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EXHIBIT 10.1
FORM OF
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
BETWEEN
THE SOUTHERN COMPANY
AND
SOUTHERN ENERGY, INC.
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TABLE OF CONTENTS
Page
ARTICLE I SEPARATION....................................................................................2
Section 1.1. Separation Date..........................................................................2
Section 1.2. Closing of Transactions..................................................................2
Section 1.3. Exchange of Secretary's Certificates.....................................................2
ARTICLE II DOCUMENTS TO BE DELIVERED ON THE SEPARATION DATE.............................................2
Section 2.1. Documents to Be Delivered By Southern....................................................2
Section 2.2 Documents to Be Delivered by Southern Energy..............................................3
ARTICLE III THE IPO AND ACTIONS PENDING THE IPO........................................................3
Section 3.1 Transactions Prior to the IPO.............................................................3
Section 3.2. Use of Proceeds..........................................................................4
Section 3.3 Cooperation...............................................................................4
Section 3.4 Conditions Precedent to Consummation of the IPO...........................................4
ARTICLE IV THE DISTRIBUTION.............................................................................6
Section 4.1 The Distribution.........................................................................6
Section 4.2 Actions Prior To The Distribution........................................................6
Section 4.3 Sole Discretion of Southern...............................................................7
Section 4.4 Conditions To Distribution................................................................8
Section 4.5 Fractional Shares.........................................................................8
ARTICLE V COVENANTS AND OTHER MATTERS...................................................................9
Section 5.1 Other Agreements..........................................................................9
Section 5.2 Further Instruments.......................................................................9
Section 5.3 Agreement For Exchange of Information.....................................................9
Section 5.4 Auditors and Audits; Annual and Quarterly Statements and Accounting......................11
Section 5.5 Consistency with Past Practices..........................................................13
Section 5.6 Payment of Expenses......................................................................13
Section 5.7 Dispute Resolution.......................................................................13
Section 5.8 Governmental Approvals...................................................................14
Section 5.9 Regulatory Proceedings...................................................................15
Section 5.10 Regulatory Effect of Distribution.......................................................15
Section 5.11 HoldCo Transaction......................................................................15
Section 5.12. Continuance of Southern Credit Support.................................................16
Section 5.13. Mobile Facility........................................................................16
Section 5.14 Assignment of Agreements................................................................17
Section 5.15 Southern Energy Board Representation....................................................17
ARTICLE VI MISCELLANEOUS...............................................................................18
Section 6.1 LIMITATION OF LIABILITY..................................................................18
Section 6.2 Entire Agreement.........................................................................18
Section 6.3 Governing Law............................................................................18
Section 6.4 Termination..............................................................................18
Section 6.5 Notices..................................................................................18
Section 6.6 Counterparts.............................................................................19
Section 6.7 Binding Effect; Assignment...............................................................19
Section 6.8 Severability.............................................................................19
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Section 6.9 Failure or Indulgence Not Waiver; Remedies Cumulative....................................19
Section 6.10 Amendment...............................................................................19
Section 6.11 Authority...............................................................................19
Section 6.12 Interpretation..........................................................................20
Section 6.13 Conflicting Agreements..................................................................20
ARTICLE VII DEFINITIONS................................................................................20
Section 7.1 Affiliated Company.......................................................................20
Section 7.2 Ancillary Agreements.....................................................................20
Section 7.3 Business Day.............................................................................20
Section 7.4 Change of Control Date...................................................................20
Section 7.5 Code.....................................................................................20
Section 7.6 Commission...............................................................................20
Section 7.7 Disputes.................................................................................21
Section 7.8 Distribution.............................................................................21
Section 7.9 Distribution Agent.......................................................................21
Section 7.10 Distribution Date.......................................................................21
Section 7.11 Exchange Act............................................................................21
Section 7.12 Governmental Approvals..................................................................21
Section 7.13 Governmental Authority..................................................................21
Section 7.14 HoldCo Transaction......................................................................21
Section 7.15 Information.............................................................................21
Section 7.16 IPO.....................................................................................21
Section 7.17 IPO Closing Date........................................................................21
Section 7.18 IPO Registration Statement..............................................................21
Section 7.19 NYSE....................................................................................22
Section 7.20 Person..................................................................................22
Section 7.21 Record Date.............................................................................22
Section 7.22 SE Finance..............................................................................22
Section 7.23 SE Capital Funding......................................................................22
Section 7.24 Separation..............................................................................22
Section 7.25 Separation Date.........................................................................22
Section 7.26 Southern Business.......................................................................22
Section 7.27 Southern Energy Business................................................................22
Section 7.28 Southern Energy Group...................................................................22
Section 7.29 Southern Energy Auditors................................................................23
Section 7.30 Southern Group..........................................................................23
Section 7.31 Southern's Auditors.....................................................................23
Section 7.32 Subsidiary..............................................................................23
Section 7.33 Xxxxxxxx Xxxxxxx........................................................................23
Section 7.34 Underwriters............................................................................23
Section 7.35 Underwriting Agreement..................................................................23
Schedule 5.11 HoldCo Transaction
Schedule 5.12 Plant Xxxxxxxx Transaction
Schedule 5.14 Transferred Agreements
Schedule 7.1 Southern Energy Affiliated Companies
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MASTER SEPARATION AND DISTRIBUTION AGREEMENT
THIS MASTER SEPARATION AND DISTRIBUTION AGREEMENT (this "Agreement") is
entered into as of September 1, 2000, between The Southern Company ("Southern"),
a Delaware corporation, and Southern Energy, Inc. ("Southern Energy"), a
Delaware corporation. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in Article VII hereof.
RECITALS
WHEREAS, the Boards of Directors of Southern and Southern Energy have each
determined that it would be appropriate and desirable for Southern to separate
the Southern Energy Group from the Southern Group (the "Separation"), and, in
connection with the Separation, for Southern to acquire certain entities
currently associated with the Southern Energy Business from Southern Energy, and
for Southern Energy to acquire certain assets from Southern; and
WHEREAS, Southern and Southern Energy currently contemplate that, in
connection with the Separation, Southern Energy will make an initial public
offering ("IPO") of an amount of its common stock pursuant to a registration
statement on Form S-1 pursuant to the Securities Act of 1933, as amended (the
"IPO Registration Statement"), that will reduce Southern's ownership of Southern
Energy by less than 20%; and
WHEREAS, Southern and Southern Energy further currently contemplate that, in
connection with the Separation, Southern Energy will transfer two of its
wholly-owned Subsidiaries, SE Finance and SE Capital Funding, to Southern (the
"HoldCo Transaction"), and Southern will assume certain liabilities in
connection therewith; and
WHEREAS, Southern currently contemplates that, within twelve months
following the IPO, Southern will distribute to the holders of its common stock,
by means of a pro rata distribution, all of the shares of Southern Energy common
stock then owned by Southern (the "Distribution"); and
WHEREAS, Southern and Southern Energy intend that the Distribution will
qualify as a tax-free distribution under Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement is intended to
be, and is hereby adopted as, a plan of reorganization under Section 368 of the
Code; and
WHEREAS, the parties intend in this Agreement, including the Exhibits and
Schedules hereto, to set forth the principal arrangements between them regarding
the Separation.
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NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
SEPARATION
Section 1.1. Separation Date. Unless otherwise provided in this Agreement,
or in any agreement to be executed in connection with this Agreement, the
effective time and date of each undertaking or agreement in connection with the
Separation shall be as of 12:01 a.m., Eastern Time, September 1, 2000 or such
other date as may be fixed by Southern (the "Separation Date").
Section 1.2. Closing of Transactions. Unless otherwise provided herein, the
closing of the transactions contemplated in Article II shall occur by the
lodging of each of the executed agreements, instruments or other documents to be
executed pursuant to this Agreement with Xxxxxxxx Xxxxxxx LLP, 000 Xxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, to be held in escrow for delivery as
provided in Section 1.3 of this Agreement.
Section 1.3. Exchange of Secretary's Certificates. Upon receipt of a
certificate of the Secretary or an Assistant Secretary of Southern in the form
attached to this Agreement as Exhibit A, Xxxxxxxx Xxxxxxx shall deliver to
Southern Energy on behalf of Southern all of the items required to be delivered
by Southern hereunder pursuant to Section 2.1 of this Agreement and each such
item shall be deemed to be delivered to Southern Energy as of the Separation
Date upon delivery of such certificate. Upon receipt of a certificate of the
Secretary or an Assistant Secretary of Southern Energy in the form attached to
this Agreement as Exhibit B, Xxxxxxxx Xxxxxxx shall deliver to Southern on
behalf of Southern Energy all of the items required to be delivered by Southern
Energy hereunder and each such item shall be deemed to be delivered to Southern
as of the Separation Date upon receipt of such certificate.
ARTICLE II
DOCUMENTS TO BE DELIVERED ON THE SEPARATION DATE
Section 2.1. Documents to Be Delivered By Southern. On the Separation Date,
Southern will deliver, or will cause its appropriate Subsidiaries to deliver, to
Southern Energy all of the following items and agreements (collectively,
together with all agreements and documents contemplated by this Agreement and
such other agreements, including any agreements, the "Ancillary Agreements"):
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(a) A duly executed Technology and Intellectual Property Ownership and
License Agreement substantially in the form attached hereto as
Exhibit C;
(b) A duly executed Employee Matters Agreement substantially in the form
attached hereto as Exhibit D;
(c) A duly executed Tax Indemnification Agreement substantially in the
form attached hereto as Exhibit E;
(d) A duly executed Transitional Services Agreement substantially in the
form attached hereto as Exhibit F;
(e) A duly executed Confidential Disclosure Agreement substantially in
the form attached hereto as Exhibit G;
(f) A duly executed Indemnification and Insurance Matters Agreement
substantially in the form attached hereto as Exhibit H;
(g) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes
hereof.
Section 2.2 Documents to Be Delivered by Southern Energy. As of the
Separation Date, in each case where Southern Energy or any of its Subsidiaries
is a party to any agreement or instrument referred to in Section 2.1, Southern
Energy will or will cause its appropriate Subsidiaries to deliver to Southern a
duly executed counterpart of such agreement or instrument.
ARTICLE III
THE IPO AND ACTIONS PENDING THE IPO
Section 3.1 Transactions Prior to the IPO. Subject to the conditions
specified in Section 3.4, Southern and Southern Energy shall use their
reasonable commercial efforts to consummate the IPO. Such efforts shall include,
but not necessarily be limited to, those specified in this Section 3.1:
(a) Registration Statement. Southern Energy shall file the IPO
Registration Statement, and such amendments or supplements thereto, as may be
necessary in order to cause the same to become and remain effective as required
by law or by the managing underwriters for the IPO (the "Underwriters"),
including, but not limited to, filing such amendments to the IPO Registration
Statement as may be required by the underwriting agreement to be entered into
among Southern Energy and the Underwriters (the "Underwriting Agreement"), the
Securities and Exchange Commission (the "Commission") or federal, state or
foreign securities laws. Southern and Southern Energy
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shall also cooperate in preparing, filing with the Commission and causing to
become effective a registration statement registering the common stock of
Southern Energy under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and any registration statements or amendments thereof which are
required to reflect the establishment of, or amendments to, any employee benefit
and other plans necessary or appropriate in connection with the IPO, the
Separation, the Distribution or the other transactions contemplated by this
Agreement.
(b) Underwriting Agreement. Southern Energy shall enter into the
Underwriting Agreement, in form and substance reasonably satisfactory to
Southern Energy, and shall comply with its obligations thereunder.
(c) Other Matters. Southern and Southern Energy shall consult with each
other and the Underwriters regarding the timing, pricing and other material
matters with respect to the IPO.
(d) Blue Sky. Southern Energy shall use its reasonable commercial efforts to
take all such action as may be necessary or appropriate under state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) in connection with the IPO.
(e) NYSE Listing. Southern Energy shall prepare, file and use reasonable
commercial efforts to seek to make effective, an application for listing of the
common stock of Southern Energy issued in the IPO on the New York Stock Exchange
(the "NYSE"), subject to official notice of issuance.
Section 3.2. Use of Proceeds. The proceeds of the IPO will be retained by
Southern Energy to be used for general corporate purposes.
Section 3.3 Cooperation. Southern Energy shall consult with, and cooperate
in all respects with, Southern in connection with the pricing of the common
stock of Southern Energy to be offered in the IPO and shall, at Southern's
direction, promptly take any and all actions necessary or desirable to
consummate the IPO as contemplated by the IPO Registration Statement and the
Underwriting Agreement.
Section 3.4 Conditions Precedent to Consummation of the IPO. As soon as
practicable after the Separation Date, the parties hereto shall use their
reasonable commercial efforts to satisfy the conditions listed below to the
consummation of the IPO. The obligations of the parties to use their reasonable
commercial efforts to consummate the IPO shall be conditioned on the
satisfaction, or waiver by Southern, of the following conditions:
(a) Registration Statement. The IPO Registration Statement shall have been
filed and declared effective by the Commission, and there shall be no stop-order
in effect with respect thereto.
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(b) Blue Sky. The actions and filings with regard to state securities and
blue sky laws of the United States (and any comparable laws under any foreign
jurisdictions) described in Section 3.1(d) shall have been taken and, where
applicable, have become effective or been accepted.
(c) NYSE Listing. The common stock of Southern Energy to be issued in the
IPO shall have been accepted for listing on the NYSE, on official notice of
issuance.
(d) Underwriting Agreement. Southern Energy shall have entered into the
Underwriting Agreement and all conditions to the obligations of Southern Energy
and the Underwriters shall have been satisfied or waived.
(e) Common Stock Ownership. Southern shall be satisfied in its sole
discretion that it will own more than 80% of the outstanding common stock of
Southern Energy following the IPO. All other conditions to permit the
Distribution to qualify as a tax-free distribution to Southern, Southern Energy
and Southern's stockholders shall, to the extent applicable as of the time of
the IPO, be satisfied, and there shall be no event or condition that is likely
to cause any of such conditions not to be satisfied as of the time of the
Distribution or thereafter.
(f) Governmental Approvals. Any material Governmental Approvals necessary to
consummate the IPO shall have been obtained and be in full force and effect.
(g) No Legal Restraints. No order, injunction or decree issued by any court
or agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Separation or the IPO or any of the other
transactions contemplated by this Agreement shall be in effect.
(h) Separation. The Separation shall have become effective.
(i) Other Actions. Such other actions as the parties hereto may, based upon
the advice of counsel, reasonably request to be taken prior to the IPO in order
to assure the successful completion of the IPO shall have been taken.
(j) No Termination. This Agreement shall not have been terminated.
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ARTICLE IV
THE DISTRIBUTION
Section 4.1 The Distribution.
(a) Delivery of Shares for Distribution. Subject to Section 4.4 hereof, on
or prior to the date the Distribution is effective (the "Distribution Date"),
Southern will deliver to the distribution agent to be appointed by Southern, or
if no distribution agent is appointed, then Southern (the "Distribution Agent"),
to distribute to the stockholders of Southern the shares of common stock of
Southern Energy held by Southern pursuant to the Distribution for the benefit of
holders of record of common stock of Southern on the Record Date, a single stock
certificate, endorsed by Southern in blank, representing all of the outstanding
shares of common stock of Southern Energy then owned by Southern, and shall
cause the transfer agent for the shares of common stock of Southern to instruct
the Distribution Agent to distribute on the Distribution Date the appropriate
number of such shares of common stock of Southern Energy to each such holder or
designated transferee or transferees of such holder.
(b) Shares Received. Subject to Sections 4.4 and 4.5, each holder of common
stock of Southern on the Record Date (or such holder's designated transferee or
transferees) will be entitled to receive in the Distribution a number of shares
of common stock of Southern Energy equal to the number of shares of common stock
of Southern held by such holder on the Record Date multiplied by a fraction the
numerator of which is the number of shares of common stock of Southern Energy
beneficially owned by Southern on the Record Date and the denominator of which
is the number of shares of common stock of Southern outstanding on the Record
Date.
(c) Obligation to Provide Information. Southern Energy and Southern, as the
case may be, will provide to the Distribution Agent all share certificates and
any information required in order to complete the Distribution on the basis
specified above.
Section 4.2 Actions Prior To The Distribution.
(a) Information Statement. Southern and Southern Energy shall prepare and
mail, prior to the Distribution Date, to the holders of common stock of Southern
such information concerning Southern Energy and the Distribution and such other
matters as Southern shall reasonably determine are necessary and as may be
required by law. Southern and Southern Energy will prepare, and Southern Energy
will, to the extent required under applicable law, file with the Commission any
such documentation which Southern and Southern Energy determines is necessary or
desirable to effectuate the Distribution, and Southern and Southern Energy shall
each use its reasonable commercial efforts to obtain all necessary approvals
from the Commission with respect thereto as soon as practicable.
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(b) Blue Sky. Southern and Southern Energy shall take all such actions as
may be necessary or appropriate under the securities or blue sky laws of the
United States (and any comparable laws under any foreign jurisdiction) in
connection with the Distribution.
(c) NYSE Listing. Southern Energy shall prepare and file, and shall use its
reasonable commercial efforts to have approved, an application for the listing
of the common stock of Southern Energy to be distributed in the Distribution on
the NYSE, subject to official notice of distribution.
(d) Resignation of Directors and Officers. Immediately prior to the
Distribution, (i) each person who is an officer, director or employee of any
member of the Southern Group and an officer, director or employee of any member
of the Southern Energy Group immediately prior to the Distribution (each a
"Joint Employee") and who is to continue as an officer, director or employee of
any member of the Southern Group after the Distribution shall resign from each
of such person's positions with each member of the Southern Energy Group, and
(ii) each such Joint Employee who is to continue as an officer, director or
employee of any member of the Southern Energy Group, after the Distribution,
shall resign from each of such person's positions with each member of the
Southern Group.
(e) Conditions. Southern and Southern Energy shall take all reasonable steps
necessary and appropriate to cause the conditions set forth in Section 4.4 to be
satisfied and to effect the Distribution on the Distribution Date.
Section 4.3 Sole Discretion of Southern. Southern currently intends,
following the consummation of the IPO, to complete the Distribution within
twelve (12) months of the IPO Closing Date. Southern shall, in its sole and
absolute discretion, determine the date of the consummation of the Distribution
and all terms of the Distribution, including, without limitation, the form,
structure and terms of any transaction(s) and/or offering(s) to effect the
Distribution and the timing of and conditions to the consummation of the
Distribution. In addition, Southern may at any time and from time to time until
the completion of the Distribution decide to abandon the Distribution or modify
or change the terms of the Distribution, including, without limitation, by
accelerating or delaying the timing of the consummation of all or part of the
Distribution. Southern Energy shall cooperate with Southern in all respects to
accomplish the Distribution and shall, at Southern's direction, promptly take
any and all actions necessary or desirable to effect the Distribution,
including, without limitation, the registration under the Securities Act of the
common stock of Southern Energy on an appropriate registration form or forms to
be designated by Southern. Southern shall select any investment banker(s) and
manager(s) in connection with the Distribution, as well as any financial
printer, solicitation and/or exchange agent and outside counsel for Southern;
provided, however, that nothing herein shall prohibit Southern Energy from
engaging (at its own expense) its own financial, legal, accounting and other
advisors in connection with the Distribution.
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Section 4.4 Conditions To Distribution. The following are conditions to the
consummation of the Distribution. The conditions are for the sole benefit of
Southern and shall not give rise to or create any duty on the part of Southern
or the Southern Board of Directors to waive or not waive any such condition.
(a) IRS Ruling. Southern shall have obtained a private letter ruling from
the Internal Revenue Service in form and substance satisfactory to Southern (in
its sole discretion), and such ruling shall remain in effect as of the
Distribution Date, to the effect that (i) the distribution by Southern of all of
its Southern Energy stock to the stockholders of Southern will qualify as a
reorganization under Section 355 of the Code; and (ii) no gain or loss will be
recognized by (and no amount will otherwise be included in the income of) the
stockholders of Southern upon their receipt of Southern Energy common stock
pursuant to the Distribution.
(b) Governmental Approvals. Any material Governmental Approvals necessary to
consummate the Distribution and the HoldCo Transaction shall have been obtained
and be in full force and effect;
(c) No Legal Restraints. No order, injunction or decree issued by any court
or agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Distribution shall be in effect and no other
event outside the control of Southern shall have occurred or failed to occur
that prevents the consummation of the Distribution; and
(d) No Material Adverse Effect. No other events or developments shall have
occurred subsequent to the IPO Closing Date that, in the judgment of the Board
of Directors of Southern, would result in the Distribution having a material
adverse effect on Southern or on the stockholders of Southern.
Section 4.5 Fractional Shares. As soon as practicable after the Distribution
Date, Southern shall direct the Distribution Agent to determine the number of
whole shares and fractional shares of common stock of Southern Energy allocable
to each holder of record or beneficial owner of common stock of Southern as of
the Record Date, to aggregate all such fractional shares and sell the whole
shares obtained thereby at the direction of Southern, in open market
transactions, at then prevailing trading prices, and to cause to be distributed
to each such holder or for the benefit of each such beneficial owner to which a
fractional share shall be allocable such holder's or owner's ratable share of
the proceeds of such sale, after making appropriate deductions of the amount
required to be withheld for federal income tax purposes and after deducting an
amount equal to all brokerage charges, commissions and transfer taxes attributed
to such sale. Southern and the Distribution Agent shall use their reasonable
commercial efforts to aggregate the shares of common stock of Southern that may
be held by any beneficial owner thereof through more than one account in
determining the fractional share allocable to such beneficial owner.
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ARTICLE V
COVENANTS AND OTHER MATTERS
Section 5.1 Other Agreements. In addition to the specific agreements,
documents and instruments annexed to this Agreement, Southern and Southern
Energy agree to execute or cause to be executed by the appropriate parties and
deliver, as appropriate, such other agreements, instruments and other documents
as may be necessary or desirable in order to effect the purposes of this
Agreement and the Ancillary Agreements.
Section 5.2 Further Instruments. At the request of Southern Energy and
without further consideration, Southern will execute and deliver, and will cause
its applicable Subsidiaries to execute and deliver, to Southern Energy and its
Subsidiaries such other instruments of transfer, conveyance, assignment,
substitution and confirmation and take such action as Southern Energy may
reasonably deem necessary or desirable in order more effectively to transfer,
convey and assign to Southern Energy and its Subsidiaries and confirm Southern
Energy's and its Subsidiaries' title to all of the assets, rights and other
things of value contemplated to be transferred to Southern Energy and its
Subsidiaries pursuant to this Agreement, the Ancillary Agreements, and any
documents referred to therein, to put Southern Energy and its Subsidiaries in
actual possession and operating control thereof and to permit Southern Energy
and its Subsidiaries to exercise all rights with respect thereto (including,
without limitation, rights under contracts and other arrangements as to which
the consent of any third party to the transfer thereof shall not have previously
been obtained). At the request of Southern and without further consideration,
Southern Energy will execute and deliver, and will cause its applicable
Subsidiaries to execute and deliver, to Southern and its Subsidiaries all
instruments, assumptions, novations, undertakings, substitutions or other
documents and take such other action as Southern may reasonably deem necessary
or desirable in order to have Southern Energy fully and unconditionally assume
and discharge the liabilities contemplated to be assumed by Southern Energy
under this Agreement or any document in connection herewith and to relieve the
Southern Group of any liability or obligation with respect thereto and evidence
the same to third parties. Neither Southern nor Southern Energy shall be
obligated, in connection with the foregoing, to expend money other than
reasonable out-of-pocket expenses, attorneys' fees and recording or similar
fees. Furthermore, each party, at the request of another party hereto, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
Section 5.3 Agreement For Exchange of Information. Each of Southern and
Southern Energy agrees to provide, or cause to be provided, to each other, at
any time before or after the Change of Control Date, as soon as reasonably
practicable after written request therefor, any Information in the possession or
under the control of such party that the requesting party reasonably needs (i)
to comply with reporting, disclosure, filing or
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other requirements imposed on the requesting party (including under applicable
securities laws) by a Governmental Authority having jurisdiction over the
requesting party, (ii) for use in any other judicial, regulatory, administrative
or other proceeding or in order to satisfy audit, accounting, claims,
regulatory, litigation or other similar requirements, (iii) to comply with its
obligations under this Agreement or any Ancillary Agreement or (iv) in
connection with the ongoing businesses of Southern or Southern Energy as it
relates to the conduct of such businesses prior to the Change of Control Date,
as the case may be; provided, however, that in the event that any party
determines that any such provision of Information could be commercially
detrimental, violate any law or agreement, or waive any attorney-client
privilege, the parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence.
(a) Internal Accounting Controls; Financial Information. After the
Separation Date, (i) each party shall maintain in effect at its own cost and
expense adequate systems and controls for its business to the extent necessary
to enable the other party to satisfy its reporting, accounting, audit and other
obligations, and (ii) each party shall provide, or cause to be provided, to the
other party and its Subsidiaries in such form as such requesting party shall
request, at no charge to the requesting party, all financial and other data and
information as the requesting party determines necessary or advisable in order
to prepare its financial statements and reports or filings with any Governmental
Authority.
(b) Ownership of Information. Any Information owned by a party that is
provided to a requesting party pursuant to this Section 5.3 shall be deemed to
remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
(c) Record Retention. To facilitate the possible exchange of Information
pursuant to this Section 5.3 and other provisions of this Agreement after the
Change of Control Date, each party agrees to use its reasonable commercial
efforts to retain all Information in its respective possession or control on the
Change of Control Date substantially in accordance with its policies as in
effect on the Separation Date. Southern Energy shall not amend its or its
Subsidiaries' record retention policies prior to the Change of Control Date
without the consent of Southern. However, except as set forth in the Tax
Indemnification Agreement, at any time after the Change of Control Date, each
party may amend their respective record retention policies at such party's
discretion; provided, however, that if a party desires to effect the amendment
within three (3) years after the Change of Control Date, the amending party must
give thirty (30) days prior written notice of such change in the policy to the
other party to this Agreement. No party will destroy, or permit any of its
Subsidiaries to destroy, any Information that exists on the Separation Date
(other than Information that is permitted to be destroyed under the current
record retention policy of such party) without first using its reasonable
commercial efforts to notify the other party of the proposed destruction and
giving the other party the opportunity to take possession of such Information
prior to such destruction.
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(d) Limitation of Liability. No party shall have any liability to any other
party in the event that any Information exchanged or provided pursuant to this
Section is found to be inaccurate, in the absence of willful misconduct by the
party providing such Information. No party shall have any liability to any other
party if any Information is destroyed or lost after reasonable commercial
efforts by such party to comply with the provisions of Section 5.4(c).
(e) Other Agreements Providing For Exchange of Information. The rights and
obligations granted under this Section 5.3 are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of Information set forth in this Agreement and any
Ancillary Agreement.
(f) Production of Witnesses; Records; Cooperation. Each party hereto shall,
except in the case of a legal or other proceeding by one party against another
party (which shall be governed by such discovery rules as may be applicable
under Section 5.7 or otherwise), use its reasonable commercial efforts to make
available to each other party, upon written request, the former, current and
future directors, officers, employees, other personnel and agents of such party
as witnesses and any books, records or other documents within its control or
which it otherwise has the ability to make available, to the extent that any
such person (giving consideration to business demands of such directors,
officers, employees, other personnel and agents) or books, records or other
documents may reasonably be required in connection with any legal, regulatory,
administrative or other proceeding in which the requesting party may from time
to time be involved, regardless of whether such legal, regulatory,
administrative or other proceeding is a matter with respect to which
indemnification may be sought hereunder. The requesting party shall bear all
costs and expenses in connection therewith.
Section 5.4 Auditors and Audits; Annual and Quarterly Statements and
Accounting. Each party agrees that, for so long as Southern Energy remains a
Subsidiary of Southern, and with respect to any financial reporting period
during which Southern Energy was a Subsidiary of Southern:
(a) Selection of Auditors. Southern Energy shall not select a different
accounting firm than the firm selected by Southern to audit its financial
statements to serve as its independent certified public accountants (the
"Southern Energy Auditors") for purposes of providing an opinion on its
consolidated financial statements without Southern's prior written consent
(which shall not be unreasonably withheld).
(b) Date of Auditors' Opinion and Quarterly Reviews. Southern Energy shall
use its reasonable commercial efforts to enable the Southern Energy Auditors to
complete their audit such that they will date their opinion on Southern Energy's
audited annual financial statements on the same date that Southern's independent
certified public accountants ("Southern's Auditors") date their opinion on
Southern's audited annual financial statements, and to enable Southern to meet
its timetable for the printing, filing
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and public dissemination of Southern's annual financial statements. Southern
Energy shall use its reasonable commercial efforts to enable the Southern Energy
Auditors to complete their quarterly review procedures such that they will
provide clearance on Southern Energy's quarterly financial statements on the
same date that Southern's Auditors provide clearance on Southern's quarterly
financial statements.
(c) Annual and Quarterly Financial Statements. Southern Energy shall provide
to Southern on a timely basis all Information that Southern reasonably requires
to meet its schedule for the preparation, printing, filing, and public
dissemination of Southern's annual and quarterly financial statements. Without
limiting the generality of the foregoing, Southern Energy will provide all
required financial Information with respect to Southern Energy and its
Subsidiaries to the Southern Energy Auditors in a sufficient and reasonable time
and in sufficient detail to permit the Southern Energy Auditors to take all
steps and perform all reviews necessary to provide sufficient assistance to
Southern's Auditors with respect to Information to be included or contained in
Southern's annual and quarterly financial statements. Similarly, Southern shall
provide to Southern Energy on a timely basis all Information that Southern
Energy reasonably requires to meet its schedule for the preparation, printing,
filing, and public dissemination of Southern Energy's annual and quarterly
financial statements. Without limiting the generality of the foregoing, Southern
will provide all required financial Information with respect to Southern and its
Subsidiaries to Southern's Auditors in a sufficient and reasonable time and in
sufficient detail to permit Southern's Auditors to take all steps and perform
all reviews necessary to provide sufficient assistance to the Southern Energy
Auditors with respect to Information to be included or contained in Southern
Energy's annual and quarterly financial statements.
(d) Identity of Personnel Performing the Annual Audit and Quarterly Reviews.
Southern Energy shall authorize the Southern Energy Auditors to make available
to Southern's Auditors both the personnel who performed or are performing the
annual audits and quarterly reviews of Southern Energy and work papers related
to the annual audits and quarterly reviews of Southern Energy, in all cases
within a reasonable time prior to the Southern Energy Auditors' opinion date, so
that Southern's Auditors are able to perform the procedures they consider
necessary to take responsibility for the work of the Southern Energy Auditors as
it relates to Southern's Auditors' report on Southern's financial statements,
all within sufficient time to enable Southern to meet its timetable for the
printing, filing and public dissemination of Southern's annual and quarterly
statements. Similarly, Southern shall authorize Southern's Auditors to make
available to the Southern Energy Auditors both the personnel who performed or
are performing the annual audits and quarterly reviews of Southern and work
papers related to the annual audits and quarterly reviews of Southern, in all
cases within a reasonable time prior to Southern's Auditors' opinion date, so
that the Southern Energy Auditors are able to perform the procedures they
consider necessary to take responsibility for the work of Southern's Auditors as
it relates to the Southern Energy Auditors' report on Southern Energy's
statements, all within sufficient time to enable Southern Energy to meet its
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timetable for the printing, filing and public dissemination of Southern Energy's
annual and quarterly financial statements.
(e) Notice of Change in Accounting Principles. Southern Energy shall give
Southern as much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting estimates or
accounting principles from those in effect on the Separation Date. Southern
Energy will consult with Southern and, if requested by Southern, Southern Energy
will consult with Southern's Auditors with respect thereto. Southern shall give
Southern Energy as much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting estimates or
accounting principles from those in effect on the Separation Date.
(f) Conflict with Third-Party Agreements. Nothing in Sections 5.3 and 5.4
shall require Southern Energy to violate any agreement with any third parties
regarding the confidentiality of confidential and proprietary information
relating to that third party or its business; provided, however, that in the
event that Southern Energy is required under Sections 5.3 and 5.4 to disclose
any such information, Southern Energy shall use all commercially reasonable
efforts to seek to obtain such third party's consent to the disclosure of such
information.
Section 5.5 Consistency with Past Practices. At all times Southern will
cause Southern Energy before the Separation Date to continue to conduct business
in the ordinary course, including but not limited to acquisitions, divestitures
and project financings, consistent with past practices.
Section 5.6 Payment of Expenses. Southern Energy shall pay all underwriting
fees (other than incentive fees), discounts and commissions incurred in
connection with the IPO. Except as otherwise provided in this Agreement, the
Ancillary Agreements or any other agreement between the parties relating to the
Separation, the IPO or the Distribution, all other out-of-pocket costs and
expenses of the parties hereto in connection with the preparation of this
Agreement and the Ancillary Agreements, the IPO (including underwriting
incentive fees) and the Distribution shall be paid by Southern. Notwithstanding
the foregoing, Southern Energy shall pay any internal fees, costs and expenses
incurred by Southern Energy in connection with the Separation, the IPO and the
Distribution.
Section 5.7 Dispute Resolution. Except as otherwise set forth in any
Ancillary Agreement, resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "Disputes"), shall be exclusively governed by and settled in
accordance with the provisions of this Section 5.7.
(a) Negotiation. The parties shall make a good faith attempt to resolve any
Dispute arising out of or relating to this Agreement through negotiation. Within
thirty (30) days after notice of a Dispute is given by either party to the other
party, each party
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shall select one or more representatives who are vice presidents, senior vice
presidents or executive vice presidents of such party, which representatives
shall meet and make a good faith attempt to resolve such Dispute and shall
continue to negotiate in good faith in an effort to resolve the Dispute or
renegotiate the applicable section or provision without the necessity of any
formal proceedings. If such representatives fail to resolve a Dispute within
thirty (30) days after the first meeting of the representatives, such Dispute
shall be referred to the chief executive officers of each of the parties for
resolution. During the course of negotiations under this Section 5.7(a), all
reasonable requests made by one party to the other for information, including
requests for copies of relevant documents, will be honored. The specific format
for such negotiations will be left to the discretion of the designated
representatives but may include the preparation of agreed upon statements of
fact or written statements of position furnished to the other party.
(b) Non-Binding Mediation. In the event that any Dispute arising out of or
related to this Agreement is not settled by the parties within thirty (30) days
after the referral of such Dispute to the chief executive officers of the
parties under Section 5.7(a), the parties will attempt in good faith to resolve
such Dispute by non-binding mediation in accordance with the American
Arbitration Association Commercial Mediation Rules. The mediation shall be held
within thirty (30) days of the end of such thirty (30) day negotiation period of
the chief executive officers. Except as provided below in Section 5.7(c), no
litigation for the resolution of such dispute may be commenced until the parties
try in good faith to settle the dispute by such mediation in accordance with
such rules and either party has concluded in good faith that amicable resolution
through continued mediation of the matter does not appear likely. The costs of
mediation shall be shared equally by the parties to the mediation. Any
settlement reached by mediation shall be recorded in writing, signed by the
parties, and shall be binding on them.
(c) Proceedings. Nothing herein, however, shall prohibit either party from
initiating litigation or other judicial or administrative proceedings if such
party would be substantially harmed by a failure to act during the time that
such good faith efforts are being made to resolve the Dispute through
negotiation or mediation. In the event that litigation is commenced under this
Section 5.7(c), the parties agree to continue to attempt to resolve any Dispute
according to the terms of Sections 5.7(a) and 5.7(b) during the course of such
litigation proceedings under this Section 5.7(c).
Section 5.8 Governmental Approvals. The parties acknowledge that certain of
the transactions contemplated by this Agreement and the Ancillary Agreements are
subject to certain conditions established by applicable government regulations,
orders, and approvals ("Existing Authority"). The parties intend to implement
this Agreement, the Ancillary Agreements and the transactions contemplated
thereby consistent with and to the extent permitted by Existing Authority and to
cooperate toward obtaining and maintaining in effect such Governmental Approvals
as may be required in order to implement this Agreement and each of the
Ancillary Agreements as fully as possible in accordance with their respective
terms. To the extent that any of the transactions contemplated by this Agreement
or any Ancillary Agreement require any Governmental
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Approvals, the parties will use their reasonable commercial efforts to obtain
any such Governmental Approvals.
Section 5.9 Regulatory Proceedings. For a period beginning on the Separation
Date and ending eighteen (18) months after the Change of Control Date, neither
Southern Energy nor any Subsidiary of Southern Energy will initiate, intervene
in, or participate in any proceedings or matter before the Federal Energy
Regulatory Commission or any agency or legislature of the States of Alabama,
Florida, Georgia or Mississippi which directly involves (1) corporate
transactions or (2) the generation, transmission, distribution, purchase or sale
of electric power by Southern or any of its Subsidiaries unless prior written
consent is given by Southern, except to the extent that any such proceedings or
matters involve obligations arising under this Agreement or any of the Ancillary
Agreements, or to the extent any such proceeding or matter directly involves a
contract or agreement for the purchase or sale of electricity or gas by Southern
Energy or any Subsidiary of Southern Energy, or to the extent any such
proceeding before the Federal Energy Regulatory Commission involves the
transmission of electricity, except for a proceeding to establish a regional
transmission organization in which Southern or any of its Subsidiaries is a
participant.
Section 5.10 Regulatory Effect of Distribution. Southern and Southern Energy
intend that the Distribution will result in Southern Energy and its Subsidiaries
losing their status under the Public Utility Holding Company Act of 1935
("PUHCA") as "affiliates" or "subsidiaries" of Southern or its Subsidiaries. To
the extent a doubt arises as to that legal effect, at the request of either,
Southern and Southern Energy shall cooperate in resolving such doubt to achieve
that mutual goal through reasonable changes in business practices, cooperating
towards regulatory or judicial filings or proceedings or obtaining no-action
letter relief. Without limiting the foregoing, in the event Southern owns less
than 20% of the outstanding common stock of Southern Energy at any time while
PUHCA continues to be in effect, Southern shall, at Southern Energy's request,
enter into voting trust agreements or voting covenants designed to eliminate
attribution of voting securities control to Southern to the extent necessary to
cause Southern Energy and its Subsidiaries to lose their status under PUHCA as
"affiliates" or "subsidiaries" of Southern or its Subsidiaries.
Section 5.11 HoldCo Transaction. As promptly as practicable following the
receipt of all required Governmental Approvals and any required consents or
approvals of any lender to Southern or Southern Energy or its Subsidiaries, (a)
Southern Energy and Southern shall cause SE Finance and SE Capital Funding to be
transferred to Southern, in substantially the manner set forth on Schedule
5.11(a) or in such other manner as Southern and Southern Energy may agree, and
each of Southern and Southern Energy shall execute and deliver any and all
instruments of transfer, stock transfer powers or other agreements or documents
and take such actions as may be necessary to effectively transfer SE Finance and
SE Capital Funding to Southern in such manner, and to permit Southern and its
Subsidiaries to exercise all rights with respect thereto, and (b) Southern and
Southern Energy shall execute and deliver any and all such instruments of
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substitution and such other instruments or agreements as shall be necessary for
the obligations of Southern Energy under the each of the agreements set forth on
Schedule 5.11(b) (the "Keepwell Agreements") to be substituted by Southern and
for Southern Energy to be unconditionally released therefrom, provided that
Southern shall not be required to grant or provide any cash or other
consideration in connection with any such assumption or substitution or assume
or otherwise become liable for any liabilities or obligations which exceed the
liabilities or obligations of Southern Energy under the Keepwell Agreements
immediately prior to such assumption.
Section 5.12. Continuance of Southern Credit Support. Notwithstanding any
other provision of this Agreement or the provisions of any Ancillary Agreement
to the contrary, the parties hereby agree that (i) Southern shall maintain in
full force and effect each guarantee, letter of credit, keepwell or support
agreement or other credit support document, instrument or other similar
arrangement issued for the benefit of any Person in the Southern Energy Group by
or on behalf of Southern (the "Credit Support Arrangements") which is
outstanding as of the Separation Date, until such time as such Credit Support
Arrangement terminates in accordance with its terms or is otherwise released at
the request of Southern Energy; provided, that Southern Energy shall use
commercially reasonable efforts, at the request of Southern, to attempt to
release or replace any Credit Support Arrangement for which such replacement or
release is reasonably available; and (ii) after the IPO Closing Date and until
the first date on which Southern Energy is no longer a Subsidiary of Southern
(the "Additional Credit Support Arrangement Commitment Termination Date"), upon
the request of Southern Energy, Southern shall issue additional Credit Support
Arrangements for the benefit of Southern Company Energy Marketing L.P. ("SCEM");
provided, that Southern shall not be obligated to issue any such additional
Credit Support Arrangements to the extent that the aggregate amount of all
outstanding Credit Support Arrangements for the benefit of SCEM would exceed
$425,000,000; provided further, that Southern shall not be required to provide
any such additional Credit Support Arrangements on terms that are materially
more burdensome to Southern than the terms of the Credit Support Arrangements
outstanding on the date of this Agreement; and provided, further, that Southern
may condition such additional Credit Support Arrangements such that they may
expire approximately six (6) months following the Additional Credit Support
Arrangement Commitment Termination Date. In consideration of Southern's
provision of the Credit Support Arrangements, Southern Energy shall pay to
Southern, beginning on the Additional Credit Support Arrangement Commitment
Termination Date, a monthly fee in an amount equal to 1% per annum, payable in
arrears on the first day of each month on the average aggregate maximum
principal amount of all Credit Support Arrangements outstanding during such
month.
Section 5.13. Mobile Facility. Southern and Southern Energy shall continue
discussions following the Separation Date regarding the appropriate ownership
and operation of the Mobile, Alabama cogeneration facility, including the
possibility of an incentive-based operating agreement with a Southern Energy
Subsidiary.
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Section 5.14 Assignment of Agreements. Effective as of the Separation Date,
Southern shall assign, transfer, convey and deliver to Southern Energy, and
agrees to cause its applicable Subsidiaries to assign, transfer, convey and
deliver to Southern Energy's applicable Subsidiaries, and Southern Energy hereby
accepts from Southern, and agrees to cause its applicable Subsidiaries to accept
from Southern's applicable Subsidiaries, all of Southern's and its applicable
Subsidiaries' respective right, title and interest in and to the documents and
agreements listed on Schedule 5.14 attached hereto (each an "Assigned
Agreement"). To the extent that Southern's or its applicable Subsidiaries'
respective right, title and interest in and to any Assigned Agreement may not be
assigned without the consent of another Person which consent has not been
obtained, this provision shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof or be unlawful, and
Southern shall use its commercially reasonable efforts to obtain any such
required consent(s) by the Distribution Date. The parties agree that if any
consent to an assignment of any Assigned Agreement shall not be obtained or if
any attempted assignment would be ineffective or would impair Southern Energy's
or its applicable Subsidiaries' rights and obligations under such Assigned
Agreement, such that Southern Energy would not in effect acquire the benefit of
all such rights and obligations, Southern, to the maximum extent permitted by
law and such Assigned Agreement, shall enter into such reasonable arrangements
with Southern Energy as are necessary to provide Southern Energy or its
applicable Subsidiary with the benefits and obligations of such Assigned
Agreement from the Separation Date. The parties shall cooperate and shall each
use their commercially reasonable efforts after the Separation Date to obtain an
assignment of such Assigned Agreement to Southern Energy.
Section 5.15 Southern Energy Board Representation. At any time after the
Separation Date, if and for so long as Southern shall beneficially own (within
the meaning of Rule 13d-3 under the Exchange Act) shares of Southern Energy
common stock which at such time represent more than 25% of the outstanding
shares of Southern Energy common stock and less than 50% of such outstanding
shares, Southern shall be entitled to designate two of the nominees of the Board
of Directors of Southern Energy for election to such Board at each annual
meeting of Southern Energy's shareholders, provided that such number of
designees shall be reduced by the number of persons then serving on the Southern
Energy Board in any class of directors that is not up for election at such
annual meeting who are then also serving as officers or directors of Southern.
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ARTICLE VI
MISCELLANEOUS
Section 6.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY MEMBER OF THE
SOUTHERN GROUP OR SOUTHERN ENERGY GROUP OR THEIR RESPECTIVE DIRECTORS, OFFICERS
AND EMPLOYEES BE LIABLE TO ANY OTHER MEMBER OF THE SOUTHERN GROUP OR SOUTHERN
ENERGY GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE
DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED,
HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S
INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THE
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT.
Section 6.2 Entire Agreement. This Agreement, the other Ancillary
Agreements and the Exhibits and Schedules referenced or attached hereto and
thereto, constitutes the entire agreement between the parties with respect to
the subject matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof.
Section 6.3 Governing Law. This Agreement shall be governed and construed
and enforced in accordance with the laws of the State of Georgia as to all
matters regardless of the laws that might otherwise govern under the principles
of conflicts of laws applicable thereto.
Section 6.4 Termination. This Agreement and all Ancillary Agreements may
be terminated and the Distribution abandoned at any time prior to the IPO
Closing Date by and in the sole discretion of Southern without the approval of
Southern Energy. This Agreement may be terminated at any time after the IPO
Closing Date and before the Change of Control Date by mutual consent of Southern
and Southern Energy. In the event of termination pursuant to this Section, no
party shall have any liability of any kind to the other party.
Section 6.5 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
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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 6.6 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 6.7 Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, 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. This Agreement may
not be assigned by any party hereto.
Section 6.8 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 either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.
Section 6.9 Failure or Indulgence Not Waiver; Remedies Cumulative. 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. All rights and remedies existing
under this Agreement or the Schedules or Exhibits attached hereto are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
Section 6.10 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 such agreement.
Section 6.11 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 actions, (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
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applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and general equity principles.
Section 6.12 Interpretation. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of 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 6.13 Conflicting Agreements. In the event of conflict between
this Agreement and any Ancillary Agreement or other agreement executed in
connection herewith, the provisions of such other agreement shall prevail.
ARTICLE VII
DEFINITIONS
Section 7.1 Affiliated Company. "Affiliated Company" means, with respect
to Southern, any entity in which Southern holds a 50% or less ownership interest
and, with respect to Southern Energy, any entity in which Southern Energy holds
a 50% or less ownership interest and that is listed on Schedule 7.1 hereto.
Schedule 7.1 may be amended from time to time after the date hereof upon mutual
written consent of the parties.
Section 7.2 Ancillary Agreements. "Ancillary Agreements" has the meaning
set forth in Section 2.1 hereof.
Section 7.3 Business Day. "Business Day" means a day other than a
Saturday, a Sunday or a day on which banking institutions located in the State
of Georgia are authorized or obligated by law or executive order to close.
Section 7.4 Change of Control Date. "Change of Control Date" means the
earlier of: (a) the Distribution Date (defined in the Master Separation
Agreement as the date the Distribution is effective), or (b) the first date on
which Southern ceases to control at least 33 1/3% of the common stock of
Southern Energy then outstanding.
Section 7.5 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
Section 7.6 Commission. "Commission" means the Securities and Exchange
Commission.
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Section 7.7 Disputes. "Disputes" has the meaning set forth in Section 5.7
hereof.
Section 7.8 Distribution. "Distribution" has the meaning set forth in the
Recitals hereof.
Section 7.9 Distribution Agent. "Distribution Agent" has the meaning set
forth in Section 4.1 hereof.
Section 7.10 Distribution Date. "Distribution Date" has the meaning set
forth in Section 4.1 hereof.
Section 7.11 Exchange Act. "Exchange Act" means the Securities and
Exchange Act of 1934, as amended.
Section 7.12 Governmental Approvals. "Governmental Approvals" means any
notices, reports or other filings to be made, or any consents, registrations,
approvals, permits or authorizations to be obtained from, any Governmental
Authority.
Section 7.13 Governmental Authority. "Governmental Authority" shall mean
any federal, state, local, foreign or international court, government,
department, commission, board, bureau, agency, official or other regulatory,
administrative or governmental authority.
Section 7.14 HoldCo Transaction. "HoldCo Transaction" has the meaning set
forth in the Recitals hereof.
Section 7.15 Information. "Information" means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
Section 7.16 IPO. "IPO" has the meaning set forth in the Recitals hereof.
Section 7.17 IPO Closing Date. "IPO Closing Date" means the date of the
closing of the IPO upon satisfaction of the conditions of Article II hereof.
Section 7.18 IPO Registration Statement. "IPO Registration Statement"
means the registration statement on Form S-1 pursuant to the Securities Act of
1933, as amended, to
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be filed with the Commission registering the shares of common stock of Southern
Energy to be issued in the IPO, together with all amendments thereto.
Section 7.19 NYSE. "NYSE" means the New York Stock Exchange.
Section 7.20 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 7.21 Record Date. "Record Date" means the close of business on
the date to be determined by the Board of Directors of Southern as the record
date for determining the stockholders of Southern entitled to receive shares of
common stock of Southern Energy in the Distribution.
Section 7.22 SE Finance. "SE Finance" means SE Finance Capital
Corporation and its Subsidiaries and Affiliated Companies.
Section 7.23 SE Capital Funding. "SE Capital Funding" means Southern
Energy Capital Funding, Inc. and its Subsidiaries and Affiliated Companies.
Section 7.24 Separation. "Separation" has the meaning set forth in the
Recitals hereof.
Section 7.25 Separation Date. "Separation Date" has the meaning set forth
in Section 1.1 hereof.
Section 7.26 Southern Business. "Southern Business" means any business of
Southern and its Subsidiaries and Affiliated Companies other than the Southern
Energy Business.
Section 7.27 Southern Energy Business. "Southern Energy Business" means
(a) the business and operations of Southern Energy and its Subsidiaries and
Affiliated Companies, and (b) except as otherwise expressly provided herein, any
terminated, divested or discontinued businesses or operations that at the time
of termination, divestiture or discontinuation primarily related to the Southern
Energy Business as then conducted; provided, that the Southern Energy Business
shall not include the business or operations of HoldCo, SE Finance, SE Capital
Funding or Southern Company Energy Solutions, Inc.
Section 7.28 Southern Energy Group. "Southern Energy Group" means
Southern Energy, each Subsidiary and Affiliated Company of Southern Energy
immediately after the Separation Date and each Person that becomes a Subsidiary
or Affiliate Company of Southern Energy after the Separation Date; provided that
the Southern Energy Group
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shall not include HoldCo, SE Finance, SE Capital Funding or Southern Company
Energy Solutions, Inc.
Section 7.29 Southern Energy Auditors. "Southern Energy Auditors" means
Southern Energy's independent certified public accountants.
Section 7.30 Southern Group. "Southern Group" means Southern, each
Subsidiary and Affiliated Company of Southern (other than any member of the
Southern Energy Group) immediately after the Separation Date and each Person
that becomes a Subsidiary or an Affiliated Company of Southern after the
Separation Date.
Section 7.31 Southern's Auditors. "Southern's Auditors" means Southern's
independent certified public accountants.
Section 7.32 Subsidiary. "Subsidiary" means with respect to any specified
Person, any corporation, any limited liability company, any partnership or other
legal entity of which such Person or its Subsidiaries owns, directly or
indirectly, more than 50% of the stock or other equity interest entitled to vote
on the election of the members of the board of directors or similar governing
body. Unless context otherwise requires, reference to Southern Energy and its
Subsidiaries at any time following the HoldCo Transaction shall not include the
subsidiaries of Southern Energy that will be transferred to Southern in
connection with the HoldCo Transaction.
Section 7.33 Xxxxxxxx Xxxxxxx. "Xxxxxxxx Xxxxxxx" means Xxxxxxxx Xxxxxxx
LLP.
Section 7.34 Underwriters. "Underwriters" means the underwriters of the
IPO.
Section 7.35 Underwriting Agreement. "Underwriting Agreement" has the
meaning set forth in Section 3.1(a) hereof.
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WHEREFORE, the parties have signed this Master Separation and
Distribution Agreement effective as of the date first set forth above.
THE SOUTHERN COMPANY SOUTHERN ENERGY, INC.
By: By:
---------------------------------- ----------------------------------
Name: H. Xxxxx Xxxxxxxx Name: S. Xxxxx Xxxxxx
Title: President and Chief Operating Title: President and Chief Executive
Officer Officer
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Schedule 5.11
HoldCo Transaction
(a) Description of HoldCo Transaction. SE Finance and SE Capital Funding
shall be transferred from Southern Energy to Southern in a manner and in an
order substantially similar to the following:
1. Southern Energy issues 1 share of redeemable preferred stock to Southern.
2. Southern Energy and Southern Company Energy Solutions ("Energy
Solutions"), a wholly-owned subsidiary of Southern, shall then create
Southern Energy Holdco, Inc. ("HoldCo").
3. Southern Energy then makes contribution to capital of HoldCo in exchange
for 80% or more of the shares of Holdco; such contribution consists of
100% of the common stock of SE Finance and SE Capital Funding. At the
same time, Energy Solutions shall contribute certain assets to a
wholly-owned limited liability company of Holdco in exchange for 20% or
less of the shares of Holdco.
4. Southern Energy redeems its 1 share of redeemable preferred stock held by
Southern in exchange for the shares of Holdco Southern Energy owns.
(b) Credit Support to be Substituted for and Released. In connection with
the HoldCo Transaction, the following instruments will be substituted for by
Southern, and Southern Energy will be released from any liability thereunder:
1. Keep Well Agreement dated December 17, 1998, from Southern Energy to
Southern Energy Finance Company, Inc. and Credit Suisse First Boston, as
agent for the lenders under the Term Loan Agreement and various Note
Purchase Agreements dated of even date therewith.
2. Keep Well Agreement dated November 17, 1999, as amended and restated as
of December 16, 1999, from Southern Energy to SE Finance Capital
Corporation and ING (U.S.) Capital L.L.C., as agent for the lenders under
the Amended and Restated Term Loan Agreement.
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Schedule 5.14
Transferred Agreements
Cooperation Agreement between The State Power Corporation of China and Southern
Company dated February, 1999.
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Schedule 7.1
Southern Energy Affiliated Companies
Each Affiliated Company listed on Exhibit 21.1 to the in the final
prospectus filed by Southern Energy with the SEC pursuant to Rule 424(b) under
the Securities Act of 1933, as amended, in connection with the IPO; other than
SE Finance and SE Capital Funding and their respective Subsidiaries and
Affiliated Companies.
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EXHIBIT A
CERTIFICATE OF SECRETARY OR ASSISTANT SECRETARY OF SOUTHERN
I, ____________________, [Assistant] Secretary of The Southern Company, a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), DO HEREBY CERTIFY that attached hereto are true and correct copies
of certain resolutions adopted by the Board of Directors of the Company, which
resolutions have not been amended, modified or rescinded and remain in full
force and effect on the date hereof.
IN WITNESS WHEREOF, I have hereunder set my hand and affixed the seal of The
Southern Company this __________________ day of ___________, 2000.
-----------------------------------
[Assistant] Secretary
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32
EXHIBIT B
CERTIFICATE OF SECRETARY OR ASSISTANT SECRETARY
OF SOUTHERN ENERGY
I, ____________________, [Assistant] Secretary of Southern Energy, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), DO HEREBY CERTIFY that attached hereto are true and correct copies
of certain resolutions adopted by the Board of Directors of the Company, which
resolutions have not been amended, modified or rescinded and remain in full
force and effect on the date hereof.
IN WITNESS WHEREOF, I have hereunder set my hand and affixed the seal of
Southern Energy, Inc. this __________________ day of ___________, 2000.
-----------------------------------
[Assistant] Secretary
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EXHIBIT C
TECHNOLOGY AND INTELLECTUAL PROPERTY OWNERSHIP AND LICENSE AGREEMENT
See Exhibit 10.4 of the IPO Registration Statement.
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34
EXHIBIT D
EMPLOYEE MATTERS AGREEMENT
See Exhibit 10.6 of the IPO Registration Statement.
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35
EXHIBIT E
TAX INDEMNIFICATION AGREEMENT
See Exhibit 10.7 of the IPO Registration Statement.
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36
EXHIBIT F
TRANSITIONAL SERVICES AGREEMENT
See Exhibit 10.2 of the IPO Registration Statement.
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37
EXHIBIT G
CONFIDENTIAL DISCLOSURE AGREEMENT
See Exhibit 10.5 of the IPO Registration Statement.
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38
EXHIBIT H
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
See Exhibit 10.3 of the IPO Registration Statement.
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