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EXHIBIT 10.3
FORM OF
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
BETWEEN
THE SOUTHERN COMPANY
AND
SOUTHERN ENERGY, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I MUTUAL RELEASES; INDEMNIFICATION...................................................................................1
Section 1.1. Release of Pre-Closing Claims................................................................................1
Section 1.2. Indemnification by Southern Energy...........................................................................2
Section 1.3. Indemnification by Southern..................................................................................3
Section 1.4. Procedures for Defense, Settlement and Indemnification of Third Party Claims.................................3
Section 1.5. Additional Matters...........................................................................................5
Section 1.6. Survival of Indemnities......................................................................................6
ARTICLE II INSURANCE MATTERS.................................................................................................6
Section 2.1. Southern Energy Insurance Coverage During the Transition Period..............................................6
Section 2.2. Cooperation and Agreement Not to Release Carriers............................................................6
Section 2.3. Southern Energy Insurance Coverage After the Insurance Transition Period.....................................7
Section 2.4. Responsibilities for Self-insured Obligations................................................................7
Section 2.5. Procedures With Respect to Insured Southern Energy Liabilities...............................................7
Section 2.6. Insufficient Limits of Liability for Southern Liabilities and Southern Energy Liabilities....................8
Section 2.7. Cooperation..................................................................................................8
Section 2.8. No Assignment or Waiver......................................................................................8
Section 2.9. No Liability.................................................................................................9
Section 2.10. No Restrictions.............................................................................................9
Section 2.11. Further Agreements..........................................................................................9
Section 2.12. Agreement Regarding Insurance Covering Environmental Claims.................................................9
Section 2.13. Matters Governed by Employee Matters Agreement..............................................................9
ARTICLE III MISCELLANEOUS....................................................................................................9
Section 3.1. Entire Agreement.............................................................................................9
Section 3.2. Governing Law...............................................................................................10
Section 3.3. Notices.....................................................................................................10
Section 3.4. Parties in Interest.........................................................................................10
Section 3.5. Other Agreements Evidencing Indemnification Obligations.....................................................10
Section 3.6. Counterparts................................................................................................10
Section 3.7. Assignment..................................................................................................10
Section 3.8. Severability................................................................................................11
Section 3.9. Failure or Indulgence Not Waiver............................................................................11
Section 3.10. Amendment..................................................................................................11
Section 3.11. Authority..................................................................................................11
Section 3.12. Interpretation.............................................................................................11
Section 3.13. Government Approvals.......................................................................................11
ARTICLE IV DEFINITIONS......................................................................................................11
Section 4.1. Action......................................................................................................11
Section 4.2. Affiliated Company..........................................................................................11
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Section 4.4. Claims Committee............................................................................................12
Section 4.5. Commingled Claims...........................................................................................12
Section 4.6. Coverage Amount.............................................................................................12
Section 4.7. Credit Support Arrangements.................................................................................12
Section 4.8. Employee Matters Agreement..................................................................................12
Section 4.9. HoldCo Transaction..........................................................................................13
Section 4.10. Employment Liabilities.....................................................................................12
Section 4.11 Environmental Claims.......................................................................................
Section 4.12. Indemnitee.................................................................................................12
Section 4.13. Insurance Policies.........................................................................................12
Section 4.14. Insurance Transition Period................................................................................13
Section 4.15. Insured Southern Energy Liability..........................................................................13
Section 4.16. Intercompany Agreements....................................................................................13
Section 4.17. IPO Registration Statement.................................................................................13
Section 4.18. Liabilities................................................................................................13
Section 4.19. Person.....................................................................................................13
Section 4.20. Separation.................................................................................................13
Section 4.21. Separation Agreement.......................................................................................14
Section 4.22. Separation Date............................................................................................14
Section 4.23. Southern Business..........................................................................................14
Section 4.24. Southern Energy Business...................................................................................14
Section 4.25. Southern Energy Covered Parties............................................................................14
Section 4.26. Southern Energy Group......................................................................................14
Section 4.27. Southern Energy Indemnitees................................................................................14
Section 4.28. Southern Energy Liabilities................................................................................14
Section 4.29. Southern Group.............................................................................................15
Section 4.30. Southern Indemnitees.......................................................................................15
Section 4.31. Subsidiary.................................................................................................15
Section 4.32. Tax Indemnification Agreement..............................................................................15
Section 4.33. Taxes......................................................................................................15
Section 4.34. Third Party Claim..........................................................................................15
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INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
THIS INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT (this
"Agreement") is entered into on [___________, 2000] between The Southern
Company, a Delaware corporation ("Southern"), and Southern Energy, Inc., a
Delaware corporation ("Southern Energy"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Article IV below.
RECITALS
WHEREAS, the Board of Directors of Southern has determined that it
is in the best interest of Southern and its stockholders to separate Southern's
existing businesses into two independent businesses;
WHEREAS, as part of the foregoing, Southern and Southern Energy have
agreed, pursuant to the Master Separation and Distribution Agreement dated
[___________, 2000] (the "Separation Agreement"), which provides, among
other things, the initial public offering of Southern Energy stock, the
distribution of such stock and the execution and delivery of certain other
agreements in order to facilitate and provide for the foregoing; and
WHEREAS, the parties desire to set forth certain agreements
regarding indemnification and insurance.
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth below, the parties hereto agree as follows:
ARTICLE I
MUTUAL RELEASES; INDEMNIFICATION
Section 1.1. Release of Pre-Closing Claims.
(a) Southern Energy Release. Except as provided in Section 1.1(c),
effective as of the Separation Date, Southern Energy does hereby, for itself and
as agent for each member of the Southern Energy Group, remise, release and
forever discharge the Southern Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Separation Date, including
any such acts, events or conditions on or before the Separation Date in
connection with the transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
(b) Southern Release. Except as provided in Section 1.1(c),
effective as of the Separation Date, Southern does hereby, for itself and as
agent for each member of the Southern Group, remise, release and forever
discharge the Southern Energy Indemnitees from any and all
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Liabilities whatsoever, whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by operation of
law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the Separation Date,
including any such acts, events or conditions on or before the Separation Date
in connection with the transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
(c) Excluded Liabilities; No Impairment. Nothing contained in
Section 1.1(a) or (b) shall release any claims under, or impair any right of any
Person to enforce, the Separation Agreement, any Ancillary Agreement (including
this Agreement), or any Intercompany Agreement, in each case in accordance with
its terms.
(d) No Actions as to Released Claims. Southern Energy agrees, for
itself and as agent for each member of the Southern Energy Group, not to make
any claim or demand, or commence any Action asserting any claim or demand,
including any claim of contribution or any indemnification, against Southern or
any member of the Southern Group, or any other Person released pursuant to
Section 1.1(a), with respect to any Liabilities released pursuant to Section
1.1(a). Southern agrees, for itself and as agent for each member of the Southern
Group, not to make any claim or demand, or commence any Action asserting any
claim or demand, including any claim of contribution or any indemnification,
against Southern Energy or any member of the Southern Energy Group, or any other
Person released pursuant to Section 1.1(b), with respect to any Liabilities
released pursuant to Section 1.1(b).
(e) Further Instruments. At any time, at the request of any other
party, each party shall cause each member of its respective Group to execute and
deliver releases reflecting the provisions hereof.
Section 1.2. Indemnification by Southern Energy. Except as otherwise
provided in this Agreement, Southern Energy shall, for itself and as agent for
each member of the Southern Energy Group, indemnify, defend (or, where
applicable, pay the defense costs for) and hold harmless the Southern
Indemnitees from and against any and all Liabilities that any third party seeks
to impose upon the Southern Indemnitees, or which are imposed upon the Southern
Indemnitees, if and to the extent such Liabilities relate to, arise out of or
result from any of the following items (without duplication):
(i) any acts or omission or alleged acts or omissions by
or on behalf of any member of the Southern Energy Group in the
conduct of the Southern Energy Business or in connection with the
IPO or the Distribution;
(ii) any breach by Southern Energy or any member of the
Southern Energy Group of the Separation Agreement or any of the
Ancillary Agreements (including this Agreement); and
(iii) any Southern Energy Liability.
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In the event that any member of the Southern Energy Group makes a
payment to the Southern Indemnitees hereunder, and any of the Southern
Indemnitees subsequently diminishes the Liabilities on account of which such
payment was made, either directly or through a third-party recovery, Southern
will promptly repay (or will procure a Southern Indemnitee to promptly repay)
such member of the Southern Energy Group the amount by which the payment made by
such member of the Southern Energy Group exceeds the actual cost of the
associated indemnified Liability.
Section 1.3. Indemnification by Southern. Except as otherwise
provided in this Agreement, Southern shall, for itself and as agent for each
member of the Southern Group, indemnify, defend (or, where applicable, pay the
defense costs for) and hold harmless the Southern Energy Indemnitees from and
against any and all Liabilities that any third party seeks to impose upon the
Southern Energy Indemnitees, or which are imposed upon the Southern Energy
Indemnitees, if and to the extent such Liabilities relate to, arise out of or
result from any of the following items (without duplication):
(i) any acts or omissions or alleged acts or omissions
by or on behalf of any member of the Southern Group in the conduct
of the Southern Business or in connection with the IPO or the
Distribution;
(ii) any breach by Southern or any member of the
Southern Group of the Separation Agreement or any of the Ancillary
Agreements (including this Agreement); and
(iii) any Liabilities of the Southern Group other than
the Credit Support Arrangements.
In the event that any member of the Southern Group makes a payment
to the Southern Energy Indemnitees hereunder, and any of the Southern Energy
Indemnitees subsequently diminishes the Liabilities on account of which such
payment was made, either directly or through a third-party recovery, Southern
Energy will promptly repay (or will procure a Southern Energy Indemnitee to
promptly repay) such member of the Southern Group the amount by which the
payment made by such member of the Southern Group exceeds the actual cost of the
indemnified Liabilities.
Section 1.4. Procedures for Defense, Settlement and Indemnification
of Third Party Claims.
(a) Notice of Claims. If a Southern Indemnitee or a Southern Energy
Indemnitee (as applicable) (an "Indemnitee") shall receive notice or otherwise
learn of the assertion by a Person (including any Governmental Authority) who is
not a member of the Southern Group or the Southern Energy Group of any claim or
of the commencement by any such Person of any Action (collectively, a "Third
Party Claim") with respect to which a party (an "Indemnifying Party") may be
obligated to provide indemnification to such Indemnitee pursuant to Section 1.2
or 1.3,
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or any other section of the Separation Agreement or any Ancillary Agreement
(including this Agreement), Southern and Southern Energy (as applicable) will
ensure that such Indemnitee shall give such Indemnifying Party written notice
thereof within thirty (30) days after becoming aware of such Third Party Claim.
Any such notice shall describe the Third Party Claim in reasonable detail.
Notwithstanding the foregoing, the delay or failure of any Indemnitee or other
Person to give notice as provided in this Section 1.4(a) shall not relieve the
related Indemnifying Party of its obligations under this Article I, except to
the extent that such Indemnifying Party is actually and substantially prejudiced
by such delay or failure to give notice.
(b) Claims Committee. Any of the parties may refer any dispute
regarding the provisions of this Article I to the Claims Committee for
resolution. All determinations of the Claims Committee, if unanimous, shall be
binding on all of the parties and their respective successors and assigns. The
Claims Committee shall reach a resolution that minimizes expenses for all
parties and seeks to avoid hiring multiple counsel. In the event a Liability
arises from both an event, act or omission relating primarily to the Southern
Energy Business and an event, act or omission relating primarily to the Southern
Business, the Claims Committee shall apportion the Liability in accordance with
comparative fault, and it may re-apportion the Liability as it learns of
additional facts bearing on that assessment. In the event that the Claims
Committee cannot reach a unanimous determination as to the nature, status or
handling of any such claims within thirty (30) days after such referral (unless
the Claims Committee unanimously agrees to a longer time period), the issue will
be submitted for resolution pursuant to the procedures set forth in the dispute
resolution provisions contained in Section 5.7 of the Separation Agreement;
provided, that the provisions of this Section 1.4(b) shall supercede the
requirements of the second sentence of Section 5.7(a) of the Separation
Agreement.
(c) Defense of Commingled Claims. With respect to any Commingled
Claim, the Claims Committee shall determine which party shall manage the defense
of, and may seek to settle or compromise, such Commingled Claim based upon the
specific facts of such claim.
(d) Defense By Indemnifying Party. Other than in the case of a
Commingled Claim, an Indemnifying Party will manage the defense of and (unless
the Indemnifying Party has specified any reservations or exceptions to the
obligation to manage the defense or to indemnify that have been referred to, but
not resolved by, the Claims Committee) may settle or compromise any Third Party
Claim. Within thirty (30) days after the receipt of notice from an Indemnitee in
accordance with Section 1.4(a) (or sooner, if the nature of such Third Party
Claim so requires), the Indemnifying Party shall notify the Indemnitee that the
Indemnifying Party will assume responsibility for managing the defense of such
Third Party Claim, which notice shall specify any reservations or exceptions.
(e) Defense By Indemnitee. If an Indemnifying Party fails to assume
responsibility for managing the defense of a Third Party Claim, or fails to
notify an Indemnitee that it will assume responsibility as provided in Section
1.4(d), such Indemnitee may manage the defense of such Third Party Claim.
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(f) No Settlement By Indemnitee Without Consent. Unless the
Indemnifying Party has failed to manage the defense of the Third Party Claim in
accordance with the terms of this Agreement, no Indemnitee may settle or
compromise any Third Party Claim without the consent of the Indemnifying Party.
(g) No Consent to Certain Judgments or Settlements Without Consent.
Notwithstanding Section 1.4(d) above, no party shall consent to entry of any
judgment or enter into any settlement of a Third Party Claim without the consent
of the other party (such consent not to be unreasonably withheld) if the effect
of such judgment or settlement is to (A) permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against the other party or (B) materially affect the other party due
to the allocation of Liabilities and related indemnities set forth in the
Separation Agreement, this Agreement or any other Ancillary Agreement.
Section 1.5. Additional Matters.
(a) Cooperation in Defense and Settlement. With respect to any Third
Party Claim that implicates both Southern Energy and Southern in a material
fashion due to the allocation of Liabilities, responsibilities for management of
defense and related indemnities set forth in the Separation Agreement, this
Agreement or any of the Ancillary Agreements, the parties agree to cooperate
fully and maintain a joint defense (in a manner that will preserve the
attorney-client privilege with respect thereto) so as to minimize such
Liabilities and defense costs associated therewith. The party that is not
responsible for managing the defense of such Third Party Claims shall, upon
reasonable request, be consulted with respect to significant matters relating
thereto and may, if necessary or helpful, associate counsel to assist in the
defense of such claims.
(b) Substitution. In the event of an Action in which the
Indemnifying Party is not a named defendant, if either the Indemnitee or the
Indemnifying Party shall so request, the parties shall endeavor to substitute
the Indemnifying Party for the named defendant. If such substitution or addition
cannot be achieved for any reason or is not requested, the rights and
obligations of the parties regarding indemnification and the management of the
defense of claims as set forth in this Article I shall not be altered.
(c) Subrogation. In the event of payment by or on behalf of any
Indemnifying Party to or on behalf of any Indemnitee in connection with any
Third Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee, in whole or in part based upon whether
the Indemnifying Party has paid all or only part of the Indemnitee's Liability,
as to any events or circumstances in respect of which such Indemnitee may have
any right, defense or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
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(d) Not Applicable to Taxes or Employment Liabilities. This
Agreement shall not apply to Taxes (which are covered by the Tax Indemnification
Agreement) or Employment Liabilities (which are covered by the Employee Matters
Agreement).
Section 1.6. Survival of Indemnities. Subject to Section 3.7, the
rights and obligations of the members of the Southern Group and the Southern
Energy Group under this Article I shall survive the sale or other transfer by
any party of any assets or businesses or the assignment by it of any Liabilities
or the sale by any member of the Southern Group or the Southern Energy Group of
the capital stock or other equity interests of any Subsidiary to any Person.
ARTICLE II
INSURANCE MATTERS
Section 2.1. Southern Energy Insurance Coverage During the
Transition Period.
(a) Maintain Comparable Insurance. Throughout the period beginning
on the Separation Date and ending on the Distribution Date (i.e., the "Insurance
Transition Period"), Southern shall, subject to insurance market conditions and
other factors beyond its control, maintain policies of insurance, including for
the benefit of Southern Energy or any of its Subsidiaries, directors, officers,
employees or other covered parties (collectively, the "Southern Energy Covered
Parties") which are comparable to those maintained generally by Southern;
provided, however, that if Southern determines that (i) the amount or scope of
such coverage will be reduced to a level materially inferior to the level of
coverage in existence immediately prior to the Insurance Transition Period or
(ii) the retention or deductible level applicable to such coverage, if any, will
be increased to a level materially greater than the levels in existence
immediately prior to the Insurance Transition Period, Southern shall give
Southern Energy notice of such determination as promptly as practicable. Upon
notice of such determination, Southern Energy shall be entitled to no less than
sixty (60) days to evaluate its options regarding continuance of coverage
hereunder and may cancel its interest in all or any portion of such coverage as
of any day within such sixty (60) day period. Except as provided below, during
the Insurance Transition Period, such policies of insurance shall cover Southern
Energy Covered Parties for liabilities and losses insured prior to the
Distribution Date.
(b) Reimbursement for Premiums. Southern Energy shall promptly pay
or reimburse Southern, as the case may be, for premium expenses, and Southern
Energy Covered Parties shall promptly pay or reimburse Southern for any costs
and expenses which Southern may incur in connection with the insurance coverages
maintained pursuant to this Section 2.1, including but not limited to any
subsequent premium adjustments. All payments and reimbursements by Southern
Energy and Southern Energy Covered Parties to Southern shall be made within
fifteen (15) days after Southern Energy's receipt of an invoice from Southern.
Section 2.2. Cooperation and Agreement Not to Release Carriers. Each
of Southern and Southern Energy will share such information as is reasonably
necessary in order to permit the other to manage and conduct its insurance
matters in an orderly fashion. Each of Southern
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and Southern Energy, at the request of the other, shall cooperate with and use
commercially reasonable efforts to assist the other in recoveries for claims
made under any insurance policy for the benefit of any insured party, and
neither Southern nor Southern Energy, nor any of their Subsidiaries, shall take
any action which would intentionally jeopardize or otherwise interfere with
either party's ability to collect any proceeds payable pursuant to any insurance
policy. Except as otherwise contemplated by the Separation Agreement, this
Agreement or any Ancillary Agreement, after the Separation Date, neither
Southern nor Southern Energy shall (and shall ensure that no member of their
respective Groups shall), without the consent of the other, provide any
insurance carrier with a release, or amend, modify or waive any rights under any
such policy or agreement, if such release, amendment, modification or waiver
would adversely affect any rights or potential rights of any member of the other
Group thereunder. However, nothing in this Section 2.2 shall (A) preclude any
member of any Group from presenting any claim or from exhausting any policy
limit, (B) require any member of any Group to pay any premium or other amount or
to incur any Liability, (C) require any member of any Group to renew, extend or
continue any policy in force or (D) except as otherwise provided in Section
2.12, apply to Southern in connection with rights to coverage for Environmental
Actions under Insurance Policies in effect prior to the Separation Date.
Section 2.3. Southern Energy Insurance Coverage After the Insurance
Transition Period. From and after expiration of the Insurance Transition Period,
Southern Energy, and Southern Energy alone, shall be responsible for obtaining
and maintaining insurance programs for its risk of loss and such insurance
arrangements shall be separate and apart from Southern's insurance programs.
Notwithstanding the foregoing, Southern, upon the request of Southern Energy,
shall use all commercially reasonable efforts to assist Southern Energy in the
transition to its own separate insurance programs from and after the Insurance
Transition Period, and shall provide Southern Energy with any information that
is in the possession of Southern and is reasonably available and necessary to
either obtain insurance coverages for Southern Energy or to assist Southern
Energy in preventing unintended self-insurance, in whatever form.
Section 2.4. Responsibilities for Self-insured Obligations. Southern
Energy will reimburse Southern for all amounts necessary to exhaust or otherwise
satisfy all applicable self-insured retentions, amounts for fronted policies,
deductibles and retrospective premium adjustments and similar amounts not
covered by Insurance Policies in connection with Southern Energy Liabilities and
Insured Southern Energy Liabilities.
Section 2.5. Procedures With Respect to Insured Southern Energy
Liabilities.
(a) Reimbursement. Southern Energy will reimburse Southern for all
amounts incurred to pursue insurance recoveries from Insurance Policies for
Insured Southern Energy Liabilities.
(b) Management of Claims. The defense of claims, suits or actions
giving rise to potential or actual Insured Southern Energy Liabilities will be
managed (in conjunction with Southern's insurers, as appropriate) by the party
that would have had responsibility for managing such claims, suits or actions
had such Insured Southern Energy Liabilities been Southern Energy Liabilities.
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Section 2.6. Insufficient Limits of Liability for Southern
Liabilities and Southern Energy Liabilities. In the event that there are
insufficient limits of liability available under Southern's Insurance Policies
in effect prior to the Distribution Date to cover the Liabilities of Southern
and/or Southern Energy that would otherwise be covered by such Insurance
Policies, then to the extent that other insurance is not available to Southern
and/or Southern Energy for such Liabilities an adjustment will be made in
accordance with the following procedures:
(i) Each party will be allocated an amount equal to
their proportional share of any excess Liabilities (net of any
deductible) of the lesser of (A) the available limits of liability
available under Southern's Insurance Policies in effect prior to the
Distribution Date net of uncollectible amounts attributable to
insurer insolvencies, and (B) the proceeds received from Southern's
Insurance Policies if the Liabilities are the subject of disputed
coverage claims and, following consultation with each other,
Southern and/or Southern Energy agree to accept less than full
policy limits from Southern's and Southern Energy's insurers (the
"Coverage Amount").
(ii) A party who receives more than its share of the
Coverage Amount (the "Overallocated Party") agrees to reimburse the
other party (the "Underallocated Party") to the extent that the
Liabilities of the Underallocated Party that would have been covered
under such Insurance Policies (subject to the limitations of Section
2.12) is less than the Underallocated Party's share of the Coverage
Amount.
(iii) This Section 2.6 shall terminate three years
following the Distribution Date; provided, however, that either
party may extend the three year period applicable to these
provisions by up to five additional two-year periods, or as
otherwise shall be agreed to in order to accomplish the allocation
objective set forth above and in order to have access to any
available coverage under the Insurance Policies.
Section 2.7. Cooperation. Southern and Southern Energy will
cooperate with each other in all respects, and they shall execute any additional
documents which are reasonably necessary, to effectuate the provisions of this
Article II.
Section 2.8. No Assignment or Waiver. This Agreement shall not be
considered as an attempted assignment of any policy of insurance or as a
contract of insurance and shall not be construed to waive any right or remedy of
any member of the Southern Group in respect of any Insurance Policy or any other
contract or policy of insurance.
Section 2.9. No Liability. Southern Energy does hereby, for itself
and as agent for each other member of the Southern Energy Group, agree that no
member of the Southern Group or any Southern Indemnitee shall have any Liability
whatsoever as a result of the insurance policies and practices of Southern and
its Subsidiaries as in effect at any time prior to the Distribution Date,
including as a result of the level or scope of any such insurance, the
creditworthiness of any insurance carrier, the terms and conditions of any
policy, the adequacy or timeliness of any notice to any insurance carrier with
respect to any claim or potential claim or otherwise.
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Section 2.10. No Restrictions. Nothing in this Agreement shall be
deemed to restrict any member of the Southern Energy Group from acquiring at its
own expense any other insurance policy in respect of any Liabilities or covering
any period.
Section 2.11. Further Agreements. The Parties acknowledge that they
intend to allocate financial obligations without violating any laws regarding
insurance, self-insurance or other financial responsibility. If it is determined
that any action undertake pursuant to the Separation Agreement, this Agreement
or any Ancillary Agreement is violative of any insurance, self-insurance or
related financial responsibility law or regulation, the parties agree to work
together to do whatever is necessary to comply with such law or regulation while
trying to accomplish, as much as possible, the allocation of financial
obligations as intended in the Separation Agreement, this Agreement and any
Ancillary Agreement.
Section 2.12. Agreement Regarding Insurance Covering Environmental
Claims. Notwithstanding anything to the contrary in this Agreement (including
Article II hereof), the Separation Agreement or any Ancillary Agreement:
(a) Except as set forth in Section 2.12(b), Southern Energy shall
not make any claim against, or be entitled to any proceeds from, any primary,
umbrella or excess general liability policy in effect prior to the Separation
Date for any Environmental Claims;
(b) In the event that an Environmental Claim could be covered under
any primary, umbrella or excess general liability policy in effect prior to the
Separation Date, and provided that at the time the claim is made Southern has
not fully and finally released or agreed to release (at Southern's sole
discretion) the insurance carrier with respect to coverage applicable to that
claim under such policy, Southern Energy shall be permitted to submit the
Environmental Claim to Southern for submission to the relevant insurance
carrier. Southern shall control all negotiations on the claim and the policy
with the insurance carrier, and Southern Energy shall be entitled to an
equitable apportionment of any proceeds received by Southern from the policy.
Section 2.13. Matters Governed by Employee Matters Agreement. This
Article II shall not apply to any insurance policies that are the subject of the
Employee Matters Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1. Entire Agreement. This Agreement, the Master Separation
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
attached hereto and thereto, constitutes the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all prior
written and oral and all contemporaneous oral agreements and understandings with
respect to the subject matter hereof.
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Section 3.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia as to all matters
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
Section 3.3. Notices. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the attention of
the party's General Counsel at the address of its principal executive office or
such other address as a party may request by notifying the other in writing.
Section 3.4. Parties in Interest. This Agreement, including the
Schedules and Exhibits hereto, and the other documents referred to herein, shall
be binding upon Southern, Southern's Subsidiaries, Southern Energy and Southern
Energy's Subsidiaries and inure solely to the benefit of the Southern Energy
Indemnitees and the Southern Indemnitees and their respective permitted assigns,
and nothing in this Agreement, express or implied, is intended to confer upon
any other Person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 3.5. Other Agreements Evidencing Indemnification
Obligations. Southern hereby agrees to execute, for the benefit of any Southern
Energy Indemnitee, such documents as may be reasonably requested by such
Southern Energy Indemnitee, evidencing Southern's agreement that the
indemnification obligations of Southern set forth in this Agreement inure to the
benefit of and are enforceable by such Southern Energy Indemnitee. Southern
Energy hereby agrees to execute, for the benefit of any Southern Indemnitee,
such documents as may be reasonably requested by such Southern Indemnitee,
evidencing Southern Energy's agreement that the indemnification obligations of
Southern Energy set forth in this Agreement inure to the benefit of and are
enforceable by such Southern Indemnitee.
Section 3.6. Counterparts. This Agreement, including the Schedules
and Exhibits hereto, and the other documents referred to herein, may be executed
in counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
Section 3.7. Assignment. The rights and obligations in this
Agreement may not be assigned or delegated by any party hereto, in whole or in
part, without the express prior written consent of the other party hereto.
Section 3.8. Severability. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
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Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible.
Section 3.9. Failure or Indulgence Not Waiver. No failure or delay
on the part of either party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor shall any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right.
Section 3.10. Amendment. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to this Agreement.
Section 3.11. Authority. Each of the parties hereto represents to
the other that (a) it has the corporate or other requisite power and authority
to execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other action, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
Section 3.12. Interpretation. The headings contained in this
Agreement, in any Exhibit or Schedule hereto and in the table or contents to
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Any capitalized term used in
any Schedule or Exhibit but not otherwise defined therein, shall have the
meaning assigned to such term in this Agreement. When a reference is made in
this Agreement to an Article or a Section, Exhibit or Schedule, such reference
shall be to an Article or Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated.
Section 3.13. Governmental Approvals. The parties acknowledge that
certain of the provisions of this Agreement may be subject to certain conditions
established by applicable government regulations, orders, and approvals
("Existing Authority"). The parties intend to implement this Agreement
consistent with and to the extent permitted by Existing Authority and to
cooperate toward obtaining and maintaining in effect such governmental agency
consents, orders or approvals as may be required in order to implement this
Agreement as fully as possible in accordance with its terms.
ARTICLE IV
DEFINITIONS
Section 4.1. Action. "Action" means any demand, action, suit,
countersuit, arbitration, inquiry, proceeding or investigation by or before any
federal, state, local, foreign or international governmental authority or any
arbitration or mediation tribunal.
Section 4.2. Affiliated Company. "Affiliated Company" has the
meaning set forth in the Separation Agreement.
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Section 4.3. Claims Committee. "Claims Committee" means a committee
composed of (i) either the General Counsel or an Associate General Counsel of
Southern and (ii) either the General Counsel or an Associate General Counsel of
Southern Energy.
Section 4.4. Commingled Claims. "Commingled Claims" means,
collectively, any Third Party Claims (i) which involve an employee, consultant
or contractor that was employed by both the Southern Energy Business and the
Southern Business, (ii) in which both Southern and Southern Energy are named, or
(iii) involving both the Southern Energy Business and the Southern Business.
Section 4.5. Coverage Amount. "Coverage Amount" has the meaning set
forth in Section 2.6(a) of this Agreement.
Section 4.6. Credit Support Arrangements. "Credit Support
Arrangements" has the meaning set forth in Section 5.13 of the Separation
Agreement.
Section 4.7. Employee Matters Agreement. "Employee Matters
Agreement" means the Employee Matters Agreement attached as an exhibit to the
Separation Agreement.
Section 4.8. Employment Liabilities. "Employment Liabilities" has
the meaning set forth in Schedule 2.01 to the Employee Matters Agreement.
Section 4.9. Environmental Claim. "Environmental Claim" means any
and all administrative or judicial actions, suits, orders, claims, liens,
notices of violation, investigations, complaints, requests for information,
proceedings or other written communication, whether criminal or civil, by any
Person based upon, alleging, asserting, or claiming any (a) violation of, or
liability under any environmental law, (b) violation of any permit, or (c)
liability for investigatory costs, cleanup costs, removal costs, remedial costs,
response costs, natural resource damages, property damage, personal injury,
fines, or penalties arising out of, based upon, resulting from or related to,
the presence, release, or threatened release into the environment of any
hazardous materials or any other environmental condition.
Section 4.10. HoldCo Transaction. "HoldCo Transaction" has the
meaning set forth in the Separation Agreement.
Section 4.11. Indemnitee. "Indemnitee" has the meaning set forth in
Section 1.4(a) hereof.
Section 4.12. Insurance Policies. "Insurance Policies" means
insurance policies pursuant to which a Person makes a true risk transfer to an
insurer.
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Section 4.13. Insurance Transition Period. "Insurance Transition
Period" has the meaning set forth in Section 2.1 of this Agreement.
Section 4.14. Insured Southern Energy Liability. "Insured Southern
Energy Liability" means any Southern Energy Liability to the extent that (i) it
is covered under the terms of Southern's Insurance Policies in effect prior to
the Distribution Date and (ii) Southern Energy is not a named insured under, or
otherwise entitled to the benefits of, such Insurance Policies.
Section 4.15. Intercompany Agreements. "Intercompany Agreements"
means any written agreement between Southern or any of its Subsidiaries or
Affiliated Companies and Southern Energy or any of its Subsidiaries or
Affiliated Companies which is in effect prior to the Separation Date.
Section 4.16. IPO Registration Statement. "IPO Registration
Statement" means the registration statement on Form S-1 pursuant to the
Securities Act to be filed with the SEC registering the shares of common stock
of Southern Energy to be issued in the IPO, together with all amendments
thereto.
Section 4.17. Liabilities. "Liabilities" means all debts,
liabilities, guarantees, assurances, commitments and obligations, whether fixed,
contingent or absolute, asserted or unasserted, matured or unmatured, liquidated
or unliquidated, accrued or not accrued, known or unknown, due or to become due,
whenever or however arising (including, without limitation, whether arising out
of any contract or tort based on negligence or strict liability) and whether or
not the same would be required by generally accepted principles and accounting
policies to be reflected in financial statements or disclosed in the notes
thereto. For purposes of any indemnification hereunder, "Liabilities" shall be
deemed also to include any and all damages, claims, suits, judgments, fines,
penalties, costs and expenses of any kind or character, including attorney's
fees.
Section 4.18. Person. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
Section 4.19. Separation. "Separation" has the meaning set forth in
the Separation Agreement.
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Section 4.20. Separation Agreement. "Separation Agreement" means the
Master Separation and Distribution Agreement dated [ _______, 2000], of which
this is an exhibit thereto.
Section 4.21. Separation Date. "Separation Date" means [12:01 a.m.,
Eastern Standard Time, July 1, 2000], or such date as may be fixed by the Board
of Directors of Southern.
Section 4.22. Southern Business. "Southern Business" has the
meaning set forth in the Separation Agreement.
Section 4.23. Southern Energy Business. "Southern Energy Business"
has the meaning set forth in the Separation Agreement.
Section 4.24. Southern Energy Covered Parties. "Southern Energy
Covered Parties" shall have the meaning set forth in Section 2.1(a) of this
Agreement.
Section 4.25. Southern Energy Group. "Southern Energy Group" has the
meaning set forth in the Separation Agreement.
Section 4.26. Southern Energy Indemnitees. "Southern Energy
Indemnitees" means Southern Energy, each member of the Southern Energy Group and
each of their respective directors, officers and employees.
Section 4.27. Southern Energy Liabilities. "Southern Energy
Liabilities" means i) all Liabilities of the Southern Energy Group, and (ii) the
Credit Support Arrangements.
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Section 4.28. Southern Group. "Southern Group" has the meaning set
forth in the Separation Agreement.
Section 4.29. Southern Indemnitees. "Southern Indemnitees" means
Southern, each member of the Southern Group and each of their respective
directors, officers and employees.
Section 4.30. Subsidiary. "Subsidiary" has the meaning set forth in
the Separation Agreement.
Section 4.31. Tax Indemnification Agreement. "Tax Indemnification
Agreement" means the Tax Indemnification Agreement attached as an exhibit to the
Separation Agreement.
Section 4.32. Taxes. "Taxes" has the meaning set forth in the Tax
Indemnification Agreement.
Section 4.33. Third Party Claim. "Third Party Claim" has the meaning
set forth in Section 1.4(a) of this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties has caused this
Indemnification and Insurance Matters Agreement to be executed on its behalf by
its officers thereunto duly authorized on the day and year first above written.
THE SOUTHERN COMPANY
By:
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Name:
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Title:
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SOUTHERN ENERGY, INC.
By:
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Name:
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Title:
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