES
	 	 	12	 
	SECTION 13 ASSIGNMENT
	 	 	13	 
	13.1 Assignment
	 	 	13	 
	13.2 Facility Lender Requested Documents
	 	 	13	 
	SECTION 14 CONFIDENTIAL INFORMATION
	 	 	14	 
	14.1 Confidentiality Obligation
	 	 	14	 
	14.2 Required Disclosure
	 	 	14	 
	14.3 Term of Obligation
	 	 	14	 
	SECTION 15 MISCELLANEOUS PROVISIONS
	 	 	14	 
	15.1 Joint Effort
	 	 	14	 
	15.2 Captions; Recitals
	 	 	14	 
	15.3 Severability
	 	 	15	 
	15.4 No Waiver
	 	 	15	 
	15.5 Applicable Law
	 	 	15	 
	15.6 Counterparts
	 	 	15	 
	15.7 Relationship Between the Parties
	 	 	15	 
	15.8 Third Parties
	 	 	15	 
	15.9 Notices
	 	 	15	 
	15.10 Conflicting Provisions
	 	 	16	 
	15.11 Entire Agreement and Amendments
	 	 	16	 
	 
	 	 	 	 

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TABLE OF CONTENTS

	 	 	 
	Appendix A

	 	Defined Terms
	Exhibit A

	 	Description of Facility and Designation of Delivery Points
	Exhibit B

	 	Demonstrated Capacity and Efficiency Tests
	Exhibit C

	 	Facility Operating Procedures
	Exhibit D

	 	NOT USED
	Exhibit E

	 	Coal and Fuel Gas specifications
	Exhibit F

	 	Sample Payment Methodology
	Exhibit G

	 	NOT USED
	Exhibit H

	 	Operations and Maintenance Agreement
	Exhibit I

	 	Site Lease and Access Agreement
	Exhibit J

	 	NOT USED
	Exhibit K

	 	NOT USED
	Exhibit L

	 	Scheduled Maintenance
	Exhibit M

	 	NOT USED
	Exhibit N

	 	Default Payment Schedule

November 14, 2007

 

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EPIC — Confidential

COAL TO FUEL GAS CONVERSION AGREEMENT

THIS COAL TO FUEL GAS CONVERSION AGREEMENT (this “CCA”) is made and entered into as of
November 14, 2007 (the “Effective Date”), between HOMELAND GASIFICATION, LLC
(“Owner”), and Homeland Energy Solutions, LLC an Iowa Limited Liability Company
(“HES” collectively with Owner “Parties”).

RECITALS

WHEREAS, Owner shall be the owner of an approximately 542 MMBtu per hour coal gasification
facility that will be constructed on a site owned by HES located in Chickasaw County, Iowa and
adjacent to the HES Ethanol Plant (“HES Plant”).

WHEREAS, HES wishes to: (i) provide coal and other fuel materials, a site on which to
construct the facility, operation and maintenance services, and disposal services to Owner’s
facility for conversion into fuel gas; and (ii) receive from Owner all of such fuel gas; and

WHEREAS, Owner wishes to: (i) receive such coal and other fuel materials and provide such fuel
conversion services; and (ii) deliver to HES fuel gas.

NOW, THEREFORE, in consideration of the foregoing and the covenants, representations and
warranties herein contained, the Parties hereby agree as follows:

SECTION 1

DEFINITIONS AND INTERPRETATION

1.1 Defined Terms. The terms set forth in Appendix A, when appearing in this CCA with
their initial letters capitalized, have the respective meanings specified in Appendix A.

1.2 Construction. As used in this CCA, (i) the terms “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation,” (ii) references to a
“Section,” “Subsection,” “Section,” “Appendix” or “Exhibit” shall mean a section, subsection,
Section, appendix or exhibit of this CCA, as the case may be, unless in any such case the context
clearly indicates otherwise, (iii) all references to a given agreement, instrument or other
document shall be a reference to that agreement, instrument or other document as modified, amended,
supplemented and restated through the date as of which such reference is made, and reference to a
law includes any amendment of modification thereof as of the date of execution of this CCA, (iv) a
reference to a Person includes its successors and permitted assigns and (v) the singular shall
include the plural and the masculine shall include the feminine, and vice versa.

SECTION 2

PURCHASE OF SERVICES

2.1 Fuel Conversion Services. Subject to the terms and conditions of this CCA, (i)
Owner shall perform Fuel Conversion Services for HES and (ii) HES shall purchase Fuel Conversion
Services from Owner.

2.2 Exclusive Nature of Agreement. The relationship between Owner and HES with
respect to the Facility and Fuel Conversion Services shall be exclusive.

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EPIC — Confidential

SECTION 3

FACILITY AND EQUIPMENT

3.1 Facility. Owner shall cause the Facility (as described in Exhibit A) to be
constructed, operated and maintained in accordance with the requirements of the Project Documents,
Applicable Laws, Accepted Coal Gasification Practices and the terms of this CCA. During the
Operating Period, Owner shall procure, obtain and maintain, at its expense, insurance coverage for
the Facility in scope and amount no less than the coverage that may be required by Applicable Law,
the Financing Documents and Accepted Coal Gasification Practices, or that are customarily obtained
by Persons engaged in businesses similar to that of Owner.

3.2 Fuel Gas Metering Equipment. Fuel Gas delivered by Owner to HES shall be metered
at the Fuel Gas Delivery Point by the Fuel Gas Metering Equipment installed and owned by Owner.
The Fuel Gas Metering Equipment shall be used to determine conclusively the amount of Fuel Gas
delivered by Owner at the Fuel Gas Delivery Point. The Btu content of the Fuel Gas delivered by
Owner shall be determined by the Fuel Gas Metering Equipment. Owner shall be responsible for the
maintenance of the Gas Metering Equipment in accordance with Accepted Coal Gasification Practices.
HES shall have the right to receive data in electronic form, in real time on a continuous basis,
from the Facility, and the Fuel Gas Metering Equipment shall incorporate communication and
telemetry equipment capable of providing such data to HES. Owner shall bear all costs and expenses
of installation, maintaining and the initial testing of the Fuel Gas Metering Equipment, and the
costs of the delivery and communication to HES of data from the Fuel Gas Metering Equipment.

3.3 Fuel Measurement. Fuel delivered by HES to the Facility shall be measured by
weight on certified scales (the “Fuel Measurement Scales”). The Fuel Measurement Scales
shall govern the tonnage of the Fuel. The Btu content and all other Fuel Specifications of the
Fuel delivered by HES shall be determined by fuel samples taken by an ASTM-approved automatic
sample system. A weekly composite of all samples taken shall be sent to a testing laboratory that
is mutually acceptable to Owner and HES, and the results of the testing laboratory’s analysis shall
conclusively determine the quality of Fuel delivered to the Fuel Delivery Point. HES shall bear
all costs and expenses of measuring, sampling and testing the fuel and the cost of delivery of and
communication of data from the Fuel Measurement Scales and the testing laboratory.

3.4 Testing and Adjustment. At HES’ cost and expense an independent third party
chosen by Owner and approved by HES shall regularly test, certify, calibrate and inspect all Fuel
Gas Metering Equipment and Fuel Measurement Scales, but no less frequently than annually. HES
shall deliver to Owner all scale certification reports for the Fuel Measurement Scales. If any
such test shows a measurement error of more than (i) two percent in the case of the Fuel Gas
Metering Equipment or (ii) two percent in the case of Fuel Measurement Scales, then a retroactive
correction of that equipment shall be made for the period during which the equipment was in error,
or if the period of error cannot be reasonably ascertained, for one-half of the time elapsed since
the date of the last test.

3.5 Access. Each Party shall have the right to receive reasonable advance notice with
respect to, and to be present at the time of, any installing, cleaning, changing, repairing,
inspecting, testing, calibrating or adjusting of Fuel Metering Equipment or Fuel Measurement Scales
irrespective of whether such Fuel Measuring Equipment or Fuel Measurement Scales is owned or
operated by the Owner, HES or by a third party.

 

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EPIC — Confidential

SECTION 4

DEMONSTRATED CAPACITY AND CURTAILMENT

4.1 Determination of the Demonstrated Capacity and Efficiency of the Facility. As
a condition to achieving Commercial Operation, Owner shall, at its own cost and expense, conduct
the capacity and efficiency tests set forth in Exhibit B (“Exhibit B Tests”) and pursuant to the
procedures stated in Exhibit B (“Exhibit B Procedures”) and the Exhibit B Tests must demonstrate
the Facility has achieved the minimum testing requirements set forth in Exhibit B. If Owner
reasonably believes that, due to equipment malfunction or other causes, the results of the Exhibit
B Tests are not representative of the actual capacity and efficiency capability of the Facility,
Owner may, at its own cost and expense, promptly correct the equipment malfunction or other causes
and may re-run the Exhibit B Tests. Notwithstanding the foregoing, the Exhibit B tests must be
completed within a 180 day period following the first capacity and efficiency tests.

4.2 Right to Observe Tests. Owner shall give HES at least 24 hours’ advance notice
of, and HES shall have the right to observe, all Exhibit B Tests.

4.3 Curtailment of the Facility by HES. Subject to a Curtailment by HES, Accepted
Coal Gasification Practices, Applicable Laws and the operational limits of the Facility as set
forth in the Facility Operating Procedures, Owner shall at all times during the Operating Period
operate the Facility at full capacity. In the event HES requires a Curtailment, HES shall promptly
notify Owner as to the timing and duration to shut down the Facility.

4.4 Fuel Gas Specifications and Delivery. The Fuel Gas shall meet the Fuel Gas
Specifications, as defined in Exhibit E, and shall be delivered to the Fuel Gas Delivery Point. HES
shall have the right to reject Fuel Gas that does not meet such Fuel Gas Specifications. Provided
the Fuel Gas meets the Fuel Gas Specifications, HES shall receive all Fuel Gas provided under this
CCA at the Fuel Gas Delivery Point and shall be solely responsible for all costs and losses from
and after the Fuel Gas Delivery Point.

4.5 Utilization Plan. Prior to the Commercial Operation Date, and at least 120 days
before the start of each Operating Year thereafter, HES shall prepare and submit to Owner a
proposed annual utilization plan for the HES Plant describing HES’ forecasted operation plan of the
HES Plant during the upcoming Operating Year. Following such submission, the Parties shall meet
and confer with respect to the operational requirements of the Facility, and Owner shall prepare
and submit to HES its proposed Scheduled Maintenance program for the upcoming Operating Year.

4.6 Fuel. HES, at its sole cost and expense, shall deliver or cause to be delivered
to Owner, (i) at the Fuel Delivery Point, all quantities of Fuel required by Owner to generate Fuel
Gas during the Start-up Period and the Operating Period and (ii) at the Gas Delivery Point, all
quantities of natural gas required by Owner to start up the Facility. HES shall be responsible
for and bear all costs and expenses related to the scheduling of Fuel and natural gas deliveries
under this CCA and the transportation of all Fuel and natural gas deliveries to the Fuel Delivery
Point and the Gas Delivery Point, respectively. All Fuel delivered or caused to be delivered by
HES pursuant to this Section 4.6 shall meet the Fuel Specifications as shown in Exhibit E. Owner
shall have the right to reject Fuel that does not meet such specifications at the Fuel Delivery
Point. The unit of Fuel quantity measurement for purposes of this CCA shall be Btu’s per short
ton.

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EPIC — Confidential

SECTION 5

PRICE AND PAYMENT

5.1 Fuel Conversion Services Charge. For each Month during the Start-up Period and
Operating Period, HES shall pay to Owner an amount equal to the Fuel Conversion Services Charge for
such Month. The Parties acknowledge and agree that in the event of a Curtailment, for such period
of the Curtailment, HES shall be obligated to pay the Fuel Conversion Services Charge (computed
using the Fuel Conversion Services Rate-Curtailment ), even if the Facility is not delivering Fuel
Gas to the Fuel Gas Delivery Point. An example, for illustration purposes only, of the Fuel
Conversion Services Charge is located in Exhibit F.

5.1.1 Fuel Conversion Efficiency Rate. Owner will meet the prescribed Reference
Efficiency Rate as determined for any calendar quarter. Any flaring that occurs that is not as a
result of a Curtailment shall be included in the Reference Efficiency Rate calculation. If for any
calendar quarter period during the Operating Period, the actual efficiency rate is less than the
Reference Efficiency Rate by more than 5%, then Owner will pay to HES (by way of a discount off the
amount payable by HES for such period as described in the last sentence of this Section 5.1.1) an
amount equal to the product of the additional Btu’s of Fuel consumed times the actual cost of such
Fuel during such calendar quarter. Any discounts due to HES pursuant to this Section 5.1.1, will
be discounted in the next Fuel Conversion Service Charge.

5.1.2 Fuel Conversion Services Credit.  For each Month during the Start-up Period
there is the risk that some of the Fuel Gas will require flaring off due to the instability of the
Fuel Conversion Services during the initial phases of the Start-Up Period. HES and Owner agree
that during the period prior to the Operating Period that HES will receive a credit to the Fuel
Conversion Services Charge (“Fuel Conversion Services Credit”) for any Fuel Gas, which Owner
produces and invoices, but which, cannot be consumed by HES. The Fuel Conversion Services Credit
shall be calculated within 20 days after the end of each Month and shall be applied to the
following Month’s Fuel Conversion Services Charge. Once the Facility enters the Operating Period,
this section shall become inoperative.

5.2  Invoicing and Payment.

5.2.1 Monthly Statements. On or before the 5th Day of each Month during the Operating
Period, Owner shall provide HES a statement by regular mail, facsimile or other acceptable means in
respect of the immediately preceding Month, which statement shall include the amount of Fuel
Conversion Services Charge for such Month and such other data and information as may be necessary
to determine the amounts payable by HES hereunder. Such statement shall be accompanied by any
supporting documentation required or reasonably requested by HES to determine the accuracy of such
statement.

5.2.2 Payment. Within 10 Days following the date HES receives each statement under
Subsection 5.2.1, HES shall pay or cause to be paid to Owner the full undisputed amount specified
therein. All such payments shall be made by wire transfer of immediately available funds to the
account of Owner at such depository as Owner shall designate in such statement. If requested by
Owner in any such statement, HES shall confirm to Owner the amount of payment, the paying bank and
the account to be credited not later than two Business Days before payment. If the payment due
date falls on a Day other than a Business Day, payment shall be due on the next succeeding Business
Day.

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EPIC — Confidential

5.2.3 Late Payments and Disputed Invoices. If there is a dispute concerning any
amount invoiced by Owner, HES shall promptly pay Owner the amount not in dispute as provided in
Subsection 5.2.2. Owner and HES shall then exercise their best efforts to determine whether such
disputed amount is due and payable. Any disputed amount that is ultimately determined to have been
payable shall be paid within 5 Days following such determination, together with Interest in
accordance with the provisions of Subsection 5.2.4. Any dispute that is not promptly resolved by
mutual agreement between the Parties shall be resolved in accordance with the provisions of Section
11.

5.2.4 Interest. Amounts not paid by either Party to the other when due under this CCA
shall bear interest, from the date such payment was due until and including the date such payment
is made, at the Interest Rate.

5.3 Adjustments. If the Parties determine that adjustments or corrections to any
statement are required as a result of inaccurate Fuel Gas Metering Equipment or Fuel Measurement
Scales or other errors in computation or billing, Owner shall promptly re-compute inaccurate
amounts due there under and shall otherwise correct any errors in such statement. To the extent
that HES has already paid any amount that is determined not to have been due, Owner shall promptly
pay that amount to HES or offset that amount against subsequent payments due or to become due by
HES to Owner. To the extent that a re-computation pursuant to this Section 5.3 determines that HES
has not paid any amount properly due, HES shall promptly pay that amount to Owner, but shall not be
charged interest over that amount. Notwithstanding the foregoing, no adjustment of any statement
or payment shall be made unless objection to the accuracy thereof is made within one (1) year of
the date of the relevant statement; and provided further that this Section 5.3 shall survive any
expiration or other termination of this CCA for a period of one (1) year from the date of such
termination for the purpose of such statement and payment objections.

5.4 Taxes. HES shall be solely liable for and shall pay or cause to be paid, or shall
reimburse Owner if Owner is required to pay, any and all Taxes relating to or arising out of (i)
the transportation, delivery, use or consumption of Fuel hereunder (whether at, prior to or after
the Fuel Delivery Point) and (ii) the delivery, transmission, sale or consumption of Fuel Gas
(whether at or after the Gas Delivery Point). HES shall indemnify, defend and hold harmless Owner
from and against liability for any such Taxes.

SECTION 6

TITLE AND RISKS ASSOCIATED WITH FUEL AND FUEL GAS

6.1 Title to Fuel and Fuel Gas. HES shall retain title to all quantities of Fuel
delivered to the Fuel Delivery Point pursuant to Section 4.6. HES shall have and retain title to
all Fuel Gas generated by the Facility from and after the time it is produced, both before and
after delivery of the Fuel Gas to the Fuel Gas Delivery Point.

6.2 Risk of Loss. Without regard to title to the Fuel as provided in Section 6.1, as
between the Parties, HES shall be deemed to be in exclusive possession and control (and be
responsible for any damage or injury resulting there from or caused thereby) of (i) Fuel prior to
the Fuel Delivery Point and (ii) Fuel Gas at and after the Fuel Gas Delivery Point. Owner shall be
deemed to be in exclusive possession and control (and be responsible for any damage or injury
resulting there from or caused thereby) of (i) Fuel at and from the Fuel Delivery Point and (ii)
Fuel Gas prior to the Fuel Gas Delivery Point. Risk of loss related to Fuel shall transfer from
HES to Owner at the Fuel Delivery Point, and risk of loss related to Fuel Gas shall transfer from
Owner to HES at the Fuel Gas Delivery Point.

 

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EPIC — Confidential

6.3 Risk of Non-Conforming Fuel. In addition to the provisions of Section 6.2, HES
remains responsible and agrees to hold harmless and indemnify Owner for all loss, expense, harm,
injury or damage, including damage in the event that: (1) HES fails to deliver Fuel to the
Facility; or (2) HES delivers Fuel, but such Fuel fails to conform to the Fuel Gas Specifications
as set forth in Exhibit E of this CCA.

SECTION 7

ROLES OF PARTIES

7.1 Roles of HES.

7.1.1 Operation and Maintenance Obligations. At all times during the Operating
Period, HES shall be responsible for the testing, operation and maintenance of the Facility and
shall bear all costs and expenses incurred in connection therewith, including the cost of labor,
daily supplies, licenses, permits and applicable taxes all according to the Operations and
Maintenance Agreement, Exhibit H. HES shall have full and complete control over the Facility at
all times, subject to the rights and remedies of Owner under this CCA, including the right of Owner
to appoint a Plant Manager pursuant to Section 7.2.1.

7.1.2 Outages. Owner shall comply with all notice, coordination, reporting and
related requirements with respect to outages for Scheduled Maintenance (as set forth in Exhibit L)
occurring at the Facility during the Operating Period.

7.1.3 Access. During the Operating Period, Owner and its representatives and
designees, including potential lenders, equity participants or clients, shall be permitted, with
adequate notice of not less than two business days, to access the Facility at all reasonable times
in order (i) to verify, review or monitor the operation of the Facility for the purpose of
determining HES’ compliance with this CCA and (ii) to view, inspect, examine and test equipment and
facilities.

7.1.4 Maintenance of Records. HES shall keep and maintain at the Facility (and shall
retain for a minimum of five years) accurate and complete operating records and logs for the
Facility in a manner consistent with Accepted Coal Gasification Practices and as required by
Applicable Law. HES shall make such records and logs available to Owner on a real-time basis, as
specified in the Facility Operating Procedures, and also for inspection and copying at the
Facility, during normal business hours and upon reasonable notice. HES shall give notice to Owner
prior to discarding any records and logs and Owner may, within 30 Days of such notice, elect to
take possession of such records and logs, in which event HES shall deliver such records and logs to
Owner.

7.1.5 Approvals and Permits. HES shall be responsible for obtaining all necessary
approvals, consents, permits, licenses, decrees, certificates or other authorizations required for
the construction, operation and maintenance of the Facility from any Governmental Authority having
jurisdiction, in accordance with Applicable Laws, including, without limitation, all applicable
environmental certificates, licenses, permits and approvals. Owner will provide commercially
reasonable assistance to HES in determining which such approvals, consents, permits, licenses,
decrees, certificates and authorizations are necessary and shall assist HES in obtaining same. HES
shall maintain compliance with each such approval, consent, permit, license, decree, certificate
and authorization.

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EPIC — Confidential

7.1.6 Waste Product Disposal. HES shall be responsible for the disposal of all waste
products generated by the Facility.

7.2 Roles of Owner.

7.2.1 Owner Responsibilities. Owner shall compensate HES for the actual cost of
operating and maintaining Owner’s facility at the rates described in the Operations and
Maintenance Agreement, Exhibit H.

SECTION 8

INDEMNITIES

8.1 Indemnity for the Parties’ Personnel and Property. HES hereby releases and shall
defend, indemnify and hold harmless the Owner and its Related Parties from and against any and all
lawsuits, claims, causes of action and demands in connection with this CCA arising from illness,
injury and death of HES’ personnel and from damage to and loss of HES’ property except for such law
suits, claims, causes of action and demands resulting from the gross negligence or willful
misconduct of Owner. Owner hereby releases and shall defend, indemnify and hold harmless HES and
its Related Parties from and against any and all lawsuits, claims, causes of action and demands in
connection with this CCA arising from illness, injury and death of Owner’s personnel and from
damage to and loss of the Owner’s property except for such lawsuits, claims, causes of action and
demands resulting from gross negligence or willful misconduct of HES.

8.2 Indemnity for Operation of the Facility. HES releases and shall defend, indemnify
and hold harmless Owner and its Related Parties from and against any and all lawsuits, claims,
causes of action and demands brought by third parties against Owner and/or its Related Parties
arising directly or indirectly from the operation or maintenance of the Facility. Owner releases
and shall defend, indemnify and hold harmless HES and its Related Parties from and against any and
all lawsuits, claims, causes of action and demands brought by third parties against HES and/or its
Related Parties arising directly or indirectly from the operation or maintenance of the Facility
prior to the Commercial Operation Date, including but not limited to claims arising out of alleged
violations of intellectual property rights.

8.3 Indemnity for Fuel. HES and Owner shall each defend, indemnify and hold harmless
the other Party and its respective Related Parties from and against any and all lawsuits, claims,
causes of action and demands brought by third parties and arising out of or relating to any act or
incident attributable to Fuel delivered pursuant to this CCA when such Fuel is on its respective
side of the Fuel Delivery Point.

8.4 Indemnity for Fuel Gas. Notwithstanding the provisions of Section 8.2, HES and
Owner shall each defend, indemnify and hold harmless the other Party and its respective Related
Parties from and against any and all lawsuits, claims, causes of action and demands brought by
third parties arising out of or relating to any act or incident attributable to Fuel Gas delivered
under this CCA when such Fuel Gas is on its respective side of the Delivery Point.

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EPIC — Confidential

8.5 Indemnity by Owner. Owner shall defend, indemnify and hold harmless HES, its
Affiliates, and their officers, directors, and employees from and against all claims, demands,
actions, damages, losses, costs, expenses, or liability (including without limitation the costs of
litigation, including
reasonable attorneys’ fees), arising out of or as a result of: (a) noncompliance with any of
Owner’s permits, licenses, or other governmental permissions, if any, for performance of
constructing the Facility; (b) any third party claim(s) arising from Owner’s tortuous actions or
omissions in the performance of constructing the Facility or operation of the Facility prior to
Commercial Operation Date, or (c) infringement upon the Intellectual Property rights of a third
party, wherein any such claim, demand, action, damage, losses, costs, expenses or liability are
owed to a third party (collectively, “Third Party Claims”).

8.6 Scope of Indemnity; Waiver of Subrogation. It is the Parties’ intent that, except
as provided in Section 8.2, the indemnity obligations in this CCA are without regard to the causes
of the claims that are being indemnified, including the negligence of any Indemnitee (as defined
below), whether such negligence is sole, joint or concurrent, or active or passive, or the strict
liability of any Indemnitee. To the extent injury or damage results from the joint or concurrent
negligent or intentional acts or omissions of the Parties (or their respective Related Parties),
each Party shall be liable under this Section 8 in proportion to its relative degree of fault. HES
and the Owner shall each cause its respective insurers to waive all express and implied rights of
subrogation against the other Party and the Related Parties of such other Party to the extent and
scope of liabilities assumed under this CCA.

8.7 Indemnification Procedure. The Person entitled to indemnification under this
Section 8 (the “Indemnitee”) shall promptly notify the indemnifying Party (the
“Indemnitor”) in writing after the receipt of notice of the commencement of any legal
action or claim against such Indemnitee in respect of which indemnification may be sought pursuant
to the foregoing provisions of this Section 8. Indemnitor shall thereafter have the right to
assume the investigation and defense of that claim, including employing legal counsel. If the
Indemnitor does not promptly assume the investigation and defense of the claim, the Indemnitee may
do so and employ legal counsel of its choosing, at the Indemnitor’s expense. In any case, the
Indemnitor shall pay or reimburse the Indemnitee for all court costs, attorneys’ fees and experts’
fees relating to the claim and post any appeals bonds. If the Indemnitee assumes the defense of a
claim, the Indemnitee has the right, at its expense, to employ separate legal counsel and
participate in the defense of that claim. The Indemnitor shall not be liable for any settlement of
a claim without its written consent to the settlement. To prevent double recovery for a claim, the
Indemnitee shall reimburse the Indemnitor for payments or costs incurred in an indemnity claim with
the proceeds of any judgment, insurance, bond, surety or other recovery by the Indemnitee for the
indemnified claim. If the Indemnitee fails to perform any of its obligations under this Section
8.6 and the failure prejudices the Indemnitor in its defense of the claim, the Indemnitor’s
obligation to indemnify shall remain in effect but shall be reduced to the extent, if any, that it
is so prejudiced.

8.8 Survival. The provisions of this Section 8 shall survive the expiration or
earlier termination of this CCA with respect to events, occurrences and claims arising on or before
such expiration or termination.

SECTION 9

 TERM OF AGREEMENT TERMINATION AND EVENTS OF DEFAULT

9.1 Term. Subject to earlier termination in accordance with this CCA, the term of
this CCA (the “Term”) shall commence on the Effective Date and shall end at the end of the
last Day of the fifteenth Operating Year; provided that any obligations of the Parties arising
prior to the date and time of termination shall survive such termination. The Term shall be
subject to renewal or extension by mutual written agreement of the Parties.

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9.2 Conditions Precedent. Each Party agrees to use commercially reasonable efforts to
promptly satisfy each of the conditions precedent set forth below. Each Party agrees to promptly
notify the other Party, but in no event later than three days, after which any condition precedent
set forth in this Section 2.2 has been satisfied. Neither Party shall have any obligation under
this CCA (except for its obligations under Sections 9.2, 12, 13, 14, and 15, all of which shall be
binding as of the Effective Date) unless and until:

Owner

	 	(a)	 	all necessary approvals, consents, permits, licenses, decrees, certificates or
other authorizations that are required for the construction, operation and maintenance
of the Facility from any Governmental Authority having jurisdiction shall have been
issued in the name of Owner or HES, as applicable, shall be in full force and effect
and all conditions with respect to such approvals, consents, permits, licenses,
decrees, certificates or other authorizations have been satisfied; and

	 
	 	(b)	 	Executed Financing Document with the Project Lender acceptable to Owner.

	 
	 	(c)	 	A Construction Contract Acceptable to Owner and Project Lender.

	 
	 	(d)	 	Funding of the LLC

HES

	 	(a)	 	Execution by HES of the coal supply contract including the construction of a hub.

	 
	 	(b)	 	 

	 
	 	(c)	 	Execution by HES of an ethanol construction contract.

	 
	 	(d)	 	HES receiving railroad approvals

	 
	 	(e)	 	.

	 
	 	(f)	 	Approval of the HES board

9.3 Termination for Failure to Satisfy Conditions Precedent. If a condition precedent
set forth in Section 9.2 above is not satisfied for any reason or no reason on or by March 31,
2008, then either Party may terminate this CCA with ten (10) days written notice, whereupon the
Parties shall have no further liability or obligation to each other hereunder, except for
obligations or duties that occurred prior to such termination and a $10,000.00 payment from HES to
Owner for engineering and project development costs.

9.4 Events of Default.

9.4.1 Owner Event of Default. Each of the following events shall constitute an event
of default of Owner (“Owner Event of Default”) under this CCA:

	 	(a)	 	the Bankruptcy of Owner;

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	 	(b)	 	Owner fails (i) to pay any amount (other than amounts disputed
in good faith) required to be paid under this CCA and such failure is not cured
within 10 Days after HES notifies Owner of such failure, or (ii) to pay any
amount within five Days following the determination under Section 11 that such
amount is due;

	 
	 	(c)	 	Owner fails to perform in any material respect any obligation
under this CCA (other than an obligation to make payment or an obligation that
is otherwise specifically set forth in this Section 9.4.1 as a separate
default) and such failure is not cured within 30 Days after HES notifies Owner
of such failure; and

	 
	 	(d)	 	Owner abandons the Facility.

9.4.2 HES Event of Default. Each of the following events shall constitute an event of
default of HES (“HES Event of Default”) under this CCA:

	 	(a)	 	The Bankruptcy of HES:

	 
	 	(b)	 	HES fails (i) to pay any amount (other than amounts disputed in
good faith) due and owing pursuant to this CCA and such failure is not cured
within 10 Days after the Owner notifies HES of such failure, or (ii) to pay any
amount within five Days following the determination under Section 11 that such
amount is due;

	 
	 	(c)	 	HES fails to perform in any material respect any obligation
under this CCA (other than an obligation to make payment or an obligation that
is otherwise specifically set forth in this Section 9.4.2 as a separate
default) and such failure is not cured within 30 Days after Owner notifies HES
of such failure; or

	 
	 	(d)	 	HES abandons or formally shut down the HES Plant.

Termination for Events of Default. If an Owner Event of Default or a HES Event of
Default is not cured within the applicable cure period provided above, after the non-defaulting
Party notifies the defaulting Party of its intent to terminate this CCA, then the non-defaulting
Party may terminate this CCA by providing notice to the defaulting Party. Whether or not this CCA
is terminated, the non-defaulting Party may assert any claims available to it under this CCA or
Applicable Law, so as to recover actual damages against the defaulting Party. If this CCA is
terminated by Owner as a result of a HES Event of Default, then Owner may elect as its remedy for
the HES Event of Default for HES to pay Owner the Early Termination Payment (Exhibit N) and upon
such payment, HES shall acquire the Facility on an AS IS, WHERE IS BASIS WITH ALL FAULTS AND
WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES (except for a warranty of title and the existence of no
liens).

SECTION 10

LIABILITY

10.1 Waiver of Consequential Damages. In no event shall either Owner or HES be liable
to the other Party hereunder or to its Related Parties for special, indirect, consequential,
punitive or exemplary damages of any nature or kind whatsoever, including loss of profits or
revenue (except with respect to payments and amounts expressly provided for in this CCA), outages
or service interruptions of
the Facility, loss of contracts, cost of capital or claims of customers, and Owner hereby
releases HES there from, and HES hereby releases Owner there from.

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10.2 Intent. The Parties intend that the waivers and disclaimers of liability,
releases from liability, limitations and apportionments of liability, and exclusive remedy
provisions expressed throughout this CCA shall apply, whether in contract, tort or otherwise, even
in the event of the negligence, strict liability or breach of contract of the Party released or
whose liability is waived, disclaimed, limited, apportioned or fixed by such exclusive remedy
provision, and shall extend to such Party’s Affiliates, contractors and suppliers, and to its and
their Related Parties. The Parties also intend and agree that such provisions shall continue in
full force and effect notwithstanding the expiration or early termination of this CCA. The Parties
confirm that the exclusive remedies and measures of damages provided in this CCA satisfy the
essential purposes hereof.

10.3 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED HEREIN, OWNER MAKES NO WARRANTIES OR
GUARANTEES, EXPRESS OR IMPLIED, CONCERNING THE FACILITY, EFFICIENCY, AVAILABILITY OR ANY OTHER
MATTER UNDER THIS CCA, AND OWNER DISCLAIMS ANY AND ALL WARRANTIES OR GUARANTEES IMPLIED BY LAW, AS
WELL AS WARRANTIES OF CUSTOM OR USAGE.

SECTION 11

DISPUTE RESOLUTION

11.1 Negotiation. In the event of any claim, dispute or disagreement arising out of
or relating to the implementation or performance of this CCA that the Parties, acting in good
faith, have been unable to resolve within 30 Days after that dispute arises, the senior management
of the Parties shall meet in good faith effort to resolve that dispute. The senior management of
the Parties shall then have 15 Days in which to resolve the disagreement. Should the senior
management of the Parties be unable to resolve the disagreement within 15 Days then the Parties may
elect to judicial relief.

SECTION 12

REPRESENTATIONS, WARRANTIES AND COVENANTS

12.1 Representations, Warranties and Covenants of Owner. Owner hereby represents,
warrants and covenants to HES that:

	 	(a)	 	Owner is a Limited Liability Company duly organized, validly existing and in
good standing under the Applicable Laws of Iowa and is qualified to do business in
Iowa;

	 
	 	(b)	 	Owner is not in violation of any Applicable Law promulgated or judgment
entered by any Governmental Authority that would affect its ability to perform any
obligations under this CCA, and there are no legal, arbitration, administrative
proceedings or any other proceeding or investigation by or before any Governmental
Authority, now pending or (to the best of its knowledge) threatened against it which,
if adversely determined, could reasonably be expected to have a material adverse
effect on Owner’s ability to perform under this CCA;

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	 	(c)	 	Owner is the legal owner of or has the legal right to use all processes,
concepts, designs, software and technology used in creating the Facility where such
information or knowledge is or could be protected by intellectual property law
(“Intellectual Property”). In such instances where Owner licenses or leases
Intellectual Property (“Owner Licensed Intellectual Property”) from a third party,
Owner can and will provide proof from the true owner that Owner is permitted to use
such Owner Licensed Intellectual Property. Except for Owner Licensed Intellectual
Property to which Owner has a right solely by way of a non-negotiated, or shrink wrap,
license, Owner shall disclose the use of all Owner Licensed Intellectual Property and
the name of the owner thereof including contact information. In the event that a
court of competent jurisdiction makes a final, non-appealable judgment or upon a
judgment becoming non-appealable by lapse of time, that a third party has superior
rights over those of Owner to all or part of the Intellectual Property, Owner shall
have the option, at its sole expense, to either (i) provide an alternative process,
concept, design, software or technology without materially degrading the economics or
performance of the Facility, or (ii) acquire the right to continue using the
Intellectual Property owned by such third party under the same conditions as provided
in this Agreement. In the event Owner is unable or unwilling to provide either
alternative of (i) or (ii) hereof within sixty (60) days following entry of such
judgment or such judgment becoming non-appealable, then HES shall, along with all its
other rights under local, State and Federal Law, have the right to terminate this CCA.
If HES terminates this CCA, HES shall retain its right to purchase the Facility
pursuant to the HOMELAND GASIFICATION, LLC terms and conditions.

	 
	 	(d)	 	Owner has made all filings with and obtained all consents, licenses, permits
and other approvals from all Governmental Authorities required or appropriate in order
to permit Owner to lawfully conduct its business now and as contemplated by this CCA;

	 
	 	(e)	 	Owner’s execution and delivery of this CCA, consummation of the transactions
contemplated herein and compliance with the terms and provisions hereof will not
conflict with or result in a breach of, or require any consent (except such consents as
have been obtained or are reasonably expected to be obtained in due course) under (i)
any of Owner’s organizational documents, (ii) any Applicable Law or any order, writ,
injunction or decree of any court or Government Authority or (iii) any agreement or
instrument to which Owner is a party or by which it is bound or to which it or its
property is subject;

	 
	 	(f)	 	this CCA has been duly and validly authorized, executed and delivered by Owner
and constitutes Owner’s legal, valid and binding obligation, enforceable against it in
accordance with the terms hereof (except as such enforceability may be limited by
Bankruptcy, insolvency, reorganization or moratorium or other similar Applicable Laws);
and

	 
	 	(g)	 	Owner’s performance of its obligations under this CCA, including all delivery
of Fuel Gas hereunder, shall be in compliance in all material respects with all
Applicable Laws.

12.2 Representations, Warranties and Covenants of HES. HES hereby represents,
warrants and covenants to Owner that:

	 	(a)	 	HES is a Limited Liability Company duly organized, validly existing and in good
standing under the laws of Iowa and is qualified to do business in all other
jurisdictions in which the nature of its business makes such qualification necessary;

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	 	(b)	 	HES is not in violation of any Applicable Law promulgated or judgment entered
by any Governmental Authority that would affect its performance of any obligations
under this CCA, and there are no legal, arbitration, administrative proceedings or any
other proceeding or investigation by or before any Governmental Authority, now pending
or (to the best of its knowledge) threatened against it which, if adversely determined,
could reasonably be expected to have a material adverse effect on its ability to
perform its obligations under this CCA;

	 	(c)	 	HES has made all filings with and obtained all consents, licenses, permits and
other approvals from all Governmental Authorities required or appropriate to be in
order to permit HES to lawfully conduct its business now and as contemplated by this
CCA;

	 
	 	(d)	 	HES’ execution and delivery of this CCA, consummation of the transactions
contemplated herein and compliance with the terms and provisions hereof will not
conflict with or result in a breach of, or require any consent under (i) any of HES’
organizational documents, (ii) any Applicable Law or regulation, or (iii) any order,
writ, injunction or decree of any court or Government Authority, or any agreement or
instrument to which HES is a party or by which it is bound or to which it or its
property is subject;

	 
	 	(e)	 	this CCA has been duly and validly authorized, executed and delivered by HES
and constitutes HES’ legal, valid and binding obligation, enforceable against it in
accordance with the terms hereof (except as such enforceability may be limited by
Bankruptcy, insolvency, reorganization or moratorium or other similar Applicable Laws);
and

	 
	 	(f)	 	HES’ performance of its obligations under this CCA, including all delivery of
Fuel hereunder, shall be in compliance in all material respects with all Applicable
Laws.

SECTION 13

ASSIGNMENT

13.1 Assignment. This CCA shall be binding upon, and shall inure to the benefit of,
the Parties hereto and their respective successors and permitted assigns. This CCA may not be
assigned by either Party in whole or in part without the prior written consent of the other Party,
which consent shall not be unreasonably withheld or delayed; provided that this CCA may be
collaterally assigned in whole (i) by Owner without such consent to the Project Lender and (ii) by
HES without such consent to its senior lender. Except for an assignment to the Project Lender and
to HES’s senior lender, no other permitted assignment by either Party of this CCA for any purpose
whatsoever shall be valid until all obligations of the assignor hereunder shall have been assumed
by the assignee by written agreement delivered to the other Party. Any assignment which does not
comply with the provisions of this Section 14.1 shall be null and void.

13.2 Facility Lender Requested Documents. In connection with any collateral
assignment by Owner or HES of this CCA as set forth in Section 13.1 above, Owner and HES shall
execute and deliver a Consent and Agreement to such assignment in the form reasonably requested by
the
applicable lender. Owner and HES further agree to furnish the Project Lender with such other
documents and legal opinions as may reasonably be requested by the lender.

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SECTION 14

CONFIDENTIAL INFORMATION

14.1 Confidentiality Obligation. Neither Party shall disclose to third parties any
written, oral or electronic confidential or proprietary information regarding the Facility or the
other Party’s business affairs, finances, technology, processes, plans or installations, product
information, know-how, or other information that is received from the other Party pursuant to this
CCA (“Confidential Information”) without the express written consent of the other Party,
which consent shall not be unreasonably withheld. Further, the Parties shall disclose Confidential
Information only to those of their employees, officers, agents and contractors who need to know
such information in connection with performing this CCA. In addition, except as reasonably
required by Owner in connection with financing the Facility or as reasonably required by either
Party for performing its obligations hereunder, both Parties shall at all times use their
reasonable efforts to keep all information regarding the terms and conditions of this CCA
confidential. This Section 14.1 shall not apply to (i) information that was already in the
possession of one Party prior to receipt from the other, (ii) information that is now or hereafter
becomes a part of the public domain through no fault of the Party to whom the information is
disclosed, (iii) information that corresponds substantially to information furnished by third
parties without restriction on disclosure, (iv) information that is developed independently by the
receiving Party’s employees who have not had access to the Confidential Information, or (v)
information that the disclosing Party expressly agrees in writing may be disclosed by the receiving
Party.

14.2 Required Disclosure. If a Party is required by Applicable Law to disclose
Confidential Information including, without limitation, any disclosure pursuant to the rules and
regulations of the US Securities Exchange Commission or any other regulatory agency having
jurisdiction over a Party, or if disclosure of Confidential Information is required in connection
with a Party’s assertion of any claim or defense in any judicial or administrative proceeding, then
such Party may disclose Confidential Information; provided that prior to such disclosure such Party
shall notify the other Party of the circumstances and substance of the disclosure. The disclosing
party shall also exercise its best efforts to minimize the amount of Confidential Information
disclosed. The Party disclosing such Confidential Information shall use reasonable efforts to
obtain proprietary or confidential treatment of such information by the third party to whom the
Confidential Information is disclosed and shall, to the extent such remedies are available, seek
protective orders limiting dissemination and use of the Confidential Information. This CCA does
not alter the rights of either Party to challenge any Applicable Law requiring the disclosure.

14.3 Term of Obligation. The confidentiality obligations of the Parties pursuant to
this Section 14 shall survive the expiration or other termination of this CCA for a period of three
years. Upon such expiration or other termination, each Party shall promptly return to the other
Party or destroy, upon request, any Confidential Information of the other Party supplied in
document or electronic form. If the Confidential Information has been destroyed then the Party
responsible for such destruction shall provide written verification of same.

SECTION 15

MISCELLANEOUS PROVISIONS

15.1 Joint Effort. This CCA was prepared jointly by the Parties, each having had the
advice of its own counsel, and shall not be construed more severely against one of the Parties than
against the other as a result of the manner in which it was prepared, negotiated or executed.

15.2 Captions; Recitals. The captions and recitals contained in this CCA are for
convenience and reference only and in no way define, describe, extend or limit the scope or intent
of this CCA or the intent of any provision contained herein.

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15.3 Severability. The invalidity or unenforceability of one or more provisions of
this CCA shall not affect the validity of the remaining provisions of this CCA, so long as the
material purposes of this CCA can be determined and effectuated.

15.4 No Waiver. Either Party’s failure to enforce any provision of this CCA or
require compliance with any terms of this CCA at any time during the Term hereof, shall in no way
be deemed to be a waiver of such Party’s right to enforce any and all such provisions at anytime
thereafter.

15.5 Applicable Law. This CCA shall be governed by, construed and enforced in
accordance with the laws of the State of Texas, without regard to its conflict of laws principles.
Venue for any legal action or proceeding with respect to this Agreement may be brought in the
courts of the United States of America for the Southern District of Texas, and by execution and
delivery of this Agreement, each party hereby accepts for itself and (to the extent permitted by
law) in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid
court.

15.6 Counterparts. This CCA may be signed in any number of counterparts, each of
which shall be considered a fully executed original, but all of which shall constitute one and the
same instrument.

15.7 Relationship Between the Parties Nothing in this CCA shall be construed as
constituting a joint venture, partnership or other association between Owner and HES, and neither
Party shall be authorized to act on behalf of or to bind the other Party or to make any
representation about or on behalf of such other Party. In addition, nothing in this CCA shall be
interpreted as constituting a lease of property of any kind.

15.8 Third Parties. Except as otherwise expressly provided in this CCA with respect
to indemnified persons, nothing in this CCA shall be construed to create any duty to, standard of
care with respect to, or any liability to any Person who is not a party to this CCA.

15.9 Notices. Any notice, invoice, demand, offer or other written instrument required
to be given pursuant to this CCA shall be in writing, shall be signed by the Party giving such
notice and shall, to the extent reasonably practicable, be sent to the other Party by telefax, and
if not reasonably practicable to be sent by telefax, then delivered to the other Party by hand
delivery, overnight courier, or registered mail, at the address set forth below:

	 	 	 	 	 
	If delivered to Owner:

	 	 	 	HOMELAND GASIFICATION LLC
	 

	 	 	 	c/o Econo-Power International Corporation
	 

	 	 	 	1502 Augusta, Suite 100
	 

	 	 	 	Houston, Texas 77057
	 

	 	 	 	Attention: John G. Keller
	 

	 	 	 	Telephone: 713-979-5198
	 

	 	 	 	Telefax: 713-979-5322
	 
	 	 	 	 
	 

	 	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	Pillsbury Winthrop Shaw Pittman LLP
	 

	 	 	 	2 Houston Center
	 

	 	 	 	909 Fannin, 22nd Floor
	 

	 	 	 	Houston, Texas 77010-1018
	 

	 	 	 	Attention: J. Todd Culwell
	 

	 	 	 	Telephone: 713-276-7600
	 

	 	 	 	Telefax: 713-276-7673

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	If delivered to HES:

	 	 	 	Homeland Energy Solutions, LLC
	 

	 	 	 	106 W. Main
	 

	 	 	 	P.O. Box C
	 

	 	 	 	Riceville, Iowa 50466
	 

	 	 	 	Attention: Stephen K. Eastman
	 

	 	 	 	Telephone:641-985-4021
	 
	 	 	 	 
	 

	 	 	 	Copy to
	 

	 	 	 	Thomas D. Johnson
	 

	 	 	 	Brown Winick Law Firm
	 

	 	 	 	666 Grand Avenue, Suite 2000
	 

	 	 	 	Des Moines, IA 50309
	 

	 	 	 	Telephone 515-242-2400 or 515-323-8514

Either Party may change the address to which notice shall be sent, or specify one additional
address to which copies of notices shall be sent, by providing a written notice to the other Party.
A notice pursuant to this CCA shall be deemed received (i) if delivered by hand or overnight
courier on the date upon which the notice was left at the address of the recipient, (ii) if sent by
registered mail, on the date of the return receipt, or (iii) if sent by telefax, upon the sender’s
receipt of an acknowledgment or transmission report generated by the machine from which the telefax
was sent indicating that the telefax was sent in its entirety to the recipient’s telefax number.
Where a Party is required under this CCA to respond to a notice within a specified period, such
period shall be considered to run from the date on which the notice was deemed received, as
provided above, and the response shall be considered timely if given as above provided by the last
day of such period.

15.10 Conflicting Provisions. In the event of any conflict or inconsistency between
the body of this CCA (including Appendix A) and any Exhibit, the terms and provisions of
the body of this
CCA shall prevail and be given priority. Subject to the foregoing, the several documents and
instruments forming part of this CCA are to be taken as mutually explanatory of one another and in
the case of ambiguities or discrepancies within or between such parts the same shall be explained
and interpreted, if possible, in a manner that gives effect to each part and avoids or minimizes
conflicts among such parts.

15.11 Entire Agreement and Amendments. This CCA sets forth the full and complete
understanding of the Parties relating to the subject matter hereof, and supersedes any and all
negotiations, agreements, understandings and representations (in each case, whether written or
oral) made or dated prior to the execution and delivery of this CCA with respect to such subject
matter. No change, amendment or modification of this CCA shall be valid or binding upon the
Parties unless in writing and duly executed by both Parties.

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IN WITNESS WHEREOF, the Parties have caused this CCA to be executed as of the Effective Date
by their duly authorized representatives as follows:

	 	 	 	 	 
	 	HOMELAND GASIFICATION, LLC

 	 
	 	By:  	/s/ William C. Douglas
 	 
	 	 	Name:  	William C. Douglas 	 
	 	 	Title:  	Sr. VP Business Development 	 
	 
	 	HOMELAND ENERGY SOLUTIONS, LLC

 	 
	 	By:  	/s/ Stephen K. Eastman
 	 
	 	 	Name:  	Stephen K. Eastman 	 
	 	 	Title:  	President 	 
	 

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APPENDIX A

DEFINED TERMS

“Accepted Coal Gasification Practices” means, with respect to a particular time
period, those practices, methods and acts that are performed during such time period by fuel gas
generators and other operators of gasification projects at facilities of similar size, location and
technology to that of the Facility, or any of the practices, methods and acts that, in the exercise
of reasonable judgment in light of the facts known at the time a decision is made, could have been
expected to accomplish a desired result at reasonable cost consistent with good business practices,
reliability, efficiency, safety, expedition and environmental protection. Accepted Coal
Gasification Practices are not intended to be limited to the optimum practices, methods or acts to
the exclusion of others, but rather to include those practices, methods and acts generally accepted
or approved by such non-utility generators and other operators during the relevant time period.

“Affiliate” means, with respect to a particular Person, any other Person that directly
or indirectly through one or more intermediaries, controls, is controlled by or is under common
control with such Person. For purposes of the foregoing, “control,” “controlled by” and “under
common control with,” with respect to a particular Person, means the possession (directly or
indirectly) of the power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or partnership interests, by contract or
otherwise.

“Agreement” means this Tolling Agreement dated as of the Effective Date between Owner
and HES (including this Appendix A and all Exhibits attached to this Coal Conversion Agreement).

“Applicable Law” means any applicable federal, state, local or other constitution,
charter, act, statute, law, ordinance, code, rule, regulation or order, or specified standards or
objective criteria or requirements contained in any applicable permit or approval, or other
legislative or administrative action of any Governmental Authority, or final decree, judgment or
order of a court or arbitration panel, or mandatory engineering, construction, safety or operating
standard or code, including all Environmental Laws.

“Bankruptcy” means, with respect to a particular Person, a situation in which (i) such
Person files a voluntary petition in bankruptcy or is adjudicated a bankrupt or insolvent, or files
any petition or answer or consent seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any present or future
applicable law relating to bankruptcy, insolvency, or other relief for debtors, or seeks or
consents or acquiesces in the appointment of any trustee, receiver, conservator or liquidator of
such Person or of all or any substantial part of its properties, (ii) a court of competent
jurisdiction enters an order, judgment or decree approving a petition filed against such Person
seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or
similar relief under the present or any future bankruptcy law or law relating to insolvency or
other relief for debtors, and such Person acquiesces in the entry of such order, judgment or decree
or such order, judgment or decree remains un-vacated and un-stayed for an aggregate of 30 days
(whether or not consecutive) from the date of entry thereof, or any trustee, receiver, conservator
or liquidator of such Person or of all or any substantial part of its property is appointed without
the consent or acquiescence of such Person and such appointment remains un-vacated and un-stayed
for an aggregate of 30 days, whether or not consecutive, (iii) such Person evidences its inability
to pay its debts as they mature, (iv) such Person gives notice to any governmental body of
insolvency or pending insolvency, or suspension or
pending suspension of operations, or (v) such Person makes an assignment for the benefit of
creditors or takes any other similar action for the protection or benefit of creditors.

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“British Thermal Unit” or “Btu” means the amount of heat required to raise the
temperature of one pound of water from 59 degrees Fahrenheit to 60 degrees Fahrenheit at an
absolute pressure of 14.696 pounds per square inch. For purposes of this CCA, Btu’s will be
calculated on a Higher Heating Value (HHV) basis.

“Business Day” means a Day other than a Saturday, Sunday or Day on which commercial
banks in New York are authorized or required to close.

“HES” has the meaning specified in the preamble.

“HES Event of Default” has the meaning specified in Section 9.4.2.

“COD Anniversary Date” means the last Day of the 12th Month beginning on or after the
Commercial Operation Date, and each anniversary of such Day.

“Confidential Information” has the meaning specified in Section 14.

“Commercial Operation Date” means the date upon which Owner notifies HES that the
tests described in Exhibit B are complete and the minimum performance standards have been
satisfied.

“Consent and Agreement” means the Consent and Agreement to be entered into by and
among Owner, HES and the Facility Lender pursuant to the provisions of Section 13.2.

“Construction Contract” means the Contract to be entered into between Owner, and
Construction Contractor for the construction of the Facility.

“Construction Contractor” means (TBD).

“Curtailment” means any of the following events: (i) HES does not require some or all
of Fuel Gas to be generated by the Facility, (ii) HES does not accept Fuel Gas at the Fuel Gas
Delivery Point, (iii) HES does not provide sufficient Fuel, or (iv) HES provides fuel that does not
meet the Fuel Specifications.

“Day” means a 24 hour period beginning at 12:00 midnight, Prevailing Time.

“Default Payment” means the payment made in the event of an early termination in which
HES is purchasing the Facility, determined in accordance with the Default Payment Schedule in
Exhibit N.

“Demonstrated Capacity” means the total MMBtu output level that the Facility is
capable of producing as demonstrated during the tests conducted in accordance with Section 4.1 and
Exhibit B.

“Dollars” or “$” means United States dollars.

“Effective Date” has the meaning specified in the preamble.

“Environmental Law” means any environmental or health and safety-related Law whether
existing as of the date hereof, previously enforced, or subsequently enacted.

November 14, 2007

 

App. A-2 

 

EPIC — Confidential

“Facility” means the approximately 542 MMBtu/hour coal gasification facility owned by
Owner that is being constructed on a site located in Chickasaw County, Iowa, which is more fully
described in Exhibit A attached hereto.

“Facility Operating Procedures” means the facility operating procedures and operating
limitations set forth in Exhibit C.

“Facility Utilization Plan” has the meaning specified in Section 4.5.

“Financing Document” means any loan or credit agreement and all related collateral
security documentation, if any, relating to (a) any indebtedness of Owner, or (b) any indebtedness
of any Affiliate of Owner, secured by the assets of Owner or by which the assets of Owner may be
encumbered, in either case the proceeds of which, directly or indirectly, are used to finance or
refinance the development, construction, ownership or operation of the Facility.

“Financial Closing Date” means the date upon which all of the Financing Documents
shall have been executed and delivered and all conditions precedent to the initial funding there
under shall have been satisfied or waived.

“Fuel” means coal meeting the specifications set forth in Exhibit E.

“Fuel Conversion Services” means the operation of the Facility by Owner to convert
Fuel delivered or caused to be delivered to the Facility by HES to generate and deliver Fuel Gas to
HES.

“Fuel Conversion Services Charge” means, for each Month (a) during the Start-up
Period, an amount equal to the product of $3.50 multiplied by (i) the amount of Fuel Gas (MMBtu’s)
generated during each Month, and (b) during each Operating Year, an amount equal to the product of
(i) the Fuel Conversion Services Rate multiplied by (ii) the amount of Fuel Gas (MMBtu’s) generated
during each Month. The difference between the Fuel Conversion Services Rate-Annual plus the Fuel
Cost and the delivered price of natural gas will be accrued in a reconciliation account. At the end
of each three month period following the Commercial Operation Date there will be a reconciliation
wherein the monthly differences for the previous three months will be reconciled. Should there be
a deficit in the reconciliation account HES will be billed in accordance with Section 5.2. The
quarterly reconciliation shall be calculated within 5 days after the end of each three month period
following the Commercial Operation Date. A description of the above calculation method is
illustrated in Exhibit F

“Fuel Conversion Services Rate” means the lesser of the delivered price of natural gas
or the Fuel Conversion Services Rate-Annual plus the Fuel Cost applicable for that month. This Rate
is for comparison purposes only to determine which of the two rates, natural gas or the Fuel
Conversion Services Rate-Annual, will be used to bill HES. In no event will HES be charged for the
price of Fuel. HES remains solely responsible for Fuel supply as set out in Section 4.6.

“Fuel Conversion Services Rate- Annual” means the Fuel Conversion Services Rate adjusted in
accordance with the formula described below; provided, however, in no event shall the Fuel
Conversion Services Rate be less than the Fuel Conversion Services Rate for the prior Operating
Year. Additionally, the Fuel Conversion Services Rate-Annual is the maximum amount that can be
billed in each billing period. HES remains solely responsible for the cost and supply of Fuel. For
the first Operating Year the rate shall be $3.50/MMBtu.

November 14, 2007

 

App. A-3 

 

EPIC — Confidential

Current Fuel Conversion Services Rate = $3.50/MMBtu x (PPIt/PPIb)

Where:

	 	 	 
	PPI =

	 	US Producer Price Index — Finished Goods without Foods and Energy.
	 
	 	 
	t =

	 	Current Period: The average of the most recent 12 months ending in the same month as
the final month in the prior Operating Year.
	 
	 	 
	b =

	 	Previous Period: The 12 month period ending in the Operating Year prior to
the prior Operating Year; provided that for the first re-determination, the previous
Operating Year is the calendar year 2007.

“Fuel Conversion Services Rate-Curtailment” means the Fuel Conversion Services Rate-Annual
modified to reflect the discounted variable expense component of the Fuel Conversion Services Rate,
all as show in Exhibit F.

“Fuel Cost” means the delivered cost of Fuel contained in the fuel supply contract between
Peabody Coal Sales and HES.

“Fuel Delivery Point” means the conveyor carrying Fuel to the top of Owner’s facility
at which Fuel is to be delivered, or provided or measured, pursuant to this CCA.

“Fuel Gas” means fuel gas meeting the specifications set forth in the Fuel Gas
Specifications.

“Fuel Gas Delivery Point” means the physical point of delivery set forth on Exhibit A
at which Fuel Gas is to be delivered, or provided and measured, pursuant to this CCA.

“Fuel Gas Metering Equipment” means the meters and associated equipment utilized in
determining the amount of Fuel Gas delivered to the Facility.

“Fuel Gas Specifications” means the quality specifications for Fuel Gas set forth in
Exhibit E.

“Fuel Measurement Scales” has the meaning specified in Section 3.3.

“Fuel Specifications” means the quality specifications for Fuel set forth in Exhibit
E.

“Gas Delivery Point” means the physical point of delivery set forth on Exhibit A at
which Natural Gas is to be delivered pursuant to this CCA.

“Governmental Authority” means (i) any federal, state, local or municipal governmental
body, (ii) any governmental, regulatory or administrative agency, commission, body or other
authority exercising or entitled to exercise any administrative, executive, judicial, legislative,
policy, regulatory or taxing authority or power, or (iii) any court or governmental tribunal.

“Indemnitee” has the meaning specified in Section 8.6.

“Indemnitor” has the meaning specified in Section 8.6.

November 14, 2007

 

App. A-4 

 

EPIC — Confidential

“Interest Rate” means a per annum rate of interest (computed on the basis of a 365-day
year) equal to the lesser of (i) the prime commercial lending rate as quoted from time to time by
The Wall Street Journal as the “Prime Rate” under the column known as “Money Rates”, plus one
percent, and (ii) the maximum rate permitted by Applicable Law.

“MMBtu” means one million British Thermal Units.

“Month” means the period beginning at 12:01 a.m., local time, on the first Day of each
calendar month and ending at the same hour on the first Day of the next succeeding calendar month.

“Operating Period” means the period beginning on the Commercial Operation Date and
ending at the end of the Term.

“Operating Year” means each period of 12 Months ending on a COD Anniversary Date;
provided that the first Operating Year shall also include the portion of the Month during which the
Commercial Operation Date occurs that is between the Commercial Operation Date and the end of such
Month.

“Operation and Maintenance Agreement” means the Operation and Maintenance Agreement,
dated as of [insert date] between Owner and [insert name of the Operator]. The scope of services
to be provided by the Owner and Operator under the Operation and Maintenance Agreement shall
include, among other things, those services described in Exhibit I.

“Option” has the meaning specified in Section 5.5.

“Owner” has the meaning specified in the preamble.

“Owner Event of Default” has the meaning specified in Section 9.1.

“Parties” means Owner and HES.

“Party” means Owner or HES.

“Person” means an individual, Governmental Authority, corporation, limited liability
company, partnership, limited partnership, trust, association or other entity.

“Prevailing Time” means the local time in New Hampton, Iowa.

“Project Documents” means the Construction Contract, the Operation and Maintenance
Agreement, this CCA and all other material agreements and documents to which Owner is a party
relating to the construction, operation and maintenance of the Facility.

“Project Lender” means any entity or entities providing non recourse debt and or
equity financing or refinancing to Owner or any Affiliate of Owner under the Financing Documents in
connection with the development, construction, ownership or operation of the Facility.

“Reference Efficiency Rate” means the amount of energy produced by the Facility,
expressed in Btu of Fuel Gas per Btu of Fuel input, which ratio shall not be less than 0.XX.

November 14, 2007

 

App. A-5 

 

EPIC — Confidential

“Related Parties” of a Party means its Affiliates, equity owners, Affiliates of its
equity owners, and their directors, officers, stockholders, employees and agents.

“Scheduled Maintenance” means the planned removal of the Facility from service to
perform work on specific components that is scheduled in advance and has a predetermined start date
and duration (e.g. annual overhaul, inspections, testing, major maintenance and routine
maintenance) all in accordance with Exhibit N.

“Start-up” means when the Facility is installed and ready to begin first delivery of
Fuel Gas to HES.

“Start-up Period” means the time period beginning on Start-up and ending on the
Commercial Operation Date.

“Taxes” means any or all federal, state or local, municipal, ad valorem, property,
occupation, severance, generation, first use, conversion, Btu or power, transmission, [utility],
gross receipts, privilege, sales, use, consumption, excise, lease, transaction, and other taxes,
governmental charges, license fees, permit fees, assessments, or increases in or interest on or
penalties relating to any of the foregoing, other than taxes based on net income or net worth.

“Term” has the meaning specified in Section 9.1.

November 14, 2007

 

App. A-6 

 

EPIC — Confidential

EXHIBIT A

DESCRIPTION OF FACILITY AND DESIGNATION OF DELIVERY POINTS

November 14, 2007

 

 

 

EPIC — Confidential

EXHIBIT B

DEMONSTRATED CAPACITY AND EFFICIENCY TESTS

The demonstrated capacity and efficiency tests will be developed by the EPC contractor using the
input from Owner, HES and the engineer. It will be complete and agreed upon XXX days prior to
testing.

November 14, 2007

 

 

 

EPIC — Confidential

EXHIBIT C

FACILITY OPERATING PROCEDURES

Operating Manuals and training materials are developed throughout the duration of the project
development. All subsystems, as well as the overall system will have operating manuals and will
require training of HES personnel. The manuals and materials will be complete and available sixty
(60) days prior to the Facility startup. As built drawings will be added to the manuals as they are
completed.

Facilitating operating procedures and training materials will be a part of the EPC contract and are
the responsibility of the Owner.

November 14, 2007

 

 

 

EPIC — Confidential

EXHIBIT D

NOT USED

November 14, 2007

 

 

 

EPIC — Confidential

EXHIBIT E

COAL AND FUEL GAS SPECIFICATIONS

The items will be specific to the coal and will be developed when the coal is selected

November 14, 2007

 

 

 

EPIC — Confidential

EXHIBIT F

ILLUSTRATION OF METHODOLGY OF CALCULATING FUEL CONVERSION

SERVICES CHARGE ON A MONTHLY BASIS

	1.	 	The following illustrates calculation of the Fuel Conversion Services Charge(FCSC)
before Commercial Operation Date:

	 
	 	 	The formula for calculation is:

	 
	 	 	FCSC = Actual Production (as measured by the Fuel Gas Metering
Equipment) in MMbtu’s X $3.50

	 
	 	 	Using the formula above and actual production of 100,000 MMBtu during the month results
in the following calculation and result:

	 
	 	 	FCSC = 100,000 MMBtu X $3.50 = $350,000.00

	 
	2.	 	After the Commercial Operation Date the above calculation is no longer used and the
following formula is in effect:

	 
	 	 	FCSC = (Actual Production during period in MMbtu’s X Fuel Conversion Services
Rate Annual)

	 
	 	 	Sample calculation using above formula:

	 
	 	 	390,240 MMBtu Actual Production X $3.65 Fuel Conversion Services Rate Annual = FCSC

	 
	 	 	390,240 X $3.65 = $ 1,424376 = FCSC

November 14, 2007

 

 

 

EPIC — Confidential

The following example describes calculations when the situation occurs in which the delivered
price of natural gas is less than the Fuel Conversion Services Rate plus Cost of Fuel both
expressed in dollar cost per MMbtu. Certain assumptions are assumed for example purposes
only. This does not apply to the curtailment Variable Expense which is set at $ 0.37 for the
term of the agreement.

Calculations are made on the assumed production described below

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assumed Syngas Production	 	 	 	 
	 	 	Actual	 	 	 	 
	 	 	MMBtu	 	 	 	 
	 	 	Delivered	 	 	Assumed Curtailed Production	 
	 	 	during	 	 	 	 	 	 	 	 	 	 	Curtailed	 	 	Total Billable	 
	 	 	Month at	 	 	 	 	 	 	Demonstrated	 	 	Production	 	 	MMBtu’s	 
	 	 	Delivery	 	 	 	 	 	 	Capacity per	 	 	Calculation in	 	 	(Production &	 
	Date	 	Point	 	 	Hours Curtailed	 	 	hour in MMBtu	 	 	MMBtu	 	 	Curtailment)	 
	Jan
	 	 	390,240	 	 	 	0	 	 	 	542	 	 	 	—	 	 	 	390,240	 
	Feb
	 	 	377,232	 	 	 	24	 	 	 	542	 	 	 	13,008	 	 	 	390,240	 
	Mar
	 	 	370,728	 	 	 	36	 	 	 	542	 	 	 	19,512	 	 	 	390,240	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	1,138,200	 	 	 	 	 	 	 	 	 	 	 	32,520	 	 	 	1,170,720	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

			
	 	 	 
	 
	 	Check must = 0
	Accrual Calculation
	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Fuel	 	 	 	 	 	 	 	 	 	 	 	 	 	 	MMBtu of	 	 	Calculation of	 	 	Billing on a	 	 	 	 
	 	 	 	 	 	 	Conversion	 	 	 	 	 	 	 	 	 	 	 	 	 	 	SynGas	 	 	Billing on a	 	 	delivered	 	 	Calculation using	 
	 	 	 	 	 	 	Services	 	 	 	 	 	 	Total FCSR and	 	 	Delivered Nat	 	 	Delivered	 	 	FCFS + Fuel	 	 	Natural Gas	 	 	method giving lesser	 
	Date	 	 	 	 	 	Rate Annual	 	 	Fuel Cost	 	 	Fuel Cost	 	 	Gas Rate	 	 	during Month	 	 	Cost	 	 	Basis	 	 	of two amounts	 
	Jan
	 	 	 	 	 	$	3.65	 	 	$	2.78	 	 	$	6.43	 	 	$	7.00	 	 	 	390,240	 	 	$	2,509,243	 	 	$	2,731,680	 	 	$	2,509,243	 
	Feb
	 	 	 	 	 	$	3.65	 	 	$	2.78	 	 	$	6.43	 	 	$	6.00	 	 	 	377,232	 	 	$	2,425,602	 	 	$	2,263,392	 	 	$	2,263,392	 
	Mar
	 	 	 	 	 	$	3.65	 	 	$	2.78	 	 	$	6.43	 	 	$	5.00	 	 	 	370,728	 	 	$	2,383,781	 	 	$	1,853,640	 	 	$	1,853,640	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,138,200	 	 	$	7,318,626	 	 	$	6,848,712	 	 	$	6,626,275	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Production Billing Calculation

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Fuel	 	 	 	 	 	 	Billing Before	 	 	 	 	 	 	 
	 	 	 	 	 	 	Conversion	 	 	MMBtu	 	 	Accrual for	 	 	Accrual	 	 	 	 
	 	 	 	 	 	 	Services	 	 	Delivered	 	 	natural gas	 	 	Reduction	 	 	Actual Monthly	 
	Date	 	 	 	 	 	Rate Annual	 	 	during Month	 	 	prices	 	 	from above	 	 	Billing	 
	Jan
	 	 	 	 	 	$	3.65	 	 	 	390,240	 	 	$	1,424,376	 	 	$	—	 	 	$	1,424,376	 
	Feb
	 	 	 	 	 	$	3.65	 	 	 	377,232	 	 	$	1,376,897	 	 	$	(162,210	)	 	$	1,214,687	 
	Mar
	 	 	 	 	 	$	3.65	 	 	 	370,728	 	 	$	1,353,157	 	 	$	(530,141	)	 	$	823,016	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 		 	 	 	 	 	 	1,138,200	 	 	$	4,154,430	 	 	$	(692,351	)	 	$	3,462,079	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Curtailment Billing Calculation

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Fuel	 	 	Cutailment	 	 	Fuel	 	 	MMBtu	 	 	Billing on a	 
	 	 	Conversion	 	 	Variable	 	 	Conversion	 	 	Delivered	 	 	Fuel	 
	 	 	Services	 	 	expense	 	 	Services Rate	 	 	during	 	 	Conversion	 
	Date	 	Rate Annual	 	 	component	 	 	Cutrailment	 	 	Curtailment	 	 	Services Basis	 
	Jan
	 	$	3.65	 	 	$	(0.37	)	 	$	3.28	 	 	 	0	 	 	$	—	 
	Feb
	 	$	3.65	 	 	$	(0.37	)	 	$	3.28	 	 	 	13,008	 	 	$	42,666	 
	Mar
	 	$	3.65	 	 	$	(0.37	)	 	$	3.28	 	 	 	19,512	 	 	$	63,999	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	32,520	 	 	$	106,666	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Check	 	 	 	 	1,170,720	 	 	 	—	 

Billing Summary of all Calculations

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Total Monthly	 	 	Add Back of	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Billing =	 	 	Quarter end	 	 	 	 
	 	 	Production	 	 	Curtailment	 	 	Production +	 	 	Reconciliation	 	 	Total Amounts	 
	Date	 	Billing	 	 	Billing	 	 	Curtailment	 	 	Billing	 	 	Billed	 
	Jan
	 	$	1,424,376	 	 	$	—	 	 	$	1,424,376	 	 	$	—	 	 	$	1,424,376	 
	Feb
	 	$	1,214,687	 	 	$	42,666	 	 	$	1,257,353	 	 	$	162,210	 	 	$	1,419,563	 
	Mar
	 	$	823,016	 	 	$	63,999	 	 	$	887,016	 	 	$	530,141	 	 	$	1,417,157	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	$	3,462,079	 	 	$	106,666	 	 	$	3,568,745	 	 	$	692,351	 	 	$	4,261,096	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Note: the Add back of the Quarter end Reconciliation occurs only at the end of the Quarter per
terms of Agreement

November 14, 2007

 

 

 

EPIC — Confidential

EXHIBIT G

NOT USED

November 14, 2007

 

 

 

EXHIBIT H

OPERATIONS AND MAINTENANCE AGREEMENT

November 14, 2007

 

 

 

EXHIBIT I

SITE LEASE AND ACCESS AGREEMENT

November 14, 2007

 

 

 

EXHIBIT J

NOT USED

November 14, 2007

 

 

 

EXHIBIT K

NOT USED

November 14, 2007

 

 

 

EXHIBIT L

SCHEDULED MAINTENANCE

November 14, 2007

 

 

 

EXHIBIT M

NOT USED

November 14, 2007

 

 

 

EXHIBIT N

DEFAULT PAYMENT SCHEDULE

To be completed when the final facility costs are known

November 14, 2007Exhibit 10(a)3

                         DEFERRED COMPENSATION PLAN FOR

                    OUTSIDE DIRECTORS OF THE SOUTHERN COMPANY

                 Amended and Restated Effective January 1, 2008

<PAGE>

                                   SECTION 1

                          Purpose and Adoption of Plan

1.1      Adoption

         The Southern Company previously established the Deferred Compensation
Plan for Directors of The Southern Company. The Plan was last amended and
restated effective July 15, 2002. The Plan has been amended from time to time
including this good faith amendment and restatement effective January 1, 2008 to
comply with Code Section 409A. Except as otherwise provided herein and
consistent with Sections 1.2 and 1.3, the terms of the Plan as in effect prior
to the effective date of this Plan shall continue to be applicable to deferrals
made pursuant to the Plan prior to January 1, 2008.

1.2      Pre-2005 Deferrals

         Compensation paid to Directors and deferred under the Plan prior to
January 1, 2005 shall be treated by Southern as not subject to Section 409A of
the Code and therefore "grandfathered." The Account balance (plus earnings
thereon) of the "grandfathered" deferrals shall only be subject to the
provisions of the Plan in effect prior to January 1, 2005. In accordance with
transition rules under Section 409A of the Code, Internal Revenue Service Notice
2005-1, and any other applicable guidance from the Department of Treasury, the
provisions of the prior Plan are only intended to preserve the rights and
features of the "grandfathered" deferrals and are, therefore, not intended to be
"materially modified" with respect to any aspect of such rights and features.
Provisions of the prior Plan should be so construed whenever necessary or
appropriate.

1.3      409A Good Faith Period

         For the period from January 1, 2005 to December 31, 2008, the Plan
shall be administered in good faith compliance with Section 409A of the Code. At
a time and in a manner determined by the Committee, Directors shall make timely
elections to conform to the Plan's terms effective on and after January 1, 2008.
  Such elections shall be made prior to January 1, 2008 and shall apply to
elections to defer Cash Compensation and/or Stock Retainer subject to Section
409A of the Code on and after January 1, 2005. In particular, such elections
shall establish the form and timing of commencement of distribution of amounts
in Deferred Compensation Accounts pursuant to a new Distribution Election. Such
elections are intended to meet the transition requirements of Section 409A of
the Code, Internal Revenue Service Notice 2005-1 and other related guidance
promulgated by the Department of Treasury.

                                   SECTION 2

                                   Definitions

         2.1 "Beneficial Ownership" means beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.

         2.2 "Board" or "Board of Directors" means the Board of Directors of the
Company.

<PAGE>

         2.3 "Business Combination" means a reorganization, merger or
consolidation or sale of Southern with another corporation or an entity treated
as a corporation for placecountry-regionUnited States federal income tax
purposes.

         2.4 "Cash Compensation" means the annual retainer fees and meeting fees
payable to a Director in cash.

         2.5 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.

         2.6 "Committee" means the Governance Committee of the Board, or such
other committee as may be designated by the Board to be responsible for
administering the Plan.

         2.7 "Common Stock" means the common stock of Southern, including any
shares into which it may be split, subdivided, or combined.

         2.8 "Company" means Southern Company or any successor thereto.

         2.9 "Compensation Payment Date" means the date on which compensation,
including Cash Compensation and the Stock Retainer, is payable to a Director or
compensation which would otherwise be payable to a Director if an election to
defer such compensation had not been made.

         2.10 "Consummation" means the completion of the final act necessary to
complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
agencies.

         2.11 "Control" means, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.

         2.12 "Deferred Cash Trust" means the Deferred Cash Compensation Trust
for Directors of The Southern Company and its Subsidiaries.

         2.13 "Deferred Compensation Account" means the Prime Rate Investment
Account, the Phantom Stock Investment Account, the Deferred Stock Account and/or
the Stock Dividend Investment Account.

         2.14 "Deferred Stock Account" means the bookkeeping account established
under Section 7.3 on behalf of a Director and includes shares of Common Stock
credited thereto to reflect the reinvestment of dividends pursuant to Section
7.3(a)(iii).

         2.15 "Deferred Stock Trust" means the Deferred Stock Trust for
Directors of The Southern Company and its Subsidiaries.

         2.16 "Director" means a member of the Board.

                                       2
<PAGE>

         2.17 "Distribution Election" means the designation by a Director of the
manner of distribution of the amounts and quantities held in the Director's
Deferred Compensation Accounts upon the director's termination from the Board
pursuant to Section 6.3.

         2.18 "Effective Date" of the amendment and restatement means January 1,
2008.

         2.19 "Employee" means an employee of Southern or any of its
subsidiaries that are "employing companies" as defined in the Southern Company
Deferred Compensation Plan as amended and restated effective January 1, 2005,
and as may be amended from time to time thereafter.

         2.20 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         2.21 "Funding Change in Control" means any of the following:

         (a) The Consummation of an acquisition by any Person of Beneficial
Ownership (during the 12-month period ending on the date of the most recent
acquisition by such Person) of 35% or more of Southern's Voting Securities;
provided, however, that for purposes of this subsection (a), the following
acquisitions of Southern's Voting Securities shall not constitute a Funding
Change in Control:

               (i) any acquisition directly from Southern,

               (ii) any acquisition by Southern,

               (iii) any acquisition by any employee benefit plan (or related
          trust) sponsored or maintained by Southern or any corporation
          controlled by Southern,

               (iv) any acquisition by a qualified pension plan or publicly held
          mutual fund,

               (v) any acquisition by an employee of Southern or its subsidiary
          or affiliate, or Group composed exclusively of such employees, or

               (vi) any Business Combination which would not otherwise
          constitute a Funding Change in Control because of the application of
          clauses (i), (ii) and (iii) of this Section 2.21(a);

         (b) The date a majority of members of the Board is replaced during any
12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Board before the date of the appointment or
election;

         (c) The Consummation of a Business Combination, unless, following such
Business Combination, all of the following three conditions are met:

               (i) all or substantially all of the individuals and entities who
          held Beneficial Ownership, respectively, of Southern's Voting
          Securities immediately prior to such Business Combination beneficially
          own, directly or indirectly, 50% or more of the combined voting power
          of the Voting Securities of the corporation surviving or resulting

                                       3
<PAGE>

          from such Business Combination, (including, without limitation, a
          corporation which as a result of such transaction holds Beneficial
          Ownership of all or substantially all of Southern's Voting Securities
          or all or substantially all of Southern's assets) (such surviving or
          resulting corporation to be referred to as "Surviving Company"), in
          substantially the same proportions as their ownership, immediately
          prior to such Business Combination, of Southern's Voting Securities;

               (ii) no Person (excluding any corporation resulting from such
          Business Combination, any qualified pension plan, publicly held mutual
          fund, Group composed exclusively of employees or employee benefit plan
          (or related trust) of Southern, its subsidiaries, or Surviving
          Company) holds Beneficial Ownership, directly or indirectly, of 35% or
          more of the combined voting power of the then outstanding Voting
          Securities of Surviving Company except to the extent that such
          ownership existed prior to the Business Combination; and

               (iii) the majority of the members of the board of directors of
          Surviving Company during the 12-month period following the Business
          Combination were members of the Southern Board of Directors at the
          earlier of the date of execution of the initial agreement, or of the
          action of the Southern Board of Directors providing for such Business
          Combination or such members of the board of directors of the Surviving
          Company are directors whose appointment or election was endorsed by a
          majority of the members of such Southern Board of Directors.

         2.22 "Funding Event" shall mean the occurrence of any of the following
events as administratively determined by the Southern Committee:

         (a) The Company has entered into a written agreement, such as, but not
limited to, a letter of intent, which, if Consummated, would result in a Funding
Change in Control;

         (b) The Company or any other Person publicly announces an intention to
take or to consider taking actions which, if Consummated, would result in a
Funding Change in Control under circumstances where the Consummation of the
announced action or intended action is legally and financially possible;

         (c) Any Person acquires Beneficial Ownership of fifteen percent (15%)
or more of the Common Stock; or

         (d) The Board elects to otherwise fund the Deferred Cash Trust and
Deferred Stock Trust in accordance with the provisions of Section 9.

         2.23 "Group" has the meaning set forth in Section 14(d) of the Exchange
Act.

         2.24 "Incumbent Board" means those individuals who constitute the
Southern board of directors as of January 1, 2008, plus any individual who shall
become a director subsequent to such date whose election or nomination for
election by Southern's shareholders was approved by a vote of at least 75% of
the directors then comprising the Incumbent Board. Notwithstanding the
foregoing, no individual who shall become a director of the Southern board of
directors subsequent to January 1, 2008, whose initial assumption of office

                                       4
<PAGE>

occurs as a result of an actual or threatened election contest (within the
meaning of Rule 14a-11 of the regulations promulgated under the Exchange Act)
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Southern board of directors shall be a member of the Incumbent Board.

         2.25 "Market Value" means the average of the high and low prices of the
Common Stock, as published in the Wall Street Journal in its report of New York
Stock Exchange composite transactions, on the date such Market Value is to be
determined, as specified herein (or the average of the high and low sale prices
on the trading day immediately preceding such date if the Common Stock is not
traded on the New York Stock Exchange on such date).

         2.26 "Modification Delay" means that the election shall not take effect
until twelve (12) months after the date the election is made, the payment which
is the subject of the election shall be deferred five (5) years from the date
previously elected by the Director, and where applicable in the case of a
payment made pursuant to a fixed schedule or specified time, the election must
be made at least twelve (12) months prior to the time payment is scheduled to be
made.

         2.27 "Outside Directors Stock Plan" means the Outside Directors Stock
Plan for The Southern Company and Its Subsidiaries, effective May 26, 2004 in
accordance with its terms, as may be amended from time-to-time.

         2.28 "Participant" means a Director or former Director who has an
unpaid Deferred Compensation Account balance under the Plan.

         2.29 "Participating Companies" means those companies that are
affiliated with the Company whose boards of directors have authorized the
establishment of trust(s) for the funding of their respective directors'
Deferred Compensation Accounts under their respective Deferred Compensation
Plans for Directors, including the Plan as maintained by the Company for its
Directors.

         2.30 "Person" means any individual, entity or group within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act.

         2.31 "Phantom Stock Investment Account" means the bookkeeping account
established pursuant to Section 7.2 in which a Director may elect to defer Cash
Compensation or make investments, and includes amounts credited thereto to
reflect the reinvestment of dividends.

         2.32 "Plan" means the Deferred Compensation Plan for Outside Directors
of The Southern Company from time-to-time in effect.

         2.33 "Plan Period" means the period designated in Section 5.

                                       5
<PAGE>

         2.34 "Preliminary Change in Control" means the occurrence of any of the
following as determined by the Southern Committee:

         (a) The Company has entered into a written agreement, such as, but not
limited to, a letter of intent, which, if Consummated, would result in a
Southern Change in Control;

         (b) The Company or any Person publicly announces an intention to take
or to consider taking actions which, if Consummated, would result in a Southern
Change in Control under circumstances where the Consummation of the announced
action or intended action is legally and financially possible;

         (c) Any Person becomes the Beneficial Owner of fifteen percent (15%) or
more of the Common Stock.

         2.35 "Prime Interest Rate" means the prime rate of interest as
published in the Wall Street Journal or its successor on the 1st day of each
quarter.

         2.36 "Prime Rate Investment Account" means the bookkeeping account
established pursuant to Section 7.1 in which a Director may elect to defer Cash
Compensation or make investments, the investment return on which is computed at
the Prime Interest Rate.

         2.37 "Separation from Service" means a ceasing of the obligation to
provide service as a Director.

         2.38 "Southern" means Southern Company.

         2.39 "Southern Change in Control" means any of the following:

         (a) The Consummation of an acquisition by any Person of Beneficial
Ownership of 20% or more of Southern's Voting Securities; provided, however,
that for purposes of this subsection (a), the following acquisitions of
Southern's Voting Securities shall not constitute a Change in Control:

               (i) any acquisition directly from Southern,

               (ii) any acquisition by Southern,

               (iii) any acquisition by any employee benefit plan (or related
          trust) sponsored or maintained by Southern or any corporation
          controlled by Southern,

               (iv) any acquisition by a qualified pension plan or publicly held
          mutual fund,

               (v) any acquisition by an Employee or Group composed exclusively
          of Employees, or

               (vi) any Business Combination which would not otherwise
          constitute a Change in Control because of the application of clauses
          (i), (ii) and (iii) of Section 2.39(a) of this Schedule;

                                       6
<PAGE>

         (b) A change in the composition of Southern's board of directors
whereby individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of Southern's board of directors; or

         (c) Consummation of a Business Combination, unless, following such
Business Combination, all of the following three conditions are met:

               (i) all or substantially all of the individuals and entities who
          held Beneficial Ownership, respectively, of Southern's Voting
          Securities immediately prior to such Business Combination beneficially
          own, directly or indirectly, 65% or more of the combined voting power
          of the Voting Securities of the corporation surviving or resulting
          from such Business Combination, (including, without limitation, a
          corporation which as a result of such transaction holds Beneficial
          Ownership of all or substantially all of Southern's Voting Securities
          or all or substantially all of Southern's assets) (such surviving or
          resulting corporation to be referred to as "Surviving Company"), in
          substantially the same proportions as their ownership, immediately
          prior to such Business Combination, of Southern's Voting Securities;

               (ii) no Person (excluding any corporation resulting from such
          Business Combination, any qualified pension plan, publicly held mutual
          fund, Group composed exclusively of employees or employee benefit plan
          (or related trust) of Southern, its subsidiaries, or Surviving
          Company) holds Beneficial Ownership, directly or indirectly, of 20% or
          more of the combined voting power of the then outstanding Voting
          Securities of Surviving Company except to the extent that such
          ownership existed prior to the Business Combination; and

               (iii) at least a majority of the members of the board of
          directors of Surviving Company were members of the Incumbent Board at
          the earlier of the date of execution of the initial agreement, or of
          the action of the Southern board of directors, providing for such
          Business Combination.

         2.40 "Southern Committee" means a committee comprised of the Chairman
of the Board, the Chief Financial Officer of the Company and the General Counsel
of the Company.

         2.41 "Stock Dividend Investment Account" means the bookkeeping
account(s) established pursuant to Section 7.4 on behalf of a Director that is
credited with shares of stock, other than Common Stock, paid as a dividend on
shares of Common Stock.

         2.42 "Stock Retainer" means the portion of the Director's retainer fee
that is required to be paid to the Director in Common Stock pursuant to the
Outside Directors Stock Plan. Such amount may be denominated in dollars and/or
shares of Common Stock.

         2.43 "Transferred Amount" means an amount (a) equal to the value of a
Director's accounts under the applicable deferred compensation plan for
directors of Alabama Power Company, Georgia Power Company, Gulf Power Company,
or Mississippi Power Company and (b) which has been transferred to the Plan in
connection with the Director's transfer from the board of directors of Alabama
Power Company, Georgia Power Company, Gulf Power Company, or Mississippi Power
Company to the Board.

                                       7
<PAGE>

         2.44 "Trust Administrator" means the individual or committee that is
established in the Deferred Stock Trust and the Deferred Cash Trust, to
administer such trusts on behalf of the Participating Companies.

         2.45 "Voting Securities" means the outstanding voting securities of a
corporation entitling the holder thereof to vote generally in the election of
such corporation's directors.

         Where the context requires, words in the masculine gender shall include
the feminine gender, words in the singular shall include the plural, and words
in the plural shall include the singular.

                                   SECTION 3

                                     Purpose

         The Plan provides Directors with an opportunity to defer compensation
paid to them on and after January 1, 2008 until a date following their
Separation from Service as a member of the Board.

                                   SECTION 4

                                   Eligibility

         An individual who serves as a Director and is not otherwise actively
employed by the Company or any of its subsidiaries or affiliates is eligible to
participate in the Plan.

                                   SECTION 5

                                  Plan Periods

         Except as pertains to a Director's initial Plan Period, all Plan
Periods shall be on a calendar year basis. The initial Plan Period applicable to
any person elected to the Board who was not a Director on the preceding December
31, shall begin on the first day of the quarter next following the effective
date of the Director's election to the Board where timing permits the transfer
of Director compensation data for purposes of administration of an initial
deferral election under this Section 5. Notwithstanding the preceding sentence,
the initial Plan Period under this amended and restated Plan for Directors
serving as of the Effective Date shall begin January 1, 2008.

                                   SECTION 6

                                    Elections

         6.1 Cash Compensation

         (a) Prior to the beginning of a Plan Period, a Director may direct that
payment of all or any portion of Cash Compensation that otherwise would be paid
to the Director for the Plan Period, be deferred in amounts as designated by the
Director, and credited to (i) a Prime Rate Investment Account, (ii) a Phantom

                                       8
<PAGE>

Stock Investment Account, or (iii) a Deferred Stock Account. With respect to a
Director's initial Plan Period, such direction to defer shall be made in a
timely manner prior to the commencement of the Plan Period in accordance with
requirements established by the Committee consistent with Section 5. Upon the
Director's Separation from Service from the Board of Directors, such deferred
compensation and accumulated investment return held in the Director's Deferred
Compensation Accounts shall be distributed to the Director in accordance with
the Director's Distribution Election and the provisions of Section 8.

               (b) (i) An election to defer Cash Compensation is irrevocable for
          a Plan Period. Such an election shall continue from Plan Period to
          Plan Period unless the Director changes his election to defer Cash
          Compensation payable in a future Plan Period prior to the beginning of
          such future Plan Period.

               (ii) The Participant may transfer all or a portion of his
          Deferred Compensation Account(s) to another Deferred Compensation
          Account(s) as provided below. No transfer of amounts between
          investment options shall be permitted under the Plan except during a
          window period and in accordance with requirements which may be
          designated by the Committee. The length and timing of each window
          period, the restrictions and procedures for transfer, the valuation of
          transferred Deferred Compensation Accounts or portions of Deferred
          Compensation Accounts, and the effective date of such transfers shall
          be determined by the Committee. In no event prior to a Director's
          Separation of Service from the Board may the Committee permit the
          transfer of a Participant's Stock Retainer. Notwithstanding the
          preceding sentence, a transfer of a Participant's Stock Retainer may
          occur after a Director's Separation from Service from the Board as
          determined by the Committee.

         (c) Cash Compensation deferred under this Section 6.1 shall be invested
in Deferred Compensation Accounts as directed by the Director in accordance with
procedures established by the Committee prior to the Compensation Payment Date.

         6.2 Stock Retainer

         Director compensation designated as Stock Retainer shall be credited to
the Director's Deferred Stock Account as of the Compensation Payment Date. Upon
the Director's Separation from Service from the Board of Directors, such
compensation and accumulated investment return held in the Director's Deferred
Stock Account shall be distributed to the Director in accordance with the
Director's Distribution Election and the provisions of Section 8.

         6.3 Distribution Election

         (a) Except as set forth in Section 6.3(b), prior to the initial
establishment of a Deferred Compensation Account for a Director, the Director
must elect that upon Separation from Service from the Board of Directors the
values and quantities held in the Directors Deferred Compensation Accounts be
distributed to the Director, pursuant to the provisions of Section 8 in a single
lump sum or in a series of annual installments not to exceed ten (10). The time
for the commencement of distributions shall be elected by the Director and shall
not be later than the first day of the month coinciding with or next following

                                       9
<PAGE>

the second anniversary of termination of Board membership. Notwithstanding the
foregoing, a Director may elect to modify his distribution election under this
Section 6.3 provided that such modification is subject to the requirements of
the Modification Delay.

         (b) In the event of a Director's Separation from Service from the Board
with Deferred Compensation Accounts established under Section 7.5, the
Transferred Amounts and accumulated investment return held in the Accounts shall
be distributed to the Director in accordance with the Director's distribution
election in effect under the applicable deferred compensation plan for directors
of Alabama Power Company, Georgia Power Company, Gulf Power Company, or
Mississippi Power Company on the date the Director transferred to the Board, and
the provisions of Section 8, unless such election is changed pursuant to Section
6.3(a).

         6.4 Beneficiary Designation

         A Director or former Director may designate a beneficiary to receive
distributions from the Plan in accordance with the provisions of Section 8 upon
the death of the Director. The beneficiary designation may be changed by a
Director or former Director at any time, and without the consent of the prior
beneficiary.

         6.5 Form of Election

         All elections pursuant to the provisions of this Section 6 of the Plan
shall be made in writing to the Secretary of the Company or Assistant Secretary
of the Company or such other person designated by the Committee on a form or
forms available upon request.

                                   SECTION 7

                                    Accounts

         7.1 Prime Rate Investment Account

         A Prime Rate Investment Account shall be established for each Director
electing deferral of Cash Compensation for investment at the Prime Interest
Rate. The amount directed by the Director to such account shall be credited to
it as of the Compensation Payment Date, as applicable, and credited thereafter
with interest computed using the Prime Interest Rate. Interest shall be computed
from the date such compensation is credited to the account and compounded
quarterly at the end of each calendar quarter. The Prime Interest Rate in effect
on the first day of a calendar quarter shall be deemed the Prime Interest Rate
in effect for that entire quarter. Interest shall accrue and compound on any
balance until the amount credited to the account is fully distributed.

         7.2 Phantom Stock Investment Account

         The Phantom Stock Investment Account established for each Director
electing deferral of Cash Compensation for investment at the Common Stock
investment rate shall be credited with the number of shares (including
fractional shares rounded to the nearest ten-thousandth) of Common Stock which
could have been purchased on the Compensation Payment Date as determined by

                                       10
<PAGE>

dividing the applicable compensation by the Market Value on such date. On the
date of the payment of dividends on the Common Stock, the Director's Phantom
Stock Investment Account shall be credited with additional shares (including
fractional shares rounded to the nearest ten-thousandth) of Common Stock, as
follows:

         (a) In the case of cash dividends, such additional shares as would have
been purchased as of the Common Stock dividend record date as if the credited
shares had been outstanding on such date and dividends reinvested thereon under
the Southern Company Southern Investment Plan;

         (b) In the case of dividends payable in property other than cash or
Common Stock, such additional shares as could be purchased at the Market Value
as of the date of payment with the fair market value of the property which would
have been payable if the credited shares had been outstanding; and

         (c) In the case of dividends payable in Common Stock, such additional
shares as would have been payable on the credited shares as if they had been
outstanding.

         7.3 Deferred Stock Account

         (a) A Director's Deferred Stock Account will be credited:

               (i) with the number of shares of Common Stock (rounded to the
          nearest ten thousandth of a share) determined by dividing the sum of
          the amount of Cash Compensation subject to deferral or investment in
          the Deferred Stock Account and the Stock Retainer (that is denominated
          in dollars), by the average price paid by the Trustee of the Deferred
          Stock Trust for shares of Common Stock with respect to the
          Compensation Payment Date as reported by the Trustee, or, if the
          Trustee shall not at such time purchase any shares of Common Stock, by
          the Market Value on such date;

               (ii) as of the date on which the Stock Retainer (that is
          denominated in shares of Common Stock) is paid, with the number of
          shares of Common Stock payable to the Director as his Stock Retainer;
          and

               (iii) as of each date on which dividends are paid on the Common
          Stock, with the number of shares of Common Stock (rounded to the
          nearest ten thousandth of a share) determined by multiplying the
          number of shares of Common Stock credited in the Director's Deferred
          Stock Account on the dividend record date, by the dividend rate per
          share of Common Stock, and dividing the product by the price per share
          of Common Stock attributable to the reinvestment of dividends on the
          shares of Common Stock held in the Deferred Stock Trust on the
          applicable dividend payment date or, if the Trustee of the Deferred
          Stock Trust has not reinvested in shares of Common Stock on the
          applicable dividend reinvestment date, the product shall be divided by
          the Market Value on the dividend payment date.

         (b) If Southern enters into transactions involving stock splits, stock
dividends, reverse splits or any other recapitalization transactions, the number
of shares of Common Stock credited to a Director's Deferred Stock Account will
be adjusted (rounded to the nearest ten thousandth of a share) so that the

                                       11
<PAGE>

Director's Deferred Stock Account reflects the same equity percentage interest
in Southern after the recapitalization as was the case before such transaction.
Notwithstanding the preceding sentence and in any event, any adjustment shall
comply with the requirements of Section 409A of the Code.

         (c) If at least a majority of Southern's stock is sold or exchanged by
its shareholders pursuant to an integrated plan for cash or property (including
stock of another corporation) or if substantially all of the assets of Southern
are disposed of and, as a consequence thereof, cash or property is distributed
to Southern's shareholders, each Director's Deferred Stock Account will, to the
extent not already so credited under this Section 7.3, be (i) credited with the
amount of cash or property receivable by a Southern shareholder directly holding
the same number of shares of Common Stock as is credited to such Director's
Deferred Stock Account and (ii) debited by that number of shares of Common Stock
surrendered by such equivalent Southern shareholder. Notwithstanding the
preceding sentence and in any event, any adjustment shall comply with the
requirements of Section 409A of the Code.

         (d) Each Director who has a Deferred Stock Account also shall be
entitled to provide directions to the Trust Administrator to vote the Common
Stock in his account in the Deferred Stock Trust with respect to any matter
presented for a vote to the shareholders of Southern. Such Trust Administrator
shall arrange for distribution to all Directors in a timely manner of all
communications directed generally to the Southern shareholders as to which their
votes are solicited.

         7.4 Stock Dividend Investment Account

         (a) A Director's Stock Dividend Investment Account will be credited as
of the date on which a dividend is paid in stock other than Common Stock to the
Company's common stockholders with the number of shares of such other
corporation's stock receivable by such Southern common stockholder. Thereafter,
if dividends are paid on the above-described non-Common Stock dividends, such
subsequent dividends shall be credited in the same manner as described in
Section 7.3(a)(iii).

         (b) Each Director who has a Stock Dividend Investment Account also
shall be entitled to provide directions to the Trust Administrator to vote the
applicable corporation's common stock held by the Deferred Stock Trust with
respect to any matter presented for a vote to such corporation's shareholders.
The Trust Administrator shall arrange for distribution to all Directors in a
timely manner of all communications directed generally to the applicable
corporation's shareholders as to which their votes are solicited.

         7.5 Transferred Amounts

         (a) As soon as administratively practicable, the Company shall
establish for a Director transferring to the Board from Alabama Power Company,
Georgia Power Company, Gulf Power Company, or Mississippi Power Company, such
Deferred Compensation Accounts as are necessary to implement Section 7.5(b).

                                       12
<PAGE>

         (b) Any Transferred Amounts will be credited to the Deferred
Compensation Account(s) established that are comparable to the deferred
compensation accounts to which such amounts were credited under the applicable
deferred compensation plan for directors of Alabama Power Company, Georgia Power
Company, Gulf Power Company, or Mississippi Power Company, as soon as
administratively practicable following the date the Transferred Amounts are
transferred to the Plan. Thereafter, the Transferred Amounts shall be credited
with investment returns as applicable under this Section 7 of the Plan.

                                    SECTION 8

                                  Distributions

         8.1 Manner of Distribution

         Upon the Separation from Service of a Director's membership on the
Board the amount credited to a Director's Deferred Compensation Accounts will be
paid to the Director or his beneficiary, as applicable, in the following manner:

         (a) the amount credited to a Director's Prime Rate Investment Account
and Phantom Stock Investment Account shall be paid in cash;

         (b) the amount credited to a Director's Deferred Stock Account shall,
except as otherwise provided in Section 7.3 and Section 10.5, or to the extent
the Company is otherwise, in the reasonable judgment of the Committee, precluded
from doing so, be paid in shares of Common Stock (with any fractional share
interest therein paid in cash to the extent of the then Market Value thereof);
and

         (c) the amount credited to a Stock Dividend Investment Account shall,
except as otherwise provided in Section 10.5, be paid from the assets in the
Deferred Stock Trust in shares of the applicable corporation, provided however
if there is not a sufficient number of shares held in the Trust, the remainder
shall be paid in cash based upon the Market Value of such shares.

         Such payments shall be from the general assets of the Company
(including the Deferred Cash Trust and the Deferred Stock Trust) in accordance
with this Section 8.

         Notwithstanding the foregoing, in the event the Company enters into an
agreement described in Section 8.3 with respect to a Director prior to the
Director's Separation from Service as a Director, the Company shall have no
obligation to make distributions to the Director under this Section 8.1 in
connection with such Director's Separation from Service of membership on the
Board.

         8.2 Timing of Distribution(s)

         Deferred amounts shall be paid in the form of (i) a lump sum payment,
or (ii) in approximately equal annual installments, as elected by the Director
pursuant to the provisions of Section 6.3. Such payments shall be made (or shall
commence) as soon as practicable following the Separation from Service of Board
membership except that such period shall not exceed ninety (90) days as

                                       13
<PAGE>

permitted by Code Section 409A or, if so elected by the Director in the
Distribution Election, up to twenty-four (24) months following such Separation
from Service.

         If at the time of a Director's Separation from Service of Board
membership, his Deferred Compensation Accounts have a cumulative balance of less
than the limit in effect under Section 402(g)(1)(B) of the Internal Revenue
Code, the balance of the Deferred Compensation Accounts may be distributed in a
single lump sum payment.

         If the Director elected to receive annual installments, the first
installment shall be equal to the balance in the Director's Deferred
Compensation Accounts on such date divided by the number of annual installment
payments. Each subsequent annual payment shall be an amount equal to the balance
in the Director's Deferred Compensation Accounts on the date of payment divided
by the number of remaining annual payments and shall be paid on the anniversary
of the preceding date of payment.

         The Market Value of any shares of Common Stock credited to a Director's
Phantom Stock Investment Account shall be determined as of a day of the month
immediately preceding the date of any lump sum or installment distribution as
determined by the Committee.

         Upon the death of a Director, or a former Director prior to the payment
of all amounts credited to the Director's Deferred Compensation Accounts, the
unpaid balance shall be paid in a lump sum to the designated beneficiary of such
Director or former Director within sixty (60) days of the date of death as
permitted by Code Section 409A. In the event a beneficiary designation has not
been made, or the designated beneficiary is deceased or cannot be located,
payment shall be made to the estate of the Director or former Director. The
Market Value of any shares of Common Stock credited to a Director's Phantom
Stock Investment Account shall be determined as of a day of the month
immediately preceding the date of any lump sum or installment distribution as
determined by the Committee.

         8.3 Transfers in Lieu of Distribution

         If the Company enters into a written agreement with a subsidiary,
affiliate or former affiliate of the Company under which the subsidiary,
affiliate or former affiliate assumes the liability for a Director's benefits
accrued under the Plan in connection with, but prior to such Director's
Separation from Service from the Board and the Director either has been or will
be elected to the board of directors of such subsidiary, affiliate or former
affiliate of the Company, the liability for the Director's benefits which have
accrued under the Plan as of the date the Director Separates from Service from
the Board shall be transferred from the Company to the subsidiary, affiliate or
former affiliate of the Company, and the Company shall have no further
obligation to make any distributions to the Director under Section 8.1 or any
other section herein. For the avoidance of doubt, the event described in the
preceding sentence shall not constitute a distribution event whereby deferred
amounts under the Plan are paid to the Director in accordance with this Section
8.

                                       14
<PAGE>

                                   SECTION 9

             Funding Change in Control and Other Special Provisions

         9.1 Funding Change in Control

         Notwithstanding any other terms of the Plan to the contrary, following
a Funding Event, the provisions of this Section 9 shall apply to the payment of
benefits under the Plan with respect to any Director who is a Participant on
such date.

9.2      Funding of Trusts

         The Deferred Cash Trust and the Deferred Stock Trust (collectively
"Trusts") have been established to hold assets of the Participating Companies
under certain circumstances as a reserve for the discharge of the Company's
obligations under the Plan. In the event of a Funding Event involving a Funding
Change in Control, the Company shall be obligated to immediately contribute such
amounts to the Trusts as may be necessary to fully fund all benefits payable
under the Plan in accordance with the procedures set forth in Section 9.3
hereof. In addition, in order to provide the added protections for certain
individuals in accordance with Paragraph 7(b) of the Deferred Cash Trust and
Paragraph 7(c) of the Deferred Stock Trust, the Company may fund the Trusts
prior to a Funding Event of the Company in accordance with the terms of the
Trusts. All assets held in the Trusts remain subject only to the claims of the
Participating Companies' general creditors whose claims against the
Participating Companies are not satisfied because of the Participating
Companies' bankruptcy or insolvency (as those terms are defined in the Trusts).
No Participant has any preferred claim on, or beneficial ownership interest in,
any assets of the Trusts before the assets are paid to the Participant and all
rights created under the Trusts, as under the Plan, are unsecured contractual
claims of the Participant against the Company.

         9.3 Funding Timing and Dispute Resolution

         As soon as practicable following a Funding Event, the Company shall
contribute to each Trust an amount based upon the funding strategy adopted by
the Trust Administrator with the assistance of an appointed actuary necessary to
fulfill the Company's obligations pursuant to this Section 9. In the event of a
dispute over such actuary's determination with respect to either or both Trusts,
the Company and any complaining Participant(s) shall refer such dispute to an
independent, third party actuarial consultant, chosen by the Company and such
Participant. If the Company and the Participant cannot agree on an independent,
third party actuarial consultant, the actuarial consultant shall be chosen by
lot from an equal number of actuaries submitted by the Company and the
applicable Trustee. Any such referral shall only occur once in total and the
determination by the third- party actuarial consultant shall be final and
binding upon both parties. The Company shall be responsible for all of the fees
and expenses of the independent actuarial consultant.

         9.4 Lump Sum Payment

         In the event of a Funding Change in Control, notwithstanding anything
to the contrary in the Plan, upon a Director's Separation from Service from the
Board, that amount in the Deferred Compensation Plan Account(s) of a Participant

                                       15
<PAGE>

who was a Director determined as of the date of such Funding Change in Control
shall be paid out in a lump sum provided that such Separation from Service
occurred within two calendar years of the Funding Change in Control. The lump
sum payment shall be made within ninety (90) days of such Separation from
Service as permitted by Code Section 409A.

                                   SECTION 10

                               General Provisions

         10.1 In the event that the Company shall decide to establish an advance
accrual reserve on its books against the future expense of payments from any
Deferred Compensation Accounts, such reserve shall not under any circumstances
be deemed to be an asset of this Plan but, at all times, shall remain a part of
the general assets of the Company, subject to claims of the Company's creditors.

         10.2 A person entitled to any amount under this Plan shall be a general
unsecured creditor of the Company with respect to such amount. Furthermore, a
person entitled to a payment or distribution with respect to a Deferred
Compensation Account shall have a claim upon the Company only to the extent of
the balance in his Deferred Compensation Accounts.

         10.3 The Company will pay all commissions, fees, and expenses that may
be incurred in operating the Plan.

         10.4 The Company will pay its prorated share of all commissions, fees,
and expenses that may be incurred in operating any trust(s) established under
the Plan (including the Deferred Stock Trust and the Deferred Cash Trust).

         10.5 Notwithstanding any other provision of this Plan:

         (a) elections under this Plan may only be made by Directors while they
are directors of the Company (with the exception of the designation of
beneficiaries); and

         (b) distributions otherwise payable to a Director in the form of Common
Stock or other corporation's stock shall be delayed and/or instead paid in cash
in an amount equal to the fair market value thereof if such payment in stock
would violate any federal or State securities laws (including Section 16(b) of
the Securities Exchange Act of 1934, as amended) and/or rules and regulations
promulgated thereunder.

         10.6 Directors, their legal representatives, and their beneficiaries
shall have no right to anticipate, alienate, sell, assign, transfer, pledge or
encumber their interests in the Plan, nor shall such interests be subject to
attachment, garnishment, levy or execution by or on behalf of creditors of the
Directors or of their beneficiaries.

                                       16
<PAGE>

                                   SECTION 11

                                 Administration

         11.1 General Provisions

         The Committee shall administer the Plan in accordance with its terms
and shall have all powers necessary to carry out the provisions of the Plan as
may be more particularly set forth herein. The Committee shall interpret the
Plan and shall determine all questions arising in the administration,
interpretation, and application of the Plan. Any such determination by the
Committee shall be conclusive and binding on all persons. The Committee shall be
the Plan's agent for service of process.

         The Committee may delegate to such officers, employees, or departments
of the Company or Southern, such authority, duties, and responsibilities of the
Committee as it, in its sole discretion, considers necessary or appropriate for
the proper and efficient operation of the Plan, including, without limitation,
(i) interpretation of the Plan, (ii) approval and payment of claims, and (iii)
establishment of procedures for administration of the Plan.

         11.2 Claims Process

         If a claim for benefits under the Plan is denied, in whole or in part,
the Committee will provide a written notice of the denial within a reasonable
period of time, but not later than 90 days after the claim is received. If
special circumstances require more time to process the claim, the Committee will
issue a written explanation of the special circumstances prior to the end of the
90 day period and a decision will be made as soon as possible, but not later
than 180 days after the claim is received.

         The written notice of claim denial will include:

          o    Specific reasons why the claim was denied;

          o    Specific references to applicable provisions of the Plan document
               or other relevant records or papers on which the denial is based,
               and information about where a Participant or his or her
               beneficiary may see them;

          o    A description of any additional material or information needed to
               process the claim, and an explanation of why such material or
               information is necessary;

          o    An explanation of the claims review procedure, including the time
               limits applicable to such procedure, as well as a statement
               notifying the Participant or his or her beneficiary of their
               right to file suit if the claim for benefits is denied, in whole
               or in part, on review.

         Upon request, a Participant or his or her beneficiary will be provided
without charge, reasonable access to, and copies of, all non-confidential
documents that are relevant to any denial of benefits. A claimant has 60 days
from the day he or she receives the original denial to request a review. Such
request must be made in writing and sent to the Committee. The request should

                                       17
<PAGE>

state the reasons why the claim should be reviewed and may also include evidence
or documentation to support the claimant's position.

         The Committee will reconsider the claimant's claim, taking into account
all evidence, documentation, and other information related to the claim and
submitted on the claimant's behalf, regardless of whether such information was
submitted or considered in the initial denial of the claim. The Committee will
make a decision within 60 days. If special circumstances require more time for
this process, the claimant will receive written explanation of the special
circumstances prior to the end of the initial 60 day period and a decision will
be sent as soon as possible, but not later than 120 days after the Committee
receives the request.

         No legal action to recover benefits or enforce or clarify rights under
a Plan can be commenced until the Participant or his or her beneficiary has
first exhausted the claims and review procedures provided under the Plan.

                                   SECTION 12

                    Amendment, Termination and Effective Date

         12.1 Amendment of the Plan

         The Plan may be amended or terminated at any time by the Board of
Directors, provided, however, that no such amendment or termination of the Plan
shall be effective if such amendment or termination is made or is effective
within a period that is (a) six (6) months before, or at any time after, a
Preliminary Change in Control and (b) prior to (x) the earlier of such time as
the Southern Committee shall have determined that the event that gave rise to
such Preliminary Change in Control shall not be Consummated or (y) two years
following the Southern Change in Control, unless such amendment or termination
during such period has the effect of increasing benefits to Participants under
the Plan, is determined by the Board of Directors to be immaterial, or applies
solely to Directors who, in the case of a Southern Change in Control, are not
Directors on the date of the respective Preliminary Change in Control. Following
a Southern Change in Control, nothing in this Section 12.1 shall prevent the
Board of Directors from amending or terminating the Plan as to any subsequent
Southern Change in Control provided that no such amendment or termination shall
impair any rights or reduce any benefits previously accrued under the Plan as a
result of a previous Southern Change in Control.

         12.2 No Impairment of Benefits

         Notwithstanding the provisions of Section 12.1 herein, no amendment to
or termination of the Plan shall impair any rights to benefits that have accrued
hereunder.

         12.3 Section 409A of the Code

         All payments of "non-qualified deferred compensation" (within the
meaning of Section 409A of the Code), whether or not expressly designated as
such, are intended to comply with the requirements of Section 409A, and shall be
interpreted in accordance therewith. Neither the Participant nor the Company may
accelerate any such deferred payment, except in compliance with Section 409A for

                                       18
<PAGE>

such events that include but may not be limited to a termination of the Plan.

         12.4 Governing Law

         This Plan shall be construed in accordance with and governed by the
laws of the State of placecountry-regionGeorgia to the extent not inconsistent
with the requirement of the Employee Retirement Income Security Act of 1974, as
amended, and Section 409A of the Code.

         IN WITNESS WHEREOF, the Plan, as amended and restated effective January
1, 2008, has been executed pursuant to resolutions of the Board of Directors of
the Company, this 30th day of October, 2007.

                                                  THE SOUTHERN COMPANY

                                                  By: /s/Patricia L. Roberts

                                                  Its: Assistant Secretary

                                       19
<PAGE>

                  SCHEDULE OF PROVISIONS FOR PRE-2005 DEFERRALS

                                   SECTION 1

                                     Purpose

         1.1 Schedule of Provisions for Pre-2005 Deferrals: This Schedule sets
forth the operative provisions of the Plan applicable to "grandfathered"
deferrals of Cash Compensation and Stock Retainer made by Participants which are
treated by the Company as not subject to Section 409A of the Code. The Deferred
Compensation Account balance (plus earnings thereon) of the grandfathered
deferrals shall only be subject to the provisions set forth in this Schedule. In
accordance with transition rules under Section 409A of the Code, Internal
Revenue Service Notice 2005-1, Treasury Regulation Section 1.409A-1 et seq., or
any other applicable guidance from the Department of Treasury, these provisions
are only intended to preserve the rights and features of the "grandfathered"
deferrals and are, therefore, not intended to "materially modify" any aspect of
such rights and features. Provisions of this Schedule should be so construed
whenever necessary or appropriate. Provisions in this Schedule shall only be
amended in accordance with this Schedule's terms.

                                   SECTION 2

                                   Definitions

         2.1 "Beneficial Ownership" means beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.

         2.2 "Board" or "Board of Directors" means the Board of Directors of the
Company.

         2.3 "Business Combination" means a reorganization, merger or
consolidation or sale of Southern with another corporation or an entity treated
as a corporation for placecountry-regionUnited States federal income tax
purposes.

         2.4 "Cash Compensation" means the annual retainer fees and meeting fees
payable to a Director in cash.

         2.5 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.

         2.6 "Committee" means the Governance Committee of the Board, or such
other committee as may be designated by the Board to be responsible for
administering the Plan and this Schedule.

         2.7 "Common Stock" means the common stock of Southern, including any
shares into which it may be split, subdivided, or combined.

         2.8 "Company" means Southern Company or any successor thereto.

<PAGE>

         2.9 "Compensation Payment Date" means the date on which compensation,
including Cash Compensation and the Stock Retainer, is payable to a Director or
compensation which would otherwise be payable to a Director if an election to
defer such compensation had not been made.

         2.10 "Consummation" means the completion of the final act necessary to
complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
agencies.

         2.11 "Control" means, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.

         2.12 "Deferred Cash Trust" means the Deferred Cash Compensation Trust
for Directors of The Southern Company and its Subsidiaries.

         2.13 "Deferred Compensation Account" means the Prime Rate Investment
Account, the Phantom Stock Investment Account, the Deferred Stock Account and/or
the Stock Dividend Investment Account applicable to "grandfathered" deferrals of
Cash Compensation and Stock Retainer made by Participants which are treated by
the Company as not subject to Section 409A of the Code.

         2.14 "Deferred Pension Election" means the election by a Director who
had a Pension Benefit as of the Termination Date, who made a single one time
election, to credit all his Pension Benefit into (i) the Prime Rate Investment
Account or (ii) the Phantom Stock Investment Account in connection with the
deferral of receipt of the Director's Pension Benefit until termination from the
Board.

         2.15 "Deferred Stock Account" means the bookkeeping account established
under Section 5.3 of this Schedule on behalf of a Director and includes shares
of Common Stock credited thereto to reflect the reinvestment of dividends
pursuant to Section 5.3(a)(iii) of this Schedule.

         2.16 "Deferred Stock Trust" means the Deferred Stock Trust for
Directors of The Southern Company and its Subsidiaries.

         2.17 "Director" means a member of the Board.

         2.18 "Distribution Election" means the designation by a Director of the
manner of distribution of the amounts and quantities held in the Director's
Deferred Compensation Accounts upon the director's termination from the Board
pursuant to Section 6.4 of this Schedule.

         2.19 "Employee" means an employee of Southern or any of its
subsidiaries that are "employing companies" as defined in the Southern Company
Deferred Compensation Plan as amended and restated effective January 1, 2005,
and as may be amended from time to time.

                                       2
<PAGE>

         2.20 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         2.21 "Funding Change in Control means any of the following:

         (a) The Consummation of an acquisition by any Person of Beneficial
Ownership (during the 12-month period ending on the date of the most recent
acquisition by such Person) of 35% or more of Southern's Voting Securities;
provided, however, that for purposes of this subsection (a), the following
acquisitions of Southern's Voting Securities shall not constitute a Funding
Change in Control:

               (i) any acquisition directly from Southern;

               (ii) any acquisition by Southern;

               (iii) any acquisition by any employee benefit plan (or related
          trust) sponsored or maintained by Southern or any corporation
          controlled by Southern;

               (iv) any acquisition by a qualified pension plan or publicly held
          mutual fund;

               (v) any acquisition by an employee of Southern or its subsidiary
          or affiliate, or Group composed exclusively of such employees; or

               (vi) any Business Combination which would not otherwise
          constitute a Funding Change in Control because of the application of
          clauses (i), (ii) and (iii) of this Section 2.21(a);

         (b) The date a majority of members of the Southern Board of Directors
is replaced during any 12-month period by directors whose appointment or
election is not endorsed by a majority of the members of the Southern Board of
Directors before the date of the appointment or election;

         (c) The Consummation of a Business Combination, unless, following such
Business Combination, all of the following three conditions are met:

               (i) all or substantially all of the individuals and entities who
          held Beneficial Ownership, respectively, of Southern's Voting
          Securities immediately prior to such Business Combination beneficially
          own, directly or indirectly, 50% or more of the combined voting power
          of the Voting Securities of the corporation surviving or resulting
          from such Business Combination, (including, without limitation, a
          corporation which as a result of such transaction holds Beneficial
          Ownership of all or substantially all of Southern's Voting Securities
          or all or substantially all of Southern's assets) (such surviving or
          resulting corporation to be referred to as "Surviving Company"), in
          substantially the same proportions as their ownership, immediately
          prior to such Business Combination, of Southern's Voting Securities;

               (ii) no Person (excluding any corporation resulting from such
          Business Combination, any qualified pension plan, publicly held mutual
          fund, Group composed exclusively of employees or employee benefit plan
          (or related trust) of Southern, its subsidiaries or Surviving Company)
          holds Beneficial Ownership, directly or indirectly, of 35% or more of

                                       3
<PAGE>

          the combined voting power of the then outstanding Voting Securities of
          Surviving Company except to the extent that such ownership existed
          prior to the Business Combination; and

               (iii) the majority of the members of the board of directors of
          Surviving Company during the 12-month period following the Business
          Combination were members of the Southern Board of Directors at the
          earlier of the date of execution of the initial agreement, or of the
          action of the Southern Board of Directors providing for such Business
          Combination or such members of the board of directors of the Surviving
          Company are directors whose appointment or election was endorsed by a
          majority of the members of such Southern Board of Directors.

         2.22 "Funding Event" shall mean the occurrence of any of the following
events as administratively determined by the Southern Committee:

         (a) The Company has entered into a written agreement, such as, but not
limited to, a letter of intent, which, if Consummated, would result in a Funding
Change in Control;

         (b) The Company or any other Person publicly announces an intention to
take or to consider taking actions which, if Consummated, would result in a
Funding Change in Control under circumstances where the Consummation of the
announced action or intended action is legally and financially possible;

         (c) Any Person acquires Beneficial Ownership of fifteen percent (15%)
or more of the Common Stock; or

         (d) The Southern Board of Directors elects to otherwise fund the
Deferred Cash Trust and Deferred Stock Trust in accordance with the provisions
of Section 7 of this Schedule.

         2.23 "Group" has the meaning set forth in Section 14(d) of the Exchange
Act.

         2.24 "Incumbent Board" means those individuals who constitute the
Southern board of directors as of January 1, 2008, plus any individual who shall
become a director subsequent to such date whose election or nomination for
election by Southern's shareholders was approved by a vote of at least 75% of
the directors then comprising the Incumbent Board. Notwithstanding the
foregoing, no individual who shall become a director of the Southern board of
directors subsequent to January 1, 2008, whose initial assumption of office
occurs as a result of an actual or threatened election contest (within the
meaning of Rule 14a-11 of the regulations promulgated under the Exchange Act)
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Southern board of directors shall be a member of the Incumbent Board.

         2.25 "Market Value" means the average of the high and low prices of the
Common Stock, as published in the Wall Street Journal in its report of New York
Stock Exchange composite transactions, on the date such Market Value is to be
determined, as specified herein (or the average of the high and low sale prices
on the trading day immediately preceding such date if the Common Stock is not
traded on the New York Stock Exchange on such date).

                                       4
<PAGE>

         2.26 "Outside Directors Stock Plan" means the Outside Directors Stock
Plan for The Southern Company and Its Subsidiaries, effective May 26, 2004 in
accordance with its terms, as may be amended from time-to-time.

         2.27 "Participant" means a Director or former Director who has an
unpaid Deferred Compensation Account balance under this Schedule.

         2.28 "Participating Companies" means those companies that are
affiliated with the Company whose boards of directors have authorized the
establishment of trust(s) for the funding of their respective directors'
Deferred Compensation Accounts under their respective Deferred Compensation
Plans for Directors, including the Plan as maintained by the Company for its
Directors.

         2.29 "Pension Benefit" means the U.S. dollar amount of the
actuarially-determined present value of benefits based on a Director's expected
service at the required retirement date under The Southern Company Outside
Directors Pension Plan, as calculated as of the Termination Date, plus accrued
earnings on such amount calculated as if invested at the Prime Interest Rate
from the Termination Date, until such amount is invested in Deferred
Compensation Accounts.

         2.30 "Pension Benefit Investment Date" means the date to be determined
by the Committee, as of which the Director's Pension Benefit will be credited to
a Deferred Compensation Account in accordance with the director's Deferred
Pension Election.

         2.31 "Phantom Stock Investment Account" means the bookkeeping account
established pursuant to Section 5.2 of this Schedule in which a Director may
elect to defer Cash Compensation or make investments, and includes amounts
credited thereto to reflect the reinvestment of dividends.

         2.32 "Plan" means the Deferred Compensation Plan for Directors of The
Southern Company as from time-to-time in effect.

         2.33 "Plan Period" means the period designated in Section 4.

         2.34 "Person" means any individual, entity or group within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act.

         2.35 "Preliminary Change in Control' means the occurrence of any of the
following as determined by the Southern Committee:

         (a) The Company has entered into a written agreement, such as, but not
limited to, a letter of intent, which, if Consummated, would result in a
Southern Change in Control;

         (b) The Company or any Person publicly announces an intention to take
or to consider taking actions which, if Consummated, would result in a Southern
Change in Control under circumstances where the Consummation of the announced
action or intended action is legally and financially possible;

                                       5
<PAGE>

         (c) Any Person becomes the Beneficial Owner of fifteen percent (15%) or
more of the Common Stock.

         2.36 "Prime Interest Rate" means the prime rate of interest as
published in the Wall Street Journal, or its successor on the 1st day of each
quarter.

         2.37 "Prime Rate Investment Account" means the bookkeeping account
established pursuant to Section 5.1 of this Schedule in which a Director may
elect to defer Cash Compensation or make investments, the investment return on
which is computed at the Prime Interest Rate.

         2.38 "Southern" means The Southern Company.

         2.39 "Southern Change in Control" means any of the following:

         (a) The Consummation of an acquisition by any Person of Beneficial
Ownership of 20% or more of Southern's Voting Securities; provided, however,
that for purposes of this subsection (a), the following acquisitions of
Southern's Voting Securities shall not constitute a Change in Control:

               (i) any acquisition directly from Southern,

               (ii) any acquisition by Southern,

               (iii) any acquisition by any employee benefit plan (or related
          trust) sponsored or maintained by Southern or any corporation
          controlled by Southern,

               (iv) any acquisition by a qualified pension plan or publicly held
          mutual fund,

               (v) any acquisition by an Employee or Group composed exclusively
          of Employees, or

               (vi) any Business Combination which would not otherwise
          constitute a Change in Control because of the application of clauses
          (i), (ii) and (iii) of Section 2.39(a) of this Schedule;

         (b) A change in the composition of Southern's board of directors
whereby individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of Southern's board of directors; or

         (c) Consummation of a Business Combination, unless, following such
Business Combination, all of the following three conditions are met:

               (i) all or substantially all of the individuals and entities who
          held Beneficial Ownership, respectively, of Southern's Voting
          Securities immediately prior to such Business Combination beneficially
          own, directly or indirectly, 65% or more of the combined voting power
          of the Voting Securities of the corporation surviving or resulting
          from such Business Combination, (including, without limitation, a
          corporation which as a result of such transaction holds Beneficial
          Ownership of all or substantially all of Southern's Voting Securities
          or all or substantially all of Southern's assets) (such surviving or

                                       6
<PAGE>

          resulting corporation to be referred to as "Surviving Company"), in
          substantially the same proportions as their ownership, immediately
          prior to such Business Combination, of Southern's Voting Securities;

               (ii) no Person (excluding any corporation resulting from such
          Business Combination, any qualified pension plan, publicly held mutual
          fund, Group composed exclusively of employees or employee benefit plan
          (or related trust) of Southern, its subsidiaries, or Surviving
          Company) holds Beneficial Ownership, directly or indirectly, of 20% or
          more of the combined voting power of the then outstanding Voting
          Securities of Surviving Company except to the extent that such
          ownership existed prior to the Business Combination; and

               (iii) at least a majority of the members of the Board were
          members of the Incumbent Board at the earlier of the date of execution
          of the initial agreement, or of the action of the Board, providing for
          such Business Combination.

         2.40 "Southern Committee" means a committee comprised of the Chairman
of the Board, the Chief Financial Officer of the Company and the General Counsel
of the Company.

         2.41 "Stock Dividend Investment Account" means the bookkeeping
account(s) established pursuant to section 5.4 of this Schedule on behalf of a
Director that is credited with shares of stock, other than Common Stock, paid as
a dividend on shares of Common Stock.

         2.42 "Stock Retainer" means the portion of the retainer fee that the
Board has determined to credit to a Director's Deferred Stock Account. Such
amount may be denominated in dollars and/or shares of Common Stock.

         2.43 "Termination Date" means January 1, 1997, the date as of which The
Southern Company Outside Directors Pension Plan was effectively terminated.

         2.44 "Transferred Amount" means an amount (a) equal to the value of a
Director's accounts under the applicable deferred compensation plan for
directors of Alabama Power Company, Georgia Power Company, Gulf Power Company,
Mississippi Power Company, or Savannah Electric and Power Company and (b) which
has been transferred to the Plan in connection with the Director's transfer from
the board of directors of Alabama Power Company, Georgia Power Company, Gulf
Power Company, Mississippi Power Company, or Savannah Electric and Power Company
to the Board.

         2.45 "Transferred Amount Investment Date" means the date as of which a
Director's Transferred Amount will be credited to a Deferred Compensation
Account in accordance with Section 5.5 of this Schedule.

         2.46 "Trust Administrator" means the individual or committee that is
established in the Deferred Stock Trust and the Deferred Cash Trust, to
administer such trusts on behalf of the Participating Companies.

         2.47 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.

                                       7
<PAGE>

         Where the context requires, words in the masculine gender shall include
the feminine gender, words in the singular shall include the plural, and words
in the plural shall include the singular.

                                   SECTION 3

                                   Eligibility

         For so long as a Director has a Deferred Compensation Account balance
governed by this Schedule, he or she shall be a Participant in the Plan for
purposes of this Schedule, and such Deferred Compensation Account balance shall
be maintained and administered solely in accordance with the terms of this
Schedule.

                                   SECTION 4

                                  Plan Periods

         No new deferral elections may be made which are subject to this
Schedule.

                                   SECTION 5

                                    Accounts

         5.1 Prime Rate Investment Account

         A Prime Rate Investment Account shall be established for each Director
electing deferral of Cash Compensation for investment at the Prime Interest
Rate. The amount directed by the Director to such account shall be credited to
it as of the Pension Benefit Investment Date, Compensation Payment Date, or
Transferred Amount Investment Date, as applicable, and credited thereafter with
interest computed using the Prime Interest Rate. Interest shall be computed from
the date such compensation is credited to the account and compounded quarterly
at the end of each calendar quarter. The Prime Interest Rate in effect on the
first day of a calendar quarter shall be deemed the Prime Interest Rate in
effect for that entire quarter. Interest shall accrue and compound on any
balance until the amount credited to the account is fully distributed.

         5.2 Phantom Stock Investment Account

         The Phantom Stock Investment Account established for each Director
electing deferral of Cash Compensation for investment at the Common Stock
investment rate shall be credited with the number of shares (including
fractional shares rounded to the nearest ten-thousandth) of Common Stock which
could have been purchased on the Pension Benefit Investment Date, the
Compensation Payment Date, or Transferred Amount Investment Date, as applicable,
as determined by dividing the applicable compensation by the Market Value on
such date. On the date of the payment of dividends on the Common Stock, the
Director's Phantom Stock Investment Account shall be credited with additional
shares (including fractional shares rounded to the nearest ten-thousandth) of
Common Stock, as follows:

                                       8
<PAGE>

         (a) In the case of cash dividends, such additional shares as would have
been purchased as of the Common Stock dividend record date as if the credited
shares had been outstanding on such date and dividends reinvested thereon under
the Southern Company Southern Investment Plan;

         (b) In the case of dividends payable in property other than cash or
Common Stock, such additional shares as could be purchased at the Market Value
as of the date of payment with the fair market value of the property which would
have been payable if the credited shares had been outstanding; and

         (c) In the case of dividends payable in Common Stock, such additional
shares as would have been payable on the credited shares as if they had been
outstanding.

         5.3 Deferred Stock Account

         (a) A Director's Deferred Stock Account will be credited:

               (i) with the number of shares of Common Stock (rounded to the
          nearest ten thousandth of a share) determined by dividing the sum of
          the amount of Cash Compensation subject to deferral or investment in
          the Deferred Stock Account and the Stock Retainer (that is denominated
          in dollars), by the average price paid by the Trustee of the Deferred
          Stock Trust for shares of Common Stock with respect to the Pension
          Benefit Investment Date or the Compensation Payment Date, as
          applicable, as reported by the Trustee, or, if the Trustee shall not
          at such time purchase any shares of Common Stock, by the Market Value
          on such date;

               (ii) as of the date on which the Stock Retainer (that is
          denominated in shares of Common Stock) is paid, with the number of
          shares of Common Stock payable to the Director as his Stock Retainer;
          and

               (iii) as of each date on which dividends are paid on the Common
          Stock, with the number of shares of Common Stock (rounded to the
          nearest ten thousandth of a share) determined by multiplying the
          number of shares of Common Stock credited in the Director's Deferred
          Stock Account on the dividend record date, by the dividend rate per
          share of Common Stock, and dividing the product by the price per share
          of Common Stock attributable to the reinvestment of dividends on the
          shares of Common Stock held in the Deferred Stock Trust on the
          applicable dividend payment date or, if the Trustee of the Deferred
          Stock Trust has not reinvested in shares of Common Stock on the
          applicable dividend reinvestment date, the product shall be divided by
          the Market Value on the dividend payment date.

         (b) If Southern enters into transactions involving stock splits, stock
dividends, reverse splits or any other recapitalization transactions, the number
of shares of Common Stock credited to a Director's Deferred Stock Account will
be adjusted (rounded to the nearest ten thousandth of a share) so that the
Director's Deferred Stock Account reflects the same equity percentage interest
in Southern after the recapitalization as was the case before such transaction.

         (c) If at least a majority of Southern's stock is sold or exchanged by
its shareholders pursuant to an integrated plan for cash or property (including
stock of another corporation) or if substantially all of the assets of Southern

                                       9
<PAGE>

are disposed of and, as a consequence thereof, cash or property is distributed
to Southern's shareholders, each Director's Deferred Stock Account will, to the
extent not already so credited under this Section 5.3, be (i) credited with the
amount of cash or property receivable by a Southern shareholder directly holding
the same number of shares of Common Stock as is credited to such Director's
Deferred Stock Account and (ii) debited by that number of shares of Common Stock
surrendered by such equivalent Southern shareholder.

               (d) Each Director who has a Deferred Stock Account also shall be
          entitled to provide directions to the Trust Administrator to vote the
          Common Stock in his account in the Deferred Stock Trust with respect
          to any matter presented for a vote to the shareholders of Southern.
          Such Trust Administrator shall arrange for distribution to all
          Directors in a timely manner of all communications directed generally
          to the Southern shareholders as to which their votes are solicited.

         5.4 Stock Dividend Investment Account

         (a) A Director's Stock Dividend Investment Account will be credited as
of the date on which a dividend is paid in stock other than Common Stock to the
Company's common stockholders with the number of shares of such other
corporation's stock receivable by such Southern common stockholder. Thereafter,
if dividends are paid on the above-described non-Common Stock dividends, such
subsequent dividends shall be credited in the same manner as described in
Section 5.3(iii) of this Schedule.

         (b) Each Director who has a Stock Dividend Investment Account also
shall be entitled to provide directions to the Trust Administrator to vote the
applicable corporation's common stock held by the Deferred Stock Trust with
respect to any matter presented for a vote to such corporation's shareholders.
The Trust Administrator shall arrange for distribution to all Directors in a
timely manner of all communications directed generally to the applicable
corporation's shareholders as to which their votes are solicited.

         5.5 Transferred Amounts

         (a) As soon as administratively practicable, the Company shall
establish for a Director transferring to the Board from Alabama Power Company,
Georgia Power Company, Gulf Power Company, Mississippi Power Company, or
Savannah Electric and Power Company, such Deferred Compensation Accounts as are
necessary to implement Section 5.5 (b) below.

         (b) Any Transferred Amounts will be credited to the Deferred
Compensation Account(s) established that are comparable to the deferred
compensation accounts to which such amounts were credited under the applicable
deferred compensation plan for directors of Alabama Power Company, Georgia Power
Company, Gulf Power Company, Mississippi Power Company, or Savannah Electric and
Power Company, as soon as administratively practicable following the date the
Transferred Amounts are transferred to the Plan. Thereafter, the Transferred
Amounts shall be credited with investment returns as applicable under this
Section 5 of the Schedule.

                                       10
<PAGE>

                                   SECTION 6

                                  Distributions

         6.1 Upon the termination of a Director's membership on the Board the
amount credited to a Director's Deferred Compensation Accounts will be paid to
the Director or his beneficiary, as applicable, in the following manner:

         (a) the amount credited to a Director's Prime Rate Investment Account
and Phantom Stock Investment Account shall be paid in cash;

         (b) the amount credited to a Director's Deferred Stock Account shall,
except as otherwise provided in Sections 5.3 and 6.7 of this Schedule, or to the
extent the Company is otherwise, in the reasonable judgment of the Committee,
precluded from doing so, be paid in shares of Common Stock (with any fractional
share interest therein paid in cash to the extent of the then Market Value
thereof); and

         (c) the amount credited to a Stock Dividend Investment Account shall,
except as otherwise provided in Section 6.7 of this Schedule, be paid from the
assets in the Deferred Stock Trust in shares of the applicable corporation,
however if there is not a sufficient number of shares held in the Trust, the
remainder shall be paid in cash based upon the Market Value of such shares.

         Such payments shall be from the general assets of the Company
(including the Deferred Cash Trust and the Deferred Stock Trust) in accordance
with this Section 6.

         Notwithstanding the foregoing, in the event the Company enters into an
agreement described in Section 6.3 of this Schedule with respect to a Director
prior to the Director's termination of membership, the Company shall have no
obligation to make distributions to the Director under this Section 6.1 in
connection with such Director's termination of membership on the Board.

         6.2 Unless other arrangements are specified by the Committee on a
uniform and nondiscriminatory basis, deferred amounts shall be paid in the form
of (i) a lump sum payment, or (ii) in approximately equal annual installments,
as elected by the Director pursuant to the provisions of Section 6.4 of this
Schedule; provided, however, that payments shall be made only in a single lump
sum if payment commences due to termination for cause. Such payments shall be
made (or shall commence) as soon as practicable following the termination of
Board membership or, if so elected in the Distribution Election, up to
twenty-four (24) months following such termination.

         In the event a Director elected to receive the balance of his Deferred
Compensation Accounts in a lump sum, distribution shall be made on the first day
of the month selected by the Director on his Distribution Election, or as soon
as reasonably possible thereafter. If the Director elected to receive annual
installments, the first payment shall be made on the first day of the month
selected by a Director, or as soon as reasonably possible thereafter, and shall
be equal to the balance in the Director's Deferred Compensation Accounts on such
date divided by the number of annual installment payments. Each subsequent
annual payment shall be an amount equal to the balance in the Director's
Deferred Compensation Accounts on the date of payment divided by the number of
remaining annual payments and shall be paid on the anniversary of the preceding
date of payment.

                                       11
<PAGE>

         The Market Value of any shares of Common Stock credited to a Director's
Phantom Stock Investment Account shall be determined as of a day of the month
immediately preceding the date of any lump sum or installment distribution as
determined by the Committee.

         Upon the death of a Director, or a former Director prior to the payment
of all amounts credited to the Director's Deferred Compensation Accounts, the
unpaid balance shall be paid in the sole discretion of the Committee (i) in a
lump sum to the designated beneficiary of such Director or former Director
within thirty (30) days of the date of death (or as soon as reasonably possible
thereafter) or (ii) in accordance with the Distribution Election made by such
Director or former Director. In the event a beneficiary designation has not been
made, or the designated beneficiary is deceased or cannot be located, payment
shall be made to the estate of the Director or former Director. The Market Value
of any shares of Common Stock credited to a Director's Phantom Stock Investment
Account shall be determined as of a day of the month immediately preceding the
date of any lump sum or installment distribution as determined by the Committee.

         6.3 If the Company enters into a written agreement with a subsidiary,
affiliate or former affiliate of the Company under which the subsidiary,
affiliate or former affiliate assumes liability for a Director's benefits
accrued under the Schedule in connection with, but prior to, such Director's
termination of membership on the Board and the Director either has been or will
be elected to the board of directors of such subsidiary, affiliate or former
affiliate of the Company, the value of the Director's benefits which have
accrued under this Schedule as of the date the Director terminates from the
Board shall be transferred from the Company to the subsidiary, affiliate or
former affiliate of the Company, and the Company shall have no further
obligation to make any distributions to the Director under Section 6.1 of the
Schedule or any other section herein.

         6.4 Distribution Election

         (a) Except as set forth in Sections 6.4(b) and (c) of this Schedule,
prior to the initial establishment of a Deferred Compensation Account for a
Director, the Director must elect, in writing, that upon termination from the
Board of Directors the values and quantities held in the Directors Deferred
Compensation Accounts be distributed to the Director, pursuant to the provisions
of this Section 6, in a lump sum or in a series of annual installments not to
exceed ten (10). The time for the commencement of distribution shall not be
later than the first day of the month coinciding with or next following the
second anniversary of termination of Board membership.

         (b) Any Director who made a Deferred Pension Election made a
Distribution Election at the time the Deferred Pension Election was made
attributable to the Pension Benefit and any accumulated investment return.

         (c) In the event a Director terminates from the Board with Deferred
Compensation Accounts established under Section 5.5 of this Schedule, the
Transferred Amounts and accumulated investment return held in such Accounts
shall be distributed to the Director in accordance with the Director's
distribution election in effect under the applicable deferred compensation plan

                                       12
<PAGE>

for directors of Southern or one of its subsidiaries or affiliates on the date
the Director is transferred to the Board and the provisions of this Section 6,
unless such election is changed pursuant to Section 6.4(d) below.

         (d) Distribution Elections made under Sections 6.4 (a), (b) and (c)
above are irrevocable except that a Director may amend any of the Distribution
Elections then in effect while the Director is still a director of the Company
as required under Section 6.7 of this Schedule and not later than the 361st day
prior to the date of the earliest distribution elected and in place under this
Schedule. Any amendment to a Director's Distribution Election pursuant to the
preceding sentence shall not accelerate the commencement of the Director's
distribution to a date which is prior to the 13th month following the date of
such amendment. In addition, any amendment to a Distribution Election must be
made on a form prescribed by the Committee and delivered to the Secretary or
Assistant Secretary of the Company.

         6.5 Beneficiary Designation

         A Director or former Director may designate a beneficiary to receive
distributions under this Schedule in accordance with the provisions of this
Section 6 upon the death of the director. The beneficiary designation may be
changed by a Director or former Director at any time, and without the consent of
the prior beneficiary.

         6.6 Form of Election

         All elections pursuant to the provisions of this Section 6 of the
Schedule shall be made in writing to the Secretary or Assistant Secretary of the
Company on a form or forms available upon request of the Secretary or Assistant
Secretary.

         6.7 Distribution Limitations

         Notwithstanding any other provision of this Schedule: (i) elections
under this Schedule may only be made by Directors while they are directors of
the Company (with the exception of the designation of beneficiaries), and (ii)
distributions otherwise payable to a Director in the form of Common Stock shall
be delayed and/or instead paid in cash in an amount equal to the fair market
value thereof if such payment in Common Stock would violate any federal or State
securities laws (including Section 16(b) of the Securities Exchange Act of 1934,
as amended) and/or rules and regulations promulgated thereunder.

                                    SECTION 7

                 Change in Control and Other Special Provisions

         7.1 Notwithstanding any other terms of this Schedule to the contrary,
following a Funding Event or a Preliminary Change in Control as the case may be,
the provisions of this Section 7 shall apply to the payment of benefits under
this Schedule with respect to any Director who is a Participant on such date.

         7.2 The Deferred Cash Trust and the Deferred Stock Trust (collectively
"Trusts") have been established to hold assets of the Participating Companies
under certain circumstances as a reserve for the discharge of the Company's
obligations under the Schedule. In the event of a Funding Event involving a

                                       13
<PAGE>

Funding Change in Control, the Company shall be obligated to immediately
contribute such amounts to the Trusts as may be necessary to fully fund all
benefits payable under this Schedule in accordance with the procedures set forth
in Section 7.3 hereof. In addition, in order to provide the added protections
for certain individuals in accordance with Paragraph 7(b) of the Deferred Cash
Trust and Paragraph 7(c) of the Deferred Stock Trust, the Company may fund the
Trusts prior to a Funding Change in Control of the Company in accordance with
the terms of the Trusts. All assets held in the Trusts remain subject only to
the claims of the Participating Companies' general creditors whose claims
against the Participating Companies are not satisfied because of the
Participating Companies' bankruptcy or insolvency (as those terms are defined in
the Trusts). No Participant has any preferred claim on, or beneficial ownership
interest in, any assets of the Trusts before the assets are paid to the
Participant and all rights created under the Trusts, as under this Schedule, are
unsecured contractual claims of the Participant against the Company.

         7.3 As soon as practicable following a Funding Event, the Company shall
contribute an amount based upon the funding strategy adopted by the Trust
Administrator with the assistance of an appointed actuary necessary to fulfill
the Company's obligations pursuant to this Section 7. In the event of a dispute
over such actuary's determination, the Company and any complaining
Participant(s) shall refer such dispute to an independent, third party actuarial
consultant, chosen by the Company and such Participant. If the Company and the
Participant cannot agree on an independent, third party actuarial consultant,
the actuarial consultant shall be chosen by lot from an equal number of
actuaries submitted by the Company and the applicable Trustee. Any such referral
shall only occur once in total and the determination by the third-party
actuarial consultant shall be final and binding upon both parties. The Company
shall be responsible for all of the fees and expenses of the independent
actuarial consultant.

         7.4 In the event of a Southern Change in Control, notwithstanding
anything to the contrary in this Schedule, upon termination as a Director, that
amount in the Deferred Compensation Plan Account(s) of a Participant who was a
Director determined as of such Change in Control shall be paid out in a lump sum
if such Participant makes an election pursuant to procedures established by the
Trust Administrator, in its sole and absolute discretion. If no such election is
made, the Director shall receive payment of his Accounts solely in accordance
with Section 6 of this Schedule.

                                   SECTION 8

                            Miscellaneous Provisions

         8.1 Except for Sections 11.1 and 11.2 of the main body of the Plan,
Sections 9, 10 and 11 of the main body of the Plan are hereby incorporated by
reference into this Schedule. Any amendment to Sections 9, 10 and 11 of the main
body of the Plan shall operate as an amendment to Sections 9, 10 and 11 of the
Schedule except that Section 8.2 below shall set forth the sole method for
amending and/or terminating this Schedule.

         8.2 Subject to Section 8.1, this Schedule may be amended or terminated
at any time by the Board in its sole discretion at any time and from time to
time by written resolution expressly modifying this Schedule provided, however,
that no such amendment or termination shall impair any rights to any benefits

                                       14
<PAGE>

that have accrued hereunder, and further provided that no such amendment or
termination of the Plan shall be effective if such amendment or termination is
made or is effective within a period that is (a) six (6) months before, or at
any time after, a Preliminary Change in Control and (b) prior to (x) the earlier
of such time as the Southern Committee shall have determined that the event that
gave rise to such Preliminary Change in Control shall not be Consummated or (y)
two years following the Southern Change in Control, unless such amendment or
termination during such period has the effect of increasing benefits to
Participants under the Plan, is determined by the Board of Directors to be
immaterial, or applies solely to Directors, who in the case of a Southern Change
in Control are not Directors on the date of the Southern Change in Control.
Following a Southern Change in Control, nothing in this Section 8.2 shall
prevent the Board of Directors from amending or terminating the Schedule as to
any subsequent Southern Change in Control provided that no such amendment or
termination shall impair any rights or reduce any benefits previously accrued
under the Schedule as a result of a previous Southern Change in Control. It is
the Company's intent that any modification to this Schedule shall not constitute
nor shall it be interpreted to be a "material modification" of any right or
feature of this Schedule as such term is defined under Section 409A of the Code,
Internal Revenue Service Notice 2005-1, Treasury Regulation Section 1.409A-1 et
seq., or any subsequent guidance promulgated by the Treasury Department, unless
the Schedule is amended contemporaneously to comply with Code Section 409A.

                                       15

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