-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HGbaMH6TY41X/zJBSQ9WG0wAZLpUdpIGc7mRlnpLS3tivq5JzsxBNli/+RhYRZxt tgKKiCpXQ9Ai7sua62je9Q== 0000092122-01-500065.txt : 20010330 0000092122-01-500065.hdr.sgml : 20010330 ACCESSION NUMBER: 0000092122-01-500065 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 65 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN CO CENTRAL INDEX KEY: 0000092122 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 580690070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-03526 FILM NUMBER: 1583368 BUSINESS ADDRESS: STREET 1: 270 PEACHTREE ST CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4045065000 MAIL ADDRESS: STREET 1: 270 PEACHTREE STREET CITY: ATLANTA STATE: GA ZIP: 30303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALABAMA POWER CO CENTRAL INDEX KEY: 0000003153 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 630004250 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-03164 FILM NUMBER: 1583369 BUSINESS ADDRESS: STREET 1: 600 N 18TH ST STREET 2: P O BOX 2641 CITY: BIRMINGHAM STATE: AL ZIP: 35291 BUSINESS PHONE: 2052571000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEORGIA POWER CO CENTRAL INDEX KEY: 0000041091 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 580257110 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06468 FILM NUMBER: 1583370 BUSINESS ADDRESS: STREET 1: 241 RALPH MCGILL BOULEVARD CITY: ATLANTA STATE: GA ZIP: 30308 BUSINESS PHONE: 4045066526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GULF POWER CO CENTRAL INDEX KEY: 0000044545 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 590276810 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-02429 FILM NUMBER: 1583371 BUSINESS ADDRESS: STREET 1: ONE ENERGY PLACE CITY: PENSACOLA STATE: FL ZIP: 32520-0102 BUSINESS PHONE: 8504446111 MAIL ADDRESS: STREET 1: ONE ENERGY PLACE CITY: PENSACOLA STATE: FL ZIP: 32520-0102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI POWER CO CENTRAL INDEX KEY: 0000066904 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 640205820 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11229 FILM NUMBER: 1583372 BUSINESS ADDRESS: STREET 1: 2992 W BEACH CITY: GULFPORT STATE: MS ZIP: 39501 BUSINESS PHONE: 2288641211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAVANNAH ELECTRIC & POWER CO CENTRAL INDEX KEY: 0000086940 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 580418070 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-05072 FILM NUMBER: 1583373 BUSINESS ADDRESS: STREET 1: 600 BAY ST EAST CITY: SAVANNAH STATE: GA ZIP: 31401 BUSINESS PHONE: 9122327171 10-K 1 year2000_10k.txt =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. 1-3526 The Southern Company 58-0690070 (A Delaware Corporation) 270 Peachtree Street, N.W. Atlanta, Georgia 30303 (404) 506-5000 1-3164 Alabama Power Company 63-0004250 (An Alabama Corporation) 600 North 18th Street Birmingham, Alabama 35291 (205) 257-1000 1-6468 Georgia Power Company 58-0257110 (A Georgia Corporation) 241 Ralph McGill Boulevard, N.E. Atlanta, Georgia 30308 (404) 506-6526 0-2429 Gulf Power Company 59-0276810 (A Maine Corporation) One Energy Place Pensacola, Florida 32520 (850) 444-6111 0-6849 Mississippi Power Company 64-0205820 (A Mississippi Corporation) 2992 West Beach Gulfport, Mississippi 39501 (228) 864-1211 1-5072 Savannah Electric and Power Company 58-0418070 (A Georgia Corporation) 600 East Bay Street Savannah, Georgia 31401 (912) 644-7171 =============================================================================== Securities registered pursuant to Section 12(b) of the Act:1 Each of the following classes or series of securities registered pursuant to Section 12(b) of the Act is registered on the New York Stock Exchange. Title of each class Registrant Common Stock, $5 par value The Southern Company Company obligated mandatorily redeemable preferred securities, $25 liquidation amount 7.75% Cumulative Quarterly Income Preferred Securities 2 7 1/8% Trust Originated Preferred Securities3 6.875% Cumulative Quarterly Income Preferred Securities4 --------------------------------------------------- Class A preferred, cumulative, $25 stated capital Alabama Power Company 5.20% Series 5.83% Series Senior Notes 7 1/8% Series A 7% Series C 7% Series B 6.75% Series J Company obligated mandatorily redeemable preferred securities, $25 liquidation amount 7.375% Trust Preferred Securities5 7.60% Trust Originated Preferred Securities6 --------------------------------------------------- Senior Notes Georgia Power Company 6 7/8% Series A 6 5/8% Series D 6.60% Series B Company obligated mandatorily redeemable preferred securities, $25 liquidation amount 7.75% Trust Preferred Securities7 7.60% Trust Preferred Securities8 7.75% Cumulative Quarterly Income 6.85% Trust Preferred Securities10 Preferred Securities9 ------------------------------------------------------ =============================================================================== 1 As of December 31, 2000. 2 Issued by Southern Company Capital Trust III and guaranteed by The Southern Company. 3 Issued by Southern Company Capital Trust IV and guaranteed by The Southern Company. 4 Issued by Southern Company Capital Trust V and guaranteed by The Southern Company. 5 Issued by Alabama Power Capital Trust I and guaranteed by Alabama Power Company. 6 Issued by Alabama Power Capital Trust II and guaranteed by Alabama Power Company. 7 Issued by Georgia Power Capital Trust I and guaranteed by Georgia Power Company. 8 Issued by Georgia Power Capital Trust II and guaranteed by Georgia Power Company. 9 Issued by Georgia Power Capital Trust III and guaranteed by Georgia Power Company. 10 Issued by Georgia Power Capital Trust IV and guaranteed by Georgia Power Company. Company obligated mandatorily redeemable Gulf Power Company preferred securities, $25 liquidation amount 7.625% Cumulative Quarterly Income Preferred Securities11 7.00% Cumulative Quarterly Income Preferred Securities12 ------------------------------------------------------ Depositary preferred shares, each representing Mississippi Power Company one-fourth of a share of preferred stock, cumulative, $100 par value 6.32% Series 6.65% Series Company obligated mandatorily redeemable preferred securities, $25 liquidation amount 7.75% Trust Originated Preferred Securities13 --------------------------------------------------- Company obligated mandatorily redeemable Savannah Electric and Power Company preferred securities, $25 liquidation amount 6.85% Trust Preferred Securities14 Securities registered pursuant to Section 12(g) of the Act:15 Title of each class Registrant Preferred stock, cumulative, $100 par value Alabama Power Company 4.20% Series 4.60% Series 4.72% Series 4.52% Series 4.64% Series 4.92% Series Class A preferred, cumulative, $100,000 stated capital Auction (1993 Series) Class A preferred, cumulative, $100 stated capital Auction (1988 Series) ---------------------------------------------------------- Preferred stock, cumulative, $100 stated value Georgia Power Company $4.60 Series (1954) ---------------------------------------------------------- =============================================================================== - -------- 11 Issued by Gulf Power Capital Trust I and guaranteed by Gulf Power Company. 12 Issued by Gulf Power Capital Trust II and guaranteed by Gulf Power Company. 13 Issued by Mississippi Power Capital Trust I and guaranteed by Mississippi Power Company. 14 Issued by Savannah Electric Capital Trust I and guaranteed by Savannah Electric and Power Company. 15 As of December 31, 2000. Preferred stock, cumulative, $100 par value Gulf Power Company 4.64% Series 5.44% Series 5.16% Series ---------------------------------------------------------- Preferred stock, cumulative, $100 par value Mississippi Power Company 4.40% Series 4.60% Series 4.72% Series 7.00% Series ---------------------------------------------------------- Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) Aggregate market value of voting stock held by non-affiliates of The Southern Company at February 28, 2001: $21.1 billion. Each of such other registrants is a wholly-owned subsidiary of The Southern Company. A description of registrants' common stock follows:
Description of Shares Outstanding Registrant Common Stock at February 28, 2001 The Southern Company Par Value $5 Per Share 681,946,097 Alabama Power Company Par Value $40 Per Share 5,608,955 Georgia Power Company No Par Value 7,761,500 Gulf Power Company No Par Value 992,717 Mississippi Power Company Without Par Value 1,121,000 Savannah Electric and Power Company Par Value $5 Per Share 10,844,635
Documents incorporated by reference: specified portions of The Southern Company's Proxy Statement relating to the 2001 Annual Meeting of Stockholders are incorporated by reference into PART III. In addition, specified portions of the Information Statements of Alabama Power Company, Georgia Power Company, Gulf Power Company and Mississippi Power Company relating to each of their respective 2001 Annual Meetings of Shareholders are incorporated by reference into PART III. This combined Form 10-K is separately filed by The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah Electric and Power Company. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to the other companies. ===============================================================================
Table of Contents Page PART I Item 1 Business Mirant Corporation (formerly Southern Energy, Inc.)............................ I-1 The SOUTHERN System............................................................ I-2 Integrated Southeast Utilities................................................. I-2 Other Business................................................................. I-2 Certain Factors Affecting the Industry......................................... I-3 Construction Programs.......................................................... I-3 Financing Programs............................................................. I-5 Fuel Supply.................................................................... I-6 Territory Served by the Integrated Southeast Utilities......................... I-8 Competition.................................................................... I-11 Regulation..................................................................... I-12 Rate Matters................................................................... I-14 Employee Relations............................................................. I-15 Item 2 Properties....................................................................... I-17 Item 3 Legal Proceedings................................................................ I-21 Item 4 Submission of Matters to a Vote of Security Holders.............................. I-22 Executive Officers of SOUTHERN................................................... I-23 Executive Officers of ALABAMA.................................................... I-24 Executive Officers of GEORGIA.................................................... I-25 Executive Officers of GULF....................................................... I-26 Executive Officers of MISSISSIPPI................................................ I-27 PART II Item 5 Market for Registrants' Common Equity and Related Stockholder Matters............ II-1 Item 6 Selected Financial Data.......................................................... II-2 Item 7 Management's Discussion and Analysis of Results of Operations and Financial Condition........................................................ II-2 Item 7A Quantitative and Qualitative Disclosures about Market Risk....................... II-2 Item 8 Financial Statements and Supplementary Data...................................... II-3 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................ II-4 PART III Item 10 Directors and Executive Officers of the Registrants............................. III-1 Item 11 Executive Compensation.......................................................... III-1 Item 12 Security Ownership of Certain Beneficial Owners and Management.................................................................... III-1 Item 13 Certain Relationships and Related Transactions.................................. III-1 PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................................................... IV-1
i
DEFINITIONS When used in Items 1 through 5 and Items 10 through 14, the following terms will have the meanings indicated. Term Meaning AEC........................................... Alabama Electric Cooperative, Inc. AFUDC......................................... Allowance for Funds Used During Construction ALABAMA....................................... Alabama Power Company AMEA.......................................... Alabama Municipal Electric Authority Clean Air Act................................. Clean Air Act Amendments of 1990 Dalton........................................ City of Dalton, Georgia DOE........................................... United States Department of Energy EMF........................................... Electromagnetic field Energy Act.................................... Energy Policy Act of 1992 Energy Solutions.............................. Southern Company Energy Solutions, Inc. Entergy Gulf States........................... Entergy Gulf States Utilities Company EPA........................................... United States Environmental Protection Agency FERC.......................................... Federal Energy Regulatory Commission FPC........................................... Florida Power Corporation FP&L.......................................... Florida Power & Light Company GEORGIA....................................... Georgia Power Company GULF.......................................... Gulf Power Company Holding Company Act........................... Public Utility Holding Company Act of 1935, as amended IBEW.......................................... International Brotherhood of Electrical Workers integrated Southeast utilities................ ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH IPP........................................... Independent power producer IRS........................................... Internal Revenue Service JEA........................................... Jacksonville Electric Authority MEAG.......................................... Municipal Electric Authority of Georgia MESH.......................................... Mobile Energy Services Holdings Mirant........................................ Mirant Corporation (formerly Southern Energy, Inc.) MISSISSIPPI................................... Mississippi Power Company NRC........................................... Nuclear Regulatory Commission OPC........................................... Oglethorpe Power Corporation PSC........................................... Public Service Commission RTO........................................... Regional Transmission Organization RUS........................................... Rural Utility Service (formerly Rural Electrification Administration)
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DEFINITIONS (continued) SAVANNAH...................................... Savannah Electric and Power Company SCS........................................... Southern Company Services, Inc. (the system service company) SEC........................................... Securities and Exchange Commission SEGCO......................................... Southern Electric Generating Company SEPA.......................................... Southeastern Power Administration SERC.......................................... Southeastern Electric Reliability Council SMEPA......................................... South Mississippi Electric Power Association SOUTHERN...................................... The Southern Company Southern LINC................................. Southern Communications Services, Inc. Southern Nuclear.............................. Southern Nuclear Operating Company, Inc. SOUTHERN system............................... SOUTHERN, the integrated Southeast utilities, SEGCO, Southern Nuclear, SCS, Southern LINC, Energy Solutions and other subsidiaries Southern Telecom.............................. Southern Telecom, Inc. SPC........................................... Southern Power Company TVA........................................... Tennessee Valley Authority
iii CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This Annual Report on Form 10-K contains forward-looking and historical information. Forward-looking information includes, among other things, statements concerning the strategic goals for SOUTHERN's new wholesale business and also SOUTHERN's earnings per share and earnings growth goals. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. The registrants caution that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which SOUTHERN and its subsidiaries are subject, as well as changes in application of existing laws and regulations; current and future litigation, including the pending EPA civil action against certain of the integrated Southeast utilities and the race discrimination litigation against certain of SOUTHERN's subsidiaries; the extent and timing of the entry of additional competition in the markets of SOUTHERN's subsidiaries; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial; internal restructuring or other restructuring options that may be pursued by SOUTHERN; state and federal rate regulation in the United States and in foreign countries in which SOUTHERN's subsidiaries operate; political, legal and economic conditions and developments in the United States and in foreign countries in which SOUTHERN's subsidiaries operate; financial market conditions and the results of financing efforts; the impact of fluctuations in commodity prices, interest rates and customer demand; weather and other natural phenomena; the performance of projects undertaken by the non-traditional business and the success of efforts to invest in and develop new opportunities; the timing and acceptance of SOUTHERN's new product and service offerings; the ability of SOUTHERN to obtain additional generating capacity at competitive prices; developments in the California power markets, including, but not limited to, governmental intervention, deterioration in the financial condition of counterparties, default on receivables due, adverse results in current or future litigation and adverse changes in the tariffs of the California Power Exchange Corporation or the California Independent System Operator Corporation; and other factors discussed elsewhere herein and in other reports filed from time to time with the SEC. iv PART I Item 1. BUSINESS SOUTHERN was incorporated under the laws of Delaware on November 9, 1945. SOUTHERN is domesticated under the laws of Georgia and is qualified to do business as a foreign corporation under the laws of Alabama. SOUTHERN owns all the outstanding common stock of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH, each of which is an operating public utility company. The integrated Southeast utilities supply electric service in the states of Alabama, Georgia, Florida, Mississippi and Georgia, respectively. More particular information relating to each of the integrated Southeast utilities is as follows: ALABAMA is a corporation organized under the laws of the State of Alabama on November 10, 1927, by the consolidation of a predecessor Alabama Power Company, Gulf Electric Company and Houston Power Company. The predecessor Alabama Power Company had had a continuous existence since its incorporation in 1906. GEORGIA was incorporated under the laws of the State of Georgia on June 26, 1930, and admitted to do business in Alabama on September 15, 1948. GULF is a corporation which was organized under the laws of the State of Maine on November 2, 1925, and admitted to do business in Florida on January 15, 1926, in Mississippi on October 25, 1976, and in Georgia on November 20, 1984. MISSISSIPPI was incorporated under the laws of the State of Mississippi on July 12, 1972, was admitted to do business in Alabama on November 28, 1972, and effective December 21, 1972, by the merger into it of the predecessor Mississippi Power Company, succeeded to the business and properties of the latter company. The predecessor Mississippi Power Company was incorporated under the laws of the State of Maine on November 24, 1924, and was admitted to do business in Mississippi on December 23, 1924, and in Alabama on December 7, 1962. SAVANNAH is a corporation existing under the laws of the State of Georgia; its charter was granted by the Secretary of State on August 5, 1921. SOUTHERN also owns all the outstanding common stock of Southern LINC, Southern Nuclear, SCS, Energy Solutions, Southern Telecom, SPC and other direct and indirect subsidiaries. Southern LINC provides digital wireless communications services to SOUTHERN's integrated Southeast utilities and also markets these services to the public within the Southeast. Southern Nuclear provides services to ALABAMA's and GEORGIA's nuclear plants. Energy Solutions develops new business opportunities related to energy products and services. Southern Telecom provides wholesale fiber optic solutions to telecommunication providers in the Southeastern United States. SPC, formed in January 2001, will be the primary growth engine for SOUTHERN's market-based energy business. ALABAMA and GEORGIA each own 50% of the outstanding common stock of SEGCO. SEGCO owns electric generating units with an aggregate capacity of 1,019,680 kilowatts at Plant Gaston on the Coosa River near Wilsonville, Alabama, and ALABAMA and GEORGIA are each entitled to one-half of SEGCO's capacity and energy. ALABAMA acts as SEGCO's agent in the operation of SEGCO's units and furnishes coal to SEGCO as fuel for its units. SEGCO also owns three 230,000 volt transmission lines extending from Plant Gaston to the Georgia state line at which point connection is made with the GEORGIA transmission line system. Reference is also made to Note 12 to the financial statements of SOUTHERN in Item 8 herein for additional information regarding SOUTHERN's segment and related information. Mirant Corporation Previously, SOUTHERN owned all the outstanding common stock of Mirant. In April 2000, SOUTHERN announced an initial public offering of up to 19.9 percent of Mirant and its intentions to spin off the remaining ownership of Mirant to SOUTHERN's common stockholders within 12 months of the initial stock offering. On October 2, 2000, Mirant completed an initial public offering of 66.7 million shares. On February 19, 2001, SOUTHERN's board of directors approved the spin off of the remaining ownership of 272 million Mirant shares to be completed in a tax free distribution on April 2, 2001. As a result of the spin off, SOUTHERN's financial statements and related information in Item 8 herein reflect Mirant as discontinued operations. I-1 The SOUTHERN System Integrated Southeast Utilities The transmission facilities of each of the integrated Southeast utilities are connected to the respective company's own generating plants and other sources of power and are interconnected with the transmission facilities of the other integrated Southeast utilities and SEGCO by means of heavy-duty high voltage lines. (In the case of GEORGIA's integrated transmission system, see Item 1 - BUSINESS - "Territory Served by the Integrated Southeast Utilities" herein.) Operating contracts covering arrangements in effect with principal neighboring utility systems provide for capacity exchanges, capacity purchases and sales, transfers of economy energy and other similar transactions. Additionally, the integrated Southeast utilities have entered into voluntary reliability agreements with the subsidiaries of Entergy Corporation, Florida Electric Power Coordinating Group and TVA and with Carolina Power & Light Company, Duke Energy Corporation, South Carolina Electric & Gas Company and Virginia Electric and Power Company, each of which provides for the establishment and periodic review of principles and procedures for planning and operation of generation and transmission facilities, maintenance schedules, load retention programs, emergency operations, and other matters affecting the reliability of bulk power supply. The integrated Southeast utilities have joined with other utilities in the Southeast (including those referred to above) to form the SERC to augment further the reliability and adequacy of bulk power supply. Through the SERC, the integrated Southeast utilities are represented on the National Electric Reliability Council. An intra-system interchange agreement provides for coordinating operations of the power producing facilities of the integrated Southeast utilities and the capacities available to such companies from non-affiliated sources and for the pooling of surplus energy available for interchange. Coordinated operation of the entire interconnected system is conducted through a central power supply coordination office maintained by SCS. The available sources of energy are allocated to the integrated Southeast utilities to provide the most economical sources of power consistent with good operation. The resulting benefits and savings are apportioned among the integrated Southeast utilities. On December 20, 1999, the FERC issued its final rule on RTOs ("Order 2000"). The order encouraged utilities owning transmission systems to form RTOs on a voluntary basis. Utilities were required to make a filing with the FERC by October 16, 2000 explaining how they would respond to Order 2000 consistent with this requirement. On October 16, 2000, SOUTHERN filed its RTO proposal. The proposal is for the formation of a for-profit company that would have control of the bulk power transmission system of SOUTHERN and other participating utilities in the region. Participants would have the option to either maintain their ownership, divest, sell or lease their transmission assets to the proposed RTO. On March 14, 2001, the FERC rejected SOUTHERN's proposal on the grounds that the limitation of the scope of services to new wholesale transmission and the provision of incentives to passive owners were inconsistent with Order 2000. This order requires a status report from SOUTHERN by May 14, 2001, but does not establish a deadline for SOUTHERN to file a revised petition. Reference is made to each registrant's "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 for additional information. SCS has contracted with SOUTHERN, each integrated Southeast utility, Mirant, various of the other subsidiaries, Southern Nuclear and SEGCO to furnish, at cost and upon request, the following services: general executive and advisory services, power pool operations, general engineering, design engineering, purchasing, accounting, finance and treasury, taxes, insurance and pensions, corporate, rates, budgeting, public relations, employee relations, systems and procedures and other services with respect to business and operations. Energy Solutions and Southern LINC have also secured from the integrated Southeast utilities certain services which are furnished at cost. Southern Nuclear has contracts with ALABAMA to operate the Farley Nuclear Plant, and with GEORGIA to operate Plants Hatch and Vogtle. See Item 1 - BUSINESS - "Regulation - Atomic Energy Act of 1954" herein. I-2 Other Business Energy Solutions focuses on new and existing programs to enhance customer satisfaction, efficiency and stockholder value. Examples are: Good Cents, an energy efficiency program for electric utility customers; Energy Services, an energy solutions consultant and contractor for industrial and large commercial customers; and Bill Payment Protection, an insurance product that protects a residential customer by paying the electric bill in the event the customer becomes involuntarily unemployed, disabled, or goes on unpaid leave. In 1996, Southern LINC began serving SOUTHERN's integrated Southeast utilities and marketing its services to non-affiliates within the Southeast. Its system covers approximately 127,000 square miles and combines the functions of two-way radio dispatch, cellular phone, short text and numeric messaging and wireless data transfer. These continuing efforts to invest in and develop new business opportunities offer the potential of earning returns which may exceed those of rate-regulated operations. However, these activities also involve a higher degree of risk. SOUTHERN expects to make substantial investments over the period 2001-2003 in these and other new businesses. In 1999, MESH, a subsidiary of SOUTHERN, filed a petition for Chapter 11 bankruptcy relief in the U.S. Bankruptcy Court. On August 4, 2000, MESH filed a proposed plan of reorganization with the bankruptcy court that was amended on September 15, 2000. The proposed plan of reorganization was again amended on February 21, 2001. Reference is made to Note 3 to the financial statements of SOUTHERN in Item 8 herein for additional information relating to this matter. Certain Factors Affecting the Industry Various factors are currently affecting the electric utility industry in general, including increasing competition and the regulatory changes related thereto, costs required to comply with environmental regulations, and the potential for new business opportunities (with their associated risks) outside of traditional rate-regulated operations. The effects of these and other factors on the SOUTHERN system are described herein. Particular reference is made to Item 1 - BUSINESS - "Other Business", "Competition" and "Environmental Regulation." See also "Cautionary Statement Regarding Forward-Looking Information." Construction Programs The subsidiary companies of SOUTHERN are engaged in continuous construction programs to accommodate existing and estimated future loads on their respective systems. Construction additions or acquisitions of property during 2001 through 2003 by the integrated Southeast utilities, SEGCO, SCS, Southern LINC and other subsidiaries are estimated as follows: (in millions) ------------------------------ -------- --------- ---------- 2001 2002 2003 -------- --------- ---------- ALABAMA $ 735 $ 891 $ 625 GEORGIA 1,613 1,349 785 GULF 279 96 76 MISSISSIPPI 62 60 69 SAVANNAH 33 31 32 SEGCO 16 17 16 SCS 29 21 21 Southern LINC 26 39 26 Other 111 60 1 --------------------------- ----------- --------- ---------- SOUTHERN system $2,904 $2,564 $1,651 =========================== =========== ========= ========== Included in these estimated totals are expenditures for construction of wholesale generation assets that may be transferred to SPC. Assuming such transfers are made, SPC's projected construction program expenditures are approximately $1.2 billion in 2001, $725 million in 2002, and $452 million in 2003. I-3
Estimated construction costs in 2001 are expected to be apportioned approximately as follows: (in millions) ---------------------------- ---------------- --------------- ------------- ---------- ---------------- ---------------- SOUTHERN system* ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH ---------------- --------------- ------------- ---------- ---------------- ---------------- New generation $ 940 $169 $ 596 $172 $ 3 $- Other generating facilities including associated plant substations 682 181 433 35 10 7 New business 368 129 188 22 19 10 Transmission 340 110 189 21 14 6 Joint line and substation 47 - 34 13 - - Distribution 184 68 85 12 11 8 Nuclear fuel 93 38 55 - - - General plant 250 40 33 4 5 2 ---------------- --------------- ------------- ---------- ---------------- ---------------- $2,904 $735 $1,613 $279 $62 $33 ================ =============== ============= ========== ================ ================
*Southern LINC, SCS, and other businesses plan capital additions to general plant in 2001 of $26 million, $29 million, and $111 million, respectively, while SEGCO plans capital additions of $16 million to generating facilities. (See Item 1 - BUSINESS - "Other Business" herein.) The construction programs are subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include: changes in business conditions; acquisitions of additional generating assets; revised load growth estimates; changes in environmental regulations; changes in existing nuclear plants to meet new regulatory requirements; increasing costs of labor, equipment and materials; and cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. SOUTHERN has approximately 6,600 megawatts of new generating capacity scheduled to be placed in service by 2003. Approximately 4,400 megawatts of additional new capacity will be dedicated to the wholesale market and owned by SPC. In 1991, the Georgia legislature passed legislation which requires GEORGIA and SAVANNAH each to file an Integrated Resource Plan for approval by the Georgia PSC. Under the plan rules, the Georgia PSC must pre-certify the construction of new power plants and new purchase power contracts. (See Item 1 - BUSINESS - "Rate Matters - Integrated Resource Planning" herein.) See Item 1 - BUSINESS - "Regulation - Environmental Regulation" herein for information with respect to certain existing and proposed environmental requirements and Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for additional information concerning ALABAMA's and GEORGIA's joint ownership of certain generating units and related facilities with certain non-affiliated utilities. I-4 Financing Programs The amount and timing of additional equity capital to be raised in 2001, as well as subsequent years, will be contingent on SOUTHERN's investment opportunities. Equity capital can be provided from any combination of public offerings, private placements, or SOUTHERN's stock plans. The integrated Southeast utilities plan to obtain the funds required for construction and other purposes from sources similar to those used in the past, which were primarily from internal sources. However, the type and timing of any financings -- if needed -- will depend on market conditions and regulatory approval. Recently, the integrated Southeast utilities have relied on the issuance of unsecured debt and trust preferred securities, in addition to unsecured pollution control bonds issued for its benefit by public authorities to meet its long-term external financing requirements. In years past, the integrated Southeast utilities issued first mortgage bonds, mortgage backed pollution control bonds and preferred stock to fund its external requirements. The amount outstanding of the latter securities has been declining in recent years. If the integrated Southeast utilities were to choose to issue new first mortgage bonds or preferred stock once again, they would be required to meet certain coverage requirements. Short-term debt is often utilized as appropriate at SOUTHERN and the integrated Southeast utilities. The maximum amounts of short-term and term-loan indebtedness authorized by the appropriate regulatory authorities are shown on the following table: Amount Outstanding at Authorized December 31, 2000 -------------- --------------------- (in millions) ALABAMA $ 750 (1) $ 281 GEORGIA 1,700 (2) 704 GULF 300(1) 43 MISSISSIPPI 350(1) 56 SAVANNAH 160(2) 75 SOUTHERN 2,000(1) 550 ------------------ -------------- -- ------------------- Notes: (1) ALABAMA's authority is based on authorization received from the Alabama PSC, which expires December 31, 2001. No SEC authorization is required for ALABAMA. GULF, MISSISSIPPI and SOUTHERN have received SEC authorization to issue from time to time short-term and/or term-loan notes to banks and commercial paper to dealers in the amounts shown through December 31, 2003, December 31, 2002 and March 31, 2008, respectively. (2) GEORGIA and SAVANNAH have received SEC authorization to issue from time to time short-term and term-loan notes to banks and commercial paper to dealers in the amounts shown through December 31, 2002. Authorization for term-loan indebtedness is also required by the Georgia PSC. SAVANNAH received authority from the Georgia PSC for $70 million in term loans expiring January 31, 2002. Reference is made to Note 8 to the financial statements for SOUTHERN, Note 4 to the financial statements for ALABAMA, GULF, MISSISSIPPI and SAVANNAH and Note 9 to the financial statements for GEORGIA in Item 8 herein for information regarding the registrants' credit arrangements. I-5 Fuel Supply The integrated Southeast utilities' and SEGCO's supply of electricity is derived predominantly from coal. The sources of generation for the years 1998 through 2000 and the estimates for 2001 are shown below: Oil and ALABAMA Coal Nuclear Hydro Gas --------- ---------- --------- --------- 1998 72 18 8 2 1999 72 20 5 3 2000 72 19 3 6 2001 70 16 5 9 GEORGIA 1998 73 22 3 2 1999 75 22 1 2 2000 76 21 1 2 2001 75 21 3 1 GULF 1998 98 ** ** 2 1999 97 ** ** 3 2000 98 ** ** 2 2001 98 ** ** 2 MISSISSIPPI 1998 80 ** ** 20 1999 81 ** ** 19 2000 83 ** ** 17 2001 78 ** ** 22 SAVANNAH 1998 76 ** ** 24 1999 78 ** ** 22 2000 88 ** ** 12 2001 85 ** ** 15 SEGCO 1998 100 ** ** * 1999 100 ** ** * 2000 100 ** ** * 2001 100 ** ** * SOUTHERN system*** 1998 76 16 4 4 1999 78 17 2 3 2000 76 16 4 4 2001 76 15 3 6 ---------- ------- --------- ---------- --------- --------- *Less than 0.5%. **Not applicable. ***Amounts shown for the SOUTHERN system are weighted averages of the integrated Southeast utilities and SEGCO. The average costs of fuel in cents per net kilowatt-hour generated for 1998 through 2000 are shown below: 1998 1999 2000 - ------------------- -------------- ------------- ------------- ALABAMA 1.54 1.44 1.54 GEORGIA 1.36 1.34 1.39 GULF 1.69 1.60 1.68 MISSISSIPPI 1.62 1.65 1.80 SAVANNAH 2.33 2.20 2.28 SEGCO 1.53 1.77 1.51 SOUTHERN System* 1.48 1.45 1.51 - ------------------- -------------- ------------- ------------- * Amounts shown for the SOUTHERN system are weighted averages of the integrated Southeast utilities and SEGCO. See SELECTED FINANCIAL DATA in Item 6 herein for each registrant's source of energy supply. I-6 As of February 9, 2001, the integrated Southeast utilities had stockpiles of coal on hand at their respective coal-fired plants which represented an estimated 23 days of recoverable supply for bituminous coal and 31 days for sub-bituminous coal. It is estimated that approximately 68 million tons of coal will be consumed in 2001 by the integrated Southeast utilities (including those units GEORGIA owns jointly with OPC, MEAG and Dalton and operates for FP&L and JEA and the units ALABAMA owns jointly with AEC). The integrated Southeast utilities currently have 60 coal contracts. These contracts cover remaining terms of up to 12 years. Approximately 15% of 2001 estimated coal requirements will be purchased in the spot market. Additionally, it has been determined that approximately 34 normal full load days of recoverable supply is desirable at the beginning of the heavy burn season between June 1 and September 30 with 31 normal full load days being the average annual target. In 2000, the weighted average sulfur content of all coal purchased by the integrated Southeast utilities for use in the coal-fired facilities was 0.77% sulfur. This sulfur level, along with banked sulfur dioxide allowances, allowed the integrated Southeast utilities and SEGCO to remain within limits as set forth by Phase II of the Clean Air Act. As more and more strict environmental regulations are proposed that impact the utilization of coal, the fuel mix will be monitored to insure that sufficient quantities of the proper type of coal or natural gas are in place to remain in compliance with applicable laws and regulations. See Item 1 - BUSINESS - "Regulation - Environmental Regulation" herein. Changes in fuel prices are generally reflected in fuel adjustment clauses contained in rate schedules. See Item 1 - BUSINESS - "Rate Matters - Rate Structure" herein. ALABAMA and GEORGIA have numerous contracts covering a portion of their nuclear fuel needs for uranium, conversion services, enrichment services and fuel fabrication. These contracts have varying expiration dates and most are short to medium term (less than 10 years). Management believes that sufficient capacity for nuclear fuel supplies and processing exists to preclude the impairment of normal operations of the SOUTHERN system's nuclear generating units. ALABAMA and GEORGIA have contracts with the DOE that provide for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent fuel in January 1998, as required by the contracts, and the companies are pursuing legal remedies against the government for breach of contract. Effective June 2000, an on-site dry storage facility for Plant Hatch became operational. Sufficient capacity is believed to be available to continue dry storage operations at Plant Hatch through the life of the plant. Sufficient fuel storage capacity currently is available at Plant Vogtle to maintain full-core discharge capability for both units into the year 2014. Sufficient fuel storage capacity is available at Plant Farley to maintain full-core discharge capability until the refueling outage scheduled in 2006 for Farley unit 1 and the refueling outage scheduled in 2008 for Farley unit 2. Procurement of on-site dry spent fuel storage capacity at Plant Farley is in progress, with the intent to place the capacity in operation as early as 2005. The Energy Act imposed upon utilities with nuclear plants, including ALABAMA and GEORGIA, obligations for the decontamination and decommissioning of federal nuclear fuel enrichment facilities. See Note 1 to SOUTHERN's, ALABAMA's and GEORGIA's financial statements in Item 8 herein. I-7 Territory Served by the Integrated Southeast Utilities The territory in which the integrated Southeast utilities provide electric service comprises most of the states of Alabama and Georgia together with the northwestern portion of Florida and southeastern Mississippi. In this territory there are non-affiliated electric distribution systems which obtain some or all of their power requirements either directly or indirectly from the integrated Southeast utilities. The territory has an area of approximately 120,000 square miles and an estimated population of approximately 11 million. ALABAMA is engaged, within the State of Alabama, in the generation and purchase of electricity and the distribution and sale of such electricity at retail in over 1,000 communities (including Anniston, Birmingham, Gadsden, Mobile, Montgomery and Tuscaloosa) and at wholesale to 15 municipally-owned electric distribution systems, 11 of which are served indirectly through sales to AMEA, and two rural distributing cooperative associations. ALABAMA also supplies steam service in downtown Birmingham. ALABAMA also sells, and cooperates with dealers in promoting the sale of, electric appliances. GEORGIA is engaged in the generation and purchase of electricity and the distribution and sale of such electricity within the State of Georgia at retail in over 600 communities, as well as in rural areas, and at wholesale currently to OPC, MEAG, the City of Dalton and the City of Hampton. GULF is engaged, within the northwestern portion of Florida, in the generation and purchase of electricity and the distribution and sale of such electricity at retail in 71 communities (including Pensacola, Panama City and Fort Walton Beach), as well as in rural areas, and at wholesale to a non-affiliated utility and a municipality. MISSISSIPPI is engaged in the generation and purchase of electricity and the distribution and sale of such energy within the 23 counties of southeastern Mississippi, at retail in 123 communities (including Biloxi, Gulfport, Hattiesburg, Laurel, Meridian and Pascagoula), as well as in rural areas, and at wholesale to one municipality, six rural electric distribution cooperative associations and one generating and transmitting cooperative. SAVANNAH is engaged, within a five-county area in eastern Georgia, in the generation and purchase of electricity and the distribution and sale of such electricity at retail and, as a member of the SOUTHERN system power pool, the transmission and sale of wholesale energy. For information relating to kilowatt-hour sales by classification for each registrant, reference is made to "Management's Discussion and Analysis-Results of Operations" in Item 7 herein. Also, for information relating to the sources of revenues for the SOUTHERN system and each of the integrated Southeast utilities, reference is made to Item 6 herein. A portion of the area served by the integrated Southeast utilities adjoins the area served by TVA and its municipal and cooperative distributors. An Act of Congress limits the distribution of TVA power, unless otherwise authorized by Congress, to specified areas or customers which generally were those served on July 1, 1957. The RUS has authority to make loans to cooperative associations or corporations to enable them to provide electric service to customers in rural sections of the country. There are 71 electric cooperative organizations operating in the territory in which the integrated Southeast utilities provide electric service at retail or wholesale. One of these, AEC, is a generating and transmitting cooperative selling power to several distributing cooperatives, municipal systems and other customers in south Alabama and northwest Florida. AEC owns generating units with approximately 840 megawatts of nameplate capacity, including an undivided ownership interest in ALABAMA's Plant Miller Units 1 and 2. AEC's facilities were financed with RUS loans secured by long-term contracts requiring distributing cooperatives to take their requirements from AEC to the extent such energy is available. Two of the 14 distributing cooperatives operating in ALABAMA's service territory obtain a portion of their power requirements directly from ALABAMA. I-8 Four electric cooperative associations, financed by the RUS, operate within GULF's service area. These cooperatives purchase their full requirements from AEC and SEPA (a federal power marketing agency). A non-affiliated utility also operates within GULF's service area and purchases its full requirements from GULF. ALABAMA and GULF have entered into separate agreements with AEC involving interconnection between the respective systems. The delivery of capacity and energy from AEC to certain distributing cooperatives in the service areas of ALABAMA and GULF is governed by the SOUTHERN/AEC Network Transmission Service Agreement. The rates for this service to AEC are based on the negotiated agreement on file with the FERC. See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for details of ALABAMA's joint-ownership with AEC of a portion of Plant Miller. MISSISSIPPI has an interchange agreement with SMEPA, a generating and transmitting cooperative, pursuant to which various services are provided, including the furnishing of protective capacity by MISSISSIPPI to SMEPA. SMEPA has a generating capacity of 821 megawatts and a transmission system estimated to be 1,480 miles in length. There are 43 electric cooperative organizations operating in, or in areas adjoining, territory in the State of Georgia in which GEORGIA provides electric service at retail or wholesale. Three of these organizations obtain their power from TVA and one from other sources. Since July 1, 1975, OPC has supplied the requirements of the remaining 39 of these cooperative organizations from self-owned generation acquired from GEORGIA and, until September 1991, through partial requirements purchases from GEORGIA. GEORGIA entered into a power coordination agreement with OPC pursuant to which, effective in September 1991, OPC ceased to be partial requirements wholesale customer of GEORGIA. Instead, OPC began the purchase of 1,250 megawatts of capacity from GEORGIA through 1999, subject to reduction or extension by OPC, and may satisfy the balance of its needs through purchases from others. OPC decreased its purchases of capacity by 250 megawatts each in September 1997, 1998 and 1999. Under the amended 1995 Integrated Resource Plan approved by the Georgia PSC in March 1997, the resources associated with the decreased purchases by OPC in 1997, 1998 and 1999 will be used to meet the needs of GEORGIA's retail customers through 2004. In April 1999, a new power supply agreement was implemented between GEORGIA and OPC. Pursuant to this agreement, OPC will purchase 250 megawatts of steam capacity through March 2006, 250 megawatts of peaking capacity through August 2000, and 125 megawatts of peaking capacity from September 2000 through August 2001. There are 65 municipally-owned electric distribution systems operating in the territory in which the integrated Southeast utilities provide electric service at retail or wholesale. AMEA was organized under an act of the Alabama legislature and is comprised of 11 municipalities. In 1986, ALABAMA entered into a firm power purchase contract with AMEA entitling AMEA to scheduled amounts of capacity (to a maximum of 100 megawatts) for a period of 15 years commencing September 1, 1986. In October 1991, ALABAMA entered into a second firm power purchase contract with AMEA entitling AMEA to scheduled amounts of additional capacity (to a maximum 80 megawatts) for a period of 15 years commencing October 1, 1991. In both contracts, the power is being sold to AMEA for its member municipalities that previously were served directly by ALABAMA as wholesale customers. Under the terms of the contracts, ALABAMA received payments from AMEA representing the net present value of the revenues associated with the respective capacity entitlements. See Note 6 to ALABAMA's financial statements in Item 8 herein for further information on these contracts. Forty-eight municipally-owned electric distribution systems and one county-owned system receive their requirements through MEAG, which was established by a state statute in 1975. MEAG serves these requirements from self-owned generation facilities acquired from GEORGIA and purchases from others. In August 1997, a power coordination agreement was implemented between GEORGIA and MEAG that replaced the partial requirements tariff pursuant to which GEORGIA previously sold wholesale energy to MEAG. Since 1977, Dalton has filled its requirements from generation facilities acquired from GEORGIA and through partial requirements purchases. One municipally-owned electric distribution system's full requirements are served under a market-based contract by GEORGIA. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) I-9 GULF and MISSISSIPPI provide wholesale requirements for one municipal system each. GEORGIA has entered into substantially similar agreements with Georgia Transmission Corporation (formerly OPC's transmission division), MEAG and Dalton providing for the establishment of an integrated transmission system to carry the power and energy of each. The agreements require an investment by each party in the integrated transmission system in proportion to its respective share of the aggregate system load. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) SCS, acting on behalf of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH, also has a contract with SEPA providing for the use of those companies' facilities at government expense to deliver to certain cooperatives and municipalities, entitled by federal statute to preference in the purchase of power from SEPA, quantities of power equivalent to the amounts of power allocated to them by SEPA from certain United States government hydroelectric projects. The retail service rights of all electric suppliers in the State of Georgia are regulated by the 1973 State Territorial Electric Service Act. Pursuant to the provisions of this Act, all areas within existing municipal limits were assigned to the primary electric supplier therein on March 29, 1973 (451 municipalities, including Atlanta, Columbus, Macon, Augusta, Athens, Rome and Valdosta, to GEORGIA; 115 to electric cooperatives; and 50 to publicly-owned systems). Areas outside of such municipal limits were either to be assigned or to be declared open for customer choice of supplier by action of the Georgia PSC pursuant to standards set forth in the Act. Consistent with such standards, the Georgia PSC has assigned substantially all of the land area in the state to a supplier. Notwithstanding such assignments, the Act provides that any new customer locating outside of 1973 municipal limits and having a connected load of at least 900 kilowatts may receive electric service from the supplier of its choice. (See also Item 1 - BUSINESS - "Competition" herein.) Under and subject to the provisions of its franchises and concessions and the 1973 State Territorial Electric Service Act, SAVANNAH has the full but nonexclusive right to serve the City of Savannah, the Towns of Bloomingdale, Pooler, Garden City, Guyton, Newington, Oliver, Port Wentworth, Rincon, Tybee Island, Springfield, Thunderbolt, Vernonburg, and in conjunction with a secondary supplier, the Town of Richmond Hill. In addition, SAVANNAH has been assigned certain unincorporated areas in Chatham, Effingham, Bryan, Bulloch and Screven Counties by the Georgia PSC. (See also Item 1 - BUSINESS - "Competition" herein.) Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather Certificates" of public convenience and necessity to MISSISSIPPI and to six distribution rural cooperatives operating in southeastern Mississippi, then served in whole or in part by MISSISSIPPI, authorizing them to distribute electricity in certain specified geographically described areas of the state. The six cooperatives serve approximately 300,000 retail customers in a certificated area of approximately 10,300 square miles. In areas included in a "Grandfather Certificate," the utility holding such certificate may, without further certification, extend its lines up to five miles; other extensions within that area by such utility, or by other utilities, may not be made except upon a showing of, and a grant of a certificate of, public convenience and necessity. Areas included in such a certificate which are subsequently annexed to municipalities may continue to be served by the holder of the certificate, irrespective of whether it has a franchise in the annexing municipality. On the other hand, the holder of the municipal franchise may not extend service into such newly annexed area without authorization by the Mississippi PSC. Long-Term Power Sales and Lease Agreements Reference is made to Note 5 to the financial statements for SOUTHERN; Note 6 to the financial statements for ALABAMA, GULF and MISSISSIPPI, and Note 7 to the financial statements for GEORGIA in Item 8 herein for information regarding contracts for the sales and lease of capacity and energy to non-territorial customers. I-10 Competition The electric utility industry in the United States is currently undergoing a period of dramatic change as a result of regulatory and competitive factors. Among the primary agents of change has been the Energy Act. The Energy Act allows IPPs to access a utility's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers, and sell energy generation to other utilities. Also, electricity sales for resale rates are being driven down by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. The integrated Southeast utilities are aggressively working to maintain and expand their share of wholesale sales in the Southeastern power markets. Although the Energy Act does not permit retail customer access, it was a major catalyst for the current restructuring and consolidation taking place within the utility industry. Numerous federal and state initiatives are in varying stages to promote wholesale and retail competition. Among other things, these initiatives allow customers to choose their electricity provider. Some states have approved initiatives that result in a separation of the ownership and/or operation of generating facilities from the ownership and/or operation of transmission and distribution facilities. While various restructuring and competition initiatives have been discussed in Alabama, Florida, Georgia, and Mississippi, none have been enacted. Enactment would require numerous issues to be resolved, including significant ones relating to recovery of any stranded investments, full cost recovery of energy produced, and other issues related to the current energy crisis in California. As a result of this crisis, many states have either discontinued or delayed implementation of initiatives involving retail deregulation. The inability of a company to recover its investments, including the regulatory assets described in Note 1 to each registrant's respective financial statements, could have a material adverse effect on such company's financial condition and results of operations. The integrated Southeast utilities are attempting to minimize or reduce their cost exposure. Reference is made to Note 3 to the financial statements for SOUTHERN under "Alabama Power Rate Adjustment Procedures" and "Georgia Power 1998 Retail Rate Order" for information regarding these efforts. Reference is made to Item 1 - BUSINESS - "Integrated Southeast Utilities" herein for information relating to an RTO filing with FERC. Continuing to be a low-cost producer could provide opportunities to increase market share and profitability in markets that evolve with changing regulation. Conversely, if the integrated Southeast utilities do not remain low-cost producers and provide quality service, then energy sales growth could be limited, and this could significantly erode earnings. Reference is made to ALABAMA, GULF, MISSISSIPPI and SAVANNAH, "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 herein for further discussion of competition. To adapt to a less regulated, more competitive environment, SOUTHERN continues to evaluate and consider a wide array of potential business strategies. These strategies may include business combinations, acquisitions involving other utility or non-utility businesses or properties, internal restructuring, disposition of certain assets, or some combination thereof. Furthermore, SOUTHERN may engage in other new business ventures that arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations and financial condition of SOUTHERN. (See Item 1 - BUSINESS - - "Other Business" herein.) As a result of the foregoing factors, SOUTHERN has experienced increasing competition for available off-system sales of capacity and energy from neighboring utilities and alternative sources of energy. Additionally, the future effect of cogeneration and small-power production facilities on the SOUTHERN system cannot currently be determined but may be adverse. I-11 ALABAMA currently has cogeneration contracts in effect with twelve industrial customers. Under the terms of these contracts, ALABAMA purchases excess generation of such companies. During 2000, ALABAMA purchased approximately 104.9 million kilowatt-hours from such companies at a cost of $3.1 million. GEORGIA currently has contracts in effect with eight small power producers whereby GEORGIA purchases their excess generation. During 2000, GEORGIA purchased 11.6 million kilowatt-hours from such companies at a cost of $482,000. GEORGIA has purchased power agreements for electricity with two cogeneration facilities. Payments are subject to reductions for failure to meet minimum capacity output. During 2000, GEORGIA purchased 698.3 million kilowatt-hours at a cost of $70.4 million from these facilities. Reference is made to Note 4 to the financial statements for GEORGIA in Item 8 herein for information regarding purchased power commitments. GULF currently has agreements in effect with four industrial customers pursuant to which GULF purchases "as available" energy from customer-owned generation. During 2000, GULF purchased 127 million kilowatt-hours from such companies for $5.2 million. SAVANNAH currently has cogeneration contracts in effect with five large customers. Under the terms of these contracts, SAVANNAH purchases excess generation of such companies. During 2000, SAVANNAH purchased 43.9 million kilowatt-hours from such companies at a cost of $2.7 million. The competition for retail energy sales among competing suppliers of energy is influenced by various factors, including price, availability, technological advancements and reliability. These factors are, in turn, affected by, among other influences, regulatory, political and environmental considerations, taxation and supply. The integrated Southeast utilities have experienced, and expect to continue to experience, competition in their respective retail service territories in varying degrees as the result of self-generation (as described above) and fuel switching by customers and other factors. (See also Item 1 - BUSINESS - "Territory Served by the Integrated Southeast Utilities" herein for information concerning suppliers of electricity operating within or near the areas served at retail by the integrated Southeast utilities.) Regulation State Commissions The integrated Southeast utilities are subject to the jurisdiction of their respective state regulatory commissions, which have broad powers of supervision and regulation over public utilities operating in the respective states, including their rates, service regulations, sales of securities (except for the Mississippi PSC) and, in the cases of the Georgia PSC and Mississippi PSC, in part, retail service territories. (See Item 1 - BUSINESS - "Rate Matters" and "Territory Served by the Integrated Southeast Utilities" herein.) Holding Company Act SOUTHERN is registered as a holding company under the Holding Company Act, and it and its subsidiary companies are subject to the regulatory provisions of said Act, including provisions relating to the issuance of securities, sales and acquisitions of securities and utility assets, services performed by SCS and Southern Nuclear, and the activities of certain of SOUTHERN's special purpose subsidiaries. While various proposals have been introduced in Congress regarding the Holding Company Act, the prospects for legislative reform or repeal are uncertain at this time. Federal Power Act The Federal Power Act subjects the integrated Southeast utilities and SEGCO to regulation by the FERC as companies engaged in the transmission or sale at wholesale of electric energy in interstate commerce, including regulation of accounting policies and practices. ALABAMA and GEORGIA are also subject to the provisions of the Federal Power Act or the earlier Federal Water Power Act applicable to licensees with respect to their hydroelectric developments. Among the hydroelectric projects subject to licensing by the FERC are 14 existing ALABAMA generating stations having an aggregate installed capacity of 1,593,600 kilowatts and 18 existing GEORGIA generating stations having an aggregate installed capacity of 1,074,696 kilowatts. I-12 GEORGIA has started the relicensing process for the Middle Chattahoochee Project. This project consists of the Goat Rock, Oliver, and North Highlands facilities. GEORGIA and OPC also have a license, expiring in 2027, for the Rocky Mountain Plant, a pure pumped storage facility of 847,800 kilowatt capacity which began commercial operation in 1995. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein and Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for additional information.) Licenses for all projects, excluding those discussed above, expire in the period 2007-2033 in the case of ALABAMA's projects and in the period 2005-2036 in the case of GEORGIA's projects. Upon or after the expiration of each license, the United States Government, by act of Congress, may take over the project, or the FERC may relicense the project either to the original licensee or to a new licensee. In the event of takeover or relicensing to another, the original licensee is to be compensated in accordance with the provisions of the Federal Power Act, such compensation to reflect the net investment of the licensee in the project, not in excess of the fair value of the property taken, plus reasonable damages to other property of the licensee resulting from the severance therefrom of the property taken. Atomic Energy Act of 1954 ALABAMA, GEORGIA and Southern Nuclear are subject to the provisions of the Atomic Energy Act of 1954, as amended, which vests jurisdiction in the NRC over the construction and operation of nuclear reactors, particularly with regard to certain public health and safety and antitrust matters. The National Environmental Policy Act has been construed to expand the jurisdiction of the NRC to consider the environmental impact of a facility licensed under the Atomic Energy Act of 1954, as amended. NRC operating licenses currently expire in June 2017 and March 2021 for Plant Farley units 1 and 2, respectively, in August 2014 and June 2018 for Plant Hatch units 1 and 2, respectively, and in January 2027 and February 2029 for Plant Vogtle units 1 and 2, respectively. On February 29, 2000, Southern Nuclear, on behalf of GEORGIA, filed a license renewal application with the NRC for Plant Hatch units 1 and 2. If approved, the operating license will be extended to 2034. Reference is made to Notes 1 and 10 to SOUTHERN's, Notes 1 and 11 to ALABAMA's and Notes 1 and 5 to GEORGIA's financial statements in Item 8 herein for information on nuclear decommissioning costs and nuclear insurance. Additionally, Note 3 to GEORGIA's financial statements contains information regarding nuclear performance standards imposed by the Georgia PSC that may impact retail rates. Environmental Regulation The integrated Southeast utilities' and SEGCO's operations are subject to federal, state and local environmental requirements which, among other things, control emissions of particulates, sulfur dioxide and nitrogen oxides into the air; the use, transportation, storage and disposal of hazardous and toxic waste; and discharges of pollutants, including thermal discharges, into waters of the United States. The integrated Southeast utilities and SEGCO expect to comply with such requirements, which generally are becoming increasingly stringent, through technical improvements, the use of appropriate combinations of low-sulfur fuel and chemicals, addition of environmental control facilities, changes in control techniques and reduction of the operating levels of generating facilities. Failure to comply with such requirements could result in the complete shutdown of individual facilities not in compliance as well as the imposition of civil and criminal penalties. Reference is made to each registrant's "Management's Discussion and Analysis" in Item 7 herein for a discussion of the Clean Air Act and other environmental legislation and proceedings, including a pending lawsuit brought on behalf of the EPA. I-13 The integrated Southeast utilities' and SEGCO's estimated capital expenditures for environmental quality control facilities for the years 2001, 2002 and 2003 are as follows: (in millions) --------------------- --- ---------- ---------- ----------- 2001 2002 2003 ---------- ---------- ----------- ALABAMA $ 76 $144 $ 48 GEORGIA 345 302 48 GULF 7 7 14 MISSISSIPPI 2 4 - SAVANNAH 2 1 4 SEGCO 1 1 1 --------------------- --- ---------- ---------- ----------- Total $433 $459 $115 ===================== === ========== ========== =========== The foregoing estimates are included in the current construction programs. (See Item 1 - BUSINESS - "Construction Programs" herein.) Additionally, each integrated Southeast utility and SEGCO has incurred costs for environmental remediation of various sites. Reference is made to each registrant's "Management's Discussion and Analysis" in Item 7 herein for information regarding the registrants' environmental remediation efforts. Also, see Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for information regarding the identification of sites that may require environmental remediation by GEORGIA. The integrated Southeast utilities and SEGCO are unable to predict at this time what additional steps they may be required to take as a result of the implementation of existing or future quality control requirements for air, water and hazardous or toxic materials, but such steps could adversely affect system operations and result in substantial additional costs. The outcome of the matters mentioned above under "Regulation" cannot now be determined, except that these developments may result in delays in obtaining appropriate licenses for generating facilities, increased construction and operating costs, or reduced generation, the nature and extent of which, while not determinable at this time, could be substantial. Rate Matters Rate Structure The rates and service regulations of the integrated Southeast utilities are uniform for each class of service throughout their respective service areas. Rates for residential electric service are generally of the block type based upon kilowatt-hours used and include minimum charges. Residential and other rates contain separate customer charges. Rates for commercial service are presently of the block type and, for large customers, the billing demand is generally used to determine capacity and minimum bill charges. These large customers' rates are generally based upon usage by the customer including those with special features to encourage off-peak usage. Additionally, the integrated Southeast utilities are allowed by their respective PSCs to negotiate the terms and compensation of service to large customers. Such terms and compensation of service, however, are subject to final PSC approval. ALABAMA, GEORGIA and SAVANNAH are allowed by state law to recover fuel and net purchased energy costs through fuel cost recovery provisions which are adjusted to reflect increases or decreases in such costs. GULF recovers from retail customers costs of fuel, net purchased power, energy conservation and environmental compliance through provisions which are adjusted to reflect increases or decreases in such costs. GULF's recovery of these costs is based upon an annual projection - any over/under recovery during such period is reflected in a subsequent annual period with interest. With respect to MISSISSIPPI's retail rates, fuel and purchased power costs are billed to such customers under the fuel and energy adjustment clause. The adjustment factors for MISSISSIPPI's retail and wholesale rates are generally levelized based on the estimated energy cost for the year, adjusted for any actual over/under collection from the previous year. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. Rate Proceedings Reference is made to Note 3 to each registrant's financial statements in Item 8 herein for a discussion of rate matters. Reference is also made to GULF's "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 herein for a discussion of recent Florida PSC matters. I-14 Integrated Resource Planning GEORGIA and SAVANNAH filed a new Integrated Resource Plan with the Georgia PSC on January 31, 2001. The plans specify how GEORGIA and SAVANNAH each intends to meet the future electrical needs of their customers through a combination of demand-side and supply-side resources. The Georgia PSC must pre-certify these new resources. Once certified, all prudently incurred construction costs and purchased power costs will be recoverable through rates. In July 1998, the Georgia PSC approved GEORGIA's and SAVANNAH's 1998 Integrated Resource Plans as filed, with minor modifications. The approved plans identify resource needs of approximately 800 megawatts to 1,200 megawatts starting in the summer of 2002. As a result, GEORGIA and SAVANNAH issued a joint request for proposals for their collective needs of 800 megawatts to 1,200 megawatts for 2002 and 2003. The bids were evaluated against self-build options, and a certification filing for the selected resources was approved by the Georgia PSC in March 2000. The selected resources for retail needs in Georgia are: (1) a 7-year purchased power agreement with the West Georgia Generating Company for 310 megawatts starting in 2002, increasing to 465 megawatts in 2005, and terminating at the end of 2009; and (2) a 7 1/2-year purchased power agreement for two 568 megawatt combined cycle units to be located at Plant Wansley starting in 2002 and terminating at the end of 2009. SAVANNAH has a 7-year purchased power agreement with GEORGIA for 200 megawatts of the 1,136 megawatt addition at Plant Wansley starting in 2002 and terminating in 2009. After 2009, this capacity will be available to the wholesale market. On December 15, 2000, GEORGIA filed a certification request for a 7-year purchased power agreement for 571 megawatts starting in 2003 and 610 megawatts starting in 2004 to be served from two combined cycle units at Plant Goat Rock; and 615 megawatts in 2004 to be served from a combined cycle unit at Plant Autaugaville. In addition, GEORGIA is seeking certification for upgrades from 3 megawatts to 9 megawatts at Plant Goat Rock Hydro units 1 and 2. GEORGIA expects the Georgia PSC to approve the 2001 Integrated Resource Plan and grant certification of the purchased power agreements in July 2001. Environmental Cost Recovery Plans GULF and MISSISSIPPI both have retail rate mechanisms that provide for recovery of environmental compliance costs. For a description of these plans, see Note 3 to each of GULF's and MISSISSIPPI's financial statements in Item 8 herein. Employee Relations The companies of the SOUTHERN system had a total of 26,021 employees on their payrolls at December 31, 2000. -------------------------------- --- ------------------------- Employees at December 31, 2000 ------------------------- ALABAMA 6,871 GEORGIA 8,855 GULF 1,327 MISSISSIPPI 1,319 SAVANNAH 554 SCS 3,431 Southern Nuclear 3,009 Other 655 -------------------------------- --- ------------------------- Total 26,021 ================================ === ========================= The integrated Southeast utilities have separate agreements with local unions of the IBEW generally covering wages, working conditions and procedures for handling grievances and arbitration. These agreements apply with certain exceptions to operating, maintenance and construction employees. ALABAMA has agreements with the IBEW on a three-year contract extending to August 14, 2001. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date. I-15 GEORGIA has an agreement with the IBEW covering wages and working conditions, which is in effect through June 30, 2002. GULF has an agreement with the IBEW on a three-year contract extending to August 15, 2001. MISSISSIPPI has an agreement with the IBEW on a four-year contract extending to August 16, 2002. SAVANNAH has four-year labor agreements with the IBEW and the Office and Professional Employees International Union that expire April 15, 2003 and December 1, 2003, respectively. Southern Nuclear has agreements with the IBEW on separate three-year contracts extending to August 15, 2001 for Plant Farley and to June 30, 2002 for Plants Hatch and Vogtle. Upon notice given at least 60 days prior to these dates, negotiations may be initiated with respect to agreement terms to be effective after such dates. Southern Nuclear also has an agreement with the United Plant Guard Workers of America for security officers at Plant Hatch extending to September 30, 2001. Upon notice given at least 60 days prior to that date, negotiations may be initiated with respect to agreement terms to be effective after such date. The agreements also subject the terms of the pension plans for the companies discussed above to collective bargaining with the unions at five-year intervals. I-16 Item 2. PROPERTIES Electric Properties - The Integrated Southeast Utilities The integrated Southeast utilities and SEGCO, at December 31, 2000, operated 34 hydroelectric generating stations, 33 fossil fuel generating stations, three nuclear generating stations and four combined cycle/cogeneration stations. The amounts of capacity owned by each company are shown in the table below. ------------------------- ------------------------------------- Nameplate Generating Station Location Capacity (1) ------------------------- ------------------- ----------------- (Kilowatts) Fossil Steam Gadsden Gadsden, AL 120,000 Gorgas Jasper, AL 1,221,250 Barry Mobile, AL 1,525,000 Greene County Demopolis, AL 300,000 (2) Gaston Unit 5 Wilsonville, AL 880,000 Miller Birmingham, AL 2,532,288 (3) --------- ALABAMA Total 6,578,538 --------- Arkwright Macon, GA 160,000 Atkinson Atlanta, GA 180,000 Bowen Cartersville, GA 3,160,000 Branch Milledgeville, GA 1,539,700 Hammond Rome, GA 800,000 McDonough Atlanta, GA 490,000 McManus Brunswick, GA 115,000 Mitchell Albany, GA 170,000 Scherer Macon, GA 750,924 (4) Wansley Carrollton, GA 925,550 (5) Yates Newnan, GA 1,250,000 --------- GEORGIA Total 9,541,174 --------- Crist Pensacola, FL 1,045,000 Lansing Smith Panama City, FL 305,000 Scholz Chattahoochee, FL 80,000 Daniel Pascagoula, MS 500,000 (6) Scherer Unit 3 Macon, GA 204,500 (4) ----------- GULF Total 2,134,500 --------- Eaton Hattiesburg, MS 67,500 Sweatt Meridian, MS 80,000 Watson Gulfport, MS 1,012,000 Daniel Pascagoula, MS 500,000 (6) Greene County Demopolis, AL 200,000 (2) ----------- MISSISSIPPI Total 1,859,500 ----------- ---------------------------------------------- ---------------- ------------------------- ----------------------------------------- Nameplate Generating Station Location Capacity ---------------------- ------------------------- ------------------ (Kilowatts) McIntosh Effingham County, GA 163,117 Kraft Port Wentworth, GA 281,136 Riverside Savannah, GA 102,278 ----------- SAVANNAH Total 546,531 ----------- Gaston Units 1-4 Wilsonville, AL SEGCO Total 1,000,000 (7) ----------- Total Fossil Steam 21,660,243 ----------- Nuclear Steam Farley Dothan, AL ALABAMA Total 1,720,000 ----------- Hatch Baxley, GA 899,612 (8) Vogtle Augusta, GA 1,060,240 (9) ----------- GEORGIA Total 1,959,852 ---------- Total Nuclear Steam 3,679,852 ----------- Combustion Turbines Greene County Demopolis, AL ALABAMA Total 720,000 ----------- Arkwright Macon, GA 30,580 Atkinson Atlanta, GA 78,720 Bowen Cartersville, GA 39,400 Dahlberg Athens, GA 640,000 Intercession City Intercession City, FL 47,333 (10) McDonough Atlanta, GA 78,800 McIntosh Units 1,2,3,4,7,8 Effingham County, GA 480,000 McManus Brunswick, GA 481,700 Mitchell Albany, GA 118,200 Robins Warner Robins, GA 160,000 Wilson Augusta, GA 354,100 Wansley Carrollton, GA 26,322 (5) ----------- GEORGIA Total 2,535,155 --------- Lansing Smith Unit A Panama City, FL 39,400 Pea Ridge Units 1-3 Pea Ridge, FL 14,250 ------ GULF Total 53,650 ------ Chevron Cogenerating Station Pascagoula, MS 147,292 (11) Sweatt Meridian, MS 39,400 Watson Gulfport, MS 39,360 --------- MISSISSIPPI Total 226,052 --------- ------------------------------------------------- ----------------- I-17 --------------------------- -------------------- ----------------- Nameplate Generating Station Location Capacity --------------------------- -------------------- ----------------- (Kilowatts) Boulevard Savannah, GA 59,100 Kraft Port Wentworth, GA 22,000 McIntosh Units 5&6 Effingham County, GA 160,000 ------- SAVANNAH Total 241,100 ------- 241,100 Gaston (SEGCO) Wilsonville, AL 19,680 (7) ----------- Total Combustion Turbines 3,795,637 ---------- Cogeneration Washington County Washington County, AL 123,428 GE Plastics Project Burkeville, AL 104,800 Theodore Theodore, AL 236,418 ----------- ALABAMA Total 464,646 ----------- Combined Cycle Barry Mobile, AL ALABAMA Total 535,212 ------- Hydroelectric Facilities Weiss Leesburg, AL 87,750 Henry Ohatchee, AL 72,900 Logan Martin Vincent, AL 128,250 Lay Clanton, AL 177,000 Mitchell Verbena, AL 170,000 Jordan Wetumpka, AL 100,000 Bouldin Wetumpka, AL 225,000 Harris Wedowee, AL 135,000 Martin Dadeville, AL 154,200 Yates Tallassee, AL 32,000 Thurlow Tallassee, AL 60,000 Lewis Smith Jasper, AL 157,500 Bankhead Holt, AL 54,000 Holt Holt, AL 40,000 ----------- ALABAMA Total 1,593,600 ---------- --------------------------- -------------------- ----------------- --------------------------- -------------------- ----------------- Nameplate Generating Station Location Capacity --------------------------- -------------------- ----------------- Barnett Shoals (Leased) Athens, GA 2,800 Bartletts Ferry Columbus, GA 173,000 Goat Rock Columbus, GA 26,000 Lloyd Shoals Jackson, GA 14,400 Morgan Falls Atlanta, GA 16,800 North Highlands Columbus, GA 29,600 Oliver Dam Columbus, GA 60,000 Rocky Mountain Rome, GA 215,256 (12) Sinclair Dam Milledgeville, GA 45,000 Tallulah Falls Clayton, GA 72,000 Terrora Clayton, GA 16,000 Tugalo Clayton, GA 45,000 Wallace Dam Eatonton, GA 321,300 Yonah Toccoa, GA 22,500 6 Other Plants 18,080 ----------- GEORGIA Total 1,077,736 ---------- Total Hydroelectric Facilities 2,671,336 ----------- Total Generating Capacity 32,806,926 =========== ------------------------------------------------ ----------------- Notes: (1) For additional information regarding facilities jointly-owned with non-affiliated parties, see Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein. (2) Owned by ALABAMA and MISSISSIPPI as tenants in common in the proportions of 60% and 40%, respectively. (3) Excludes the capacity owned by AEC. (4) Capacity shown for GEORGIA is 8.4% of Units 1 and 2 and 75% of Unit 3. Capacity shown for GULF is 25% of Unit 3. (5) Capacity shown is GEORGIA's portion (53.5%) of total plant capacity. (6) Represents 50% of the plant which is owned as tenants in common by GULF and MISSISSIPPI. (7) SEGCO is jointly-owned by ALABAMA and GEORGIA. (See Item 1 - BUSINESS herein.) (8) Capacity shown is GEORGIA's portion (50.1%) of total plant capacity. (9) Capacity shown is GEORGIA's portion (45.7%) of total plant capacity. (10) Capacity shown represents 33-1/3% of total plant capacity. GEORGIA owns a 1/3 interest in the unit with 100% use of the unit from June through September. FPC operates the unit. (11) Generation is dedicated to a single industrial customer. (12) Capacity shown is GEORGIA's portion (25.4%) of total plant capacity. OPC operates the plant. I-18 Except as discussed below under "Titles to Property," the principal plants and other important units of the integrated Southeast utilities and SEGCO are owned in fee by the respective companies. It is the opinion of management of each such company that its operating properties are adequately maintained and are substantially in good operating condition. MISSISSIPPI owns a 79-mile length of 500-kilovolt transmission line which is leased to Entergy Gulf States. The line, completed in 1984, extends from Plant Daniel to the Louisiana state line. Entergy Gulf States is paying a use fee over a forty-year period covering all expenses and the amortization of the original $57 million cost of the line. At December 31, 2000, the unamortized portion of this cost was $34.8 million. The all-time maximum demand on the integrated Southeast utilities and SEGCO was 31,359,000 kilowatts and occurred in August 2000. This amount excludes demand served by capacity retained by MEAG and Dalton and excludes demand associated with power purchased from OPC and SEPA by its preference customers. The reserve margin for the integrated Southeast utilities and SEGCO at that time was 8.1%. For additional information on peak demands, reference is made to Item 6 - SELECTED FINANCIAL DATA herein. ALABAMA and GEORGIA will incur significant costs in decommissioning their nuclear units at the end of their useful lives. (See Item 1 - BUSINESS - "Regulation - Atomic Energy Act of 1954" and Note 1 to SOUTHERN's, ALABAMA's and GEORGIA's financial statements in Item 8 herein.) Jointly-Owned Facilities ALABAMA and GEORGIA have sold and GEORGIA has purchased undivided interests in certain generating plants and other related facilities to or from non-affiliated parties. The percentages of ownership resulting from these transactions are as follows:
Total Percentage Ownership ---------------- -------- ------------ -------- --------- ------------ -------- Capacity ALABAMA AEC GEORGIA OPC MEAG DALTON FPC -------------- ---------------- -------- ------------ -------- --------- ------------ -------- (Megawatts) Plant Miller Units 1 and 2 1,320 91.8% 8.2% -% -% -% -% -% Plant Hatch 1,796 - - 50.1 30.0 17.7 2.2 - Plant Vogtle 2,320 - - 45.7 30.0 22.7 1.6 - Plant Scherer Units 1 and 2 1,636 - - 8.4 60.0 30.2 1.4 - Plant Wansley 1,779 - - 53.5 30.0 15.1 1.4 - Rocky Mountain 848 - - 25.4 74.6 - - - Intercession City, FL 142 - - 33.3 - - - 66.7 ----------------------------- -------------- -- ---------------- -------- ------------ -------- --------- ------------ --------
ALABAMA and GEORGIA have contracted to operate and maintain the respective units in which each has an interest (other than Rocky Mountain and Intercession City, as described below) as agent for the joint owners. In addition, GEORGIA has commitments regarding a portion of a 5 percent interest in Plant Vogtle owned by MEAG that are in effect until the later of retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest. The payments for capacity are required whether any capacity is available. The energy cost is a function of each unit's variable operating costs. Except for the portion of the capacity payments related to the 1987 and 1990 write-offs of Plant Vogtle costs, the cost of such capacity and energy is included in purchased power from non-affiliates in GEORGIA's Statements of Income in Item 8 herein. I-19 Titles to Property The integrated Southeast utilities' and SEGCO's interests in the principal plants (other than certain pollution control facilities, one small hydroelectric generating station leased by GEORGIA and the land on which five combustion turbine generators of MISSISSIPPI are located, which is held by easement) and other important units of the respective companies are owned in fee by such companies, subject only to the liens of applicable mortgage indentures (except for SEGCO) and to excepted encumbrances as defined therein. The integrated Southeast utilities own the fee interests in certain of their principal plants as tenants in common. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) Properties such as electric transmission and distribution lines and steam heating mains are constructed principally on rights-of-way which are maintained under franchise or are held by easement only. A substantial portion of lands submerged by reservoirs is held under flood right easements. In substantially all of its coal reserve lands, SEGCO owns or will own the coal only, with adequate rights for the mining and removal thereof. I-20 Item 3. LEGAL PROCEEDINGS (1) United States of America v. ALABAMA (United States District Court for the Northern District of Alabama) Reference is made to Note 3 to ALABAMA's financial statements in Item 8 herein under the caption "Environmental Litigation." (2) United States of America v. GEORGIA and SAVANNAH (United States District Court for the Northern District of Georgia) On March 27, 2001, the U.S. District Court granted the EPA's motion to amend its complaint to add the alleged violations at SAVANNAH's Plant Kraft and to add SAVANNAH as a defendant and denied the EPA's motion to add GULF and MISSISSIPPI as defendants due to lack of jurisdiction. Reference is made to Note 3 to GEORGIA's financial statements in Item 8 herein under the caption "Environmental Litigation." (3) Cooper et al. v. GEORGIA, SOUTHERN, SCS and Energy Solutions (Superior Court of Fulton County, Georgia) Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein under the caption "Race Discrimination Litigation." (4) GEORGIA has been designated as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act with respect to a site in Brunswick, Georgia. Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein under the captions "Georgia Power Potentially Responsible Party Status" and "Other Environmental Contingencies," respectively. (5) In re: Mobile Energy Services Company, LLC; In re: Mobile Energy Services Holdings, Inc. (U.S. Bankruptcy Court for the Southern District of Alabama). Reference is made to Note 3 to SOUTHERN's financial statements in Item 8 herein under the caption "Mobile Energy Services' Petition for Bankruptcy." (6) Gordon v. SOUTHERN et al. (United States District Court for the Southern District of California) Reference is made to Note 3 to SOUTHERN"s financial statements in Item 8 herein under the caption "California Electricity Markets Litigation." (7) Pier 23 Restaurant v. SOUTHERN et al. (United States District Court for the Northern District of California) Reference is made to Note 3 to SOUTHERN"s financial statements in Item 8 herein under the caption "California Electricity Markets Litigation." See Item 1 - BUSINESS - "Construction Programs," "Fuel Supply," "Regulation - - Federal Power Act" and "Rate Matters" as well as Note 3 to each registrant's financial statements in Item 8 herein for a description of certain other administrative and legal proceedings discussed therein. Additionally, each of the integrated Southeast utilities, SCS, Southern Nuclear, Energy Solutions and Southern LINC are, in the normal course of business, engaged in litigation or administrative proceedings that include, but are not limited to, acquisition of property, injuries and damages claims, and complaints by present and former employees. I-21 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ALABAMA ALABAMA held a special meeting of shareholders on December 14, 2000, for the purpose of amending its charter to provide to the holders of Preferred Stock the right to vote at all elections of directors of ALABAMA. The amendment was passed and the vote tabulation was as follows: Shares For Against Abstain Common Stock 5,608,955 0 0 Preferred Stock 1,505,832 462,101 127,473 --------- ------- ------- Total 7,114,787 462,101 127,473 ========= ======= ======= GEORGIA By unanimous written consent effective December 14, 2000, GEORGIA's common shareholder authorized amending GEORGIA's charter to provide to the holders of Preferred Stock the right to vote at all elections of directors of GEORGIA. The vote tabulation was as follows: Shares For Against Abstain Common Stock 7,761,500 0 0 GULF GULF held a special meeting of shareholders on December 14, 2000, for the purpose of amending its charter to provide to the holders of Preferred Stock the right to vote at all elections of directors of GULF. The amendment was passed and the vote tabulation was as follows: Shares For Against Abstain Common Stock 992,717 0 0 Preferred Stock 26,842 1,321 21 ----------- ----- -- Total 1,019,559 1,321 21 =========== ===== == MISSISSIPPI MISSISSIPPI held a special meeting of shareholders on December 14, 2000, for the purpose of amending its charter to provide to the holders of Preferred Stock the right to vote at all elections of directors of MISSISSIPPI. The amendment was passed and the vote tabulation was as follows: Shares For Against Abstain Common Stock 1,121,000 0 0 Preferred Stock 196,119 10,363 11,762 ----------- ------ ------ Total 1,317,119 10,363 11,762 =========== ====== ====== I-22 EXECUTIVE OFFICERS OF SOUTHERN (Identification of executive officers of SOUTHERN is inserted in Part I in accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the officers set forth below are as of December 31, 2000. A. W. Dahlberg Chairman and Director Age 60 Elected Director in 1985 and Chairman effective March 1995 through March 2001, and Chief Executive Officer effective March 1995 to March 2001. Also served as President from January 1994 to June 1999. H. Allen Franklin President, Chief Executive Officer and Director Age 56 Elected Director in 1988 and Chief Executive Officer effective March 1, 2001. Previously served as President and Chief Operating Officer of SOUTHERN from June 1999 to March 2001; and as President and Chief Executive Officer of GEORGIA from January 1994 to June 1999. Elmer B. Harris Executive Vice President and Director Age 61 Elected Director in 1989 and Executive Vice President in 1991. He also has served as President and Chief Executive Officer of ALABAMA since 1989. David M. Ratcliffe Executive Vice President Age 52 Elected in 1999. He also has served as President and Chief Executive Officer of GEORGIA since June 1999. Previously served as Executive Vice President, Treasurer and Chief Financial Officer of GEORGIA from March 1998 to June 1999; and as Senior Vice President of SOUTHERN from March 1995 to March 1998. Stephen A. Wakefield Senior Vice President and General Counsel Age 60 Elected in 1997. Previously, he was a partner at the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP from July 1991 through August 1997. Gale E. Klappa Financial Vice President, Chief Financial Officer and Treasurer Age 50 Elected effective March 1, 2001. Previously served as Chief Strategic Officer of SOUTHERN from October 1999 to March 2001; President of Mirant's North America Group and Senior Vice President of Mirant from December 1998 to October 1999; and as President and Chief Executive Officer of Western Power Distribution, a subsidiary of Mirant located in Bristol, England, from September 1995 to December 1998. Charles D. McCrary Vice President Age 49 Elected in 1998; serves as Chief Production Officer for the SOUTHERN system. He also has served as Executive Vice President of GEORGIA since May 1998. Previously, he served as Executive Vice President of ALABAMA from 1994 through April 1998. W. G. Hairston, III Age 56 President and Chief Executive Officer of Southern Nuclear since 1993. The officers of SOUTHERN were elected for a term running from the last annual meeting of the directors (May 24, 2000) for one year until the next annual meeting or until their successors are elected and have qualified, except for Mr. Franklin and Mr. Klappa, whose elections were effective on the date indicated. I-23 EXECUTIVE OFFICERS OF ALABAMA (Identification of executive officers of ALABAMA is inserted in Part I in accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the officers set forth below are as of December 31, 2000. Elmer B. Harris President, Chief Executive Officer and Director Age 61 Elected in 1989. Served as President and Chief Executive Officer since 1989. Elected Executive Vice President of SOUTHERN in 1991. Served as a Director of SOUTHERN since 1989. Michael D. Garrett Executive Vice President Age 51 Elected in 1998. Served as Executive Vice President of Customer Service since January 2000. Previously served as Executive Vice President of External Affairs from March 1998 to January 2000; and Senior Vice President of External Affairs from February 1994 to March 1998. William B. Hutchins, III Executive Vice President, Chief Financial Officer and Treasurer Age 57 Elected in 1991. Served as Treasurer since 1998 in addition to Executive Vice President and Chief Financial Officer since 1991. C. Alan Martin Executive Vice President Age 52 Elected in 1999. Served as Executive Vice President of External Affairs since January 2000. Previously served as Executive Vice President and Chief Marketing Officer for SOUTHERN from 1998 to 1999; and Vice President of Human Resources for SOUTHERN from May 1995 to March 1998. Jerry L. Stewart Senior Vice President Age 51 Elected in 1999. Served as Senior Vice President of Fossil and Hydro Generation since 1999. Previously served as Vice President of SCS from 1992 to 1999. The officers of ALABAMA were elected for a term running from the last annual meeting of the directors (April 28, 2000) for one year until the next annual meeting or until their successors are elected and have qualified. I-24 EXECUTIVE OFFICERS OF GEORGIA (Identification of executive officers of GEORGIA is inserted in Part I in accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the officers set forth below are as of December 31, 2000. David M. Ratcliffe President, Chief Executive Officer and Director Age 52 Elected as an Executive Officer in 1998 and as Director in 1999. Served as President and Chief Executive Officer since June 1999. Previously served as Executive Vice President, Treasurer and Chief Financial Officer of GEORGIA from 1998 to 1999; and as Senior Vice President of SOUTHERN from March 1995 to March 1998. William C. Archer, III Executive Vice President Age 52 Elected in 1995. Served as Executive Vice President of External Affairs since 1995. Previously served as Senior Vice President of External Affairs from April 1995 to September 1995. Thomas A. Fanning Executive Vice President, Treasurer and Chief Financial Officer Age 43 Elected in 1999. Previously served as Senior Vice President of SOUTHERN from June 1998 to June 1999; and Senior Vice President and Chief Information Officer for SOUTHERN from March 1995 to 1998. Gene R. Hodges Executive Vice President Age 62 Elected in 1986. Served as Executive Vice President of Customer Operations, Power Delivery and Safety since 1992. James K. Davis Senior Vice President Age 60 Elected in 1993. Served as Senior Vice President of Corporate Relations since 1993, with Employee Relations being added to his responsibilities in 2000. Robert H. Haubein Senior Vice President Age 60 Elected in 1992. Served as Senior Vice President of Fossil/Hydro Power since 1994. Leonard J. Haynes Senior Vice President Age 50 Elected in 1998. Served as Senior Vice President of Marketing since 1998. Previously served as Vice President of Retail Sales and Services from October 1995 to November 1998. Fred D. Williams Senior Vice President Age 56 Elected in 1992. Served as Senior Vice President of Resource Policy and Planning since 1998. Previously served as Senior Vice President of Wholesale Power Marketing from 1995 to 1998. The officers of GEORGIA were elected for a term running from the last annual meeting of the directors (May 17, 2000) for one year until the next annual meeting or until their successors are elected and have qualified. I-25 EXECUTIVE OFFICERS OF GULF (Identification of executive officers of GULF is inserted in Part I in accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the officers set forth below are as of December 31, 2000. Travis J. Bowden President, Chief Executive Officer and Director Age 62 Elected in 1994. Served as President and Chief Executive Officer since 1994. Francis M. Fisher, Jr. Vice President Age 52 Elected in 1989. Served as Vice President of Power Delivery and Customer Operations since 1996. Previously served as Vice President of Employee and External Relations from 1989 to 1996. John E. Hodges, Jr. Vice President Age 57 Elected in 1989. Served as Vice President of Marketing and Employee/External Affairs since 1996. Previously served as Vice President of Customer Operations from 1989 to 1996. Ronnie R. Labrato Comptroller and Chief Financial Officer Age 47 Elected as an Executive Officer in July 2000. Previously served as Controller from 1992 to 2000. Robert G. Moore Vice President Age 51 Elected in 1997. Served as Vice President of Power Generation and Transmission of GULF and Vice President of Fossil Generation of SCS since 1997. Previously served as Plant Manager of Plant Bowen at GEORGIA from March 1993 to August 1997. Warren E. Tate Secretary/Treasurer and Regional Chief Information Officer Age 58 Elected as an Executive Officer in July 2000. Served as Secretary/Treasurer and Regional Chief Information Officer since 1996. The officers of GULF were elected for a term running from the last annual meeting of the directors (July 28, 2000) for one year until the next annual meeting or until their successors are elected and have qualified. I-26 EXECUTIVE OFFICERS OF MISSISSIPPI (Identification of executive officers of MISSISSIPPI is inserted in Part I in accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the officers set forth below are as of December 31, 2000. Dwight H. Evans President, Chief Executive Officer and Director Age 52 Elected in 1995. Previously served as Executive Vice President of External Affairs of GEORGIA from 1989 to 1995. H. E. Blakeslee Vice President Age 60 Elected in 1984. Served as Vice President of Customer Services and Retail Marketing since 1984. Don E. Mason Vice President Age 59 Elected in 1983. Served as Vice President of External Affairs and Corporate Services since 1983. Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer Age 48 Elected in 1995. Served as Vice President, Secretary, Treasurer and Chief Financial Officer since 1995. Gene L. Ussery, Jr. Vice President Age 51 Elected in 2000. Served as Vice President of Power Generation and Delivery since September 2000. Previously served as Northern Cluster Manager at GEORGIA for Plants Hammond, Bowen and McDonough-Atkinson from July 2000 to September 2000. He served as Manager of Plant Bowen at GEORGIA from 1997 to 2000; and Manager of Plant McDonough at GEORGIA from 1996 to 1997. The officers of MISSISSIPPI were elected for a term running from the last annual meeting of the directors (April 26, 2000) for one year until the next annual meeting or until their successors are elected and have qualified, except for Mr. Ussery, whose election was effective on September 21, 2000. I-27 PART II Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) The common stock of SOUTHERN is listed and traded on the New York Stock Exchange. The stock is also traded on regional exchanges across the United States. High and low stock prices, per the New York Stock Exchange Composite Tape during each quarter for the past two years were as follows: ------------------------ ----------- --- -------------- High Low ----------- -------------- 2000 First Quarter $25-7/8 $20-3/8 Second Quarter 27-7/8 21-11/16 Third Quarter 35 23-13/32 Fourth Quarter 33-22/25 27-1/2 1999 First Quarter $29-5/8 $23-1/4 Second Quarter 29-3/16 22-3/4 Third Quarter 28 25 Fourth Quarter 27-1/8 22-1/16 -------------------- --------------- --- -------------- There is no market for the other registrants' common stock, all of which is owned by SOUTHERN. On February 28, 2001, the closing price of SOUTHERN's common stock was $30.95. (b) Number of SOUTHERN's common stockholders at December 31, 2000: 160,116 Each of the other registrants have one common stockholder, SOUTHERN. (c) Dividends on each registrant's common stock are payable at the discretion of their respective board of directors. The dividends on common stock declared by SOUTHERN and the integrated Southeast utilities to their stockholder(s) for the past two years were as follows: (in thousands) ------------------- --------- ------------- ---------- Registrant Quarter 2000 1999 ------------------- --------- ------------- ---------- SOUTHERN First $220,557 $233,879 Second 217,289 233,445 Third 217,289 228,690 Fourth 218,098 225,470 ALABAMA First 103,600 98,000 Second 105,200 98,400 Third 104,400 99,700 Fourth 103,900 103,500 GEORGIA First 136,500 133,100 Second 138,600 133,700 Third 137,600 135,500 Fourth 136,900 140,700 GULF First 14,600 15,000 Second 14,900 15,100 Third 14,800 15,300 Fourth 14,700 15,900 MISSISSIPPI First 13,600 13,800 Second 13,800 13,800 Third 13,700 14,000 Fourth 13,600 14,500 SAVANNAH First 6,100 6,200 Second 6,200 6,200 Third 6,000 6,300 Fourth 6,000 6,500 ------------------- --------- ------------- ---------- The dividend paid per share by SOUTHERN was 33.5(cent) for each quarter of 1999 and 2000. The dividend paid on SOUTHERN's common stock for the first quarter of 2001 was 33.5(cent) per share. The amount of dividends on their common stock that may be paid by the subsidiary registrants is restricted in accordance with their first mortgage bond indenture. The amounts of earnings retained in the business II-1 and the amounts restricted against the payment of cash dividends on common stock at December 31, 2000 were as follows: -------------------- ------------------ --- -------------- Retained Restricted Earnings Amount ------------------ -------------- (in millions) ALABAMA $1,228 $ 796 GEORGIA 1,788 891 GULF 156 127 MISSISSIPPI 173 118 SAVANNAH 110 68 Consolidated 4,672 2,000 -------------------- ------------------ --- -------------- Item 6. SELECTED FINANCIAL DATA SOUTHERN. Reference is made to information under the heading "Selected Consolidated Financial and Operating Data," contained herein at pages II-41 and II-42. ALABAMA. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-74 and II-75. GEORGIA. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-109 and II-110. GULF. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-138 and II-139. MISSISSIPPI. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-167 and II-168. SAVANNAH. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-194 and II-195. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION SOUTHERN. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-8 through II-17. ALABAMA. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-46 through II-54. GEORGIA. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-79 through II-87. GULF. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-114 through II-122. MISSISSIPPI. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-143 through II-150. SAVANNAH. Reference is made to information under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition," contained herein at pages II-172 through II-178. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to information in SOUTHERN's "Management's Discussion and Analysis - Market Price Risk" and to Note 1 to SOUTHERN's financial statements under the heading "Financial Instruments for Non-Trading Activities" contained herein on pages II-13 through II-14 and II-28, respectively. Reference is also made to "Management's Discussion and Analysis - Exposure to Market Risks" in Item 7 of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH contained herein at pages II-51, II-83. II-118, II-146, and II-175, respectively. II-2 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO 2000 FINANCIAL STATEMENTS
Page The Southern Company and Subsidiary Companies: Report of Independent Public Accountants................................................................ II-7 Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998.................. II-18 Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998.............. II-19 Consolidated Balance Sheets at December 31, 2000 and 1999............................................... II-20 Consolidated Statements of Capitalization at December 31, 2000 and 1999................................. II-22 Consolidated Statements of Common Stockholders' Equity for the Years Ended ..... December 31, 2000, 1999 and 1998................................................................ II-24 Consolidated Statements of Comprehensive Income for the Years Ended ..... December 31, 2000, 1999 and 1998................................................................ II-24 Notes to Financial Statements........................................................................... II-25 ALABAMA: Report of Independent Public Accountants .............................................................. II-45 Statements of Income for the Years Ended December 31, 2000, 1999 and 1998............................... II-55 Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998........................... II-56 Balance Sheets at December 31, 2000 and 1999 ........................................................... II-57 Statements of Capitalization at December 31, 2000 and 1999 ............................................. II-59 Statements of Common Stockholder's Equity for the Years Ended ..... December 31, 2000, 1999 and 1998............................................................... II-61 Notes to Financial Statements........................................................................... II-62 GEORGIA: Report of Independent Public Accountants................................................................ II-78 Statements of Income for the Years Ended December 31, 2000, 1999 and 1998............................... II-88 Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998........................... II-89 Balance Sheets at December 31, 2000 and 1999 ........................................................... II-90 Statements of Capitalization at December 31, 2000 and 1999 ............................................. II-92 Statements of Common Stockholder's Equity for the Years Ended ..... December 31, 2000, 1999 and 1998............................................................... II-94 Notes to Financial Statements........................................................................... II-95 GULF: Report of Independent Public Accountants................................................................ II-113 Statements of Income for the Years Ended December 31, 2000, 1999 and 1998............................... II-123 Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998........................... II-124 Balance Sheets at December 31, 2000 and 1999 ........................................................... II-125 Statements of Capitalization at December 31, 2000 and 1999 ............................................. II-127 Statements of Common Stockholder's Equity for the Years Ended ..... December 31, 2000, 1999 and 1998............................................................... II-128 Notes to Financial Statements........................................................................... II-129 II-3 Page MISSISSIPPI: Report of Independent Public Accountants................................................................ II-142 Statements of Income for the Years Ended December 31, 2000, 1999 and 1998............................... II-151 Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998........................... II-152 Balance Sheets at December 31, 2000 and 1999 ........................................................... II-153 Statements of Capitalization at December 31, 2000 and 1999 ............................................. II-155 Statements of Common Stockholder's Equity for the Years Ended ..... December 31, 2000, 1999 and 1998............................................................... II-157 Notes to Financial Statements........................................................................... II-158 SAVANNAH: Report of Independent Public Accountants................................................................ II-171 Statements of Income for the Years Ended December 31, 2000, 1999 and 1998............................... II-179 Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998........................... II-180 Balance Sheets at December 31, 2000 and 1999 ........................................................... II-181 Statements of Capitalization at December 31, 2000 and 1999 ............................................. II-183 Statements of Common Stockholder's Equity for the Years Ended ..... December 31, 2000, 1999 and 1998............................................................... II-184 Notes to Financial Statements........................................................................... II-185
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. II-4 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES FINANCIAL SECTION II-5 MANAGEMENT'S REPORT Southern Company and Subsidiary Companies 2000 Annual Report The management of Southern Company has prepared -- and is responsible for -- the consolidated financial statements and related information included in this report. These statements were prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the accounting records reflect only authorized transactions of the company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The company's system of internal accounting controls is evaluated on an ongoing basis by the company's internal audit staff. The company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of five independent directors provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the company's operations are conducted according to a high standard of business ethics. In management's opinion, the consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Southern Company and its subsidiary companies in conformity with accounting principles generally accepted in the United States. /s/H. Allen Franklin H. Allen Franklin President and Chief Executive Officer /s/Gale E. Klappa Gale E. Klappa Financial Vice President, Chief Financial Officer, and Treasurer II-6 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Southern Company: We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of Southern Company (a Delaware corporation) and subsidiary companies as of December 31, 2000 and 1999, and the related consolidated statements of income, comprehensive income, common stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements (pages II-18 through II-40)referred to above present fairly, in all material respects, the financial position of Southern Company and subsidiary companies as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/Arthur Andersen LLP Atlanta, Georgia February 28, 2001 II-7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Southern Company and Subsidiary Companies 2000 Annual Report RESULTS OF OPERATIONS - --------------------- OVERVIEW OF CONSOLIDATED EARNINGS Southern Company's solid financial performance resulted in record earnings for 2000. Higher earnings were driven by both strong growth of selling electricity in the Southeast and by the global subsidiary's competitive energy supply business outside the Southeast. Reported earnings in both 2000 and 1999 reflected significant items not related to the normal day-to-day business activities. After adjusting for these items, earnings per share for 2000 was $2.13 compared with $1.90 in 1999. Earnings as reported and the details of earnings as adjusted are shown in the following table. In April 2000, Southern Company announced an initial public offering of up to 19.9 percent of Mirant Corporation -- formerly Southern Energy, Inc. -- and its intentions to spin off the remaining ownership of Mirant to Southern Company stockholders within 12 months of the initial stock offering. On October 2, 2000, Mirant completed an initial public offering of 66.7 million shares of common stock. On February 19, 2001, Southern Company's board of directors approved the spin off of the remaining ownership of 272 million Mirant shares to be completed in a tax free distribution on April 2, 2001. As a result of the spin off, Southern Company financial statements and related information reflect Mirant as discontinued operations. A reconciliation of reported consolidated earnings, including discontinued operations, to earnings as adjusted -- which exclude non-day to day business items -- and the related explanations are as follows: Consolidated Earnings Net Income Per Share ---------------- -------------- 2000 1999 2000 1999 --------------- --------------- (in millions) Earnings from -- Continuing operations $ 994 $ 915 $1.52 $1.33 Discontinued operations 319 361 .49 .53 - --------------------------------------------------------------- Earnings as reported 1,313 1,276 2.01 1.86 - --------------------------------------------------------------- Mirant transition costs 80 - .12 - Mobile Energy write down 10 69 .01 .10 Gain on asset sale - (78) - (.11) Work force reductions - 50 - .07 Other (8) (14) (.01) (.02) - --------------------------------------------------------------- Total adjustments 82 27 .12 .04 - --------------------------------------------------------------- Earnings as adjusted $1,395 $1,303 $2.13 $1.90 =============================================================== Mirant's transition costs shown in the table include charges related to becoming a public company and changes in their tax strategy in Asia. In 2000 and 1999, Southern Company recorded asset impairment charges related to Mobile Energy Services -- see Note 3 to the financial statements. In 1999, Mirant sold a portion of its business in the United Kingdom. Work force reduction programs began in late 1999 for a German utility in which Mirant has an ownership interest. SOUTHERN COMPANY BUSINESS ACTIVITIES Discussion of the results of operations is focused on the traditional business of the integrated Southeast utilities. The remaining portion of Southern Company's other business activities include telecommunications, energy products and services, leveraged leasing activities, as well as the parent holding company. The impact of these other business activities on the consolidated results of operations is not significant. For more information, see Note 12. Integrated Southeast Utilities The five integrated Southeast utilities provide electric service in four states. These utilities are Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric. A condensed income statement for these companies is as follows: Increase (Decrease) Amount From Prior Year ------ -------------------- 2000 2000 1999 -------------------------------------------------------------- (in millions) Operating revenues $9,860 $735 $(238) - --------------------------------------------------------------- Fuel 2,564 236 7 Purchased power 677 268 13 Other operation and maintenance 2,472 41 4 Depreciation and amortization 1,135 89 (277) Taxes other than income taxes 532 11 13 - --------------------------------------------------------------- Total operating expenses 7,380 645 (240) - --------------------------------------------------------------- Operating income 2,480 90 2 Other income, net (18) (11) (84) - --------------------------------------------------------------- Earnings before interest and taxes 2,462 79 (82) Interest expenses and other 650 15 (44) Income taxes 703 28 (28) - --------------------------------------------------------------- Net income $1,109 $ 36 $ (10) =============================================================== II-8 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report Revenues Operating revenues for the integrated Southeast utilities in 2000 and the amount of change from the prior year are as follows: Increase (Decrease) Amount From Prior Year ------- -------------------- 2000 2000 1999 - --------------------------------------------------------------- (in millions) Retail -- Base revenues $6,014 $174 $(262) Fuel cost recovery and other 2,599 353 76 - --------------------------------------------------------------- Total retail 8,613 527 (186) - --------------------------------------------------------------- Sales for resale -- Within service area 377 27 (24) Outside service area 600 127 (49) - ---------------------------------------------------------------- Total sales for resale 977 154 (73) Other operating revenues 270 54 21 - --------------------------------------------------------------- Operating revenues $9,860 $735 $(238) =============================================================== Percent change 8.1% (2.5)% - --------------------------------------------------------------- Base revenues increased $174 million in 2000 as a result of continued customer growth in the traditional service area and the positive impact of weather on energy sales. However, total base revenues of $5.8 billion in 1999 declined as a result of a Georgia Power rate reduction and recorded revenue sharing in 1999. For additional information, see Note 3 to the financial statements under "Georgia Power 1998 Retail Rate Order." Customer growth in the Southeast somewhat offset the rate decrease. Electric rates include provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses -- including the fuel component of purchased energy -- and do not affect net income. However, cash flow is affected by the economic loss from untimely recovery of these receivables. Each company has filed or will be filing for approval of new fuel rates to be more reflective of escalating fuel costs. Revenues from sales for resale within the service area were up as a result of additional demand during the hot summer of 2000. Sales for resale revenues within the service area were $350 million in 1999, down 6.5 percent from the prior year. This sharp decline resulted primarily from supplying less electricity under contractual agreements with certain wholesale customers in 1999. Energy sales for resale outside the service area are principally unit power sales under long-term contracts to Florida utilities. Economy energy and energy under short-term contracts are also sold for resale outside the service area. Revenues from long-term unit power contracts have both a capacity and energy component. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. The capacity and energy components of the unit power contracts were as follows: 2000 1999 1998 - --------------------------------------------------------------- (in millions) Capacity $177 $174 $196 Energy 178 157 152 - --------------------------------------------------------------- Total $355 $331 $348 =============================================================== Capacity revenues in 2000 and 1999 varied slightly compared with the prior year as a result of adjustments and true-ups related to contractual pricing. No significant declines in the amount of capacity are scheduled until the termination of the contracts in 2010. Energy Sales The changes in revenues for the traditional business in the Southeast are influenced heavily by the amount of energy sold each year. Kilowatt-hour sales for 2000 and the percent change by year were as follows: Amount Percent Change (billions of ------ --------------------------- kilowatt-hours) 2000 2000 1999 1998 - --------------------------------------------------------------- Residential 46.2 6.5% (0.2)% 10.9% Commercial 46.2 6.6 4.0 7.2 Industrial 56.7 1.0 1.6 2.1 Other 1.0 2.7 1.6 3.1 ----- Total retail 150.1 4.3 1.7 6.2 Sales for resale -- Within service area 9.6 1.5 (4.1) (0.4) Outside service area 17.2 33.0 (0.4) (5.6) ----- Total 176.9 6.4 1.2 4.7 =============================================================== The rate of growth in 2000 total retail energy sales was very strong. Residential energy sales reflected a substantial increase as a result of the hotter-than-normal summer weather and the number of residential customers served increased by 59,000 during the year. Commercial and industrial sales, both in II-9 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report 2000 and 1999, continued to show slight gains in excess of the national averages. This reflects the strength of business and economic conditions in Southern Company's traditional service area in the southeastern United States. The rate of increase in 1999 total retail energy sales was significantly lower than in 1998. Residential energy sales experienced a decline as a result of milder weather in 1999, which strongly affected the total retail sales increase of 1.7 percent. Energy sales to retail customers are projected to increase at an average annual rate of 2.1 percent during the period 2001 through 2011. Sales to customers outside the service area under long-term contracts for unit power sales increased 21 percent in 2000 and increased 19 percent in 1999. These changes in sales were influenced by weather and fluctuations in prices for oil and natural gas, the primary fuel sources for utilities with which the company has long-term contracts. However, these fluctuations in energy sales under long-term contracts have minimal effects on earnings because the energy is generally sold at variable cost. Expenses In 2000, operating expenses of $7.4 billion increased $645 million compared with the prior year. The costs to produce electricity for the traditional business in 2000 increased by $498 million to meet higher energy demands. Non-production operation and maintenance expenses increased $47 million in 2000. In 2000, depreciation and amortization expenses increased $89 million of which $50 million resulted from the 1998 Georgia Power rate order as referred to earlier. In 1999, operating expenses of $6.7 billion decreased $240 million. This decline was driven by a reduction of $277 million accelerated depreciation of plant being recorded primarily as a result of the 1998 Georgia Power rate order. The costs to produce electricity for the traditional business in the Southeast for 1999 increased by $68 million to meet higher energy demands. All other operation and maintenance expenses declined by $44 million. Fuel costs constitute the single largest expense for the integrated Southeast utilities. The mix of fuel sources for generation of electricity is determined primarily by system load, the unit cost of fuel consumed, and the availability of hydro and nuclear generating units. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated -- within the traditional business service area -- were as follows: 2000 1999 1998 - ------------------------------------------------------------------- Total generation (billions of kilowatt-hours) 174 165 164 Sources of generation (percent) -- Coal 78 78 77 Nuclear 16 17 16 Hydro 2 2 4 Oil and gas 4 3 3 Average cost of fuel per net kilowatt-hour generated (cents) -- 1.51 1.45 1.48 - ------------------------------------------------------------------- In 2000, fuel and purchased power costs increased $504 million as a result of 10.6 billion more kilowatt-hours being sold than in 1999. Demand was met with some 2.5 billion additional kilowatt-hours being purchased and using generation with higher unit fuel cost than last year. Total fuel and purchased power costs of $2.7 billion in 1999 increased only $20 million while total energy sales increased 2.0 billion kilowatt-hours compared with the amounts recorded in 1998. Continued efforts to control energy costs helped lower the average cost of fuel per net kilowatt-hour generated in 1999. Total interest charges and other financing costs in 2000 increased $15 million reflecting new generating units being constructed requiring some external financing. Total interest charges and other financing costs in 1999 decreased $44 million from amounts reported in the previous year. The decline reflected additional refinancing of debt in 1999. Discontinued Operations Mirant is a global energy company whose businesses include competitive electricity distribution companies, independent power projects, and energy trading and risk management companies. II-10 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report On February 19, 2001, Southern Company's board of directors approved the spin off of Mirant, to be effective on April 2, 2001. As a result of this action, Mirant's financial and related information is shown as discontinued operations. All historical financial statements, footnotes, and related disclosures have been reclassified to conform with the current year presentation. Earnings from discontinued operations are shown net of income taxes and minority interest. Southern Company earnings per share as adjusted was $2.13 in 2000, of which Mirant's earnings as adjusted contributed approximately $0.60 per share. On the same basis in 1999, Southern Company earnings per share was $1.90, of which $0.47 was attributed to Mirant. Effects of Inflation Southern Company's traditional business of the integrated Southeast utilities is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on Southern Company because of the large investment in utility plant with long economic lives. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and preferred securities. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of continuing operations for the past three years are not necessarily indicative of future earnings potential. The level of Southern Company's future earnings depends on numerous factors. The two major factors are the ability of the regulated integrated Southeast utilities to achieve energy sales growth while containing cost in a more competitive environment; and the profitability of the new competitive market-based wholesale generating facilities being added. The traditional business or the five Southeast utilities currently operate as vertically integrated companies providing electricity to customers within the traditional service area of the southeastern United States. Prices for electricity provided to retail customers are set by state public service commissions under cost-based regulatory principles. Retail rates and earnings are reviewed and adjusted periodically within certain limitations based on earned return on equity. See Note 3 to the financial statements for additional information about these and other regulatory matters. Future earnings for the traditional business in the near term will depend upon growth in energy sales, which is subject to a number of factors. These factors include weather, competition, new short and long-term contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the traditional service area. The electric utility industry in the United States is continuing to evolve as a result of regulatory and competitive factors. Among the primary agents of change has been the Energy Policy Act of 1992 (Energy Act). The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell energy generation to other utilities. Also, electricity sales for resale rates are affected by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. Although the Energy Act does not permit retail customer access, it was a major catalyst for the current restructuring and consolidation taking place within the utility industry. Numerous federal and state initiatives are in varying stages to promote wholesale and retail competition. Among other things, these initiatives allow customers to choose their electricity provider. Some states have approved initiatives that result in a separation of the ownership and/or operation of generating facilities from the ownership and/or operation of transmission and distribution facilities. While various restructuring and competition initiatives have been discussed in Alabama, Florida, Georgia, and Mississippi, none have been enacted. Enactment would require numerous issues to be resolved, including significant ones relating to recovery of any stranded investments, full cost recovery of energy produced, and other issues related to the current energy crisis in California. As a result of this crisis, many states II-11 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report have either discontinued or delayed implementation of initiatives involving retail deregulation. The inability of a company to recover its investments, including the regulatory assets described in Note 1 to the financial statements, could have a material adverse effect on financial condition and results of operations. Continuing to be a low-cost producer could provide opportunities to increase market share and profitability in markets that evolve with changing regulation. Conversely, if Southern Company's integrated Southeast utilities do not remain low-cost producers and provide quality service, then energy sales growth could be limited, and this could significantly erode earnings. To adapt to a less regulated, more competitive environment, Southern Company continues to evaluate and consider a wide array of potential business strategies. These strategies may include business combinations, acquisitions involving other utility or non-utility businesses or properties, internal restructuring, disposition of certain assets, or some combination thereof. Furthermore, Southern Company may engage in other new business ventures that arise from competitive and regulatory changes in the utility industry. Pursuit of any of the above strategies, or any combination thereof, may significantly affect the business operations and financial condition of Southern Company. On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued its final rule on Regional Transmission Organizations (RTOs). The order encouraged utilities owning transmission systems to form RTOs on a voluntary basis. After participating in regional conferences with customers and other members of the public to discuss the formation of RTOs, utilities were required to make a filing with the FERC. Southern Company filed on October 16, 2000, a proposal for the creation of an RTO. The proposal is for the formation of a for-profit company that would have control of the bulk power transmission system of Southern Company and any other participating utilities. Participants would have the option to either maintain their ownership, divest, sell, or lease their assets to the proposed RTO. If the FERC accepts the proposal as filed, the creation of an RTO is not expected to have a material impact on Southern Company's financial statements. The outcome of this matter cannot now be determined. The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA) to allow holding companies to form exempt wholesale generators to sell power largely free of regulation under PUHCA. These entities are able to own and operate power generating facilities and sell power to affiliates -- under certain restrictions. Southern Company is aggressively working to maintain and expand its share of wholesale sales in the southeastern power markets. In January 2001, Southern Company announced the formation of a new subsidiary -- Southern Power Company. The new subsidiary will own, manage, and finance wholesale generating assets in the Southeast. Southern Power will be the primary growth engine for Southern Company's market-based energy business. Energy from its assets will be marketed to wholesale customers under the Southern Company name. By 2005, plans call for Southern Power to have developed or acquired more than 7,500 megawatts dedicated to the competitive wholesale business. Within 10 years, the new wholesale generating company's goal is to own more than 15,000 megawatts. In accordance with Financial Accounting Standards Board (FASB) Statement No. 87, Employers' Accounting for Pensions, Southern Company recorded non-cash income of approximately $130 million in 2000. Pension plan income in 2001 is expected to be less as a result of plan amendments. Future pension income is dependent on several factors including trust earnings and changes to the plan. For more information, see Note 2. Southern Company is involved in various matters being litigated. See Note 3 to the financial statements for information regarding material issues that could possibly affect future earnings. Compliance costs related to current and future environmental laws and regulations could affect earnings if such costs are not fully recovered. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." The staff of the SEC has questioned certain of the current accounting practices of the electric utility industry -- including Southern Company's -- regarding the recognition, measurement, and classification in the financial statements of decommissioning costs for nuclear generating facilities. In response to these questions, the Financial Accounting Standards Board (FASB) is reviewing the accounting for liabilities related to the retirement of long-lived II-12 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report assets, including nuclear decommissioning. If the FASB issues new accounting rules, the estimated costs of retiring Southern Company's nuclear and other facilities may be required to be recorded as liabilities in the Consolidated Balance Sheets. Also, the annual provisions for such costs could change. Because of the company's current ability to recover asset retirement costs through rates, these changes would not have a significant adverse effect on results of operations. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. The integrated Southeast utilities are subject to the provisions of FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of a company's operations is no longer subject to these provisions, the company would be required to write off related regulatory assets and liabilities that are not specifically recoverable, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. New Accounting Standard In June 2000, FASB issued Statement No. 138, an amendment of Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 133, as amended, establishes accounting and reporting standards for derivative instruments and for hedging activities. Statement No. 133 requires that certain derivative instruments be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in the fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Southern Company utilizes financial instruments to reduce its exposure to changes in interest rates and foreign currency exchange rates. Southern Company also enters into commodity related forward contracts to limit exposure to changing prices on certain fuel purchases and electricity purchases and sales. Substantially all of these bulk energy purchases and sales meet the definition of a derivative under Statement No. 133. In many cases, these transactions meet the normal purchase and sale exception and the related contracts will continue to be accounted for under the accrual method. Certain of these instruments qualify as cash flow hedges resulting in the deferral of related gains and losses in other comprehensive income until the hedged transactions occur. Any ineffectiveness will be recognized currently in net income. However, others will be required to be marked to market through current period income. Southern Company adopted Statement No. 133 effective January 1, 2001. The cumulative effect of adoption was a reduction of approximately $300 million in comprehensive income, which was all related to discontinued operations. The impact on net income was immaterial. The application of the new rules is still evolving and further guidance from FASB is expected, which could additionally impact Southern Company's financial statements. Also, as wholesale energy markets mature, the accounting for future transactions could be significantly impacted by Statement No. 133, resulting in more volatility in net income and comprehensive income. FINANCIAL CONDITION - ------------------ Overview Southern Company's financial condition continues to remain strong. In 2000, the integrated Southeast utilities' earnings were at the high end of their respective allowed range of return on equity. Also, earnings from discontinued operations made a solid contribution. These factors drove the reported consolidated net income to a record $1.31 billion in 2000. The quarterly dividend declared in January 2001 was 33 1/2 cents per share, or $1.34 annually. Southern Company is committed to a goal of maintaining its current annual dividend of $1.34 per share and to grow the dividend over time consistent with earnings expectations. After the Mirant spin off, Southern Company's target will be to grow earnings per share at an average annual rate of 3 to 5 percent. Gross property additions to utility plant from continuing operations were $2.2 billion in 2000. The majority of funds needed for gross property additions since 1997 has been provided from operating activities. The Consolidated Statements of Cash Flows provide additional details. Market Price Risk Southern Company is exposed to market risks, including changes in interest rates, currency exchange rates, and certain commodity prices. To manage the II-13 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report volatility attributable to these exposures, the company nets the exposures to take advantage of natural offsets and enters into various derivative transactions for the remaining exposures pursuant to the company's policies in areas such as counterparty exposure and hedging practices. Generally, company policy is that derivatives are to be used only for hedging purposes. Derivative positions are monitored using techniques that include market valuation and sensitivity analysis. The company's market risk exposures relative to interest rate changes have not changed materially versus the previous reporting period. In addition, the company is not aware of any facts or circumstances that would significantly impact such exposures in the near-term. If the company sustained a 100 basis point change in interest rates for all variable rate debt, the change would affect annualized interest expense by approximately $23 million at December 31, 2000. Based on the company's overall interest rate exposure at December 31, 2000, including derivative and other interest rate sensitive instruments, a near-term 100 basis point change in interest rates would not materially affect the consolidated financial statements. Due to cost-based rate regulations, the integrated Southeast utilities have limited exposure to market volatility in interest rates, commodity fuel prices, and prices of electricity. To mitigate residual risks relative to movements in electricity prices, the companies enter into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market. Realized gains and losses are recognized in the income statement as incurred. At December 31, 2000, exposure from these activities was not material to the consolidated financial statements. For additional information, see Note 1 to the financial statements under "Financial Instruments for Non-Trading Activities." Capital Structure During 2000, the integrated Southeast utilities sold, through public authorities, $79 million of pollution control revenue bonds. In addition, senior notes of $650 million were issued in 2000. The companies continued to reduce financing costs by retiring higher-cost securities. Retirements of bonds and senior notes, including maturities, totaled $298 million during 2000, $1.2 billion during 1999, and $1.7 billion during 1998. Retirements of preferred stock totaled $86 million during 1999 and $239 million during 1998. In December 2000, Southern Company issued 28 million treasury shares of common stock through a public offering. The offering raised $800 million and was priced at $28.50 per share. The proceeds were used to reduce debt. In April 1999, Southern Company announced the repurchase of up to 50 million shares of its common stock over a two-year period through open market or privately negotiated transactions. Under this program, 50 million shares were repurchased by February 2000 at an average price of $25.53. Funding for the program was provided from Southern Company's commercial paper program. At the close of 2000, the company's common stock market value was 33 1/4 per share, compared with book value of $15.69 per share. The market-to-book value ratio was 212 percent at the end of 2000, compared with 170 percent at year-end 1999, and 207 percent at year-end 1998. Capital Requirements for Construction The construction program of Southern Company is budgeted at $2.9 billion for 2001, $2.6 billion for 2002, and $1.7 billion for 2003. Actual construction costs may vary from this estimate because of changes in such factors as: business conditions; environmental regulations; nuclear plant regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Southern Company has approximately 6,300 megawatts of new generating capacity scheduled to be placed in service by 2003. Approximately 4,100 megawatts of additional new capacity will be dedicated to the wholesale market and owned by Southern Power. Significant construction of transmission and distribution facilities and upgrading of generating plants will be continuing for the traditional business in the Southeast. II-14 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report Other Capital Requirements In addition to the funds needed for the construction program, approximately $1.4 billion will be required by the end of 2003 for present improvement fund requirements and maturities of long-term debt. Also, the subsidiaries will continue to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital if market conditions permit. Environmental Matters On November 3, 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S. District Court against Alabama Power, Georgia Power, and the system service company. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to five coal-fired generating facilities in Alabama and Georgia. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The EPA concurrently issued to the integrated Southeast utilities a notice of violation related to 10 generating facilities, which includes the five facilities mentioned previously. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as defendants. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. These complaints and notices of violation allege that the utilities had failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August 1, 2000, the U.S. District Court granted Alabama Power's motion to dismiss for lack of jurisdiction in Georgia and granted the system service company's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against Alabama Power in federal district court in Birmingham, Alabama. The EPA did not include the system service company in the new complaint. Southern Company believes that its integrated utilities complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes civil penalties of up to $27,500 per day per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. In November 1990, the Clean Air Act Amendments of 1990 (Clean Air Act) were signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- significantly affected Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants were required in two phases. Phase I compliance began in 1995 and some 50 generating units were brought into compliance with Phase I requirements. Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. Construction expenditures for Phase I nitrogen oxide and sulfur dioxide emissions compliance totaled approximately $300 million. Phase II sulfur dioxide compliance was required in 2000. Southern Company used emission allowances and fuel switching to comply with Phase II requirements. Also, equipment to control nitrogen oxide emissions was installed on additional system fossil-fired units as necessary to meet Phase II limits and ozone non-attainment requirements for metropolitan Atlanta through 2000. Compliance for Phase II and initial ozone non-attainment requirements increased total construction expenditures through 2000 by approximately $100 million. The one-hour ozone non-attainment standards for the Atlanta and Birmingham areas have been set and must be implemented in May 2003. Seven generating plants will be affected in the Atlanta area and two plants in the Birmingham area. Additional construction expenditures for compliance with these new rules are currently estimated at approximately $935 million. A significant portion of costs related to the acid rain and ozone non-attainment provisions of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. II-15 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report In July 1997, the EPA revised the national ambient air quality standards for ozone and particulate matter. This revision made the standards significantly more stringent. In the subsequent litigation of these standards, the U.S. Supreme Court recently dismissed certain challenges but found the EPA's implementation program for the new ozone standard unlawful and remanded it to the EPA. In addition, the Federal District of Columbia Circuit Court of Appeals will address other legal challenges to these standards in mid-2001. If the standards are eventually upheld, implementation could be required by 2007 to 2010. In September 1998, the EPA issued the final regional nitrogen oxide reduction rules to the states for implementation. Compliance is required by May 31, 2004. The final rule affects 21 states, including Alabama and Georgia. Additional construction expenditures for compliance with these new rules are currently estimated at approximately $195 million. In December 2000, the EPA completed its utility studies for mercury and other hazardous air pollutants (HAPS) and issued a determination that an emission control program for mercury and, perhaps, other HAPS is warranted. The program is to be developed over the next four years under the Maximum Achievable Control Technology (MACT) provisions of the Clean Air Act. This determination is being challenged in the courts. In January 2001, the EPA proposed guidance for the determination of Best Available Retrofit Technology (BART) emission controls under the Regional Haze Regulations. Installation of BART controls is expected to take place around 2010. Litigation of the BART rules is probable in the near future. Implementation of the final state rules for these initiatives could require substantial further reductions in nitrogen oxide, sulfur dioxide, mercury, and other HAPS emissions from fossil-fired generating facilities and other industries in these states. Additional compliance costs and capital expenditures resulting from the implementation of these rules and standards cannot be determined until the results of legal challenges are known, and the states have adopted their final rules. Reviews by the new administration in Washington, D.C. add to the uncertainties associated with BART guidance and the MACT determination for mercury and other HAPS. The EPA and state environmental regulatory agencies are reviewing and evaluating various other matters including: control strategies to reduce regional haze; limits on pollutant discharges to impaired waters; water intake restrictions; and hazardous waste disposal requirements. The impact of any new standards will depend on the development and implementation of applicable regulations. Southern Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the subsidiaries could incur substantial costs to clean up properties. The subsidiaries conduct studies to determine the extent of any required cleanup costs and have recognized in their respective financial statements costs to clean up known sites. These costs for Southern Company amounted to $4 million in 2000, $4 million in 1999, and $6 million in 1998. Additional sites may require environmental remediation for which the subsidiaries may be liable for a portion or all required cleanup costs. See Note 3 to the financial statements for information regarding Georgia Power's potentially responsible party status at a site in Brunswick, Georgia. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of Southern Company's operations. The full impact of any such changes cannot be determined at this time. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect Southern Company. The impact of new legislation -- if any -- will depend on the subsequent development and implementation of II-16 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Southern Company and Subsidiary Companies 2000 Annual Report applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. Sources of Capital The amount and timing of additional equity capital to be raised in 2001 -- as well as in subsequent years -- will be contingent on Southern Company's investment opportunities. Equity capital can be provided from any combination of public offerings, private placements, or the company's stock plans. The integrated Southeast utilities plan to obtain the funds required for construction and other purposes from sources similar to those used in the past, which were primarily from internal sources. However, the type and timing of any financings -- if needed -- will depend on market conditions and regulatory approval. In recent years, financings primarily have utilized unsecured debt and trust preferred securities. Southern Power will use both external funds and equity capital from Southern Company to finance its construction program. To meet short-term cash needs and contingencies, Southern Company had at the beginning of 2001 approximately $199 million of cash and cash equivalents and $5.1 billion of unused credit arrangements with banks. Cautionary Statement Regarding Forward-Looking Information Southern Company's 2000 Annual Report includes forward-looking statements in addition to historical information. Forward-looking information includes, among other things, statements concerning the strategic goals for Southern Company's new wholesale business and also Southern Company's earnings per share and earnings growth goals. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. Southern Company cautions that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which Southern Company and its subsidiaries are subject, as well as changes in application of existing laws and regulations; current and future litigation, including the pending EPA civil action against Georgia Power and potentially other of Southern Company's subsidiaries and the race discrimination litigation against certain of Southern Company's subsidiaries; the extent and timing of the entry of additional competition in the markets of Southern Company's subsidiaries; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial; internal restructuring or other restructuring options, that may be pursued by Southern Company; state and federal rate regulation in the United States and in foreign countries in which Southern Company's subsidiaries operate; political, legal and economic conditions and developments in the United States and in foreign countries in which Southern Company's subsidiaries operate; financial market conditions and the results of financing efforts; the impact of fluctuations in commodity prices, interest rates and customer demand; weather and other natural phenomena; the performance of projects undertaken by the non-traditional business and the success of efforts to invest in and develop new opportunities; the timing and acceptance of Southern Company's new product and service offerings; the ability of Southern Company to obtain additional generating capacity at competitive prices; developments in the California power markets, including, but not limited to, governmental intervention, deterioration in the financial condition of counterparties, default on receivables due, adverse results in current or future litigation and adverse changes in the tariffs of the California Power Exchange Corporation or the California Independent System Operator Corporation; and other factors discussed elsewhere herein and in other reports (including Form 10-K) filed from time to time by Southern Company with the SEC. II-17 CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 2000, 1999, and 1998 Southern Company and Subsidiary Companies 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- (in millions) Operating Revenues: Retail sales $ 8,613 $8,086 $8,272 Sales for resale 977 823 896 Other revenues 476 408 331 - ---------------------------------------------------------------------------------------------------------------------------- Total operating revenues 10,066 9,317 9,499 - ---------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Fuel 2,564 2,328 2,321 Purchased power 677 409 396 Other operations 1,862 1,839 1,852 Maintenance 852 829 800 Depreciation and amortization 1,171 1,139 1,340 Taxes other than income taxes 536 523 511 - ---------------------------------------------------------------------------------------------------------------------------- Total operating expenses 7,662 7,067 7,220 - ---------------------------------------------------------------------------------------------------------------------------- Operating Income 2,404 2,250 2,279 Other Income: Interest income 51 70 154 Other, net (26) (55) (53) - ---------------------------------------------------------------------------------------------------------------------------- Earnings From Continuing Operations Before Interest and Income Taxes 2,429 2,265 2,380 - ---------------------------------------------------------------------------------------------------------------------------- Interest and Other: Interest expense, net 659 556 558 Distributions on capital and preferred securities of subsidiaries 169 175 141 Preferred dividends of subsidiaries 19 20 25 - ---------------------------------------------------------------------------------------------------------------------------- Total interest and other 847 751 724 - ---------------------------------------------------------------------------------------------------------------------------- Earnings From Continuing Operations Before Income Taxes 1,582 1,514 1,656 Income taxes 588 599 670 - ---------------------------------------------------------------------------------------------------------------------------- Earnings From Continuing Operations 994 915 986 Earnings from discontinued operations, net of income taxes of $86, $127, and $(121) for 2000, 1999, and 1998, respectively 319 361 (9) - ---------------------------------------------------------------------------------------------------------------------------- Consolidated Net Income $ 1,313 $1,276 $ 977 ============================================================================================================================ Common Stock Data:6 Basic and diluted earnings per share of common stock - Earnings per share from continuing operations $1.52 $1.33 $ 1.41 Earnings per share from discontinued operations (Note 11) 0.49 0.53 (0.01) - ---------------------------------------------------------------------------------------------------------------------------- Consolidated Basic and Diluted Earnings Per Share $2.01 $1.86 $1.40 ============================================================================================================================ Average number of shares of common stock outstanding (in millions) 653 685 697 Cash dividends paid per share of common stock $1.34 $1.34 $ 1.34 - ---------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
II-18 CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000, 1999, and 1998 Southern Company and Subsidiary Companies 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- (in millions) Operating Activities: Consolidated net income $ 1,313 $ 1,276 $ 977 Adjustments to reconcile consolidated net income to net cash provided from operating activities -- Less income from discontinued operations (Note 11) 319 361 (9) Depreciation and amortization 1,337 1,216 1,530 Deferred income taxes and investment tax credits 97 10 21 Gain on asset sales 5 (2) (20) Other, net 455 888 (40) Changes in certain current assets and liabilities -- Receivables, net (379) (141) (49) Fossil fuel stock 78 (41) (24) Materials and supplies (15) (37) 10 Accounts payable 180 (65) 103 Other 66 244 (200) - ------------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities of continuing operations 2,818 2,987 2,317 - ------------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (2,225) (1,881) (1,356) Sales of property - - 83 Other (81) (400) (166) - ------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities of continuing operations (2,306) (2,281) (1,439) - ------------------------------------------------------------------------------------------------------------------------------- Financing Activities: Increase (decrease) in notes payable, net (275) 831 (365) Proceeds -- Other long-term debt 743 1,469 2,496 Capital and preferred securities - 250 435 Preferred stock - - 200 Common stock 910 24 234 Redemptions -- First mortgage bonds (211) (890) (1,479) Other long-term debt (204) (483) (278) Capital and preferred securities - (100) - Preferred stock - (86) (239) Common stock repurchased (415) (862) (125) Payment of common stock dividends (873) (921) (933) Other (54) (76) (155) - ------------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities of continuing operations (379) (844) (209) - ------------------------------------------------------------------------------------------------------------------------------- Cash used for discontinued operations (88) (20) (534) - ------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 45 (158) 135 Cash and Cash Equivalents at Beginning of Year 154 312 177 - ------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 199 $ 154 $ 312 =============================================================================================================================== Supplemental Cash Flow Information From Continuing Operations: Cash paid during the year for -- Interest (net of amount capitalized) $802 $684 $680 Income taxes $661 $656 $757 - ------------------------------------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these statements.
II-19 CONSOLIDATED BALANCE SHEETS At December 31, 2000 and 1999 Southern Company and Subsidiary Companies 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------- Assets 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- (in millions) Current Assets: Cash and cash equivalents $ 199 $ 154 Special deposits 6 22 Receivables, less accumulated provisions for uncollectible accounts of $22 in 2000 and $22 in 1999 1,312 1,043 Unrecovered retail fuel clause revenue 418 244 Fossil fuel stock, at average cost 195 274 Materials and supplies, at average cost 508 493 Other 187 132 - ------------------------------------------------------------------------------------------------------------------------- Total current assets 2,825 2,362 - ------------------------------------------------------------------------------------------------------------------------- Property, Plant, and Equipment: In service 34,188 32,702 Less accumulated depreciation 14,350 13,655 - ------------------------------------------------------------------------------------------------------------------------- 19,838 19,047 Nuclear fuel, at amortized cost 215 227 Construction work in progress 1,569 1,265 - ------------------------------------------------------------------------------------------------------------------------- Total property, plant, and equipment 21,622 20,539 - ------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Nuclear decommissioning trusts, at fair value 690 658 Net assets of discontinued operations (Note 11) 3,320 2,913 Leveraged leases 596 556 Other 165 156 - ------------------------------------------------------------------------------------------------------------------------- Total other property and investments 4,771 4,283 - ------------------------------------------------------------------------------------------------------------------------- Deferred Charges and Other Assets: Deferred charges related to income taxes 957 987 Prepaid pension costs 498 368 Debt expense, being amortized 99 104 Premium on reacquired debt, being amortized 280 302 Other 310 346 - ------------------------------------------------------------------------------------------------------------------------- Total deferred charges and other assets 2,144 2,107 - ------------------------------------------------------------------------------------------------------------------------- Total Assets $31,362 $29,291 ========================================================================================================================= The accompanying notes are an integral part of these balance sheets. II-20
CONSOLIDATED BALANCE SHEETS (continued) At December 31, 2000 and 1999 Southern Company and Subsidiary Companies 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- (in millions) Current Liabilities: Securities due within one year $ 67 $ 329 Notes payable 1,680 1,955 Accounts payable 869 669 Customer deposits 140 128 Taxes accrued -- Income taxes 88 107 Other 208 198 Interest accrued 121 139 Vacation pay accrued 119 113 Other 445 391 - ---------------------------------------------------------------------------------------------------------------------------- Total current liabilities 3,737 4,029 - ---------------------------------------------------------------------------------------------------------------------------- Long-term debt (See accompanying statements) 7,843 7,251 - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,074 3,884 Deferred credits related to income taxes 551 640 Accumulated deferred investment tax credits 664 693 Employee benefits provisions 478 465 Prepaid capacity revenues 58 80 Other 653 430 - ---------------------------------------------------------------------------------------------------------------------------- Total deferred credits and other liabilities 6,478 6,192 - ---------------------------------------------------------------------------------------------------------------------------- Company or subsidiary obligated mandatorily redeemable capital and preferred securities (See accompanying statements) 2,246 2,246 - ---------------------------------------------------------------------------------------------------------------------------- Cumulative preferred stock of subsidiaries (See accompanying statements) 368 369 - ---------------------------------------------------------------------------------------------------------------------------- Common stockholders' equity (See accompanying statements) 10,690 9,204 - ---------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $31,362 $29,291 ============================================================================================================================ Commitments and Contingent Matters (Notes 1, 2, 3, 5, 8, 9, and 10) - ---------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these balance sheets.
II-21 CONSOLIDATED STATEMENTS OF CAPITALIZATION At December 31, 2000 and 1999 Southern Company and Subsidiary Companies 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- (in millions) (percent of total) Long-Term Debt of Subsidiaries: First mortgage bonds -- Maturity Interest Rates -------- -------------- 2000 6.00% $ - $ 200 2003 6.13% to 6.63% 325 325 2004 6.60% 35 35 2005 6.07% 10 10 2006 through 2010 6.50% to 6.90% 95 95 2021 through 2025 6.88% to 9.00% 635 646 2026 through 2030 6.88% 30 30 - ---------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 1,130 1,341 - ---------------------------------------------------------------------------------------------------------------------------- Long-term notes payable -- 5.35% to 9.75% due 2001-2004 766 584 5.38% to 8.58% due 2005-2008 744 964 6.25% to 7.63% due 2009-2017 170 170 6.38% to 8.12% due 2018-2038 793 801 6.63% to 7.13% due 2039-2048 1,029 1,029 Adjustable rates (5.79% to 7.75% at 1/1/01) due 2000-2005 734 148 - ---------------------------------------------------------------------------------------------------------------------------- Total long-term notes payable 4,236 3,696 - ---------------------------------------------------------------------------------------------------------------------------- Other long-term debt -- Pollution control revenue bonds -- Collateralized: 4.38% to 6.75% due 2000-2026 539 617 Variable rates (4.73% to 5.05% at 1/1/01) due 2015-2025 90 120 Non-collateralized: 4.53% to 6.75% due 2015-2034 406 263 Variable rates (3.50% to 5.35% at 1/1/01) due 2011-2037 1,475 1,510 - ---------------------------------------------------------------------------------------------------------------------------- Total other long-term debt 2,510 2,510 - ---------------------------------------------------------------------------------------------------------------------------- Capitalized lease obligations 95 97 - ---------------------------------------------------------------------------------------------------------------------------- Unamortized debt (discount), net (61) (64) - ---------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $509 million) 7,910 7,580 Less amount due within one year 67 329 - ---------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 7,843 7,251 37.1% 38.0% - ----------------------------------------------------------------------------------------------------------------------------
II-22 CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued) At December 31, 2000 and 1999 Southern Company and Subsidiary Companies 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------------------------- (in millions) (percent of total) Company or Subsidiary Obligated Mandatorily Redeemable Capital and Preferred Securities: $25 liquidation value -- 6.85% to 7.00% 435 435 7.13% to 7.38% 297 297 7.60% to 7.63% 415 415 7.75% 649 649 8.14% to 8.19% 400 400 Auction rate (6.52% at 1/1/01) 50 50 - --------------------------------------------------------------------------------------------------------------------------- Total company or subsidiary obligated mandatorily redeemable capital and preferred securities (annual distribution requirement -- $169 million) 2,246 2,246 10.6 11.8 - --------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock of Subsidiaries: $100 par or stated value -- 4.20% to 7.00% 98 99 $25 par or stated value -- 5.20% to 5.83% 200 200 Adjustable and auction rates -- at 1/1/01: 5.14% to 5.25% 70 70 - --------------------------------------------------------------------------------------------------------------------------- Total cumulative preferred stock of subsidiaries (annual dividend requirement -- $19 million) 368 369 1.7 1.9 - --------------------------------------------------------------------------------------------------------------------------- Common Stockholders' Equity: Common stock, par value $5 per share -- Authorized -- 1 billion shares Issued -- 2000: 701 million shares -- 1999: 701 million shares Treasury -- 2000: 19 million shares -- 1999: 35 million shares Par value 3,503 3,503 Paid-in capital 3,153 2,480 Treasury, at cost (545) (919) Retained earnings 4,672 4,232 Accumulated other comprehensive income from discontinued operations (93) (92) - --------------------------------------------------------------------------------------------------------------------------- Total common stockholders' equity 10,690 9,204 50.6 48.3 - --------------------------------------------------------------------------------------------------------------------------- Total Capitalization $21,147 $19,070 100.0% 100.0% =========================================================================================================================== The accompanying notes are an integral part of these statements.
II-23 CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY For the Years Ended December 31, 2000, 1999, and 1998 Southern Company and Subsidiary Companies 2000 Annual Report
Accumulated Other Comprehensive Common Stock Income ------------------------------------- From Par Paid In Retained Discontinued Value Capital Treasury Earnings Operations Total - ------------------------------------------------------------------------------------------------------------------------------- (in millions) Balance at January 1, 1998 $3,467 $2,331 $ - $3,842 $ 7 $ 9,647 Net income - - - 977 - 977 Other comprehensive income - - - - 8 8 Stock issued 32 132 70 - - 234 Stock repurchased, at cost - - (125) - - (125) Cash dividends - - - (933) - (933) Other - - (3) (8) - (11) - ------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 3,499 2,463 (58) 3,878 15 9,797 Net income - - - 1,276 - 1,276 Other comprehensive income - - - - (107) (107) Stock issued 4 17 1 - - 22 Stock repurchased, at cost - - (861) - - (861) Cash dividends - - - (921) - (921) Other - - (1) (1) - (2) - ------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 3,503 2,480 (919) 4,232 (92) 9,204 Net income - - - 1,313 - 1,313 Other comprehensive income - - - - (1) (1) Stock issued - - 910 - - 910 Stock repurchased, at cost - - (414) - - (414) Cash dividends - - - (873) - (873) Other - 673 (122) - - 551 - ------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 $3,503 $3,153 $ (545) $4,672 $ (93) $10,690 ===============================================================================================================================
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 2000, 1999, and 1998 Southern Company and Subsidiary Companies 2000 Annual Report
2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- (in millions) Consolidated Net Income $1,313 $1,276 $977 Other comprehensive income from discontinued operations, net of minority interest: Foreign currency translation adjustments (2) (165) 12 Less applicable income taxes (benefits) (1) (58) 4 - ------------------------------------------------------------------------------------------------------------------------------- Consolidated Comprehensive Income $1,312 $1,169 $985 =============================================================================================================================== The accompanying notes are an integral part of these statements.
II-24 NOTES TO FINANCIAL STATEMENTS Southern Company and Subsidiary Companies 2000 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Southern Company is the parent company of five integrated Southeast utilities, a system service company, Southern Communications Services (Southern LINC), Southern Company Energy Solutions, Southern Nuclear Operating Company (Southern Nuclear), Mirant Corporation -- formerly Southern Energy, Inc. -- and other direct and indirect subsidiaries. The integrated Southeast utilities -- Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric -- provide electric service in four states. Contracts among the integrated Southeast utilities -- related to jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) and/or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to Southern Company and subsidiary companies. Southern LINC provides digital wireless communications services to the integrated Southeast utilities and also markets these services to the public within the Southeast. Southern Company Energy Solutions develops new business opportunities related to energy products and services. Southern Nuclear provides services to Southern Company's nuclear power plants. Mirant acquires, develops, builds, owns, and operates power production and delivery facilities and provides a broad range of energy-related services to utilities and industrial companies in selected countries around the world. Mirant businesses include independent power projects, integrated utilities, a distribution company, and energy trading and marketing businesses outside the southeastern United States. As a result of the approved spin off of Mirant, Southern Company's financial statements and related information, both current and historical, reflect Mirant as discontinued operations. For additional information, see Note 11. The financial statements reflect Southern Company's investments in the subsidiaries on a consolidated basis. All material intercompany items have been eliminated in consolidation. Certain prior years' data presented in the consolidated financial statements have been reclassified to conform with the current year presentation. Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both the company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The integrated Southeast utilities also are subject to regulation by the FERC and their respective state public service commissions. The companies follow accounting principles generally accepted in the United States and comply with the accounting policies and practices prescribed by their respective commissions. The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires the use of estimates, and the actual results may differ from those estimates. Regulatory Assets and Liabilities The integrated Southeast utilities are subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Consolidated Balance Sheets at December 31 relate to the following: 2000 1999 - --------------------------------------------------------------- (in millions) Deferred income tax charges $ 957 $ 987 Premium on reacquired debt 280 302 Department of Energy assessments 46 52 Vacation pay 92 87 Postretirement benefits 30 33 Deferred income tax credits (551) (640) Accelerated amortization (220) (85) Storm damage reserves (34) (29) Other, net 116 144 - --------------------------------------------------------------- Total $ 716 $ 851 =============================================================== In the event that a portion of a company's operations is no longer subject to the provisions of FASB Statement No. 71, the company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the company would be required to determine if any impairment to other assets exists, including plant, and write down the assets, if impaired, to their fair value. II-25 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report Revenues and Fuel Costs Revenues are recognized as services are rendered. Unbilled revenues are accrued at the end of each fiscal period. Fuel costs are expensed as the fuel is used. Electric rates for the integrated Southeast utilities include provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current regulated rates. Southern Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. For all periods presented, uncollectible accounts continued to average less than 1 percent of revenues. Fuel expense includes the amortization of the cost of nuclear fuel and a charge, based on nuclear generation, for the permanent disposal of spent nuclear fuel. Total charges for nuclear fuel included in fuel expense amounted to $136 million in 2000, $137 million in 1999, and $133 million in 1998. Alabama Power and Georgia Power have contracts with the U.S. Department of Energy (DOE) that provide for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent fuel in January 1998 as required by the contracts, and the companies are pursuing legal remedies against the government for breach of contract. Effective June 2000, an on-site dry storage facility for Plant Hatch became operational. Sufficient capacity is believed to be available to continue dry storage operations at Plant Hatch through the life of the plant. Sufficient fuel storage capacity currently is available at Plant Vogtle to maintain full-core discharge capability for both units into the year 2014. Sufficient fuel storage capacity is available at Plant Farley to maintain full-core discharge capability until the refueling outage scheduled in 2006 for Farley Unit 1 and the refueling outage scheduled in 2008 for Farley Unit 2. Procurement of on-site dry spent fuel storage capacity at Plant Farley is in progress, with the intent to place the capacity in operation as early as 2005. Also, the Energy Policy Act of 1992 required the establishment of a Uranium Enrichment Decontamination and Decommissioning Fund, which is funded in part by a special assessment on utilities with nuclear plants. This assessment is being paid over a 15-year period, which began in 1993. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The law provides that utilities will recover these payments in the same manner as any other fuel expense. Alabama Power and Georgia Power -- based on its ownership interests -- estimate their respective remaining liability at December 31, 2000, under this law to be approximately $25 million and $19 million. These obligations are recorded in the Consolidated Balance Sheets. Depreciation and Nuclear Decommissioning Depreciation of the original cost of plant in service is provided primarily by using composite straight-line rates, which approximated 3.4 percent in both 2000 and 1999 and 3.3 percent in 1998. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its original cost -- together with the cost of removal, less salvage -- is charged to accumulated depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected costs of decommissioning nuclear facilities and removal of other facilities. Georgia Power recorded accelerated amortization and depreciation amounting to $135 million in 2000, $85 million in 1999, and $314 million in 1998. See Note 3 under "Georgia Power 1998 Retail Rate Order" for additional information. The Nuclear Regulatory Commission (NRC) requires all licensees operating commercial power reactors to establish a plan for providing, with reasonable assurance, funds for decommissioning. Alabama Power and Georgia Power have external trust funds to comply with the NRC's regulations. Amounts previously recorded in internal reserves are being transferred into the external trust funds over periods approved by the respective state public service commissions. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission the radioactive portions of a nuclear unit based on the size and type of reactor. Alabama Power and Georgia Power have filed plans with the NRC to ensure that -- over time -- the deposits and earnings of the external trust funds will provide the minimum funding amounts prescribed by the NRC. Site study cost is the estimate to decommission a specific facility as of the site study year, and ultimate cost is the estimate to decommission a specific facility as of its retirement date. The estimated costs of decommissioning -- both site study costs and ultimate costs -- based on the most current study as II-26 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report of December 31, 2000, for Alabama Power's Plant Farley and Georgia Power's ownership interests in plants Hatch and Vogtle were as follows: Plant Plant Plant Farley Hatch Vogtle - -------------------------------------------------------------- Site study basis (year) 1998 2000 2000 Decommissioning periods: Beginning year 2017 2014 2027 Completion year 2031 2042 2045 - -------------------------------------------------------------- (in millions) Site study costs: Radiated structures $629 $486 $420 Non-radiated structures 60 37 48 - -------------------------------------------------------------- Total $689 $523 $468 ============================================================== (in millions) Ultimate costs: Radiated structures $1,868 $1,004 $1,468 Non-radiated structures 178 79 166 - -------------------------------------------------------------- Total $2,046 $1,083 $1,634 ============================================================== Significant assumptions: Inflation rate 4.5% 4.7% 4.7% Trust earning rate 7.0 6.5 6.5 - -------------------------------------------------------------- The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making these estimates. Georgia Power has filed with the NRC an application requesting a 20-year renewal of the licenses for both units at Plant Hatch, which would permit the operation of both units until 2034. Annual provisions for nuclear decommissioning are based on an annuity method as approved by the respective state public service commissions. The amount expensed in 2000 and fund balances were as follows: Plant Plant Plant Farley Hatch Vogtle - --------------------------------------------------------------- (in millions) Amount expensed in 2000 $ 18 $ 19 $ 9 Accumulated provisions: External trust funds, at fair value $314 $230 $146 Internal reserves 38 20 12 - --------------------------------------------------------------- Total $352 $250 $158 =============================================================== Alabama Power's decommissioning costs for ratemaking are based on the site study. Effective January 1, 1999, the Georgia Public Service Commission (GPSC) increased Georgia Power's annual provision for decommissioning expenses TO $28 million. This amount is based on the NRC generic estimate to decommission the radioactive portion of the facilities as of 1997. The estimates are $526 million and $438 million for plants Hatch and Vogtle, respectively. The ultimate costs associated with the 1997 NRC minimum funding requirements are $1.1 billion and $1.3 billion for plants Hatch and Vogtle, respectively. Alabama Power and Georgia Power expect their respective state public service commissions to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. Income Taxes Southern Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Property, Plant, and Equipment Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of funds used during construction was $71 million in 2000, $36 million in 1999, and $19 million in 1998. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property -- exclusive of minor items of property -- is capitalized. Leveraged Leases Southern Company has several leveraged lease agreements -- ranging up to 30 years -- that primarily relate to energy generation, distribution, and transportation assets. The investment income earned from these leveraged leases is immaterial for all periods presented. II-27 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report Impairment of Long-Lived Assets and Intangibles Southern Company evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, as compared to the carrying value of the assets. If an impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value of the assets and recording a provision for loss if the carrying value is greater than the fair value. For assets identified as held for sale, the carrying value is compared to the estimated fair value less the cost to sell in order to determine if an impairment provision is required. Until the assets are disposed of, their estimated fair value is reevaluated when circumstances or events change. Cash and Cash Equivalents For purposes of the consolidated financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the costs of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Comprehensive Income Comprehensive income -- consisting of net income and foreign currency translation adjustments, net of taxes -- is presented in the consolidated financial statements. The objective of the statement is to report a measure of all changes in common stock equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Financial Instruments for Non-Trading Activities Southern Company uses derivative financial instruments to hedge exposures to fluctuations in interest rates, foreign currency exchange rates, and certain commodity prices. Gains and losses on qualifying hedges are deferred and recognized either in income or as an adjustment to the carrying amount of the hedged item when the transaction occurs. Southern Company is exposed to losses related to financial instruments in the event of counterparties' nonperformance. The company has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate the company's exposure to counterparty credit risk. The company is unaware of any counterparties that will fail to meet their obligations. Southern Company has firm purchase commitments for equipment that require payment in euros. As a hedge against fluctuations in the exchange rate for euros, the company entered into forward currency swaps. The notional amount is 32 million euros maturing in 2001 through 2002. At December 31, 2000, the unrecognized gain on these swaps was approximately $3 million. Other Southern Company financial instruments for which the carrying amount did not equal fair value at December 31 were as follows: Carrying Fair Amount Value - ------------------------------------------------------------------ (in millions) Long-term debt: At December 31, 2000 $7,815 $7,702 At December 31, 1999 7,483 7,046 Capital and preferred securities: At December 31, 2000 2,246 2,190 At December 31, 1999 2,246 1,942 - ------------------------------------------------------------------ The fair values for long-term debt and capital and preferred securities were based on either closing market price or closing price of comparable instruments. 2. Retirement Benefits Southern Company has defined benefit, trusteed, pension plans that cover substantially all employees. Southern Company provides certain medical care and life insurance benefits for retired employees. Substantially all these employees may become eligible for such benefits when they retire. The integrated Southeast utilities fund trusts to the extent required by their respective regulatory commissions. In late 2000, Southern Company adopted several pension and postretirement benefits plan changes that had the effect of increasing benefits to both current and future retirees. The effects of these changes will be to increase annual pension and postretirement benefits costs by approximately $28 million and $26 million, respectively. II-28 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report The measurement date for plan assets and obligations is September 30 for each year. The following disclosures exclude discontinued operations. Pension Plans Changes during the year in the projected benefit obligations and in the fair value of plan assets were as follows: Projected Benefit Obligations --------------------- 2000 1999 - ---------------------------------------------------------------- (in millions) Balance at beginning of year $3,098 $3,084 Service cost 94 95 Interest cost 227 204 Benefits paid (145) (143) Actuarial (gain) loss (28) (142) - ---------------------------------------------------------------- Balance at end of year $3,246 $3,098 ================================================================ Plan Assets ------------------- 2000 1999 - ---------------------------------------------------------------- (in millions) Balance at beginning of year $5,266 $4,646 Actual return on plan assets 1,030 771 Benefits paid (139) (151) - ---------------------------------------------------------------- Balance at end of year $6,157 $5,266 ================================================================ The accrued pension costs recognized in the Consolidated Balance as follows: 2000 1999 - --------------------------------------------------------------- (in millions) Funded status $ 2,911 $ 2,168 Unrecognized transition obligation (64) (77) Unrecognized prior service cost 97 106 Unrecognized net gain (2,446) (1,829) - --------------------------------------------------------------- Prepaid asset recognized in the Consolidated Balance Sheets $ 498 $ 368 =============================================================== Components of the pension plans' net periodic cost were as follows: 2000 1999 1998 - -------------------------------------------------------------- (in millions) Service cost $ 94 $ 95 $ 86 Interest cost 227 204 204 Expected return on plan assets (384) (348) (320) Recognized net gain (64) (41) (47) Net amortization (3) (4) (3) - -------------------------------------------------------------- Net pension cost (income) $(130) $ (94) $ (80) ============================================================== Postretirement Benefits Changes during the year in the accumulated benefit obligations and in the fair value of plan assets were as follows: Accumulated Benefit Obligations -------------------- 2000 1999 - --------------------------------------------------------------- (in millions) Balance at beginning of year $ 980 $1,029 Service cost 18 21 Interest cost 76 68 Benefits paid (43) (36) Actuarial (gain) loss 21 (102) - --------------------------------------------------------------- Balance at end of year $1,052 $ 980 =============================================================== Plan Assets ------------------ 2000 1999 - --------------------------------------------------------------- (in millions) Balance at beginning of year $395 $336 Actual return on plan assets 47 36 Employer contributions 59 60 Benefits paid (42) (37) - --------------------------------------------------------------- Balance at end of year $459 $395 =============================================================== The accrued postretirement costs recognized in the Consolidated Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in millions) Funded status $(593) $(585) Unrecognized transition obligation 189 203 Unrecognized prior service cost 66 - Unrecognized net loss (gain) (53) 10 Fourth quarter contributions 35 26 - --------------------------------------------------------------- Accrued liability recognized in the Consolidated Balance Sheets $(356) $(346) =============================================================== Components of the postretirement plans' net periodic cost were as follows: 2000 1999 1998 - -------------------------------------------------------------- (in millions) Service cost $ 18 $ 21 $ 18 Interest cost 76 68 68 Expected return on plan assets (34) (26) (21) Recognized net gain - 2 2 Net amortization 18 15 15 - -------------------------------------------------------------- Net postretirement cost $ 78 $ 80 $ 82 ============================================================== II-29 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report The weighted average rates assumed in the actuarial calculations for both the pension plans and postretirement benefits were: 2000 1999 - --------------------------------------------------------------- Discount 7.50% 7.50% Annual salary increase 5.00 5.00 Long-term return on plan assets 8.50 8.50 - --------------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement benefit obligation was a weighted average medical care cost trend rate of 7.29 percent for 2000, decreasing gradually to 5.50 percent through the year 2005, and remaining at that level thereafter. An annual increase or decrease in the assumed medical care cost trend rate of 1 percent would affect the accumulated benefit obligation and the service and interest cost components at December 31, 2000 as follows: 1 Percent 1 Percent Increase Decrease - --------------------------------------------------------------- (in millions) Benefit obligation $71 $63 Service and interest costs 6 6 - --------------------------------------------------------------- Employee Savings Plan Southern Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The company provides a 75 percent matching contribution up to 6 percent of an employee's base salary. Total matching contributions made to the plan for the years 2000, 1999, and 1998 were $49 million, $46 million, and $43 million, respectively. 3. CONTINGENCIES AND REGULATORY MATTERS Georgia Power Potentially Responsible Party Status In January 1995, Georgia Power and four other unrelated entities were notified by the Environmental Protection Agency (EPA) that they have been designated as potentially responsible parties under the Comprehensive Environmental Response, Compensation, and Liability Act with respect to a site in Brunswick, Georgia. As of December 31, 2000, Georgia Power had recorded approximately $5 million in cumulative expenses associated with Georgia Power's agreed-upon share of the removal and remedial investigation and feasibility study costs for this site. The final outcome of this matter cannot now be determined. However, based on the nature and extent of Georgia Power's activities relating to the site, management believes that the company's portion of any remaining remediation costs should not be material to the financial statements. Environmental Litigation On November 3, 1999, the EPA brought a civil action in the U.S. District Court against Alabama Power, Georgia Power, and the system service company. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to five coal-fired generating facilities in Alabama and Georgia. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. The EPA concurrently issued to the integrated Southeast utilities a notice of violation related to 10 generating facilities, which includes the five facilities mentioned previously. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as defendants. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. These complaints and notices of violation allege that the utilities had failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August 1, 2000, the U.S. District Court granted Alabama Power's motion to dismiss for lack of jurisdiction in Georgia and granted the system service company's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against Alabama Power in federal district court in Birmingham, Alabama. The EPA did not include the system service company in the new complaint. Southern Company believes that its integrated utilities complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. II-30 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. Mobile Energy Services' Petition for Bankruptcy Mobile Energy Services Holdings (MESH), a subsidiary of Southern Company, is the owner and operator of a facility that generates electricity, produces steam, and processes black liquor as part of a pulp and paper complex in Mobile, Alabama. On January 14, 1999, MESH filed a petition for Chapter 11 bankruptcy relief in the U.S. Bankruptcy Court. This action was in response to Kimberly-Clark Tissue Company's (Kimberly-Clark) announcement in May 1998 of plans to close its pulp mill, effective September 1, 1999. The pulp mill had historically provided 50 percent of MESH's revenues. As a result of settlement discussions with Kimberly-Clark and MESH's bondholders, Southern Company recorded in 1999 a $69 million after-tax write down of its investment in MESH. Southern Company recorded an additional $10 million after-tax write down in 2000. At December 31, 2000, MESH had total assets of $373 million and senior debt outstanding of $190 million of first mortgage bonds and $72 million related to tax-exempt bonds. In connection with the bond financings, Southern Company provided certain limited guarantees, in lieu of funding debt service and maintenance reserve accounts with cash. As of December 31, 2000, Southern Company had paid the full $41 million pursuant to the guarantees. Southern Company continues to have guarantees outstanding of certain potential environmental and other obligations of MESH that represent a maximum contingent liability of $19 million at December 31, 2000. Mirant has agreed to indemnify Southern Company for any future obligations incurred under such guarantees. On August 4, 2000, MESH filed a proposed plan of reorganization with the bankruptcy court. The proposed plan of reorganization was again amended on February 21, 2001. Changes in circumstances since the filing of the amended plan may require further modifications of the plan. Southern Company expects that approval of a plan of reorganization would result in a termination of Southern Company's ownership interest in MESH, but would not affect Southern Company's continuing guarantee obligations described earlier. The final outcome of this matter cannot now be determined. California Electricity Markets Litigation Five lawsuits have been filed in the superior courts of California alleging that certain owners of electric generation facilities in California, including Southern Company, engaged in various unlawful and anticompetitive acts that served to manipulate wholesale power markets and inflate wholesale electricity prices in California. Four of the suits seek class action status. One lawsuit naming Southern Company, Mirant, and other generators as defendants alleges that, as a result of the defendants' conduct, customers paid approximately $4 billion more for electricity than they otherwise would have and seeks an award of treble damages, as well as other injunctive and equitable relief. The other suits likewise seek treble damages and equitable relief. While two of the suits name Southern Company as a defendant, it appears that the allegations, as they may relate to Southern Company, are directed to activities of subsidiaries of Mirant. One such suit names Mirant itself as a defendant. Southern Company has notified Mirant of its claim for indemnification for costs associated with these actions under the terms of the master separation agreement that governs the spin off of Mirant. Mirant has undertaken the defense of all of the claims. The final outcome of these lawsuits cannot now be determined. Race Discrimination Litigation On July 28, 2000, a lawsuit alleging race discrimination was filed by three Georgia Power employees against Georgia Power, Southern Company, and the system service company in the United States District Court for the Northern District of Georgia. The lawsuit also raised claims on behalf of a purported class. The plaintiffs seek compensatory and punitive damages in an unspecified amount, as well as injunctive relief. On August 14, 2000, the lawsuit was amended to add four more plaintiffs and a new defendant, Southern Company Energy Solutions, Inc. The lawsuit is in the discovery phase. The final outcome of this matter cannot now be determined. Alabama Power Rate Adjustment Procedures In November 1982, the Alabama Public Service Commission (APSC) adopted rates that provide for periodic adjustments based upon Alabama Power's earned return II-31 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report on end-of-period retail common equity. The rates also provide for adjustments to recognize the placing of new generating facilities in retail service. Both increases and decreases have been placed into effect since the adoption of these rates. The rate adjustment procedures allow a return on common equity range of 13 percent to 14.5 percent and limit increases or decreases in rates to 4 percent in any calendar year. There is a moratorium on any periodic retail rate increases (but not decreases) until July 2001. In December 1995, the APSC issued an order authorizing Alabama Power to reduce balance sheet items -- such as plant and deferred charges -- at any time the company's actual base rate revenues exceed the budgeted revenues. In April 1997, the APSC issued an additional order authorizing Alabama Power to reduce balance sheet asset items. This order authorizes the reduction of such items up to an amount equal to five times the total estimated annual revenue reduction resulting from future rate reductions initiated by Alabama Power. In 1998, Alabama Power -- in accordance with the 1995 rate order -- recorded $33 million of additional amortization of premium on reacquired debt. Alabama Power did not record any additional amounts in 2000 or 1999. The ratemaking procedures will remain in effect until the APSC votes to modify or discontinue them. Georgia Power 1998 Retail Rate Order As required by the GPSC, Georgia Power filed a general rate case in 1998. On December 18, 1998, the GPSC approved a three-year rate order for Georgia Power ending December 31, 2001. Under the terms of the order, Georgia Power's earnings will continue to be evaluated against a retail return on common equity range of 10 percent to 12.5 percent. Georgia Power's annual retail rates were decreased by $262 million effective January 1, 1999, and by an additional $24 million effective January 1, 2000. In addition, the order provided for $85 million annually to be applied to accelerated amortization or depreciation of assets, and up to an additional $50 million annually in 2000 and 2001 of any earnings above the 12.5 percent return. In accordance with the rate order, Georgia Power recorded accelerated amortization of $135 million and $85 million in 2000 and 1999, respectively. In May 2000, the GPSC ordered that these funds be maintained in a regulatory liability account and ordered that interest be accrued on this account at the prime rate. In 2000, interest of $10 million was recorded. These amounts are reflected on the balance sheets in deferred credits and other liabilities, other. Two-thirds of any additional earnings above the 12.5 percent return in any year will be applied to rate reductions and the remaining one-third retained by Georgia Power. In both 2000 and 1999, Georgia Power's return was above 12.5 percent, and accordingly, it recorded in 1999 $79 million of revenues to be refunded to customers in 2000. In 2000, Georgia Power recorded $44 million as an estimate of revenues to be refunded in 2001. Georgia Power is required to file a general rate case on July 1, 2001. At that time, the GPSC is expected to determine whether the rate order should be continued, modified, or discontinued. 4. JOINT OWNERSHIP AGREEMENTS Alabama Power owns an undivided interest in units 1 and 2 of Plant Miller and related facilities jointly with Alabama Electric Cooperative, Inc. Georgia Power owns undivided interests in plants Vogtle, Hatch, Scherer, and Wansley in varying amounts jointly with Oglethorpe Power Corporation (OPC), the Municipal Electric Authority of Georgia, the city of Dalton, Georgia, Florida Power & Light Company (FP&L), and Jacksonville Electric Authority (JEA). In addition, Georgia Power has joint ownership agreements with OPC for the Rocky Mountain facilities and with Florida Power Corporation (FPC) for a combustion turbine unit at Intercession City, Florida. At December 31, 2000, Alabama Power's and Georgia Power's ownership and investment (exclusive of nuclear fuel) in jointly owned facilities with the above entities were as follows: Jointly Owned Facilities ---------------------------------------- Percent Amount of Accumulated Ownership Investment Depreciation ---------- ---------------------------- (in millions) Plant Vogtle (nuclear) 45.7% $3,301 $1,724 Plant Hatch (nuclear) 50.1 873 650 Plant Miller (coal) Units 1 and 2 91.8 743 312 Plant Scherer (coal) Units 1 and 2 8.4 112 53 Plant Wansley (coal) 53.5 300 150 Rocky Mountain (pumped storage) 25.4 169 72 Intercession City (combustion turbine) 33.3 11 1 - --------------------------------------------------------------- II-32 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report Alabama Power and Georgia Power have contracted to operate and maintain the jointly owned facilities -- except for the Rocky Mountain project and Intercession City -- as agents for their respective co-owners. The companies' proportionate share of their plant operating expenses is included in the corresponding operating expenses in the Consolidated Statements of Income. 5. LONG-TERM POWER SALES AND LEASE AGREEMENTS The integrated Southeast utilities have long-term contractual agreements for the sale and lease of capacity to certain non-affiliated utilities located outside the system's service area. These agreements are firm and are related to specific generating units. Because the energy is generally provided at cost under these agreements, profitability is primarily affected by capacity revenues. Unit power from specific generating plants is currently being sold to FP&L, FPC, and JEA. Under these agreements, approximately 1,500 megawatts of capacity is scheduled to be sold annually unless reduced by FP&L, FPC, and JEA for the periods after 2000 with a minimum of three years notice -- until the expiration of the contracts in 2010. Capacity revenues from unit power sales amounted to $177 million in 2000, $174 million in 1999, and $196 million in 1998. During 2000, Georgia Power and Mississippi Power entered into certain operating leases for portions of their generating unit capacity. Capacity revenues from these operating leases amounted to $20 million in 2000 and are included in the financial statements as sales for resale. Minimum future capacity revenues from noncancelable operating leases as of December 31, 2000 are as follows: Year Amounts - ----- ----------- (in millions) 2001 $ 53 2002 66 2003 66 2004 66 2005 27 2006 and thereafter 114 - ---------------------------------------------------------------- Total $392 ================================================================ 6. Income Taxes At December 31, 2000, the tax-related regulatory assets and liabilities were $957 million and $551 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized interest. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. The following tables and disclosures exclude discontinued operations. Details of income tax provisions are as follows: 2000 1999 1998 - --------------------------------------------------------------- (in millions) Total provision for income taxes: Federal -- Current $ 421 $ 504 $ 548 Deferred 95 11 23 - --------------------------------------------------------------- 516 515 571 - --------------------------------------------------------------- State -- Current 71 85 102 Deferred 1 (1) (3) - --------------------------------------------------------------- 72 84 99 - --------------------------------------------------------------- Total $ 588 $ 599 $ 670 =============================================================== The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 2000 1999 - --------------------------------------------------------------- (in millions) Deferred tax liabilities: Accelerated depreciation $3,199 $3,088 Property basis differences 1,105 1,175 Other 650 444 - --------------------------------------------------------------- Total 4,954 4,707 - --------------------------------------------------------------- Deferred tax assets: Federal effect of state deferred taxes 111 113 Other property basis differences 206 221 Deferred costs 190 102 Pension and other benefits 125 121 Other 231 198 - --------------------------------------------------------------- Total 863 755 - --------------------------------------------------------------- Net deferred tax liabilities 4,091 3,952 Portion included in current assets, net (17) (68) - --------------------------------------------------------------- Accumulated deferred income taxes in the Consolidated Balance Sheets $4,074 $3,884 =============================================================== In accordance with regulatory requirements, deferred investment tax credits are amortized over the lives of the related property with such amortization normally applied as a credit to reduce depreciation in the Consolidated Statements of Income. Credits amortized in this manner amounted to $30 million II-33 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report in 2000, $30 million in 1999, and $38 million in 1998. At December 31, 2000, all investment tax credits available to reduce federal income taxes payable had been utilized. The provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. Federal statutory rate to earnings before income taxes and preferred dividends of subsidiaries, as a result of the following: 2000 1999 1998 - --------------------------------------------------------------- Federal statutory rate 35.0% 35.0% 35.0% State income tax, net of federal deduction 3.4 3.8 3.8 Non-deductible book depreciation 1.7 1.9 4.0 Difference in prior years' deferred and current tax rate (1.3) (1.3) (1.3) Other (2.1) (0.3) (1.6) - --------------------------------------------------------------- Effective income tax rate 36.7% 39.1% 39.9% =============================================================== Southern Company files a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. 7. Common Stock Stock Issued and Repurchased The amount and timing of additional equity capital to be raised in 2001 -- as well as in subsequent years -- will be contingent on Southern Company's investment opportunities. Equity capital may be provided from any combination of public offerings, private placements, or the company's stock plans. In December 2000, Southern Company issued 28 million treasury shares of common stock through a public offering. The offering, which included an overallotment of 3 million shares, raised some $800 million and was priced at $28.50 per share. The proceeds were used to repay short-term commercial paper. In April 1999, Southern Company's Board of Directors approved the repurchase of up to 50 million shares of Southern Company's common stock over a two-year period through open market or privately negotiated transactions. Under this program, 50 million shares were repurchased by February 2000 at an average price of $25.53. Funding for the program was provided from Southern Company's commercial paper program. Shares Reserved At December 31, 2000, a total of 59 million shares was reserved for issuance pursuant to the Southern Investment Plan, the Employee Savings Plan, the Outside Directors Stock Plan, and the Performance Stock Plan. Performance Stock Plan The performance stock plan provides non-qualified stock options to a large segment of Southern Company's employees ranging from line management to executives. As of December 31, 2000, 5,744 current and former employees participated in the plan. The maximum number of shares of common stock that may be issued under the plan may not exceed 40 million. The prices of options granted to date have been at the fair market value of the shares on the dates of grant. Options granted to date become exercisable pro rata over a maximum period of three years from the date of grant. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the plan. Stock option activity in 1999 and 2000 for the plan is summarized below: Shares Average Subject Option Price To Option Per Share - --------------------------------------------------------------- Balance at December 31, 1998 6,445,398 $22.77 Options granted 2,108,818 26.56 Options canceled (28,630) 25.48 Options exercised (56,708) 19.51 - --------------------------------------------------------------- Balance at December 31, 1999 8,468,878 23.73 Options granted 6,977,038 23.25 Options canceled (226,597) 23.66 Options exercised (984,897) 21.63 - --------------------------------------------------------------- Balance at December 31, 2000 14,234,422 $23.63 =============================================================== Shares reserved for future grants: At December 31, 1998 36,598,001 At December 31, 1999 34,515,156 At December 31, 2000 27,750,261 - --------------------------------------------------------------- Options exercisable: At December 31, 1999 4,525,349 At December 31, 2000 5,898,698 - --------------------------------------------------------------- Southern Company accounts for its stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25. Accordingly, no compensation expense has been recognized. II-34 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report The following table summarizes information about options outstanding at December 31, 2000: Price Range of Options -------------------------- 14-20 21-24 25-28 - -------------------------------------------------------------- Outstanding: Shares (in thousands) 430 10,217 3,587 Average remaining life (in years) 2.5 8.2 8.1 Average exercise price $17.36 $22.79 $26.77 Exerciseable: Shares (in thousands) 424 3,653 1,822 Average exercise price $17.64 $21.96 $26.84 - -------------------------------------------------------------- The estimated fair values of stock options granted in 2000, 1999 and 1998 were derived using the Black-Scholes stock option pricing model. The following table shows the assumptions and the weighted average fair values of stock options: 2000 1999 1998 - ----------------------------------------------------------------- Interest rate 6.7% 5.8% 5.5% Average expected life of stock options (in years) 4.0 3.7 3.7 Expected volatility of common stock 20.9% 20.7% 19.2% Expected annual dividends on common stock $1.34 $1.34 $1.34 Weighted average fair value of stock options granted $3.36 $4.61 $4.27 - ----------------------------------------------------------------- The pro forma impact on earnings of fair-value accounting for options granted - -- as required by FASB Statement No. 123, Accounting for Stock-Based Compensation -- is 1.2 cents per share in 2000 and less than 1 cent in both 1999 and 1998. Diluted Earnings Per Share For Southern Company, the only difference in computing basic and diluted earnings per share is attributable to outstanding options under the Performance Stock Plan. The effect of the stock options was determined using the treasury stock method. Shares used to compute diluted earnings per share are as follows: Average Common Stock Shares ------------------------------- 2000 1999 1998 - --------------------------------------------------------------- (in thousands) As reported shares 653,086 685,163 696,944 Effect of options 1,108 580 739 - --------------------------------------------------------------- Diluted shares 654,194 685,743 697,683 =============================================================== Common Stock Dividend Restrictions The income of Southern Company is derived primarily from equity in earnings of its subsidiaries. At December 31, 2000, consolidated retained earnings included $3.5 billion of undistributed retained earnings of the subsidiaries. Of this amount, $2.0 billion was restricted against the payment by the subsidiary companies of cash dividends on common stock under terms of bond indentures. 8. FINANCING Capital and Preferred Securities Company or subsidiary obligated mandatorily redeemable capital and preferred securities have been issued by special purpose financing entities of Southern Company and its subsidiaries. Substantially all the assets of these special financing entities are junior subordinated notes issued by the related company seeking financing. Each of these companies considers that the mechanisms and obligations relating to the capital or preferred securities issued for its benefit, taken together, constitute a full and unconditional guarantee by it of the respective special financing entities' payment obligations with respect to the capital or preferred securities. At December 31, 2000, capital securities of $950 million and preferred securities of $1.3 billion were outstanding. Southern Company guarantees the notes related to $950 million of capital or preferred securities issued on its behalf. Long-Term Debt Due Within One Year A summary of the improvement fund requirements and scheduled maturities and redemptions of long-term debt due within one year at December 31 is as follows: 2000 1999 - -------------------------------------------------------------- (in millions) Bond improvement fund requirements $11 $ 14 Less: Portion to be satisfied by certifying property additions 11 9 - -------------------------------------------------------------- Cash requirements - 5 First mortgage bond maturities and redemptions - 200 Other long-term debt maturities 67 124 - -------------------------------------------------------------- Total $67 $329 ============================================================== The first mortgage bond improvement fund requirements amount to 1 percent of each outstanding series of bonds authenticated under the indentures prior to II-35 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report January 1 of each year, other than those issued to collateralize pollution control revenue bonds and other obligations. The requirements may be satisfied by depositing cash or reacquiring bonds, or by pledging additional property equal to 166 2/3 percent of such requirements. With respect to the collateralized pollution control revenue bonds, the integrated Southeast utilities have authenticated and delivered to trustees a like principal amount of first mortgage bonds as security for obligations under installment sale or loan agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under the agreements. Improvement fund requirements and/or serial maturities through 2005 applicable to other long-term debt are as follows: $67 million in 2001; $489 million in 2002; $479 million in 2003; $323 million in 2004; and $600 million in 2005. Assets Subject to Lien Each of Southern Company's subsidiaries is organized as a legal entity, separate and apart from Southern Company and its other subsidiaries. The subsidiary companies' mortgages, which secure the first mortgage bonds issued by the companies, constitute a direct first lien on substantially all of the companies' respective fixed property and franchises. There are no agreements or other arrangements among the subsidiary companies under which the assets of one company have been pledged or otherwise made available to satisfy obligations of Southern Company or any of its other subsidiaries. Bank Credit Arrangements At the beginning of 2001, unused credit arrangements with banks totaled $5.1 billion, of which $3.2 billion expires during 2001, $1.0 billion during 2002, and $900 million during 2003 and 2004. The following table outlines the credit arrangements by company: Amount of Credit ----------------------------------- Expires --------------- 2002 & Company Total Unused 2001 beyond - ------- ------------------------------------ (in millions) Alabama Power $ 925 $ 925 $ 535 $ 390 Georgia Power 1,765 1,765 1,265 500 Gulf Power 123 115 115 - Mississippi Power 117 117 117 - Savannah Electric 65 50 40 10 Southern Company 2,100 2,100 1,100 1,000 Other 60 51 51 - - -------------------------------------------------------------- Total $5,155 $5,123 $3,223 $1,900 ============================================================== Approximately $2.9 billion of the credit facilities allows for term loans ranging from one to three years. Most of the agreements include stated borrowing rates but also allow for competitive bid loans. All of the credit arrangements require payment of commitment fees based on the unused portion of the commitments or the maintenance of compensating balances with the banks. These balances are not legally restricted from withdrawal. Of the total $5.1 billion in unused credit, $2.1 billion, $1.65 billion, and $780 million are syndicated credit arrangements of Southern Company, Georgia Power, and Alabama Power, respectively. These facilities also require the payment of agent fees. A portion of the $5.1 billion unused credit with banks is allocated to provide liquidity support to the companies' variable rate pollution control bonds. The amount of variable rate pollution control bonds requiring liquidity support as of December 31, 2000, was $1.6 billion. Southern Company, Alabama Power, and Georgia Power borrow through commercial paper programs that have the liquidity support of committed bank credit arrangements. In addition, the companies from time to time borrow under uncommitted lines of credit with banks. 9. COMMITMENTS Construction Program Southern Company is engaged in continuous construction programs, currently estimated to total $2.9 billion in 2001, $2.6 billion in 2002, and $1.7 billion in 2003. The construction programs are subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include: changes in business conditions; acquisition of additional generating assets; revised load growth estimates; changes in environmental regulations; changes in existing nuclear plants to meet new regulatory requirements; increasing costs of labor, equipment, and materials; and cost of capital. At December 31, 2000, significant purchase commitments were outstanding in connection with the construction program. Southern Company has approximately 6,300 megawatts of additional generating capacity scheduled to be placed in service by 2003. See Management's Discussion and Analysis under "Environmental Matters" for II-36 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report information on the impact of the Clean Air Act Amendments of 1990 and other environmental matters. Fuel and Purchased Power Commitments To supply a portion of the fuel requirements of the generating plants, Southern Company has entered into various long-term commitments for the procurement of fossil and nuclear fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Also, Southern Company has entered into various long-term commitments for the purchase of electricity. Total estimated long-term obligations at December 31, 2000, were as follows: Purchased Year Fuel Power - ---- ------------------------- (in millions) 2001 $ 2,481 $ 81 2002 1,897 97 2003 1,711 99 2004 1,328 95 2005 1,055 95 2006 and thereafter 3,764 693 - -------------------------------------------------------------- Total commitments $12,236 $1,160 ============================================================== Operating Leases Southern Company has operating lease agreements with various terms and expiration dates. These expenses totaled $42 million, $35 million, and $26 million for 2000, 1999, and 1998, respectively. At December 31, 2000, estimated minimum rental commitments for noncancelable operating leases were as follows: Year Amounts - ---- ------------ (in millions) 2001 $ 57 2002 71 2003 71 2004 68 2005 64 2006 and thereafter 388 - -------------------------------------------------------------- Total minimum payments $719 ============================================================== Guarantees Southern Company has made separate guarantees to certain counterparties regarding performance of contractual commitments by Mirant's trading and marketing subsidiaries. At December 31, 2000, the total notional amount of guarantees was $419 million and the estimated fair value of net contractual commitments outstanding was approximately $259 million. Based upon a statistical analysis of credit risk, Southern Company's potential exposure under these contractual commitments would not materially differ from the estimated fair value. At December 31, 2000, Southern Company had guaranteed $11 million related to a Mirant purchase power agreement. The guarantee expires March 2001. Southern Company also has guaranteed certain of Mirant's foreign currency swap transactions. At December 31, 2000, notional amounts under these swaps were the differences between (pound)44 million and $68 million and between DM370 million and $206 million; however, due to favorable exchange ratesSouthern Company had no exposure under these guarantees. The sterling and deutsche mark swaps expire in 2002 and 2003, respectively. After the spin off, Mirant will pay Southern Company a monthly fee of 1 percent on the average aggregate maximum principal amount of all guarantees outstanding until they are replaced or expire. Southern Company's guarantees related to Mirant trading and marketing activities are limited to a maximum of $425 million, with any guarantees since October 2, 2000 expiring no later than October 2, 2001. Mirant must use reasonable efforts to release Southern Company from all such support arrangements and will indemnify Southern Company for any obligations incurred. 10. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988, Alabama Power and Georgia Power maintain agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at the companies' nuclear power plants. The act provides funds up to $9.5 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. A company could be assessed up to $88 million per incident for each licensed reactor it operates, but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment, excluding any applicable state premium taxes, for Alabama Power and Georgia Power -- based on its ownership and buyback interests -- is $176 million and $178 million, respectively, per incident, but not more than an aggregate of $20 million per company to be paid for each incident in any one year. II-37 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report Alabama Power and Georgia Power are members of Nuclear Electric Insurance Limited (NEIL), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. Additionally, both companies have policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million primary coverage. This excess insurance is also provided by NEIL. NEIL also covers the additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased costs of replacement power in an amount up to $3.5 million per week -- starting 12 weeks after the outage -- for one year and up to $2.8 million per week for the second and third years. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under that policy. The current maximum annual assessments for Alabama Power and Georgia Power under the three NEIL policies would be $17 million and $19 million, respectively. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. All retrospective assessments -- whether generated for liability, property, or replacement power -- may be subject to applicable state premium taxes. 11. DISCONTINUED OPERATIONS In April 2000, Southern Company announced an initial public offering of up to 19.9 percent of Mirant and its intentions to spin off the remaining ownership of Mirant to Southern Company stockholders within 12 months of the initial stock offering. On October 2, 2000, Mirant completed an initial public offering of 66.7 million shares of common stock priced at $22 per share. This represented 19.7 percent of the 338.7 million shares outstanding. As a result of the stock offering, Southern Company recorded a $560 million increase in paid-in capital with no gain or loss being recognized. On February 19, 2001, Southern Company's board of directors approved the spin off of its remaining ownership of 272 million Mirant shares to be completed in a tax free distribution on April 2, 2001. Shares from the spin off will be distributed at a ratio of approximately 0.4 for every share of Southern Company common stock held at record date. As a result of the spin off, Southern Company's December 31, 2000, financial statements have been prepared with Mirant's results of operations and cash flows shown as discontinued operations. All historical financial statements presented and footnotes have been reclassified to conform to this presentation, with the historical assets and liabilities of Mirant presented on the balance sheet as net assets of discontinued operations. Summarized financial information for the discontinued operations is as follows at December 31: 2000 1999 1998 - --------------------------------------------------------------- (in millions) Revenues $13,315 $2,265 $1,819 Income taxes 86 127 (121) Net income 319 361 (9) - --------------------------------------------------------------- 2000 1999 - --------------------------------------------------------------- (in millions) Current assets $ 9,057 $ 1,254 Total assets 22,377 12,191 Current liabilities 9,726 3,169 Total liabilities 17,585 8,473 Minority and other interests 1,472 805 Net assets of discontinued operations 3,320 2,913 - --------------------------------------------------------------- 12. SEGMENT AND RELATED INFORMATION Southern Company's reportable business segment is the five integrated Southeast utilities that provide electric service in four states. Net income and total assets for discontinued operations are included in the reconciling eliminations column. The all other category includes parent Southern Company, which does not II-38 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Report allocate operating expenses to business segments. Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include telecommunications, energy products and services, and leasing and financing services. Intersegment revenues are not material. Financial data for business segments and products and services are as follows: Business Segments
Integrated Southeast All Reconciling Year Utilities Other Eliminations Consolidated - ---- ------------------------------------------------------------------------------------ (in millions) 2000 - ----- Operating revenues $ 9,860 $ 246 $ (40) $10,066 Depreciation and amortization 1,135 36 - 1,171 Interest income 43 9 (1) 51 Interest expense 631 197 - 828 Income taxes 703 (115) - 588 Segment net income (loss) 1,109 (115) 319 1,313 Total assets 26,917 2,200 2,245 31,362 Gross property additions 2,199 26 - 2,225 - ------------------------------------------------------------------------------------------------------------------------------- Integrated Southeast All Reconciling Year Utilities Other Eliminations Consolidated - ---- ------------------------------------------------------------------------------------ (in millions) 1999 - ----- Operating revenues $ 9,125 $ 221 $ (29) $ 9,317 Depreciation and amortization 1,046 93 - 1,139 Interest income 64 50 (44) 70 Interest expense 613 155 (37) 731 Income taxes 675 (76) - 599 Segment net income (loss) 1,073 (154) 357 1,276 Total assets 25,336 2,127 1,828 29,291 Gross property additions 1,854 27 - 1,881 - -------------------------------------------------------------------------------------------------------------------------------
II-39 NOTES (continued) Southern Company and Subsidiary Companies 2000 Annual Eeport
Integrated Southeast All Reconciling Year Utilities Other Eliminations Consolidated - ----- ------------------------------------------------------------------------------------ (in millions) 1998 - ---- Operating revenues $ 9,363 $ 167 $ (31) $ 9,499 Depreciation and amortization 1,323 17 - 1,340 Interest income 150 58 (54) 154 Interest expense 654 99 (54) 699 Income taxes 703 (33) - 670 Segment net income (loss) 1,083 (97) (9) 977 Total assets 24,420 2,817 1,486 28,723 Gross property additions 1,298 58 - 1,356 - -------------------------------------------------------------------------------------------------------------------------------
Products and Services
Integrated Southeast Utilities Revenues -------------------------------------------------------------------------------------------- Year Retail Wholesale Other Total - ---- ------------------------------------------------------------------------------------------- (in millions) 2000 $8,613 $977 $270 $9,860 1999 8,086 823 216 9,125 1998 8,272 896 195 9,363 - -------------------------------------------------------------------------------------------------------------------------------
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for 2000 and 1999 -- including discontinued operations for net income and earnings per share -- are as follows:
Per Common Share ---------------------------------------------------- Operating Operating Consolidated Price Range Quarter Ended Revenues Income Net Income Earnings Dividends High Low - ------------- ------------------------------------ ----------------------------------------------------- (in millions) March 2000 $2,052 $ 428 $245 $0.38 $0.335 25 7/8 20 3/8 June 2000 2,522 598 342 0.52 0.335 27 7/8 21 11/16 September 2000 3,198 1,041 614 0.95 0.335 35 23 13/32 December 2000 2,294 337 112 0.16 0.335 33 22/25 27 1/2 March 1999 $1,920 $ 408 $224 $0.32 $0.335 29 5/8 23 1/4 June 1999 2,288 569 314 0.45 0.335 29 3/16 22 3/4 September 1999 3,050 981 615 0.90 0.335 28 25 December 1999 2,059 292 123 0.19 0.335 27 1/8 22 1/16 - ----------------------------------------------------------------------------------------------------------------------- Southern Company's business is influenced by seasonal weather conditions.
II-40 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1996-2000 Southern Company and Subsidiary Companies 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in millions) $10,066 $9,317 $9,499 $8,774 $8,675 Total Assets (in millions) $31,362 $29,291 $28,723 $27,898 $26,352 Gross Property Additions (in millions) $2,225 $1,881 $1,356 $1,138 $1,064 Return on Average Common Equity (percent) 13.20 13.43 10.04 10.30 12.53 Cash Dividends Paid Per Share of Common Stock $1.34 $1.34 $1.34 $1.30 $1.26 - ------------------------------------------------------------------------------------------------------------------------------- Consolidated Net Income (in millions): Continuing operations $ 994 $ 915 $986 $990 $1,046 Discontinued operations 319 361 (9) (18) 81 - ------------------------------------------------------------------------------------------------------------------------------- Total $1,313 $1,276 $977 $972 $1,127 =============================================================================================================================== Basic and Diluted Earnings Per Share of Common Stock: Continuing operations $1.52 $1.33 $ 1.41 $ 1.45 $1.56 Discontinued operations 0.49 0.53 (0.01) (0.03) 0.12 - ------------------------------------------------------------------------------------------------------------------------------- Total $2.01 $1.86 $ 1.40 $1.42 $1.68 =============================================================================================================================== Capitalization (in millions): Common stock equity $10,690 $ 9,204 $ 9,797 $ 9,647 $ 9,216 Preferred stock and securities 2,614 2,615 2,465 2,155 1,402 Long-term debt 7,843 7,251 6,505 6,347 6,556 - ------------------------------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year $21,147 $19,070 $18,767 $18,149 $17,174 =============================================================================================================================== Capitalization Ratios (percent): Common stock equity 50.6 48.3 52.2 53.2 53.7 Preferred stock and securities 12.3 13.7 13.1 11.9 8.2 Long-term debt 37.1 38.0 34.7 34.9 38.1 - ------------------------------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year 100.0 100.0 100.0 100.0 100.0 =============================================================================================================================== Other Common Stock Data: Book value per share (year-end) $15.69 $13.82 $14.04 $13.91 $13.61 Market price per share: High 35 29 5/8 31 9/16 26 1/4 25 7/8 Low 20 3/8 22 1/16 23 15/16 19 7/8 21 1/8 Close 33 1/4 23 1/2 29 1/16 25 7/8 22 5/8 Market-to-book ratio (year-end) (percent) 211.9 170.0 207.0 186.0 166.2 Price-earnings ratio (year-end) (times) 16.5 12.6 20.8 18.2 13.5 Dividends paid (in millions) $873 $921 $933 $889 $846 Dividend yield (year-end) (percent) 4.0 5.7 4.6 5.0 5.6 Dividend payout ratio (percent) 66.5 72.2 95.6 91.5 75.1 Shares outstanding (in thousands): Average 653,087 685,163 696,944 685,033 672,590 Year-end 681,158 665,796 697,747 693,423 677,036 Stockholders of record (year-end) 160,116 174,179 187,053 200,508 215,246 - ------------------------------------------------------------------------------------------------------------------------------- Customers (year-end) (in thousands): Residential 3,398 3,339 3,277 3,220 3,157 Commercial 527 513 497 479 464 Industrial 14 15 15 16 17 Other 5 4 5 5 5 - ------------------------------------------------------------------------------------------------------------------------------- Total 3,944 3,871 3,794 3,720 3,643 =============================================================================================================================== Employees (year-end) 26,021 26,269 25,206 24,682 25,034 - -------------------------------------------------------------------------------------------------------------------------------
II-41 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1996-2000 (continued) Southern Company and Subsidiary Companies 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- Operating Revenues (in millions): Residential $ 3,367 $3,105 $3,163 $2,837 $2,894 Commercial 2,922 2,743 2,763 2,595 2,559 Industrial 2,292 2,237 2,267 2,139 2,136 Other 32 1 79 76 76 - ----------------------------------------------------------------------------------------------------------------------- Total retail 8,613 8,086 8,272 7,647 7,665 Sales for resale within service area 377 350 374 376 409 Sales for resale outside service area 600 473 522 510 429 - ----------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 9,590 8,909 9,168 8,533 8,503 Other revenues 476 408 331 241 172 - ----------------------------------------------------------------------------------------------------------------------- Total $10,066 $9,317 $9,499 $8,774 $8,675 ======================================================================================================================= Kilowatt-Hour Sales (in millions): Residential 46,213 43,402 43,503 39,217 40,117 Commercial 46,249 43,387 41,737 38,926 37,993 Industrial 56,746 56,210 55,331 54,196 52,798 Other 970 945 929 903 911 - ----------------------------------------------------------------------------------------------------------------------- Total retail 150,178 143,944 141,500 133,242 131,819 Sales for resale within service area 9,579 9,440 9,847 9,884 10,935 Sales for resale outside service area 17,190 12,929 12,988 13,761 10,777 - ----------------------------------------------------------------------------------------------------------------------- Total 176,947 166,313 164,335 156,887 153,531 ======================================================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 7.29 7.15 7.27 7.23 7.21 Commercial 6.32 6.32 6.62 6.67 6.74 Industrial 4.04 3.98 4.10 3.95 4.04 Total retail 5.74 5.62 5.85 5.74 5.81 Sales for resale 3.65 3.68 3.92 3.75 3.86 Total sales 5.42 5.36 5.58 5.44 5.54 Average Annual Kilowatt-Hour Use Per Residential Customer 13,702 13,107 13,379 12,296 12,824 Average Annual Revenue Per Residential Customer $998.38 $937.81 $972.89 $889.50 $925.12 Plant Nameplate Capacity Owned (year-end) (megawatts) 32,807 31,425 31,161 31,146 31,076 Maximum Peak-Hour Demand (megawatts): Winter 26,370 25,203 21,108 22,969 22,631 Summer 31,359 30,578 28,934 27,334 27,190 System Reserve Margin (at peak) (percent) 8.1 8.5 12.8 15.0 14.0 Annual Load Factor (percent) 60.2 59.2 60.0 59.4 62.3 Plant Availability (percent): Fossil-steam 86.8 83.3 85.2 88.2 86.4 Nuclear 90.5 89.9 87.8 88.8 89.7 - ----------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 72.3 73.1 72.8 74.7 73.3 Nuclear 15.1 15.7 15.4 16.5 16.7 Hydro 1.5 2.3 3.9 4.3 4.1 Oil and gas 4.0 2.8 3.3 1.7 1.5 Purchased power 7.1 6.1 4.6 2.8 4.4 - ----------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 100.0 100.0 =======================================================================================================================
II-42 ALABAMA POWER COMPANY FINANCIAL SECTION II-43 MANAGEMENT'S REPORT Alabama Power Company 2000 Annual Report The management of Alabama Power Company has prepared -- and is responsible for - -- the financial statements and related information included in this report. These statements were prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the accounting records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of independent directors, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted according to a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of Alabama Power Company in conformity with accounting principles generally accepted in the United States. /s/Elmer B. Harris Elmer B. Harris President and Chief Executive Officer /s/William B. Hutchins, III William B. Hutchins, III Executive Vice President, Chief Financial Officer, and Treasurer II-44 REPORT OF INDEPENDENT PUBLIC ACCOUNTANT To Alabama Power Company: We have audited the accompanying balance sheets and statements of capitalization of Alabama Power Company (an Alabama corporation and a wholly owned subsidiary of Southern Company) as of December 31, 2000 and 1999, and the related statements of income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-55 through II-73) referred to above present fairly, in all material respects, the financial position of Alabama Power Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/Arthur Andersen LLP Birmingham, Alabama February 28, 2001 II-45 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Alabama Power Company 2000 Annual Report RESULTS OF OPERATIONS Earnings Alabama Power Company's 2000 net income after dividends on preferred stock was $420 million, representing a $20 million (5 percent) increase from the prior year. This improvement is primarily attributable to an increase in territorial sales partially offset by increased non-fuel operating expenses. In 1999, earnings were $400 million, representing a 6 percent increase from the prior year. This increase was due to a decrease in amortization related to premiums paid to reacquire debt pursuant to an Alabama Public Service Commission (APSC) order. See Note 3 to the financial statements under "Retail Rate Adjustment Procedures" for additional details. The return on average common equity for 2000 was 13.58 percent compared to 13.85 percent in 1999, and 13.63 percent in 1998. Revenues Operating revenues for 2000 were $3.7 billion, reflecting an increase from 1999. The following table summarizes the principal factors that have affected operating revenues for the past two years: Increase (Decrease) Amount From Prior Year ---------------------------------------- 2000 2000 1999 - ------------------------------------------------------------------- (in thousands) Retail -- Base revenues $2,108,939 $ 80,264 $ 10,022 Fuel cost recovery and other 843,768 61,326 20,418 - ------------------------------------------------------------------- Total retail 2,952,707 141,590 30,440 - ------------------------------------------------------------------- Sales for resale -- Non affiliates 461,730 46,353 (33,596) Affiliates 166,219 73,780 (11,123) - ------------------------------------------------------------------- Total sales for resale 627,949 120,133 (44,719) Other operating revenues 86,805 20,264 13,380 - ------------------------------------------------------------------- Total operating revenues $3,667,461 $281,987 $ (899) =================================================================== Percent change 8.33% (0.03)% - -------------------------------------------------------------------- Retail revenues of $3.0 billion in 2000 increased $142 million (5 percent) from the prior year, compared with an increase of $30 million (1.1 percent) in 1999. The primary contributors to the increase in revenues in 2000 were the positive impact of weather on energy sales, continued economic growth in the Company's service territory, and an increase in fuel revenues. Fuel revenues have no effect on net income because they represent the recording of revenues to offset fuel expenses, including the fuel component of purchased energy. Fuel rates billed to customers are designed to fully recover fluctuating fuel costs over a period of time. Higher natural gas prices and decreased hydro production combined with increased costs of purchased power have resulted in a large under-recovery of fuel costs at December 31, 2000. Effective January 2001, the Company's fuel rate was increased to address this under-recovery. The Company expects to significantly reduce this balance over a three-year period. II-46 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 2000 Annual Report The $20 million (30.5 percent) increase in other operating revenues in 2000 as compared to 1999 was due primarily to an increase in steam sales in conjunction with the operation of the Company's co-generation facilities. Retail revenues in 1999 increased $30 million (1.1 percent) over 1998. The predominant factors causing the rise in revenues in 1999 were continued growth in the Company's service territory, as well as an increase in fuel revenues. These increases were offset by the effect of milder temperatures in 1999 as compared to 1998. Energy sales for resale outside the service area are predominantly unit power sales under long-term contracts to Florida utilities. Economy energy and energy sold under short-term contracts are also sold for resale outside the service area. Revenues from long-term power contracts have both a capacity and energy component. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. These capacity and energy components of the unit power contracts were as follows: 2000 1999 1998 --------------------------------------- (in millions) Capacity $127 $122 $142 Energy 128 112 118 -------------------------------------------------------- Total $255 $234 $260 ======================================================== Capacity revenues from non-affiliates were relatively unchanged in 2000 compared to the prior year. Capacity revenues from non-affiliates in 1999 decreased 13.9 percent compared to 1998. This decrease was attributable to the lowering of the equity return under formula rate contracts, as well as other adjustments and true-ups related to contractual pricing. Revenues from sales to affiliated companies within the Southern electric system, as well as purchases of energy, will vary from year to year depending on demand and the availability and cost of generating resources at each company. These transactions did not have a significant impact on earnings. Kilowatt-hour (KWH) sales for 2000 and the percent change by year were as follows: KWH Percent Change -------------------------------------- 2000 2000 1999 -------------------------------------- (millions) Residential 16,772 6.8% (0.6)% Commercial 12,989 5.5 3.4 Industrial 22,101 0.7 1.7 Other 206 2.3 2.3 ------------ Total retail 52,068 3.8 1.4 Sales for resale - Non-affiliates 14,848 19.4 5.0 Affiliates 5,369 6.7 (15.8) ------------ Total 72,285 6.9% 0.5% - --------------------------------------------------------------- The increases in 2000 and 1999 retail energy sales were primarily due to the strength of business and economic conditions in the Company's service area. In 2000, residential energy sales experienced a 6.8 percent increase over the prior year primarily as a result of warmer summer temperatures and cold winter weather conditions compared to 1999. Assuming normal weather, sales to retail customers are projected to grow approximately 2.9 percent annually on average during 2001 through 2005. Expenses In 2000, total operating expenses of $2.7 billion were up $235 million or 9.4 percent compared with the prior year. This increase was mainly due to a $183 million increase in fuel and purchased power costs, accompanied by a $23 million increase in maintenance expenses. In 1999, total operating expenses of $2.5 billion decreased $13 million or 0.5 percent compared with 1998. This decline was mainly due to a $15 million net decrease in fuel and purchased power costs and a $23 million decrease in maintenance expense, offset by an increase in taxes other than income taxes of $12 million. II-47 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 2000 Annual Report Fuel costs constitute the single largest expense for the Company. The mix of fuel sources for generation of electricity is determined primarily by system load, the unit cost of fuel consumed, and the availability of hydro and nuclear generating units. The amount and sources of generation and the average cost of fuel per net KWH generated were as follows: -------------------------- 2000 1999 1998 -------------------------- Total generation (billions of KWHs) 65 63 63 Sources of generation (percent) -- Coal 72 72 72 Nuclear 19 20 18 Hydro 3 5 8 Oil & Gas 6 3 2 Average cost of fuel per net KWH generated (cents) -- 1.54 1.44 1.54 - -------------------------------------------------------------- In 2000, total fuel and purchased power costs of $1.3 billion increased $183 million (16 percent), while total energy sales increased 4,658 million kilowatt hours (6.9 percent) compared with the amounts recorded in 1999. Fuel and purchased power costs in 1999 decreased $15 million (1 percent) compared to 1998. Purchased power consists of purchases from affiliates in the Southern electric system and non-affiliated companies. Purchased power transactions among the Company and its affiliates will vary from period to period depending on demand, the availability, and the variable production cost of generating resources at each company. During 2000, purchased power transactions among the Company and non-affiliates increased $72 million (77 percent) due to higher costs associated with these energy purchases and to offset decreased hydro generation, which was down significantly compared to 1999 as a result of lower stream flows. The 8.4 percent increase in maintenance expense in 2000 as compared to 1999 is primarily attributable to an increase in the maintenance of overhead distribution lines and additional accruals to partially replenish the natural disaster reserve. The 7.5 percent decrease in maintenance expenses in 1999 is primarily attributable to a decrease in distribution expenses. Depreciation and amortization expense increased 4.9 percent in 2000 and 2.6 percent in 1999. These increases reflect additions to property, plant, and equipment. Taxes other than income taxes increased $5 million (2.5 percent) in 2000 as compared to 1999. This increase is attributable to increases in real and personal property taxes and public utility license taxes. Total net interest and other charges increased $7 million (2.7 percent) in 2000. This increase results primarily from an increase in interest on long-term debt offset by a decrease in other interest charges. Total net interest and other charges decreased $38 million (12.3 percent) in 1999 primarily from a decrease in the amortization of premiums on reacquired debt pursuant to an APSC order. See Note 3 to the financial statements under "Retail Rate Adjustment Procedures" for additional details. Effects of Inflation The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in utility plant with long economic lives. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations, such as long-term debt and preferred securities. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors. The major factor is the ability of the Company to achieve energy sales growth while containing cost in a more competitive environment. The Company currently operates as a vertically integrated utility providing electricity to customers within its traditional service area located in the II-48 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 2000 Annual Report state of Alabama. Prices for electricity provided by the Company to retail customers are set by the APSC under cost-based regulatory principles. Future earnings for the traditional business in the near term will depend upon growth in energy sales, which is subject to a number of factors. These factors include weather, competition, new short and long-term contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the Company's traditional service area. The electric utility industry in the United States is continuing to evolve as a result of regulatory and competitive factors. Among the primary agents of change has been the Energy Policy Act of 1992 (Energy Act). The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and/or commercial customers and sell excess energy generation to other utilities. Also, electricity sales for resale rates are affected by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. Although the Energy Act does not permit retail customer access, it was a major catalyst for the current restructuring and consolidation taking place within the utility industry. Numerous federal and state initiatives are in varying stages to promote wholesale and retail competition. Among other things, these initiatives allow customers to choose their electricity provider. Some states have approved initiatives that result in a separation of the ownership and/or operation of generating facilities from the ownership and/or operation of transmission and distribution facilities. While various restructuring and competition initiatives have been discussed in Alabama, none have been enacted. In October 2000, the APSC completed a two-year study of electric industry restructuring, concluding that (i) restructuring of the electric utility industry in Alabama was not in the public interest and (ii) the APSC itself would not mandate retail competition or electric industry restructuring without enabling state legislation. Electric utility restructuring would require numerous issues to be resolved, including significant ones relating to recovery of any stranded investments, full cost recovery of energy produced, and other issues related to the current energy crisis in California. As a result of this crisis, many states have either discontinued or delayed implementation of initiatives involving retail deregulation. The inability of the Company to recover its investments, including the regulatory assets described in Note 1 to the financial statements, could have a material adverse effect on the Company's financial statements. Continuing to be a low-cost producer could provide opportunities to increase market share and profitability in markets that evolve with changing regulation. Conversely, if the Company does not remain a low-cost producer and provide quality service, then energy sales growth could be limited, and this could significantly erode earnings. On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued its final rule on Regional Transmission Organizations (RTOs). The order encouraged utilities owning transmission systems to form RTOs on a voluntary basis. After participating in the regional conferences with customers and other members of the public to discuss the formation of RTOs, utilities were required to make a filing with the FERC. Southern Company and its integrated southeast utility subsidiaries, including the Company, filed on October 16, 2000, a proposal for the creation of an RTO. The proposal is for the formation of a for-profit company that would have control of the bulk power transmission system of the Company and any other participating utilities. Participants would have the option to either maintain their ownership, divest, sell, or lease their assets to the proposed RTO. If the FERC accepts the proposal as filed, the creation of an RTO is not expected to have a material impact on the Company's financial statements. The outcome of this matter cannot now be determined. The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA) to allow holding companies to form exempt wholesale generators to sell power largely free of regulation under PUHCA. These entities are able to own and operate power generating facilities and sell power to affiliates--under certain restrictions. The Company is constructing 1,230 megawatts of wholesale generating facilities in Autaugaville, Alabama to begin operation in 2003. Half of this capacity has been certified by the APSC to serve the Company's retail customers II-49 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 2000 Annual Report for seven years. The other half of the capacity will be sold into the wholesale market and will not affect retail rates. Southern Company is aggressively working to maintain and expand its share of wholesale sales in the southeastern power markets. In January 2001, Southern Company announced the formation of a new subsidiary--Southern Power Company (SPC). The new subsidiary will own, manage, and finance wholesale generating assets in the Southeast. SPC will be the primary growth engine for Southern Company's market-based energy business. Energy from its assets will be marketed to wholesale customers under the Southern Company name. Currently, the Company plans to transfer the generating facilities under construction in Autaugaville to SPC in 2001. The Company will enter into a purchased power agreement for half of the capacity of these generating facilities to serve its territorial customers. In accordance with Financial Accounting Standards Board (FASB) Statement No. 87, Employers' Accounting for Pensions, the Company recorded non-cash income of approximately $54 million in 2000. Pension plan income in 2001 is expected to be less as a result of plan amendments. Future pension income is dependent on several factors including trust earnings and changes to the plan. For more information, see Note 2. Rates to retail customers served by the Company are regulated by the APSC. Rates for the Company can be adjusted periodically within certain limitations based on earned retail rate of return compared with an allowed return. There is a moratorium on any periodic retail rate increases (but not decreases) until July 2001. In December 1995, the APSC issued an order authorizing the Company to reduce balance sheet items -- such as plant and deferred charges -- at any time the Company's actual base rate revenues exceed the budgeted revenues. In April 1997, the APSC issued an additional order authorizing the Company to reduce balance sheet asset items. This order authorizes the reduction of such items up to an amount equal to five times the total estimated annual revenue reduction resulting from future rate reductions initiated by the Company. In April 2000, the APSC approved an amendment to the Company's existing rate structure to provide for the recovery of retail costs associated with certified purchased power agreements. In November 2000, the APSC certified a seven-year purchased power agreement pertaining to 615 megawatts of the Company's wholesale generating facilities under construction in Autaugaville, Alabama, all of which will be delivered in 2003. In addition, the APSC certified a seven-year purchased power agreement with a third party for approximately 630 megawatts; one half of the power will be delivered in 2003 while the remaining half is scheduled for delivery in 2004. The Company is involved in various matters being litigated. See Note 3 to the financial statements for information regarding material issues that could possibly affect future earnings. Compliance costs related to current and future environmental laws and regulations could affect earnings if such costs are not fully recovered. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." The staff of the Securities and Exchange Commission (SEC) has questioned certain of the current accounting practices of the electric utility industry -- including the Company -- regarding the recognition, measurement, and classification in the financial statements of decommissioning costs for nuclear generating facilities. In response to these questions, the FASB is reviewing the accounting for liabilities related to the retirement of long-lived assets, including nuclear decommissioning. If the FASB issues new accounting rules, the estimated costs of retiring the Company's nuclear and other facilities may be required to be recorded as liabilities in the Balance Sheets. Also, the annual provisions for such costs could change. Because of the Company's current ability to recover asset retirement costs through rates, these changes would not have a significant adverse effect on results of operations. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. The Company is subject to the provisions of FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operations is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable, and determine if any other assets have been impaired. See Note 1 to the financial statements under II-50 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 2000 Annual Report "Regulatory Assets and Liabilities" for additional information. New Accounting Standard In June 2000, FASB issued Statement No. 138, an amendment of Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 133, as amended, establishes accounting and reporting standards for derivative instruments and for hedging activities. Statement No. 133 requires that certain derivative instruments be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in the fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company utilizes financial instruments to reduce its exposure to changes in foreign currency exchange rates. The Company also enters into commodity related forward contracts to limit exposure to changing prices on certain fuel purchases and electricity purchases and sales. Substantially all of the Company's bulk energy purchases and sales meet the definition of a derivative under Statement No. 133. In many cases, these transactions meet the normal purchase and sale exception and the related contracts will continue to be accounted for under the accrual method. Certain of these instruments qualify as cash flow hedges resulting in the deferral of related gains and losses in other comprehensive income until the hedged transactions occur. Any ineffectiveness will be recognized currently in net income. However, others will be required to be marked to market through current period income. The Company adopted Statement No. 133 effective January 1, 2001, with no material impact. The application of the new rules is still evolving and further guidance from FASB is expected, which could additionally impact the Company's financial statements. Exposure to Market Risk Due to cost-based rate regulation, the Company has limited exposure to market volatility in interest rates, commodity fuel prices, and prices of electricity. To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market. Realized gains and losses are recognized in the income statement as incurred. At December 31, 2000, exposure from these activities was not material to the Company's financial position, results of operations, or cash flows. Also, based on the Company's overall interest rate exposure at December 31, 2000, a near-term 100 basis point change in interest rates would not materially affect the financial statements. FINANCIAL CONDITION Overview The Company's financial condition remained stable in 2000. This stability is the continuation over recent years of growth in retail energy sales and cost control measures combined with a significant lowering of the cost of capital, achieved through the refinancing and/or redemption of higher-cost long-term debt and preferred stock. The Company had gross property additions of $871 million in 2000. The majority of funds needed for gross property additions for the last several years have been provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. The Statements of Cash Flows provide additional details. Capital Structure The Company's ratio of common equity to total capitalization -- including short-term debt -- was 42.2 percent in 2000 and 42.4 percent in 1999 and 1998. During 2000, the Company issued $250 million of senior notes, the proceeds of which were used primarily to repay short-term indebtedness. Capital Requirements Capital expenditures are estimated to be $735 million for 2001, $891 million for 2002, and $625 million for 2003. See Note 4 to the financial statements for additional details. Actual construction costs may vary from estimates because of changes in such factors as: business conditions; environmental regulations; nuclear plant regulations; load projections; the cost and efficiency of construction labor, II-51 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 2000 Annual Report equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Other Capital Requirements The Company will continue to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital if market conditions permit. Environmental Matters In November 1990, the Clean Air Act Amendments (Clean Air Act) were signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- significantly affected the integrated Southeast utility subsidiaries of Southern Company, including the Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants were required in two phases. Phase I compliance began in 1995 and some 50 generating plants within the operating companies of Southern Company were brought into compliance with Phase I requirements. Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. Construction expenditures for Phase I compliance totaled approximately $25 million for the Company. Phase II sulfur dioxide compliance was required in 2000. The Company used emission allowances and fuel switching to comply with Phase II requirements. Also, equipment to control nitrogen oxide emissions was installed on additional system fossil-fired units as necessary to meet Phase II limits. Compliance with Phase II increased total construction expenditures through 2000 by $63 million The one-hour ozone non-attainment standards for the Birmingham area have been set and must be implemented in May 2003. Two generating plants will be affected in the Birmingham area. Additional construction expenditures for compliance with these new rules are currently estimated at approximately $230 million. In July 1997, the Environmental Protection Agency (EPA), revised the national ambient air quality standards for ozone and particulate matter. This revision made the standards significantly more stringent. In the subsequent litigation of these standards, the U. S. Supreme Court recently dismissed certain challenges but found the EPA's implementation program for the new ozone standard unlawful and remanded it to the EPA. In addition, the Federal District of Columbia Circuit Court of Appeals will address other legal challenges to these standards in mid-2001. If the standards are eventually upheld, implementation could be required by 2007 to 2010. In September 1998, the EPA issued the final regional nitrogen oxide reduction rules to the states for implementation. Compliance is required by May 31, 2004. The final rule affects 21 states including Alabama. If standards and rules for implementation are upheld, the additional construction expenditures for compliance are estimated at approximately $189 million. A significant portion of costs related to the acid rain and ozone non-attainment provisions of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. On November 3, 1999, the EPA brought a civil action against the Company in the U. S. District Court. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to coal-fired generating facilities at the Company's Plants Miller, Barry, and Gorgas. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The EPA concurrently issued a notice of violation to the Company relating to these specific facilities, as well as Plants Greene County and Gaston. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. The complaint and notice of violation allege that the Company had failed to secure necessary permits or install additional pollution control equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August 1, 2000, the U.S. District Court granted the Company's motion to dismiss for lack of jurisdiction in Georgia and granted the system service II-52 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 2000 Annual Report company's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against the Company in federal district court in Birmingham, Alabama. The EPA did not include the system service company in the new complaint. The Company believes that it complied with applicable laws and EPA regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes civil penalties of up to $27,500 per day per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. In December 2000, the EPA completed its utility studies for mercury and other hazardous air pollutants (HAPS) and issued a determination that an emission control program for mercury and perhaps, other HAPS is warranted. The program is to be developed over the next four years under the Maximum Achievable Control Technology (MACT) provisions of the Clean Air Act. This determination is being challenged in the courts. In January 2001, the EPA proposed guidance for the determination of Best Available Retrofit Technology (BART) emission controls under the Regional Haze Regulations. Installation of BART controls would likely be required around 2010. Litigation of the BART rules is probable in the near future. Implementation of the final state rules for these initiatives could require substantial further reductions in nitrogen oxide, sulfur dioxide, mercury, and other HAPS emissions from fossil-fired generating facilities and other industries in these states. Additional compliance costs and capital expenditures resulting from the implementation of these rules and standards cannot be determined until the results of legal challenges are known, and the states have adopted their final rules. Reviews by the new administration in Washington, D.C. add to the uncertainties associated with BART guidance and the MACT determination for mercury and other HAPS. The EPA and state environmental regulatory agencies are reviewing and evaluating various other matters including: control strategies to reduce regional haze; limits on pollutant discharges to impaired waters; water intake restrictions; and hazardous waste disposal requirements. The impact of any new standards will depend on the development and implementation of applicable regulations. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur substantial costs to clean up properties. The Company conducts studies to determine the extent of any required cleanup costs and will recognize in the financial statements costs to clean up known sites. The Company has not incurred any cleanup costs to date. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of any such changes cannot be determined at this time. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Company. The impact of new legislation -- if any - -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. Sources of Capital The Company plans to obtain the funds required for construction and other purposes from sources similar to those used in the past, which were primarily from internal sources. However, the type and timing of any financings - if needed - will depend on market conditions and regulatory approval. In recent years, financings primarily have utilized unsecured debt and trust preferred securities. II-53 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 2000 Annual Report As required by the Nuclear Regulatory Commission and as ordered by the APSC, the Company has established external trust funds for nuclear decommissioning costs. In 1994, the Company also established an external trust fund for postretirement benefits as ordered by the APSC. The cumulative effect of funding these items over a long period will diminish internally funded capital and may require capital from other sources. For additional information concerning nuclear decommissioning costs, see Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning." Cautionary Statement Regarding Forward-Looking Information This Annual Report includes forward-looking statements in addition to historical information. Forward-looking information includes, among other things, statements concerning projected retail sales growth and scheduled completion of new generation. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. The Company cautions that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations; current and future litigation, including the pending EPA civil action against the Company; the extent and timing of the entry of additional competition in the markets of the Company; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial; internal restructuring or other restructuring options, that may be pursued by the Company; state and federal rate regulation in the United States; political, legal and economic conditions and developments in the United States; financial market conditions and the results of financing efforts; the impact of fluctuations in commodity prices, interest rates and customer demand; weather and other natural phenomena; the ability of the Company to obtain additional generating capacity at competitive prices; and other factors discussed elsewhere herein and in other reports (including Form 10-K) filed from time to time by the Company with the SEC. II-54 STATEMENTS OF INCOME For the Years Ended December 31, 2000, 1999, and 1998 Alabama Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues: Retail sales $2,952,707 $2,811,117 $2,780,677 Sales for resale -- Non-affiliates 461,730 415,377 448,973 Affiliates 166,219 92,439 103,562 Other revenues 86,805 66,541 53,161 - ----------------------------------------------------------------------------------------------------------------------------- Total operating revenues 3,667,461 3,385,474 3,386,373 - ----------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 963,275 855,632 900,309 Purchased power -- Non-affiliates 164,881 93,204 92,998 Affiliates 184,014 180,563 150,897 Other 538,529 531,696 527,954 Maintenance 301,046 277,724 300,383 Depreciation and amortization 364,618 347,574 338,822 Taxes other than income taxes 209,673 204,645 193,049 - ----------------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,726,036 2,491,038 2,504,412 - ----------------------------------------------------------------------------------------------------------------------------- Operating Income 941,425 894,436 881,961 Other Income (Expense): Interest income 38,167 55,896 68,553 Equity in earnings of unconsolidated subsidiaries (Note 5) 3,156 2,650 5,271 Other, net (7,909) (24,861) (37,050) - ----------------------------------------------------------------------------------------------------------------------------- Earnings Before Interest and Income Taxes 974,839 928,121 918,735 - ----------------------------------------------------------------------------------------------------------------------------- Interest and Other: Interest expense, net 251,663 245,235 285,940 Distributions on preferred securities of subsidiary (Note 8) 25,549 24,662 22,354 - ----------------------------------------------------------------------------------------------------------------------------- Total interest and other, net 277,212 269,897 308,294 - ----------------------------------------------------------------------------------------------------------------------------- Earnings Before Income Taxes 697,627 658,224 610,441 Income taxes (Note 7) 261,555 241,880 218,575 - ----------------------------------------------------------------------------------------------------------------------------- Net Income 436,072 416,344 391,866 Dividends on Preferred Stock 16,156 16,464 14,643 - ----------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 419,916 $ 399,880 $ 377,223 ============================================================================================================================= The accompanying notes are an integral part of these statements.
II-55 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000, 1999, and 1998 Alabama Power Company 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 436,072 $ 416,344 $ 391,866 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 412,998 403,332 425,167 Deferred income taxes and investment tax credits, net 66,166 29,039 79,430 Other, net (37,703) (12,661) (66,739) Changes in certain current assets and liabilities -- Receivables, net (125,652) 33,509 49,747 Fossil fuel stock 23,967 (1,344) (9,052) Materials and supplies (10,662) (17,968) 11,932 Accounts payable 107,702 (38,556) 26,583 Energy cost recovery, retail (69,190) (97,869) (95,427) Other 23,336 5,930 (9,803) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 827,034 719,756 803,704 - ---------------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (870,581) (809,044) (610,132) Other (49,414) (72,218) (52,940) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (919,995) (881,262) (663,072) - ---------------------------------------------------------------------------------------------------------------------------------- Financing Activities: Increase (decrease) in notes payable, net 184,519 96,824 (306,882) Proceeds -- Other long-term debt 250,000 751,650 1,462,990 Preferred securities - 50,000 - Preferred stock - - 200,000 Capital contributions from parent company 204,371 204,347 30,000 Redemptions -- First mortgage bonds (111,009) (470,000) (771,108) Other long-term debt (5,987) (104,836) (107,776) Preferred stock - (50,000) (88,000) Payment of preferred stock dividends (16,110) (15,788) (15,596) Payment of common stock dividends (417,100) (399,600) (367,100) Other (951) (15,864) (66,869) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash provided from financing activities 87,733 46,733 (30,341) - ---------------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents (5,228) (114,773) 110,291 Cash and Cash Equivalents at Beginning of Period 19,475 134,248 23,957 - ---------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Period $ 14,247 $ 19,475 $ 134,248 ================================================================================================================================== Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $237,066 $229,305 $234,360 Income taxes (net of refunds) 175,303 170,121 188,942 - ---------------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
II-56 BALANCE SHEETS At December 31, 2000 and 1999 Alabama Power Company 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------- Assets 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- (in thousands) Current Assets: Cash and cash equivalents $ 14,247 $ 19,475 Receivables -- Customer accounts receivable 337,870 265,900 Under-recovered retail fuel clause revenue 237,817 168,627 Other accounts and notes receivable 60,315 42,137 Affiliated companies 95,704 40,083 Accumulated provision for uncollectible accounts (6,237) (4,117) Refundable income taxes - 17,997 Fossil fuel stock, at average cost 60,615 84,582 Materials and supplies, at average cost 178,299 167,637 Other 52,624 46,011 - --------------------------------------------------------------------------------------------------------------------------------- Total current assets 1,031,254 848,332 - --------------------------------------------------------------------------------------------------------------------------------- Property, Plant, and Equipment: In service 12,431,575 11,783,078 Less accumulated provision for depreciation 5,107,822 4,901,384 - --------------------------------------------------------------------------------------------------------------------------------- 7,323,753 6,881,694 Nuclear fuel, at amortized cost 94,050 106,836 Construction work in progress 744,974 715,153 - --------------------------------------------------------------------------------------------------------------------------------- Total property, plant, and equipment 8,162,777 7,703,683 - --------------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Equity investments in unconsolidated subsidiaries (Note 5) 38,623 34,891 Nuclear decommissioning trusts 313,895 286,653 Other 13,612 12,156 - --------------------------------------------------------------------------------------------------------------------------------- Total other property and investments 366,130 333,700 - --------------------------------------------------------------------------------------------------------------------------------- Deferred Charges and Other Assets: Deferred charges related to income taxes (Note 7) 345,550 330,405 Prepaid pension costs 268,259 213,971 Debt expense, being amortized 8,758 9,563 Premium on reacquired debt, being amortized 76,020 83,895 Department of Energy assessments 24,588 27,685 Other 95,772 97,470 - --------------------------------------------------------------------------------------------------------------------------------- Total deferred charges and other assets 818,947 762,989 - --------------------------------------------------------------------------------------------------------------------------------- Total Assets $10,379,108 $9,648,704 ================================================================================================================================= The accompanying notes are an integral part of these balance sheets.
II-57 BALANCE SHEETS At December 31, 2000 and 1999 Alabama Power Company 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------ Liabilities and Stockholder's Equity 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ (in thousands) Current Liabilities: Securities due within one year (Note 10) $ 844 $ 100,943 Notes payable 281,343 96,824 Accounts payable -- Affiliated 124,534 91,315 Other 209,205 140,842 Customer deposits 36,814 31,704 Taxes accrued -- Income taxes 65,505 100,569 Other 19,471 18,295 Interest accrued 33,186 26,365 Vacation pay accrued 31,711 30,112 Other 97,743 84,267 - ------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 900,356 721,236 - ------------------------------------------------------------------------------------------------------------------------------ Long-term debt (See accompanying statements) 3,425,527 3,190,378 - ------------------------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 7) 1,401,424 1,240,344 Deferred credits related to income taxes (Note 7) 222,485 265,102 Accumulated deferred investment tax credits 249,280 260,367 Employee benefits provisions 84,816 82,298 Prepaid capacity revenues (Note 6) 58,377 79,703 Other 176,559 155,901 - ------------------------------------------------------------------------------------------------------------------------------ Total deferred credits and other liabilities 2,192,941 2,083,715 - ------------------------------------------------------------------------------------------------------------------------------ Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding company junior subordinated notes (See accompanying statements) (Note 8) 347,000 347,000 - ------------------------------------------------------------------------------------------------------------------------------ Cumulative preferred stock (See accompanying statements) 317,512 317,512 - ------------------------------------------------------------------------------------------------------------------------------ Common stockholder's equity (See accompanying statements) 3,195,772 2,988,863 - ------------------------------------------------------------------------------------------------------------------------------ Total Liabilities and Stockholder's Equity $10,379,108 $9,648,704 ============================================================================================================================== The accompanying notes are an integral part of these balance sheets.
II-58 STATEMENTS OF CAPITALIZATION At December 31, 2000 and 1999 Alabama Power Company 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Long-Term Debt: First mortgage bonds -- Maturity Interest Rates -------- -------------- March 1, 2000 6.00% $ - $ 100,000 2023 through 2024 7.30% - 9.00% 488,991 500,000 - ---------------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 488,991 600,000 - ---------------------------------------------------------------------------------------------------------------------------------- Senior notes -- 5.35% due November 15, 2003 156,200 156,200 7.850% due May 15, 2003 250,000 - 7.125% due August 15, 2004 250,000 250,000 5.49% due November 1, 2005 225,000 225,000 7.125% due October 1, 2007 200,000 200,000 5.375% due October 1, 2008 160,000 160,000 6.25% to 7.125% due 2010-2048 1,202,581 1,207,622 - ---------------------------------------------------------------------------------------------------------------------------------- Total senior notes 2,443,781 2,198,822 - ---------------------------------------------------------------------------------------------------------------------------------- Other long-term debt -- Pollution control revenue bonds -- Collateralized: 5.50% due 2024 24,400 24,400 Variable rates (4.73% to 5.05% at 1/1/01) due 2015-2017 89,800 89,800 Non-collateralized: 6.69% due 2021 65,000 - Variable rates (3.50% to 5.30% at 1/1/01) due 2021-2028 360,940 425,940 - ---------------------------------------------------------------------------------------------------------------------------------- Total other long-term debt (Note 9) 540,140 540,140 - ---------------------------------------------------------------------------------------------------------------------------------- Capitalized lease obligations 4,165 5,111 - ---------------------------------------------------------------------------------------------------------------------------------- Unamortized debt premium (discount), net (50,706) (52,752) - ---------------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $179.6 million) 3,426,371 3,291,321 Less amount due within one year 844 100,943 - ---------------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year $3,425,527 $3,190,378 46.9% 46.6% - ----------------------------------------------------------------------------------------------------------------------------------
II-59 STATEMENTS OF CAPITALIZATION (continued) At December 31, 2000 and 1999 Alabama Power Company 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Company Obligated Mandatorily Redeemable Preferred Securities: (Note 8) $25 liquidation value -- 7.375% $ 97,000 $ 97,000 7.60% 200,000 200,000 Auction rate (6.52% at 1/1/01) 50,000 50,000 - ---------------------------------------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $25.6 million) 347,000 347,000 4.8 5.1 - ---------------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $100 par or stated value -- 4.20% to 4.92% 47,512 47,512 $25 par or stated value -- 5.20% to 5.83% 200,000 200,000 Auction rates -- at 1/1/01 5.14% to 5.25% 70,000 70,000 - ---------------------------------------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $16.5 million) 317,512 317,512 4.4 4.6 - ---------------------------------------------------------------------------------------------------------------------------------- Common Stockholder's Equity: Common stock, par value $40 per share -- Authorized - 6,000,000 shares Outstanding - 5,608,955 shares in 2000 and 1999 Par value 224,358 224,358 Paid-in capital 1,743,363 1,538,992 Premium on Preferred Stock 99 99 Retained earnings 1,227,952 1,225,414 - ---------------------------------------------------------------------------------------------------------------------------------- Total common stockholder's equity 3,195,772 2,988,863 43.9 43.7 - ---------------------------------------------------------------------------------------------------------------------------------- Total Capitalization $7,285,811 $6,843,753 100.0% 100.0% ================================================================================================================================== The accompanying notes are an integral part of these statements.
II-60 STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the Years Ended December 31, 2000, 1999, and 1998 Alabama Power Company 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------------------- Premium on Common Paid-In Preferred Retained Stock Capital Stock Earnings Total - --------------------------------------------------------------------------------------------------------------------------- (in thousands) Balance at January 1, 1998 $224,358 $1,304,645 $99 $1,221,467 $2,750,569 Net income after dividends on preferred stock - - - 377,223 377,223 Capital contributions from parent company - 30,000 - - 30,000 Cash dividends on common stock - - - (367,100) (367,100) Other - - - (6,625) (6,625) - ---------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 224,358 1,334,645 99 1,224,965 2,784,067 Net income after dividends on preferred stock - - - 399,880 399,880 Capital contributions from parent company - 204,347 - - 204,347 Cash dividends on common stock - - - (399,600) (399,600) Other - - - 169 169 - ---------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 224,358 1,538,992 99 1,225,414 2,988,863 Net income after dividends on preferred stock - - - 419,916 419,916 Capital contributions from parent company - 204,371 - - 204,371 Cash dividends on common stock - - - (417,100) (417,100) Other - - - (278) (278) - ---------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 $224,358 $1,743,363 $99 $1,227,952 $3,195,772 ============================================================================================================================ The accompanying notes are an integral part of these statements.
II-61 NOTES TO FINANCIAL STATEMENTS Alabama Power Company 2000 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Alabama Power Company (the Company) is a wholly owned subsidiary of Southern Company, which is the parent company of five integrated Southeast utilities, a system service company (SCS), Southern Communications Services (Southern LINC), Southern Company Energy Solutions, Southern Nuclear Operating Company (Southern Nuclear), Mirant Corporation--formerly Southern Energy, Inc.-- and other direct and indirect subsidiaries. The integrated Southeast utilities --Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company-- provide electric service in four states. Contracts among the integrated Southeast utilities - related to jointly-owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) and/or the Securities and Exchange Commission (SEC). SCS provides, at cost, specialized services to Southern Company and its subsidiary companies. Southern LINC provides digital wireless communications services to the integrated Southeast utilities and also markets these services to the public within the Southeast. Southern Company Energy Solutions develops new business opportunities related to energy products and services. Southern Nuclear provides services to Southern Company's nuclear power plants. Mirant acquires, develops, builds, owns, and operates power production and delivery facilities and provides a broad range of energy-related services to utilities and industrial companies in selected countries around the world. Mirant businesses include independent power projects, integrated utilities, a distribution company, and energy trading and marketing businesses outside the southeastern United States. Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company is also subject to regulation by the FERC and the Alabama Public Service Commission (APSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by its respective regulatory commissions. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from those estimates. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Related-Party Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at cost: general and design engineering, purchasing, accounting and statistical, finance and treasury, tax, information resources, marketing, auditing, insurance and pension administration, human resources, systems and procedures, and other services with respect to business and operations and power pool transactions. Costs for these services amounted to $187 million, $218 million, and $201 million during 2000, 1999, and 1998, respectively. The Company also has an agreement with Southern Nuclear to operate Plant Farley and provide the following nuclear-related services at cost: general executive and advisory services; general operations, management and technical services; administrative services including procurement, accounting, statistical, and employee relations; and other services with respect to business and operations. Costs for these services amounted to $148 million, $135 million, and $137 million during 2000, 1999, and 1998, respectively. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. II-62 NOTES (continued) Alabama Power Company 2000 Annual Report Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to the following: 2000 1999 ----------------------- (in millions) Deferred income tax charges $ 346 $ 330 Deferred income tax credits (222) (265) Premium on reacquired debt 76 84 Department of Energy assessments 25 28 Vacation pay 32 30 Natural disaster reserve (18) (19) Other, net 30 59 - ---------------------------------------------------------------- Total $ 269 $ 247 ================================================================ In the event that a portion of the Company's operations is no longer subject to the provisions of FASB Statement No. 71, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the Company would be required to determine if any impairment to other assets exists, including plant, and write down the assets, if impaired, to their fair values. Revenues and Fuel Costs The Company currently operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the state of Alabama, and to wholesale customers in the southeast. Revenues are recognized as services are rendered. Unbilled revenues are accrued at the end of each fiscal period. Fuel revenues have no effect on net income because they represent the recording of revenues to offset fuel expenses, including the fuel component of purchased energy. Fuel rates billed to customers are designed to fully recover fluctuating fuel costs over a period of time. Higher natural gas prices and decreased hydro production combined with increased costs of purchased power have resulted in a large under-recovery of fuel costs at December 31, 2000. Effective January 2001, the Company's fuel rate was increased to address this under-recovery. The Company expects to significantly reduce this balance over a three-year period. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. For all periods presented, uncollectible accounts continue to average less than 1 percent of revenues. Fuel expense includes the amortization of the cost of nuclear fuel and a charge, based on nuclear generation, for the permanent disposal of spent nuclear fuel. Total charges for nuclear fuel included in fuel expense amounted to $61 million in 2000, $63 million in 1999, and $59 million in 1998. The Company has a contract with the U.S. Department of Energy (DOE) that provides for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent fuel in January 1998 as required by the contract, and the Company is pursuing legal remedies against the government for breach of contract. Sufficient fuel storage capacity is available at Plant Farley to maintain full-core discharge capability until the refueling outage scheduled in 2006 for Farley Unit 1 and the refueling outage scheduled in 2008 for Farley Unit 2. Procurement of on-site dry spent fuel storage capacity at Plant Farley is in progress, with the intent to place the capacity in operation as early as 2005. Also, the Energy Policy Act of 1992 required the establishment of a Uranium Enrichment Decontamination and Decommissioning Fund, which is funded in part by a special assessment on utilities with nuclear plants. This assessment is being paid over a 15-year period, which began in 1993. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The law provides that utilities will recover these payments in the same manner as any other fuel expense. The Company estimates its remaining liability under this law to be approximately $25 million at December 31, 2000. This obligation is recognized in the accompanying Balance Sheets. Depreciation and Nuclear Decommissioning Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.2 percent in 2000, 1999 and 1998. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost -- together with the cost of removal, less salvage -- is charged to accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected cost of decommissioning nuclear facilities and removal of other facilities. II-63 NOTES (continued) Alabama Power Company 2000 Annual Report The Nuclear Regulatory Commission (NRC) requires all licensees operating commercial nuclear power reactors to establish a plan for providing, with reasonable assurance, funds for decommissioning. The Company has established external trust funds to comply with the NRC's regulations. Amounts previously recorded in internal reserves are being transferred into the external trust funds over periods approved by the APSC. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission the radioactive portions of a nuclear unit based on the size and type of reactor. The Company has filed plans with the NRC to ensure that -- over time -- the deposits and earnings of the external trust funds will provide the minimum funding amounts prescribed by the NRC. Site study cost is the estimate to decommission the facility as of the site study year, and ultimate cost is the estimate to decommission the facility as of retirement date. The estimated costs of decommissioning -- both site study costs and ultimate costs - based on the most current study for Plant Farley were as follows: Site study basis (year) 1998 Decommissioning periods: Beginning year 2017 Completion year 2031 ------------------------------------------------------------- (in millions) Site study costs: Radiated structures $ 629 Non-radiated structures 60 ------------------------------------------------------------- Total $ 689 ============================================================= (in millions) Ultimate costs: Radiated structures $1,868 Non-radiated structures 178 ------------------------------------------------------------- Total $2,046 ============================================================= The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of changes in the assumed date of decommissioning, changes in NRC requirements, or changes in the assumptions used in making estimates. Annual provisions for nuclear decommissioning are based on an annuity method as approved by the APSC. The amount expensed in 2000 and fund balances as of December 31, 2000 were: (in millions) Amount expensed in 2000 $ 18 ---------------------------------------------------------- Accumulated provisions: External trust funds, at fair value $314 Internal reserves 38 ---------------------------------------------------------- Total $352 ========================================================== All of the Company's decommissioning costs are approved for recovery by the APSC through the ratemaking process. Significant assumptions include an estimated inflation rate of 4.5 percent and an estimated trust earnings rate of 7.0 percent. The Company expects the APSC to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. Income Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Allowance For Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The amount of AFUDC capitalized was $43 million in 2000, $23 million in 1999, and $9 million in 1998. The composite rate used to determine the amount of allowance was 9.6 percent in 2000, 8.8 percent in 1999, and 9.0 percent in 1998. AFUDC, net of income tax, as a percent of net income after dividends on preferred stock was 8.4 percent in 2000, 4.7 percent in 1999, and 1.8 percent in 1998. II-64 NOTES (continued) Alabama Power Company 2000 Annual Report Property, Plant, and Equipment Property, plant, and equipment is stated at original cost. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of maintenance, repairs and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property --exclusive of minor items of property -- is capitalized. Financial Instruments The Company uses derivative financial instruments to hedge exposures to fluctuations in foreign currency exchange rates and certain commodity prices. Gains and losses on qualifying hedges are deferred and recognized either in income or as an adjustment to the carrying amount of the hedged item when the transaction occurs. The Company is exposed to losses related to financial instruments in the event of counterparties' nonperformance. The Company has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate the Company's exposure to counterparty credit risk. The Company is unaware of any counterparties that will fail to meet their obligations. The Company has firm purchase commitments for equipment that require payment in euros. As a hedge against fluctuations in the exchange rate for euros, the Company entered into forward currency swaps. The notional amount is 16 million euros maturing in 2001 through 2002. At December 31, 2000, the unrecognized gain on these swaps was approximately $1 million. Other Company financial instruments for which the carrying amount did not equal fair value at December 31 are as follows: Carrying Fair Amount Value ------------------------- (in millions) Long-term debt: At December 31, 2000 $3,422 $3,375 At December 31, 1999 3,286 3,045 Preferred Securities: At December 31, 2000 347 344 At December 31, 1999 347 299 -------------------------------------------------------------- The fair value for long-term debt and preferred securities was based on either closing market prices or closing prices of comparable instruments. Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Natural Disaster Reserve In accordance with an APSC order the Company has established a Natural Disaster Reserve. The Company is allowed to accrue $250 thousand per month, until the maximum accumulated provision of $32 million is attained. Higher accruals to restore the reserve to its authorized level are allowed whenever the balance in the reserve declines below $22.4 million. At December 31, 2000, the reserve balance was $18 million. 2. RETIREMENT BENEFITS The Company has defined benefit, trusteed, pension plans that cover substantially all employees. The Company provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for such benefits when they retire. The Company funds trusts to the II-65 NOTES (continued) Alabama Power Company 2000 Annual Report extent deductible under federal income tax regulations or to the extent required by the APSC and FERC. In late 2000, the Company adopted several pension and postretirement benefit plan changes that had the effect of increasing benefits to both current and future retirees. The effects of these changes will be to increase annual pension and postretirement benefits cost by approximately $8 million and $12 million, respectively. The measurement date for plan assets and obligations is September 30 of each year. The weighted average rates assumed in the actuarial calculations for both the pension and postretirement benefit plans were: 2000 1999 - ------------------------------------------------------------ Discount 7.50% 7.50% Annual salary increase 5.00 5.00 Long-term return on plan assets 8.50 8.50 - ------------------------------------------------------------ Pension Plan Changes during the year in the projected benefit obligations and in the fair value of plan assets were as follows: Projected Benefit Obligations --------------------------- 2000 1999 - --------------------------------------------------------------- (in millions) Balance at beginning of year $873 $868 Service cost 22 23 Interest cost 64 57 Benefits paid (51) (51) Actuarial gain and employee transfers (8) (24) - --------------------------------------------------------------- Balance at end of year $900 $873 =============================================================== Plan Assets --------------------------- 2000 1999 - --------------------------------------------------------------- (in millions) Balance at beginning of year $1,647 $1,461 Actual return on plan assets 302 245 Benefits paid (51) (51) Employee transfers 23 (8) - --------------------------------------------------------------- Balance at end of year $1,921 $1,647 =============================================================== The accrued pension costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in millions) Funded status $1,021 $ 774 Unrecognized transition obligation (21) (25) Unrecognized prior service cost 33 36 Unrecognized net actuarial gain (765) (571) - --------------------------------------------------------------- Prepaid asset recognized in the Balance Sheets $ 268 $ 214 =============================================================== Components of the pension plans' net periodic cost were as follows: 2000 1999 1998 - ------------------------------------------------------------------ (in millions) Service cost $ 23 $ 23 $ 22 Interest cost 64 57 59 Expected return on plan assets (119) (109) (102) Recognized net actuarial gain (20) (14) (16) Net amortization (2) (2) (2) - ------------------------------------------------------------------ Net pension income $(54) $ (45) $(39) ================================================================== Postretirement Benefits Changes during the year in the accumulated benefit obligations and in the fair value of plan assets were as follows: Accumulated Benefit Obligations --------------------------- 2000 1999 - ---------------------------------------------------------------- (in millions) Balance at beginning of year $264 $278 Service cost 4 5 Interest cost 19 18 Benefits paid (12) (10) Actuarial gain and employee transfers (11) (27) - --------------------------------------------------------------- Balance at end of year $264 $264 =============================================================== Plan Assets --------------------------- 2000 1999 - --------------------------------------------------------------- (in millions) Balance at beginning of year $161 $137 Actual return on plan assets 25 18 Employer contributions 18 16 Benefits paid (12) (10) - --------------------------------------------------------------- Balance at end of year $192 $161 =============================================================== II-66 NOTES (continued) Alabama Power Company 2000 Annual Report The accrued postretirement costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in millions) Funded status $(72) $(103) Unrecognized transition obligation 49 53 Unrecognized net actuarial gain (35) (12) Fourth quarter contributions 4 8 - --------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $(54) $ (54) =============================================================== Components of the plans' net periodic cost were as follows: 2000 1999 1998 - --------------------------------------------------------------- (in millions) Service cost $ 4 $ 5 $ 5 Interest cost 19 18 18 Expected return on plan assets (13) (11) (9) Net amortization 4 4 4 - --------------------------------------------------------------- Net postretirement cost $ 14 $ 16 $18 =============================================================== An additional assumption used in measuring the accumulated postretirement benefit obligations was a weighted average medical care cost trend rate of 7.29 percent for 2000, decreasing gradually to 5.50 percent through the year 2005, and remaining at that level thereafter. An annual increase or decrease in the assumed medical care cost trend rate of 1 percent would affect the accumulated benefit obligation and the service and interest cost components at December 31, 2000 as follows: 1 Percent 1 Percent Increase Decrease - --------------------------------------------------------------- (in millions) Benefit obligation $15 $14 Service and interest costs 1 1 =============================================================== Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides a 75 percent matching contribution up to 6 percent of an employee's base salary. Total matching contributions made to the plan for the years 2000, 1999, and 1998 were $11 million, $10 million, and $10 million, respectively. Work Force Reduction Programs The Company has incurred costs for work force reduction programs totaling $2.6 million, $5.6 million and $19.4 million for the years 2000, 1999 and 1998, respectively. These costs were deferred and are being amortized in accordance with regulatory treatment. The unamortized balance of these costs was $1.4 million at December 31, 2000. 3. CONTINGENCIES AND REGULATORY MATTERS Environmental Litigation On November 3, 1999, the Environmental Protection Agency (EPA), brought a civil action against the Company in the U. S. District Court. The complaint alleges violations of the prevention of significant deterioration and new source review provision of the Clean Air Act with respect to coal-fired generating facilities at the Company's Plants Miller, Barry and Gorgas. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. The EPA concurrently issued to the Company a notice of violation relating to these specific facilities, as well as Plants Greene County and Gaston. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation. The complaint and the notice of violation are similar to those brought against and issued to several other electric utilities. The complaint and the notice of violation allege that the Company failed to secure necessary permits or install additional pollution control equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August 1, 2000, the U.S. District Court granted the Company's motion to dismiss for lack of jurisdiction in Georgia and granted SCS's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against the Company in federal district court in Birmingham, Alabama. The EPA did not include SCS in the new complaint. The Company believes that it complied with applicable laws and the EPA's II-67 NOTES (continued) Alabama Power Company 2000 Annual Report regulations and interpretations in effect at the time the work in question took place. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. Retail Rate Adjustment Procedures The APSC has adopted rates that provide for periodic adjustments based upon the Company's earned return on end-of-period retail common equity. The rates also provide for adjustments to recognize the placing of new generating facilities into retail service. Both increases and decreases have been placed into effect since the adoption of these rates. The rate adjustment procedures allow a return on common equity range of 13.0 percent to 14.5 percent and limit increases or decreases in rates to 4 percent in any calendar year. There is a moratorium on any periodic retail rate increases (but not decreases) until July 2001. In December 1995, the APSC issued an order authorizing the Company to reduce balance sheet items -- such as plant and deferred charges -- at any time the Company's actual base rate revenues exceed the budgeted revenues. In April 1997, the APSC issued an additional order authorizing the Company to reduce balance sheet asset items. This order authorizes the reduction of such items up to an amount equal to five times the total estimated annual revenue reduction resulting from future rate reductions initiated by the Company. In 1998, the Company - in accordance with the 1995 rate order - recorded $33 million of additional amortization of premium on reacquired debt. The Company did not record any additional amounts in 2000 or 1999. In April 2000, the APSC approved an amendment to the Company's existing rate structure to provide for the recovery of retail costs associated with certified purchased power agreements. In November 2000, the APSC certified a seven-year purchased power agreement pertaining to 615 megawatts of the Company's wholesale generating facilities under construction in Autaugaville, Alabama, all of which will be delivered in 2003. In addition, the APSC certified a seven-year purchased power agreement with a third party for approximately 630 megawatts; one half of the power will be delivered in 2003 while the remaining half is scheduled for delivery in 2004. The Company's ratemaking procedures will remain in effect until the APSC votes to modify or discontinue them. 4. FINANCING AND COMMITMENTS Construction Program To the extent possible, the Company's construction program is expected to be financed primarily from internal sources. Short-term debt is often utilized and the amounts available are discussed below. The Company may issue additional long-term debt and preferred securities for debt maturities, redeeming higher-cost securities, and meeting additional capital requirements. The Company currently estimates property additions to be $735 million in 2001, $891 million in 2002, and $625 million in 2003. The Company is constructing 1,230 megawatts of wholesale generating facilities in Autaugaville, Alabama to begin operation in 2003. Half of this capacity has been certified by the APSC to serve the Company's retail customers for seven years. The other half of the capacity will be sold into the wholesale market and will not affect retail rates. During 2001, the Company plans to transfer these generating facilities to Southern Power Company (SPC), the new wholesale subsidiary formed by Southern Company. If the Company transfers wholesale generation assets to SPC as planned, construction expenditures for the years 2001 through 2003 will be $598 million, $591 million and $583 million, respectively. During 2001, the Company expects to complete the replacement of the steam generators at Plant Farley, as well as the construction of new generating capacity at Plant Barry. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading of generating plants, including the expenditures necessary to comply with environmental regulation. The capital budget is subject to periodic review and revision, and actual capital costs incurred may vary from estimates because of changes in such factors as: business conditions; environmental regulations; nuclear plant II-68 NOTES (continued) Alabama Power Company 2000 Annual Report regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Financing The ability of the Company to finance its capital budget depends on the amount of funds generated internally and the funds it can raise by external financing. The Company plans to obtain the funds required for construction and other purposes from sources similar to those used in the past, which were primarily from internal sources. However, the type and timing of any financings - if needed - will depend on market conditions and regulatory approval. In recent years, financings primarily have utilized unsecured debt and trust preferred securities. Bank Credit Arrangements The Company maintains committed lines of credit in the amount of $925 million (including $418 million of such lines which are dedicated to funding purchase obligations relating to variable rate pollution control bonds). Of these lines, $535 million expire at various times during 2001 and $390 million expire in 2004. In certain cases, such lines require payment of a commitment fee based on the unused portion of the commitment or the maintenance of compensating balances with the banks. Because the arrangements are based on an average balance, the Company does not consider any of its cash balances to be restricted as of any specific date. Moreover, the Company borrows from time to time pursuant to arrangements with banks for uncommitted lines of credit. At December 31, 2000, the Company had regulatory approval to have outstanding up to $750 million of short-term borrowings. Assets Subject to Lien The Company's mortgage, as amended and supplemented, securing the first mortgage bonds issued by the Company, constitutes a direct lien on substantially all of the Company's fixed property and franchises. Purchased Power Commitments The Company has entered into various long-term commitments for the purchase of electricity. Estimated total long-term obligations at December 31, 2000 were as follows: Year Commitments - ---- --------------- (in millions) 2001 $ - 2002 - 2003 16 2004 34 2005 37 2006 and beyond 180 - ----------------------------------------------------------- Total commitments $ 267 =========================================================== Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement of fossil and nuclear fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels and other financial commitments. Total estimated long-term obligations at December 31, 2000, were as follows: Year Commitments - ---- --------------- (in millions) 2001 $ 998 2002 841 2003 722 2004 669 2005 525 2006 - 2024 2,287 - ----------------------------------------------------------- Total commitments $6,042 =========================================================== II-69 NOTES (continued) Alabama Power Company 2000 Annual Report Operating Leases The Company has entered into coal rail car rental agreements with various terms and expiration dates. These expenses totaled $20.9 million in 2000, $17.8 million in 1999, and $5.8 million in 1998. At December 31, 2000, estimated minimum rental commitments for noncancellable operating leases were as follows: Year Commitments - ---- ------------- (in millions) 2001 $ 22.2 2002 21.6 2003 21.2 2004 18.2 2005 15.5 2006 - 2017 44.7 - ----------------------------------------------------------- Total minimum payments $143.4 =========================================================== 5. JOINT OWNERSHIP AGREEMENTS The Company and Georgia Power Company own equally all of the outstanding capital stock of Southern Electric Generating Company (SEGCO), which owns electric generating units with a total rated capacity of 1,020 megawatts, together with associated transmission facilities. The capacity of these units is sold equally to the Company and Georgia Power Company under a contract which, in substance, requires payments sufficient to provide for the operating expenses, taxes, interest expense and a return on equity, whether or not SEGCO has any capacity and energy available. The term of the contract extends automatically for two-year periods, subject to either party's right to cancel upon two year's notice. The Company's share of expenses totaled $85 million in 2000, $92 million in 1999 and $74 million in 1998, and is included in "Purchased power from affiliates" in the Statements of Income. In addition, the Company has guaranteed unconditionally the obligation of SEGCO under an installment sale agreement for the purchase of certain pollution control facilities at SEGCO's generating units, pursuant to which $24.5 million principal amount of pollution control revenue bonds are outstanding. Georgia Power Company has agreed to reimburse the Company for the pro rata portion of such obligation corresponding to its then proportionate ownership of stock of SEGCO if the Company is called upon to make such payment under its guaranty. At December 31, 2000, the capitalization of SEGCO consisted of $51 million of equity and $78 million of long-term debt on which the annual interest requirement is $5.3 million. SEGCO paid dividends totaling $5.1 million in 2000, $4.3 million in 1999, and $8.7 million in 1998, of which one-half of each was paid to the Company. SEGCO's net income was $5.9 million, $5.4 million, and $7.5 million for 2000, 1999 and 1998, respectively. The Company's percentage ownership and investment in jointly-owned generating plants at December 31, 2000, is as follows: Total Megawatt Company Facility (Type) Capacity Ownership --------------------- ------------ ------------- Greene County 500 60.00% (1) (coal) Plant Miller Units 1 and 2 1,320 91.84% (2) (coal) ----------------------------------------------------------- (1) Jointly owned with an affiliate, Mississippi Power Company. (2) Jointly owned with Alabama Electric Cooperative, Inc. Company Accumulated Facility Investment Depreciation --------------------- -------------- --------------- (in millions) Greene County $100 $ 46 Plant Miller Units 1 and 2 743 312 ---------------------------------------------------------- 6. LONG-TERM POWER SALES AGREEMENTS General The Company and the other integrated utility subsidiaries of Southern Company have entered into long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. These agreements -- expiring at various dates discussed below -- are firm and pertain to capacity related to specific generating units. Because the energy is generally sold at cost under these agreements, profitability is primarily affected by revenues from capacity sales. The Company's capacity revenues amounted to $127 million in 2000, $122 million in 1999, and $142 million in 1998. Unit power from Plant Miller is being sold to Florida Power Corporation (FPC), Florida Power & Light Company (FP&L), and Jacksonville Electric Authority (JEA). Under these agreements, approximately 1,235 megawatts of capacity are II-70 NOTES (continued) Alabama Power Company 2000 Annual Report scheduled to be sold through 2001. Thereafter, these sales will remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after 2001 with a minimum of three years notice -- until the expiration of the contracts in 2010. No notices of cancellation have been received. Alabama Municipal Electric Authority (AMEA) Capacity Contracts In August 1986, the Company entered into a firm power sales contract with AMEA entitling AMEA to scheduled amounts of capacity (to a maximum 100 megawatts) for a period of 15 years commencing September 1, 1986 (1986 Contract). In October 1991, the Company entered into a second firm power sales contract with AMEA entitling AMEA to scheduled amounts of additional capacity (to a maximum 80 megawatts) for a period of 15 years commencing October 1, 1991 (1991 Contract). In both contracts the power will be sold to AMEA for its member municipalities that previously were served directly by the Company as wholesale customers. Under the terms of the contracts, the Company received payments from AMEA representing the net present value of the revenues associated with the respective capacity entitlements, discounted at effective annual rates of 9.96 percent and 11.19 percent for the 1986 and 1991 contracts, respectively. These payments are being recognized as operating revenues and the discounts are being amortized to other interest expense as scheduled capacity is made available over the terms of the contracts. In order to secure AMEA's advance payments and the Company's performance obligation under the contracts, the Company issued and delivered to an escrow agent first mortgage bonds representing the maximum amount of liquidated damages payable by the Company in the event of a default under the contracts. No principal or interest is payable on such bonds unless and until a default by the Company occurs. As the liquidated damages decline under the contracts, a portion of the bonds equal to the decreases is returned to the Company. At December 31, 2000, $61.3 million of such bonds were held by the escrow agent under the contracts. 7. INCOME TAXES At December 31, 2000, the tax-related regulatory assets and liabilities were $346 million and $222 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized interest. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the income tax provisions are as follows: 2000 1999 1998 -------------------------------- (in millions) Total provision for income taxes: Federal -- Current $168 $194 $123 Deferred 60 24 72 - ----------------------------------------------------------------- 228 218 195 - ----------------------------------------------------------------- State -- Current 27 19 16 Deferred 7 5 7 - ------------------------------------------------------ ---------- 34 24 23 - ----------------------------------------------------------------- Total $262 $242 $218 ================================================================= The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 2000 1999 ------------------ (in millions) Deferred tax liabilities: Accelerated depreciation $ 992 $884 Property basis differences 405 419 Fuel cost adjustment 93 65 Premium on reacquired debt 30 31 Pensions 75 60 Other 12 11 - ----------------------------------------------------------------- Total 1,607 1,470 - ----------------------------------------------------------------- Deferred tax assets: Capacity prepayments 18 24 Other deferred costs 14 25 Postretirement benefits 24 22 Unbilled revenue 23 13 Other 81 63 - ----------------------------------------------------------------- Total 160 147 - ----------------------------------------------------------------- Net deferred tax liabilities 1,447 1,323 Portion included in current liabilities, net (46) (83) - ----------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $1,401 $1,240 ================================================================= II-71 NOTES (continued) Alabama Power Company 2000 Annual Report Deferred investment tax credits are amortized over the lives of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $11 million in 2000, 1999, and 1998. At December 31, 2000, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 2000 1999 1998 -------------------------- Federal statutory rate 35.0% 35.0% 35.0% State income tax, net of federal deduction 3.1 2.4 2.5 Non-deductible book depreciation 1.4 1.6 1.5 Differences in prior years' deferred and current tax rates (1.3) (1.3) (1.6) Other (0.7) (0.9) (1.6) - --------------------------------------------------------------- Effective income tax rate 37.5% 36.8% 35.8% =============================================================== Southern Company files a consolidated federal and certain state income tax returns. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. 8. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES Statutory business trusts formed by the Company, of which the Company owns all the common securities, have issued mandatorily redeemable preferred securities as follows: Date of Maturity Issue Amount Rate Notes Date --------------------------------------------------- (millions) (millions) Trust I 1/1996 $ 97 7.375% $100 3/2026 Trust II 1/1997 200 7.60 206 12/2036 Trust III 2/1999 50 Auction 52 2/2029 Substantially all of the assets of each trust are junior subordinated notes issued by the Company in the respective approximate principal amounts set forth above. The distribution rate of Trust III's auction rate securities was 6.52% at January 1, 2001. The Company considers that the mechanisms and obligations relating to the preferred securities, taken together, constitute a full and unconditional guarantee by the Company of the Trusts' payment obligations with respect to the preferred securities. The Trusts are subsidiaries of the Company and, accordingly, are consolidated in the Company's financial statements. 9. OTHER LONG-TERM DEBT Pollution control obligations represent installment purchases of pollution control facilities financed by funds derived from sales by public authorities of revenue bonds. The Company is required to make payments sufficient for the authorities to meet principal and interest requirements of such bonds. With respect to $114.2 million of such pollution control obligations, the Company has authenticated and delivered to the trustees a like principal amount of first mortgage bonds as security for its obligations under the installment purchase agreements. No principal or interest on these first mortgage bonds is payable unless and until a default occurs on the installment purchase agreements. In May 2000, the Company issued $250 million of unsecured senior notes. The proceeds of this issuance were used to repay short-term indebtedness. All of the Company's senior notes are, in effect, subordinated to all secured debt of the Company, including its first mortgage bonds. The estimated aggregate annual maturities of capitalized lease obligations through 2005 are as follows: $0.8 million in 2001, $0.9 million in 2002, $0.9 million in 2003, $1.0 million in 2004 and $0.1 million in 2005. 10. SECURITIES DUE WITHIN ONE YEAR A summary of the improvement fund requirements and scheduled maturities and redemptions of long-term debt due within one year at December 31 is as follows: 2000 1999 ------------------------ (in thousands) First mortgage bond maturities and redemptions $ - $100,000 Other long-term debt maturities (Note 9) 844 943 ------------------------------------------------------------- Total long-term debt due within one year $844 $100,943 ============================================================= The annual first mortgage bond improvement fund requirement is 1 percent of the aggregate principal amount of bonds of each series authenticated, so long II-72 NOTES (continued) Alabama Power Company 2000 Annual Report as a portion of that series is outstanding, and may be satisfied by the deposit of cash and/or reacquired bonds, the certification of unfunded property additions, or a combination thereof. 11. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988 (the Act), the Company maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at Plant Farley. The Act provides funds up to $9.5 billion for public liability claims that could arise from a single nuclear incident. Plant Farley is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program of deferred premiums which could be assessed, after a nuclear incident, against all owners of nuclear reactors. The Company could be assessed up to $88 million per incident for each licensed reactor it operates but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment, excluding any applicable state premium taxes, for the Company is $176 million per incident but not more than an aggregate of $20 million to be paid for each incident in any one year. The Company is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. Additionally, the Company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million primary coverage. This excess insurance is also provided by NEIL. NEIL also covers the additional cost that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased costs of replacement power in an amount up to $3.5 million per week (starting 12 weeks after the outage) for one year and up to $2.8 million per week for the second and third years. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under that policy. The current maximum annual assessments for the Company under the three NEIL policies would be $17 million. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies shall be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the Company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. All retrospective assessments, whether generated for liability, property or replacement power may be subject to applicable state premium taxes. 12. COMMON STOCK DIVIDEND RESTRICTIONS The Company's first mortgage bond indenture contains various common stock dividend restrictions that remain in effect as long as the bonds are outstanding. At December 31, 2000, retained earnings of $796 million were restricted against the payment of cash dividends on common stock under terms of the mortgage indenture. 13. QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly financial data for 2000 and 1999 are as follows: Net Income After Dividends Quarter Operating Operating on Preferred Ended Revenues Income Stock - -------------------- ----------------------------------------- (in millions) March 2000 $ 746 $172 $ 68 June 2000 900 229 103 September 2000 1,137 390 209 December 2000 884 151 40 March 1999 $ 714 $162 $ 63 June 1999 823 209 93 September 1999 1,116 388 201 December 1999 733 136 43 - ----------------------------------------------------------------- The Company's business is influenced by seasonal weather conditions. II-73 SELECTED FINANCIAL AND OPERATING DATA 1996-2000 Alabama Power Company 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $3,667,461 $3,385,474 $3,386,373 $3,149,111 $3,120,775 Net Income after Dividends on Preferred Stock (in thousands) $419,916 $399,880 $377,223 $375,939 $371,490 Cash Dividends on Common Stock (in thousands) $417,100 $399,600 $367,100 $339,600 $347,500 Return on Average Common Equity (percent) 13.58 13.85 13.63 13.76 13.75 Total Assets (in thousands) $10,379,108 $9,648,704 $9,225,698 $8,812,867 $8,733,846 Gross Property Additions (in thousands) $870,581 $809,044 $610,132 $451,167 $425,024 - --------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $3,195,772 $2,988,863 $2,784,067 $2,750,569 $2,714,277 Preferred stock 317,512 317,512 317,512 255,512 340,400 Company obligated mandatorily redeemable preferred securities 347,000 347,000 297,000 297,000 97,000 Long-term debt 3,425,527 3,190,378 2,646,566 2,473,202 2,354,006 - --------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $7,285,811 $6,843,753 $6,045,145 $5,776,283 $5,505,683 ================================================================================================================================- Capitalization Ratios (percent): Common stock equity 43.9 43.7 46.1 47.6 49.3 Preferred stock 4.4 4.6 5.3 4.4 6.2 Company obligated mandatorily redeemable preferred securities 4.8 5.1 4.9 5.2 1.7 Long-term debt 46.9 46.6 43.7 42.8 42.8 - --------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0 ================================================================================================================================- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 A1 A1 Standard and Poor's A A+ A+ A+ A+ Fitch AA-* AA- AA- AA- AA- Preferred Stock - Moody's a2 a2 a2 a2 a2 Standard and Poor's BBB+ A- A A A Fitch A* A A A+ A+ Unsecured Long-Term Debt - Moody's A2 A2 A2 A2 - Standard and Poor's A A A A - Fitch A+* A+ A+ A+ - ================================================================================================================================- Customers (year-end): Residential 1,132,410 1,120,574 1,106,217 1,092,161 1,073,559 Commercial 193,106 188,368 182,738 177,362 171,827 Industrial 4,819 4,897 5,020 5,076 5,100 Other 745 735 733 728 732 - --------------------------------------------------------------------------------------------------------------------------------- Total 1,331,080 1,314,574 1,294,708 1,275,327 1,251,218 ================================================================================================================================- Employees (year-end): 6,871 6,792 6,631 6,531 6,865 - --------------------------------------------------------------------------------------------------------------------------------- *Effective 1/22/01 the Fitch Security Ratings for First Mortgage Bonds, Preferred Stock, and Unsecured Long-Term Debt are A+, A-, and A respectively.
II-74 SELECTED FINANCIAL AND OPERATING DATA 1996-2000 (continued) Alabama Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $ 1,222,509 $1,145,646 $ 1,133,435 $ 997,507 $ 998,806 Commercial 854,695 807,098 779,169 724,148 696,453 Industrial 859,668 843,090 853,550 775,591 759,628 Other 15,835 15,283 14,523 13,563 13,729 - ----------------------------------------------------------------------------------------------------------------------------------- Total retail 2,952,707 2,811,117 2,780,677 2,510,809 2,468,616 Sales for resale - non-affiliates 461,730 415,377 448,973 431,023 391,669 Sales for resale - affiliates 166,219 92,439 103,562 161,795 216,620 - ----------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 3,580,656 3,318,933 3,333,212 3,103,627 3,076,905 Other revenues 86,805 66,541 53,161 45,484 43,870 - ----------------------------------------------------------------------------------------------------------------------------------- Total $3,667,461 $3,385,474 $3,386,373 $3,149,111 $3,120,775 ==================================================================================================================================- Kilowatt-Hour Sales (in thousands): Residential 16,771,821 15,699,081 15,794,543 14,336,408 14,593,761 Commercial 12,988,728 12,314,085 11,904,509 11,330,312 10,904,476 Industrial 22,101,407 21,942,889 21,585,117 20,727,912 19,999,258 Other 205,827 201,149 196,647 180,389 192,573 - ----------------------------------------------------------------------------------------------------------------------------------- Total retail 52,067,783 50,157,204 49,480,816 46,575,021 45,690,068 Sales for resale - non-affiliates 14,847,533 12,437,599 11,840,910 12,329,480 9,491,237 Sales for resale - affiliates 5,369,474 5,031,781 5,976,099 8,993,326 10,292,066 - ----------------------------------------------------------------------------------------------------------------------------------- Total 72,284,790 67,626,584 67,297,825 67,897,827 65,473,371 ==================================================================================================================================- Average Revenue Per Kilowatt-Hour (cents): Residential 7.29 7.30 7.18 6.96 6.84 Commercial 6.58 6.55 6.55 6.39 6.39 Industrial 3.89 3.84 3.95 3.74 3.80 Total retail 5.67 5.60 5.62 5.39 5.40 Sales for resale 3.11 2.91 3.10 2.78 3.07 Total sales 4.95 4.91 4.95 4.57 4.70 Residential Average Annual Kilowatt-Hour Use Per Customer 14,875 14,097 14,370 13,254 13,705 Residential Average Annual Revenue Per Customer $1,084.26 $1,028.76 $1,031.21 $922.21 $937.95 Plant Nameplate Capacity Ratings (year-end) (megawatts) 12,122 11,379 11,151 11,151 11,151 Maximum Peak-Hour Demand (megawatts): Winter 9,478 8,863 7,757 8,478 8,413 Summer 11,019 10,739 10,329 9,778 9,912 Annual Load Factor (percent) 59.3 59.7 62.9 62.7 61.3 Plant Availability (percent): Fossil-steam 89.4 80.4 85.6 86.3 86.6 Nuclear 88.3 91.0 80.2 88.8 90.5 - ----------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 63.0 64.1 65.3 65.7 67.0 Nuclear 16.9 17.8 16.3 17.9 18.5 Hydro 2.9 4.7 6.9 7.5 7.1 Oil and gas 4.9 1.1 1.5 0.7 0.4 Purchased power - From non-affiliates 4.6 4.5 3.3 2.4 2.4 From affiliates 7.7 7.8 6.7 5.8 4.6 - ----------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 100.0 100.0 ==================================================================================================================================-
II-75 GEORGIA POWER COMPANY FINANCIAL SECTION II-76 MANAGEMENT'S REPORT Georgia Power Company 2000 Annual Report The management of Georgia Power Company has prepared this annual report and is responsible for the financial statements and related information. These statements were prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the accounting records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls based upon the recognition that the cost of the system should not exceed its benefits. The Company believes that its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, which is composed of three independent directors, provides a broad overview of management's financial reporting and control functions. At least three times a year this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal control and financial reporting matters. The internal auditors and the independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted with a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of Georgia Power Company in conformity with accounting principles generally accepted in the United States. /s/ David M. Ratcliffe David M. Ratcliffe President and Chief Executive Officer /s/ Thomas A. Fanning Thomas A. Fanning Executive Vice President, Treasurer and Chief Financial Officer II-77 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Georgia Power Company: We have audited the accompanying balance sheets and statements of capitalization of Georgia Power Company (a Georgia corporation and a wholly owned subsidiary of Southern Company) as of December 31, 2000 and 1999, and the related statements of income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-88 through II-108) referred to above present fairly, in all material respects, the financial position of Georgia Power Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Atlanta, Georgia February 28, 2001 II-78 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Georgia Power Company 2000 Annual Report RESULTS OF OPERATIONS Earnings Georgia Power Company's 2000 earnings totaled $559 million, representing an $18 million (3.3 percent) increase over 1999. This earnings increase is primarily due to higher retail and wholesale sales and continued control of operating expenses, partially offset by additional accelerated amortization of regulatory assets allowed under the second year of a Georgia Public Service Commission (GPSC) three-year retail rate order. Georgia Power Company's 1999 earnings totaled $541 million, representing a $29 million (5.1 percent) decrease from 1998. This earnings decrease was primarily due to the recognition of interest income in 1998 as a result of the resolution of tax issues with the Internal Revenue Service (IRS). Earnings in 1999 from normal operations increased due primarily to lower accelerated depreciation under the GPSC retail rate order, sales growth, and decreased financing costs, partially offset by retail rate reductions under the new order and lower wholesale revenues. Revenues Operating revenues in 2000 and the amount of change from the prior year are as follows: Increase (Decrease) From Prior Year Amount ---------------------- 2000 2000 1999 ---- ----------------------- Retail - (in millions) Base revenues $3,119 $ 84 $(292) Fuel cost recovery 1,198 183 44 - --------------------------------------------------------------------- Total retail 4,317 267 (248) - --------------------------------------------------------------------- Sales for resale - Non-affiliates 298 88 (49) Affiliates 96 20 (5) - --------------------------------------------------------------------- Total sales for resale 394 108 (54) - --------------------------------------------------------------------- Other operating revenues 160 39 21 - -------------------------------------------------------- ------------ Total operating revenues $4,871 $414 $(281) ===================================================================== Percent change 9.3% (5.9)% - --------------------------------------------------------------------- Retail base revenues of $3.1 billion in 2000 increased $84 million (2.8 percent) primarily due to a 4.9 percent increase in sales. Under the GPSC retail rate order, the Company recorded $44 million of revenue subject to refund for estimated earnings above 12.5 percent retail return on common equity in 2000. Refunds will be made to customers in 2001. Retail base revenues of $3.0 billion in 1999 decreased $292 million (8.8 percent) primarily due to retail rate reductions under the GPSC retail rate order. Pursuant to the GPSC retail rate order, in 1999 the Company also recorded $79 million of revenue subject to refund for estimated earnings above 12.5 percent retail return on common equity. Revenue subject to refund is reflected in "Base revenues" in the chart above. The $79 million in refunds were made to customers in 2000. See Note 3 to the financial statements under "Retail Rate Order" for additional information. Electric rates include provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. Under these fuel cost recovery provisions, fuel revenues generally equal fuel expenses -- including the fuel component of purchased energy -- and do not affect net income. However cash flow is affected by the untimely recovery of these receivables. As of December 31, 2000, the Company had $132 million in underrecovered fuel costs. The Company currently plans to make a filing with the GPSC in early 2001 to establish a new fuel rate in order to better reflect current fuel cost and to collect the current underrecovered balance. Wholesale revenues from sales to non-affiliated utilities increased in 2000 and decreased in 1999 as follows: 2000 1999 1998 ------------------------------- (in millions) Outside service area - Long-term contracts $ 55 $ 55 $ 51 Other sales 162 74 93 Inside service area 81 81 115 - --------------------------------------------------------------- Total $298 $210 $259 =============================================================== Revenues from long-term contracts outside the service area remained constant in 2000 and increased slightly in 1999 due to increased energy sales. See Note 7 to the financial statements for further information regarding these sales. Revenues from other sales outside the service area primarily represent wholesale sales from Plant Dahlberg which went into service during 2000 and increases in power marketing activities. These activities include the purchase and resale of energy. Consequently, changes in revenues are generally offset by corresponding changes in purchased power expense from non-affiliates. Wholesale II-79 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2000 Annual Report revenues from customers within the service area remained constant in 2000 but decreased in 1999 primarily due to a decrease in revenues under a power supply agreement with Oglethorpe Power Corporation (OPC). Revenues from sales to affiliated companies within the Southern electric system, as well as purchases of energy, will vary from year to year depending on demand and the availability and cost of generating resources at each company. These transactions do not have a significant impact on earnings. Other operating revenues in 2000 increased $39 million (33 percent) primarily due to increased revenues from the transmission of electricity and gains on the sale of generating plant emission allowances. Under a GPSC order, $28 million of the gains on emission allowance sales in 2000 were used to reduce recoverable fuel costs and as such, did not affect earnings. In 1999, other operating revenues increased $21 million or (21 percent) from the previous year due primarily to increased revenues from the rental of electric equipment and property. Kilowatt-hour (KWH) sales for 2000 and the percent change by year were as follows: Percent Change ---------------------- 2000 KWH 2000 1999 --------- ------------------------ (in billions) Residential 20.7 6.6% (0.4)% Commercial 25.6 8.1 3.7 Industrial 27.5 0.9 0.1 Other 0.6 3.2 1.5 --------- Total retail 74.4 4.9 1.1 --------- Sales for resale - Non-affiliates 6.5 27.7 (21.4) Affiliates 2.4 35.6 (11.9) --------- Total sales for resale 8.9 29.8 (19.1) --------- Total sales 83.3 7.1 (1.0) ========= - ------------------------------------------------------------ Residential and commercial sales increased 6.6 percent and 8.1 percent, respectively, due to warmer summer temperatures and colder winter weather. Strong regional economic growth was also a factor in the increase in commercial sales. Industrial sales remained fairly constant. In 1999, residential sales decreased 0.4 percent due to moderate summer temperatures, while commercial sales increased 3.7 percent due to strong regional economic growth. Industrial sales remained fairly constant. Expenses Fuel costs constitute the single largest expense for the Company. The mix of fuel sources for generation of electricity is determined primarily by system load, the unit cost of fuel consumed, and the availability of hydro and nuclear generating units. The amount and sources of generation and the average cost of fuel per net KWH generated were as follows: 2000 1999 1998 ----------------------------- Total generation (billions of KWH) 73.6 69.3 69.1 Sources of generation (percent) -- Coal 75.8 75.5 73.3 Nuclear 21.2 21.6 21.6 Hydro 0.8 1.0 2.6 Oil and gas 2.2 1.9 2.5 Average cost of fuel per net KWH generated (cents) -- 1.39 1.34 1.36 - ----------------------------------------------------------------- Fuel expense increased 10.7 percent in 2000 due to an increase in generation to meet higher energy demands, a decrease in generation from hydro plants, and a higher average cost of fuel. Fuel expense increased 0.3 percent in 1999 due to a slight increase in fossil and nuclear generation and a decrease in generation from hydro plants, partially offset by a lower average cost of fuel. Purchased power expense in 2000 increased $206 million (53 percent) over the prior year due to higher retail energy demands and power marketing activities. The majority of the increase was offset by increases in retail fuel revenues and power marketing revenues and therefore did not affect earnings. As discussed above, the expense associated with energy purchased for power marketing activities is generally offset by revenue when resold. Purchased power expense decreased slightly in 1999. Other operation and maintenance expenses in 2000 increased slightly over those in 1999. Increased line maintenance, customer assistance and sales expense and additional severance costs were partially offset by decreased generating plant maintenance and decreased employee benefit provisions. Other operation and II-80 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2000 Annual Report maintenance expenses increased 1.6 percent in 1999 primarily due to increased generating plant maintenance, partially offset by a reduction in the charges related to the implementation of a customer service system in 1998, decreased year 2000 readiness costs, and decreased employee benefit provisions. Depreciation and amortization increased $66 million in 2000 due to $50 million of additional accelerated amortization of regulatory assets required under the second year of the GPSC retail rate order and increased plant in service. Depreciation and amortization decreased $261 million in 1999 primarily due to higher depreciation charges recognized in 1998 under the prior GPSC accounting order and the completion in 1998 of the amortization of deferred Plant Vogtle costs. Interest income decreased $3 million in 2000 primarily due to decreased interest on temporary cash investments. Interest income decreased in 1999 primarily due to the 1998 recognition of $73 million in interest income resulting from the resolution of tax issues with the IRS and the State of Georgia. Other, net decreased in 2000 due to an increase in charitable contributions. In 1999, other, net decreased due primarily to increased bad debt expense related to consumer energy efficiency improvement financing. Interest expense, net increased in 2000 due to the issuance of an additional $300 million in senior notes during 2000. Interest expense, net decreased in 1999 due primarily to the refinancing or retirement of securities. The Company refinanced or retired $179 million and $775 million of securities in 2000 and 1999, respectively. Distributions on preferred securities of subsidiary companies decreased $7 million in 2000 due to the redemption of $100 million of preferred securities in December 1999. Distributions on preferred securities of subsidiary companies increased $11 million in 1999 due to the issuance of additional mandatorily redeemable preferred securities in January 1999. Effects of Inflation The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in utility plants with long economic life. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and preferred securities. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. FUTURE EARNINGS POTENTIAL The results of operations for the past three years are not necessarily indicative of future earnings. The level of future earnings depends on numerous factors including regulatory matters and energy sales. The Company currently operates as a vertically integrated utility providing electricity to customers within its traditional service area located in the State of Georgia. Prices for electricity provided by the Company to retail customers are set by the GPSC under cost-based regulatory principles. On January 1, 1999, the Company began operating under a new three-year retail rate order. The Company's earnings are evaluated against a retail return on common equity range of 10 percent to 12.5 percent, with required rate reductions of $262 million on an annual basis effective in 1999 and an additional $24 million effective in 2000. The order provides for $85 million in each year, plus up to $50 million of any earnings above the 12.5 percent return during the second and third years, to be applied to accelerated amortization or depreciation of assets. Two-thirds of any additional earnings above the 12.5 percent return will be applied to rate reductions, with the remaining one-third retained by the Company. Pursuant to the GPSC retail rate order, in 2000 and 1999, the Company recorded $85 million in accelerated amortization of regulatory assets. In 2000, the Company also recorded the additional $50 million of accelerated amortization. The accelerated amortization is recorded in a regulatory liability account as mandated by the GPSC. In addition, the Company recorded $44 million and $79 million of revenue subject to refund for estimated earnings above 12.5 percent in 2000 and 1999, respectively. Refunds applicable to 1999 were made to customers in 2000. The Company will file a general rate case on July 2, 2001 in response to which the GPSC would be expected to II-81 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2000 Annual Report determine whether the retail rate order should be continued, modified, or discontinued. See Note 3 to the financial statements under "Retail Rate Order" for additional information. Growth in energy sales is subject to a number of factors which traditionally have included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, initiatives to increase sales to existing customers, and the rate of economic growth in the Company's service area. Assuming normal weather, retail sales growth from 2000 is projected to be approximately 2.4 percent annually on average during 2001 through 2003. The Company has entered into purchase power agreements which will result in higher capacity and operating and maintenance payments in future years. See Note 4 to the financial statements under "Purchased Power Commitments" for additional information. The Company is constructing two 566 megawatt combined cycle units at Plant Wansley to begin operation in 2002. These units have been certified by the GPSC to serve the Company's retail customers for approximately seven years. Savannah Electric will have the rights to 200 megawatts of capacity from these units for the same seven-year period. The Company is also constructing a 571 megawatt combined cycle unit at Plant Goat Rock to begin operation in 2002, and a 610 megawatt combined cycle unit at Plant Goat Rock to begin operation in 2003. The power from these units will initially be sold into the wholesale market when they begin operation. The Company has filed with the GPSC for certification of these units to begin serving the Company's retail customers in 2003 and 2004, respectively, for a term of seven years each. In addition to seeking certification of Plant Goat Rock, the Company is also seeking certification of a seven year commitment to 615 megawatts beginning in 2004 at Plant Autaugaville to serve its retail customers. Plant Autaugaville is currently under construction by Alabama Power. Further, the Company is constructing Plant Dahlberg, a ten unit, 800 megawatt combustion turbine peaking power plant that will serve the wholesale market. Units one through eight began operation in May 2000; units nine and ten are expected to begin operation in June 2001. The Company has entered into wholesale contracts to sell all 800 megawatts of capacity. These contracts cover substantially all of the output of the plant for the first five years. Because these units are dedicated to the wholesale market, retail rates will not be affected. The Company is aggressively working to maintain and expand its share of wholesale sales in the Southeastern power markets. In January 2001, Southern Company announced the formation of a new subsidiary, Southern Power Company (SPC). SPC will own, manage, and finance wholesale generating assets in the Southeast. Energy from its assets will be marketed to wholesale customers under the Southern Company name. The current plan is for Georgia Power and Alabama Power to transfer Plant Dahlberg and the units under construction at Plants Wansley, Goat Rock, and Autaugaville to SPC in 2001. The Company will enter into purchased power capacity agreements with SPC for power from the units at Plants Wansley, Goat Rock, and Autaugaville to serve the Company's retail customers. In accordance with Financial Accounting Standards Board (FASB) Statement No. 87, Employers' Accounting for Pensions, the Company recorded non-cash income of approximately $59 million in 2000. Pension plan income in 2001 is expected to be less as a result of plan amendments. Future pension income is dependent on several factors including trust earnings and changes to the plan. For additional information see Note 2 to the financial statements. Compliance costs related to current and future environmental laws, regulations, and litigation could affect earnings if such costs are not fully recovered. See "Environmental Issues" for further discussion of these matters. The electric utility industry in the United States is continuing to evolve as a result of regulatory and competitive factors. Among the primary agents of change has been the Energy Policy Act of 1992 (Energy Act). The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. Although the Energy Act II-82 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2000 Annual Report does not permit retail customer access, it was a major catalyst for the current restructuring and consolidation taking place within the utility industry. On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued its final rule on Regional Transmission Organizations (RTOs). The order encouraged utilities owning transmission systems to form RTOs on a voluntary basis. After participating in regional conferences with customers and other members of the public to discuss the formation of RTOs, utilities were required to make a filing with the FERC. On October 16, 2000, Southern Company and its five integrated Southeast utilities, including the Company, filed with the FERC a proposal for the creation of an RTO. The proposal is for the formation of a for-profit company that would have control of the bulk power transmission system of participating utilities. Participants would have the option to either maintain their ownership, divest, sell, or lease their assets to the proposed RTO. If the FERC accepts the proposal as filed, the creation of the RTO is not expected to have a material impact on the financial statements of the Company. However, the ultimate outcome of this matter cannot now be determined. The Company continues to compete with other electric suppliers within the state. In Georgia, most new retail customers with at least 900 kilowatts of connected load may choose their electricity supplier. Numerous federal and state initiatives are in varying stages to promote wholesale and retail competition across the nation. Among other things, these initiatives allow customers to choose their electricity provider. As these initiatives materialize, the structure of the utility industry could radically change. Some states have approved initiatives that result in a separation of the ownership and/or operation of generating facilities from the ownership and/or operation of transmission and distribution facilities. While the GPSC has held workshops to discuss retail competition and industry restructuring, there has been no proposed or enacted legislation to date in Georgia. Enactment would require numerous issues to be resolved, including significant ones relating to transmission pricing and recovery of costs. The GPSC continues its assessment of the range of potential stranded costs. The inability of the Company to recover all its costs, including the regulatory assets described in Note 1 to the financial statements, could have a material effect on the financial condition of the Company. The Company is attempting to reduce regulatory assets through the GPSC retail rate order. See Note 3 to the financial statements under "Retail Rate Order" for additional information. The Company is subject to the provisions of FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operations is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. The staff of the Securities and Exchange Commission (SEC) has questioned certain of the current accounting practices of the electric utility industry - including the Company's - regarding the recognition, measurement, and classification in the financial statements of decommissioning costs for nuclear generating facilities. In response to these questions, the FASB is reviewing the accounting for liabilities related to the retirement of long-lived assets, including nuclear decommissioning. If the FASB issues new accounting rules, the estimated costs of retiring the Company's nuclear and other facilities may be required to be recorded as liabilities in the Balance Sheets. Also, the annual provisions for such costs could change. Because of the Company's current ability to recover asset retirement costs through rates, these changes would not have a significant adverse effect on results of operations. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. Exposure to Market Risks Due to cost-based rate regulation, the Company currently has limited exposure to market volatility in interest rates, commodity fuel prices and prices of electricity. (See the discussion above for potential changes in industry structure.) To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market. Realized gains and losses are recognized in the income statement as incurred. At December 31, 2000, exposure from these activities was not material to the Company's financial position, results of operations, or cash flows. Also, based on the Company's overall interest rate exposure at December 31, 2000, a near-term 100 basis point II-83 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2000 Annual Report change in interest rates would not materially affect the financial statements. New Accounting Standard In June 2000, the FASB issued Statement No. 138, an amendment of Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 133, as amended, establishes accounting and reporting standards for derivative instruments and for hedging activities. Statement No. 133 requires that certain derivative instruments be recorded in the balance sheet as either an asset or liability measured at fair value and that changes in the fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Substantially all of the Company's bulk energy purchases and sales meet the definition of a derivative under Statement No. 133. In many cases, these transactions meet the normal purchase and sale exception and the related contracts will continue to be accounted for under the accrual method. Certain of these instruments qualify as cash flow hedges resulting in the deferral of related gains and losses in other comprehensive income until the hedged transactions occur. Any ineffectiveness will be recognized currently in net income. However, others will be required to be marked to market through current period income. The Company adopted the provisions of Statement No. 133 effective January 1, 2001. The impact on net income was immaterial. The application of the new rules is still evolving and further guidance from the FASB is expected, which could additionally impact the Company's financial statements. FINANCIAL CONDITION Plant Additions In 2000, gross utility plant additions were $1.1 billion. These additions were primarily related to transmission and distribution facilities, the purchase of nuclear fuel, and the construction of additional combustion turbine and combined cycle units. The funds needed for gross property additions are currently provided from operations, short-term and long-term debt, and capital contributions from Southern Company. The Statements of Cash Flows provide additional details. Financing Activities In 2000, the Company's financing costs increased due to the issuance of new debt during the year. New issues during 1998 through 2000 totaled $1.5 billion and retirement or repayment of higher-cost securities totaled $1.7 billion. Special purpose subsidiaries of the Company have issued mandatorily redeemable preferred securities. See Note 9 to the financial statements under "Preferred Securities" for additional information. Composite financing rates for long-term debt, preferred stock, and preferred securities for the years 1998 through 2000, as of year-end, were as follows: 2000 1999 1998 ---------------------------------- Composite interest rate on long-term debt 5.90% 5.48% 5.64% Composite preferred stock dividend rate 4.60 4.60 5.52 Composite preferred securities dividend rate 7.49 7.49 7.89 - ------------------------------------------------------------------ Liquidity and Capital Requirements Cash provided from operations decreased by $135 million in 2000, primarily due to higher fuel and purchased power expenses related to increased energy demands. The Company estimates that construction expenditures for the years 2001 through 2003 will total $1.6 billion, $1.3 billion, and $0.8 billion, respectively. If the Company transfers wholesale generation assets to SPC in 2001 as contemplated, construction expenditures for the years 2001 through 2003 will total $1.0 billion, $0.9 billion, and $0.7 billion, respectively. Investments in additional combustion turbine and combined cycle generating units, transmission and distribution facilities, enhancements to existing generating plants, and equipment to comply with environmental requirements are planned. Cash requirements for redemptions announced and maturities of long-term debt are expected to total $581 million during 2001 through 2003. As a result of requirements by the Nuclear Regulatory Commission, the Company has established external trust funds for the purpose of funding nuclear II-84 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2000 Annual Report decommissioning costs. The amount to be funded is $30 million each year in 2001, 2002, and 2003. For additional information concerning nuclear decommissioning costs, see Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning." Sources of Capital The Company expects to meet future capital requirements primarily using funds generated from operations and equity funds from Southern Company and, if needed, by the issuance of new debt and equity securities, term loans, and short-term borrowings. To meet short-term cash needs and contingencies, the Company had approximately $1.8 billion of unused credit arrangements with banks at the beginning of 2001. See Note 9 to the financial statements under "Bank Credit Arrangements" for additional information. Recently, the Company has relied on the issuance of unsecured debt and trust preferred securities, in addition to unsecured pollution control bonds issued for its benefit by public authorities, to meet its long-term external financing requirements. In years past, the Company issued first mortgage bonds, mortgage backed pollution control bonds and preferred stock to fund its external requirements. The amount outstanding of the later securities has been steadily declining during the last four years. If the Company were to choose to issue new first mortgage bonds or preferred stock once again, it would be required to meet certain coverage requirements. ENVIRONMENTAL ISSUES Clean Air Act In November 1990, the Clean Air Act Amendments of 1990 (Clean Air Act) were signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- significantly affected Southern Company's subsidiaries, including the Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants are required in two phases. Phase I compliance began in 1995 and some 50 generating units within Southern Company's subsidiaries were brought into compliance with Phase I requirements. Southern Company's subsidiaries, including the Company, achieved Phase I sulfur dioxide compliance at the affected units by switching to low-sulfur coal, which required some equipment upgrades. Construction expenditures for the Company's Phase I compliance totaled approximately $167 million. Phase II sulfur dioxide compliance was required in 2000. Southern Company's subsidiaries, including the Company, used emission allowances and fuel switching to comply with Phase II requirements. Also, equipment to control nitrogen oxide emissions was installed on additional system fossil-fired units as necessary to meet Phase II limits and ozone non-attainment requirements for metropolitan Atlanta through 2000. Compliance for Phase II and initial ozone non-attainment requirements increased total construction expenditures for the Company through 2000 by approximately $39 million. The one-hour ozone non-attainment standards for the Atlanta area have been set and must be implemented in May 2003. Seven generating plants will be affected in the Atlanta area. Additional construction expenditures for the Company's compliance with these new rules are currently estimated at approximately $705 million. A significant portion of costs related to the acid rain and ozone non-attainment provisions of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. II-85 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2000 Annual Report Environmental Protection Agency Litigation On November 3, 1999, the EPA brought a civil action in the U.S. District Court for the Northern District of Georgia. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to coal-fired generating facilities at the Company's Bowen and Scherer plants. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The EPA concurrently issued a notice of violation to the Company relating to these two plants. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation. The complaint and the notice of violation are similar to those brought against and issued to several other electric utilities. The complaint and the notice of violation allege that the Company failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. The Company believes that it complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes civil penalties of up to $27,500 per day per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition unless such costs can be recovered through regulated rates. Other Environmental Issues In July 1997, the EPA revised the national ambient air quality standards for ozone and particulate matter. This revision made the standards significantly more stringent. In the subsequent litigation of these standards, the U.S. Supreme Court recently dismissed certain challenges but found the EPA's implementation program for the new ozone standard unlawful and remanded it to the EPA. In addition, the Federal District of Columbia Circuit Court of Appeals will address other legal challenges to these standards in mid-2001. If the standards are eventually upheld, implementation could be required by 2007 to 2010. In September 1998, the EPA issued the final regional nitrogen oxide reduction rules to the states for implementation. Compliance is required by May 31, 2004. The final rule affects 21 states, including Georgia. In December 2000, the EPA completed its utility study for mercury and other hazardous air pollutants (HAPS) and issued a determination that an emission control program for mercury and, perhaps, other HAPS is warranted. The program is to be developed over the next four years under the Maximum Achievable Control Technology (MACT) provisions of the Clean Air Act. This determination is being challenged in the courts. In January 2001, the EPA proposed guidance for the determination of Best Available Retrofit Technology (BART) emission controls under the Regional Haze Regulations. Installation of BART controls would likely be required around 2010. Litigation of the BART rules is probable in the near future. Implementation of the final state rules for these initiatives could require substantial further reductions in nitrogen oxide, sulfur dioxide, mercury, and other HAPS emissions from fossil-fired generating facilities and other industries in these states. Additional compliance costs and capital expenditures resulting from the implementation of these rules and standards cannot be determined until the results of legal challenges are known, and the states have adopted their final rules. Reviews by the new administration in Washington, D.C. add to the uncertainties associated with BART guidance and the MACT determination for mercury and other HAPS. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur costs to clean up properties currently or previously owned. The Company conducts studies to determine the extent of any required clean-up costs and has recognized in the financial statements costs to clean up known sites. These costs for the Company amounted to $4 million, $4 million, and $6 million in 2000, 1999, and 1998, respectively. Additional sites may require environmental remediation for which the Company may be liable for a portion of or all required clean-up costs. See Note 3 to the financial statements under "Other Environmental Contingencies" for information regarding the Company's potentially responsible party status at a site in Brunswick, Georgia, and the status of sites listed on the State of Georgia's hazardous site inventory. II-86 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 2000 Annual Report The EPA and state environmental regulatory agencies are reviewing and evaluating various matters including: control strategies to reduce regional haze; limits on pollutant discharges to impaired waters; water intake restrictions; and hazardous waste disposal requirements. The impact of any new standards will depend on the development and implementation of applicable regulations. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of any such changes cannot be determined at this time. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Company. The impact of new legislation -- if any - -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION The Company's 2000 Annual Report contains forward-looking and historical information. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. The Company cautions that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations; current and future litigation, including the pending EPA civil action and the race discrimination litigation against the Company; the extent and timing of the entry of additional competition in the Company's markets; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial; internal restructuring or other restructuring options, that may be pursued by the Company; state and federal rate regulation in the United States; political, legal and economic conditions and developments in the United States; financial market conditions and the results of financing efforts; the impact of fluctuations in commodity prices, interest rates and customer demand; weather and other natural phenomena; the ability of the Company to obtain additional generating capacity at competitive prices; and other factors discussed elsewhere herein and in other reports (including Form 10-K) filed from time to time by the Company with the SEC. 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STATEMENTS OF INCOME For the Years Ended December 31, 2000, 1999, and 1998 Georgia Power Company 2000 Annual Report - ------------------------------------------------------------------------------------------------------------ 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ (in thousands) Operating Revenues: Retail sales $4,317,338 $4,050,088 $4,298,217 Sales for resale -- Non-affiliates 297,643 210,104 259,234 Affiliates 96,150 76,426 81,606 Other revenues 159,487 120,057 99,196 - ------------------------------------------------------------------------------------------------------------ Total operating revenues 4,870,618 4,456,675 4,738,253 - ------------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 1,017,878 919,876 917,119 Purchased power -- Non-affiliates 356,189 214,573 229,960 Affiliates 239,815 174,989 161,003 Other 795,458 784,359 819,589 Maintenance 404,189 411,983 358,218 Depreciation and amortization 619,094 552,966 813,802 Taxes other than income taxes 204,527 202,853 204,623 Write down of Rocky Mountain plant - - 33,536 - ------------------------------------------------------------------------------------------------------------ Total operating expenses 3,637,150 3,261,599 3,537,850 - ------------------------------------------------------------------------------------------------------------ Operating Income 1,233,468 1,195,076 1,200,403 Other Income (Expense): Interest income 2,629 5,583 79,578 Equity in earnings of unconsolidated subsidiaries 3,051 2,721 3,735 Other, net (50,495) (47,986) (38,277) - ------------------------------------------------------------------------------------------------------------ Earnings Before Interest and Income Taxes 1,188,653 1,155,394 1,245,439 - ------------------------------------------------------------------------------------------------------------ Interest Charges and Other: Interest expense, net 208,868 194,869 216,313 Distributions on preferred securities of subsidiaries 59,104 65,774 54,327 - ------------------------------------------------------------------------------------------------------------ Total interest charges and other, net 267,972 260,643 270,640 - ------------------------------------------------------------------------------------------------------------ Earnings Before Income Taxes 920,681 894,751 974,799 Income taxes 360,587 351,639 398,632 - ------------------------------------------------------------------------------------------------------------ Net Income 560,094 543,112 576,167 Dividends on Preferred Stock 674 1,729 5,939 - ------------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 559,420 $ 541,383 $ 570,228 ============================================================================================================ The accompanying notes are an integral part of these statements.
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STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000, 1999, and 1998 Georgia Power Company 2000 Annual Report - ------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 560,094 $ 543,112 $ 576,167 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 712,960 663,878 867,637 Deferred income taxes and investment tax credits, net (28,961) (34,930) (93,005) Other, net (51,501) (42,179) 40,396 Changes in certain current assets and liabilities -- Receivables, net (108,621) 21,665 (25,453) Fossil fuel stock 26,835 (22,165) (8,066) Materials and supplies (9,715) (10,417) (3,090) Accounts payables 64,412 13,095 47,862 Energy cost recovery, retail (95,235) (26,862) (7,649) Other (9,092) 90,788 6,997 - ------------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 1,061,176 1,195,985 1,401,796 - ------------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (1,078,163) (790,464) (499,053) Other (5,450) (27,454) 67,031 - ------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (1,083,613) (817,918) (432,022) - ------------------------------------------------------------------------------------------------------------------------------- Financing Activities: Increase (decrease) in notes payable, net 67,598 295,389 (25,378) Proceeds -- Senior notes 300,000 100,000 495,000 Pollution control bonds 78,725 238,000 89,990 Preferred securities - 200,000 - Capital contributions from parent company 301,514 155,777 235 Retirements -- First mortgage bonds (100,000) (404,000) (558,250) Pollution control bonds (78,725) (235,000) (89,990) Preferred securities - (100,000) - Preferred stock (383) (36,231) (106,064) Capital distributions to parent company - - (270,000) Payment of preferred stock dividends (751) (984) (9,137) Payment of common stock dividends (549,600) (543,000) (536,600) Other (1,231) (29,630) (26,641) - ------------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 17,147 (359,679) (1,036,835) - ------------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents (5,290) 18,388 (67,061) Cash and Cash Equivalents at Beginning of Year 34,660 16,272 83,333 - ------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $29,370 $34,660 $16,272 - ------------------------------------------------------------------------------------------------------------------------------- Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $ 265,373 $ 247,050 $ 269,524 Income taxes (net of refunds) 392,310 394,457 480,318 - ------------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
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BALANCE SHEETS At December 31, 2000 and 1999 Georgia Power Company 2000 Annual Report - ------------------------------------------------------------------------------------------------------------------------------------ Assets 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ (in thousands) Current Assets: Cash and cash equivalents $ 29,370 $ 34,660 Receivables -- Customer accounts receivable 465,249 401,773 Unrecovered retail fuel clause revenue 131,623 36,388 Other accounts and notes receivable 156,143 102,544 Affiliated companies 13,312 16,006 Accumulated provision for uncollectible accounts (5,100) (7,000) Fossil fuel stock, at average cost 99,463 126,298 Materials and supplies, at average cost 263,609 253,894 Other 97,515 63,990 - ------------------------------------------------------------------------------------------------------------------------------------ Total current assets 1,251,184 1,028,553 - ------------------------------------------------------------------------------------------------------------------------------------ Property, Plant, and Equipment: In service 16,469,706 15,798,624 Less accumulated provision for depreciation 6,914,512 6,538,574 - ------------------------------------------------------------------------------------------------------------------------------------ 9,555,194 9,260,050 Nuclear fuel, at amortized cost 120,570 119,288 Construction work in progress (Note 4) 652,264 425,975 - ------------------------------------------------------------------------------------------------------------------------------------ Total property, plant, and equipment 10,328,028 9,805,313 - ------------------------------------------------------------------------------------------------------------------------------------ Other Property and Investments: Equity investments in unconsolidated subsidiaries (Note 4) 25,485 25,024 Nuclear decommissioning trusts 375,666 371,914 Other 33,829 33,766 - ------------------------------------------------------------------------------------------------------------------------------------ Total other property and investments 434,980 430,704 - ------------------------------------------------------------------------------------------------------------------------------------ Deferred Charges and Other Assets: Deferred charges related to income taxes (Note 8) 565,982 590,893 Prepaid pension costs 205,113 145,801 Debt expense, being amortized 53,748 55,824 Premium on reacquired debt, being amortized 173,610 184,331 Other 120,964 120,441 - ------------------------------------------------------------------------------------------------------------------------------------ Total deferred charges and other assets 1,119,417 1,097,290 - ------------------------------------------------------------------------------------------------------------------------------------ Total Assets $13,133,609 $12,361,860 ==================================================================================================================================== The accompanying notes are an integral part of these balance sheets.
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BALANCE SHEETS At December 31, 2000 and 1999 Georgia Power Company 2000 Annual Report - --------------------------------------------------------------------------------------------------------------- Liabilities and Stockholder's Equity 2000 1999 - --------------------------------------------------------------------------------------------------------------- (in thousands) Current Liabilities: Securities due within one year (Note 9) $ 1,808 $ 155,772 Notes payable 703,839 636,241 Accounts payable -- Affiliated 117,168 76,591 Other 397,550 346,785 Customer deposits 78,540 74,695 Taxes accrued -- Income taxes 5,151 7,914 Other 137,511 127,414 Interest accrued 47,244 58,665 Vacation pay accrued 38,865 38,143 Other 153,400 153,767 - --------------------------------------------------------------------------------------------------------------- Total current liabilities 1,681,076 1,675,987 - --------------------------------------------------------------------------------------------------------------- Long-term debt (See accompanying statements) 3,041,939 2,688,358 - --------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 2,182,783 2,202,565 Deferred credits related to income taxes (Note 8) 247,067 267,083 Accumulated deferred investment tax credits (Note 8) 352,282 367,114 Employee benefits provisions 177,444 181,529 Other 397,655 236,812 - --------------------------------------------------------------------------------------------------------------- Total deferred credits and other liabilities 3,357,231 3,255,103 - --------------------------------------------------------------------------------------------------------------- Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding company junior subordinated notes (See accompanying statements) 789,250 789,250 - --------------------------------------------------------------------------------------------------------------- Cumulative preferred stock (See accompanying statements) 14,569 14,952 - --------------------------------------------------------------------------------------------------------------- Common stockholder's equity (See accompanying statements) 4,249,544 3,938,210 - --------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholder's Equity $13,133,609 $12,361,860 =============================================================================================================== The accompanying notes are an integral part of these balance sheets.
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STATEMENTS OF CAPITALIZATION At December 31, 2000 and 1999 Georgia Power Company 2000 Annual Report - ---------------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Long-Term Debt: First mortgage bonds -- Maturity Interest Rates -------- -------------- March 1, 2000 6.00% $ - $ 100,000 April 1, 2003 6.625% 200,000 200,000 August 1, 2003 6.35% 75,000 75,000 2005 6.07% 10,000 10,000 2008 6.875% 50,000 50,000 2025 7.70% 57,000 57,000 - ---------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 392,000 492,000 - ---------------------------------------------------------------------------------------------------------------- Senior notes -- (Note 9) Variable rate (6.71375% at 1/1/01) due February 22, 2002 300,000 - 5.50% due December 1, 2005 150,000 150,000 6.60% due December 31, 2038 200,000 200,000 6.625% due March 31, 2039 100,000 100,000 6.875% due December 31, 2047 145,000 145,000 - ---------------------------------------------------------------------------------------------------------------- Total senior notes payable 895,000 595,000 - ---------------------------------------------------------------------------------------------------------------- Other long-term debt -- (Note 9) Pollution control revenue bonds -- Maturity Interest Rates -------- ------------- 2000 4.375% - 50,000 2005 5.00% 57,000 57,000 2011 Variable (5.10% at 1/1/01) 10,450 10,450 2018-2019 6.00% to 6.25% 13,100 13,100 2021-2025 5.40% to 6.75% 308,660 337,385 2022-2025 Variable (4.85% to 5.35% at 1/1/01) 622,075 622,075 2026-2030 Variable (5.00% to 5.10% at 1/1/01) 206,180 206,180 2030 4.53% 78,725 - 2032-2034 Variable (5.0% to 5.30% at 1/1/01) 140,000 140,000 2034 5.25% to 5.45% 238,000 238,000 - ---------------------------------------------------------------------------------------------------------------- Total other long-term debt 1,674,190 1,674,190 - ---------------------------------------------------------------------------------------------------------------- Capital lease obligations (Note 9) 85,179 85,851 - ---------------------------------------------------------------------------------------------------------------- Unamortized debt discount, net (2,622) (2,911) - ---------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $179.6 million) 3,043,747 2,844,130 Less amount due within one year (Note 9) 1,808 155,772 - ----------------------------------------------------------------------------------------------------------------------------------- Total long-term debt excluding amount due within one year $ 3,041,939 $ 2,688,358 37.6 % 36.2 % - -----------------------------------------------------------------------------------------------------------------------------------
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STATEMENTS OF CAPITALIZATION (continued) At December 31, 2000 and 1999 Georgia Power Company 2000 Annual Report - ----------------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Company Obligated Mandatorily Redeemable Preferred Securities (Note 9): $25 liquidation value -- 6.85% $ 200,000 $ 200,000 $25 liquidation value -- 7.60% 175,000 175,000 $25 liquidation value -- 7.75% 189,250 189,250 $25 liquidation value -- 7.75% 225,000 225,000 - ----------------------------------------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $59.1 million) 789,250 789,250 9.7 10.6 - ----------------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock, without par value: Authorized -- 55,000,000 shares Outstanding -- 145,689 shares at December 31, 2000 Outstanding -- 149,520 shares at December 31, 1999 $100 stated value -- 4.60% 14,569 14,952 - ----------------------------------------------------------------------------------------------------------------------------------- Total cumulative preferred stock (annual dividend requirement -- $0.7 million) 14,569 14,952 0.2 0.2 - ----------------------------------------------------------------------------------------------------------------------------------- Common Stockholder's Equity: Common stock, without par value -- Authorized -- 15,000,000 shares Outstanding -- 7,761,500 shares 344,250 344,250 Paid-in capital 2,117,497 1,815,983 Premium on preferred stock 40 40 Retained earnings (Note 9) 1,787,757 1,777,937 - ----------------------------------------------------------------------------------------------------------------------------------- Total common stockholder's equity (See accompanying statements) 4,249,544 3,938,210 52.5 53.0 - ----------------------------------------------------------------------------------------------------------------------------------- Total Capitalization $ 8,095,302 $ 7,430,770 100.0 % 100.0 % - ----------------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
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STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the Years Ended December 31, 2000, 1999, and 1998 Georgia Power Company 2000 Annual Report - -------------------------------------------------------------------------------------------------------------------------------- Premium on Common Paid-In Preferred Retained Stock Capital Stock Earnings Total - -------------------------------------------------------------------------------------------------------------------------------- (in thousands) Balance at January 1, 1998 $344,250 $1,929,971 $160 $1,745,347 $4,019,728 Net income after dividends on preferred stock - - - 570,228 570,228 Capital distributions to parent company - (270,000) - - (270,000) Capital contributions from parent company - 235 - - 235 Cash dividends on common stock - - - (536,600) (536,600) Preferred stock transactions, net - - (2) 583 581 - -------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 344,250 1,660,206 158 1,779,558 3,784,172 Net income after dividends on preferred stock - - - 541,383 541,383 Capital contributions from parent company - 155,777 - - 155,777 Cash dividends on common stock - - - (543,000) (543,000) Preferred stock transactions, net - - (118) (4) (122) - -------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 344,250 1,815,983 40 1,777,937 3,938,210 Net income after dividends on preferred stock - - - 559,420 559,420 Capital contributions from parent company - 301,514 - - 301,514 Cash dividends on common stock - - - (549,600) (549,600) - -------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 $344,250 $2,117,497 $40 $1,787,757 $4,249,544 ================================================================================================================================ The accompanying notes are an integral part of these statements.
II-94 NOTES TO FINANCIAL STATEMENTS Georgia Power Company 2000 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General The Company is a wholly owned subsidiary of Southern Company, which is the parent company of five integrated Southeast utilities, Southern Company Services (SCS), the system service company, Southern Communications Services (Southern LINC), Mirant Corporation (formerly Southern Energy), Southern Nuclear Operating Company (Southern Nuclear), Southern Company Energy Solutions, and other direct and indirect subsidiaries. The integrated Southeast utilities (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four states. Contracts among the integrated Southeast utilities -- related to jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC). SCS provides, at cost, specialized services to Southern Company and subsidiary companies. Southern LINC provides digital wireless communications services to the subsidiary companies and also markets these services to the public within the Southeast. Southern Company Energy Solutions develops new business opportunities related to energy products and services. Southern Nuclear provides services to Southern Company's nuclear power plants. Mirant Corporation acquires, develops, builds, owns, and operates power production and delivery facilities and provides a broad range of energy-related services to utilities and industrial companies in selected countries around the world. Mirant Corporation's businesses include independent power projects, integrated utilities, a distribution company, and energy trading and marketing businesses outside the Southeastern United States. Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company is also subject to regulation by the FERC and the Georgia Public Service Commission (GPSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by the respective regulatory commissions. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from these estimates. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Related-Party Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at cost: general and design engineering, purchasing, accounting and statistical, finance and treasury, tax, information resources, marketing, auditing, insurance and pension, human resources, systems and procedures, and other services with respect to business and operations and power pool operations. Costs for these services amounted to $269 million, $253 million, and $251 million during 2000, 1999, and 1998, respectively. The Company has an agreement with Southern Nuclear under which the following nuclear-related services are rendered to the Company at cost: general executive and advisory services; general operations, management and technical services; administrative services including procurement, accounting and statistical, employee relations, and systems and procedures services; strategic planning and budgeting services; and other services with respect to business and operations. Costs for these services amounted to $281 million, $270 million, and $269 million during 2000, 1999, and 1998, respectively. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. Pursuant to the terms of the GPSC retail rate order, the Company recorded $135 million and $85 million in 2000 and 1999, respectively, of accelerated cost recovery of regulatory assets which have II-95 NOTES (continued) Georgia Power Company 2000 Annual Report been recorded on the balance sheet as a regulatory liability. See Note 3 under "Retail Rate Order" for additional information. Regulatory assets and (liabilities) reflected in the Company's Balance Sheets at December 31 relate to the following: 2000 1999 ---------------------- (in millions) Deferred income taxes $ 566 $ 591 Deferred income tax credits (247) (267) Premium on reacquired debt 174 184 Corporate building lease 55 54 Vacation pay 49 47 Postretirement benefits 30 33 Department of Energy assessments 21 24 Deferred nuclear outage costs 28 26 Accelerated cost recovery (220) (85) Interest, accelerated cost recovery (10) - Other, net 23 3 - --------------------------------------------------------------- Total $ 469 $ 610 =============================================================== In the event that a portion of the Company's operations is no longer subject to the provisions of Statement No. 71, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the Company would be required to determine if any impairment to other assets exists, including plant, and write down the assets, if impaired, to their fair value. Revenues and Fuel Costs The Company currently operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the state of Georgia, and to wholesale customers in the Southeast. Revenues are recognized as services are rendered. Unbilled revenues are accrued at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The Company's fuel cost recovery mechanism includes provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. For all periods presented, uncollectible accounts averaged less than 1 percent of revenues. Fuel expense includes the amortization of the cost of nuclear fuel and a charge, based on nuclear generation, for the permanent disposal of spent nuclear fuel. Total charges for nuclear fuel included in fuel expense amounted to $75 million in 2000, $74 million in 1999, and $74 million in 1998. The Company has a contract with the U.S. Department of Energy (DOE) that provides for the permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of spent fuel in January 1998 as required by the contracts, and the Company is pursuing legal remedies against the government for breach of contract. Effective June 2000, the on-site dry storage facility for Plant Hatch became operational. Sufficient capacity is believed available to continue dry storage operations at Plant Hatch through the life of the plant. Sufficient fuel storage capacity currently is available at Plant Vogtle to maintain full-core discharge capability for both units into the year 2014. Also, the Energy Policy Act of 1992 required the establishment of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. The assessment will be paid over a 15-year period, which began in 1993. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The law provides that utilities will recover these payments in the same manner as any other fuel expense. The Company -- based on its ownership interests -- estimates its remaining liability under this law at December 31, 2000 to be approximately $19 million. This obligation is recorded in the accompanying Balance Sheets. Depreciation and Nuclear Decommissioning Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 3.3 percent in 2000 and 1999, and 3.2 percent in 1998. In addition, pursuant to a GPSC retail rate order, the Company recorded accelerated depreciation of electric plant of $304 million in 1998. Total accelerated depreciation recorded under the GPSC retail rate order was $467 million. These charges are recorded in the accumulated provision for depreciation. When property subject to depreciation is retired or otherwise disposed of in the normal course of II-96 NOTES (continued) Georgia Power Company 2000 Annual Report business, its original cost -- together with the cost of removal, less salvage - -- is charged to accumulated depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected costs of decommissioning nuclear facilities and removal of other facilities. Nuclear Regulatory Commission (NRC) regulations require all licensees operating commercial power reactors to establish a plan for providing, with reasonable assurance, funds for decommissioning. The Company has established external trust funds to comply with the NRC's regulations. Amounts previously recorded in internal reserves are being transferred into the external trust funds over a set period of time as ordered by the GPSC. Earnings on the trust funds are considered in determining decommissioning expense. The NRC's minimum external funding requirements are based on a generic estimate of the cost to decommission the radioactive portions of a nuclear unit based on the size and type of reactor. The Company has filed plans with the NRC to ensure that -- over time -- the deposits and earnings of the external trust funds will provide the minimum funding amounts prescribed by the NRC. The Company periodically conducts site-specific studies to estimate the actual cost of decommissioning its nuclear generating facilities. Site study cost is the estimate to decommission the facility as of the site study year, and ultimate cost is the estimate to decommission the facility as of its retirement date. The estimated site study costs based on the most current study and ultimate costs assuming an inflation rate of 4.7 percent for the Company's ownership interests are as follows: Plant Plant Hatch Vogtle -------------------- Site study basis (year) 2000 2000 Decommissioning periods: Beginning year 2014 2027 Completion year 2042 2045 - ------------------------------------------------------------- (in millions) Site study costs: Radiated structures $486 $420 Non-radiated structures 37 48 - ------------------------------------------------------------- Total $523 $468 ============================================================= (in millions) Ultimate costs: Radiated structures $1,004 $1,468 Non-radiated structures 79 166 - ------------------------------------------------------------- Total $1,083 $1,634 ============================================================= The decommissioning cost estimates are based on prompt dismantlement and removal of the plant from service. The actual decommissioning costs may vary from the above estimates because of changes in the assumed date of decommissioning, changes in the NRC requirements, changes in the assumptions used in making the estimates, changes in regulatory requirements, changes in technology, and changes in costs of labor, materials, and equipment. The Company has filed with the NRC an application requesting a 20-year renewal of the licenses for both units at Plant Hatch which would permit the operation of both units until 2034. Annual provisions for nuclear decommissioning expense are based on an annuity method as approved by the GPSC. The amounts expensed in 2000 and fund balances as of December 31, 2000 were: Plant Plant Hatch Vogtle - ---------------------------------------------------------------- (in millions) Amount expensed in 2000 $ 19 $ 9 ================================================================ (in millions) Accumulated provisions: External trust funds, at fair value $230 $146 Internal reserves 20 12 - ---------------------------------------------------------------- Total $250 $158 ================================================================ Effective January 1, 1999, the GPSC increased the annual provision for decommissioning expenses to $28 million from $20 million in 1998. This amount is based on the NRC generic estimate to decommission the radioactive II-97 NOTES (continued) Georgia Power Company 2000 Annual Report portion of the facilities as of 1997 of $526 million and $438 million for Plants Hatch and Vogtle, respectively. The ultimate costs associated with the 1997 NRC minimum funding requirements are $1.1 billion and $1.3 billion for Plants Hatch and Vogtle, respectively. Significant assumptions include an estimated inflation rate of 3.6 percent and an estimated trust earnings rate of 6.5 percent. The Company expects the GPSC to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. Income Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Allowance for Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new regulated facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. For the years 2000, 1999, and 1998, the average AFUDC rates were 6.74 percent, 5.61 percent, and 6.71 percent, respectively. AFUDC, net of taxes, as a percentage of net income after dividends on preferred stock, was less than 2.0 percent for 2000, 1999 and 1998. Property, Plant, and Equipment Property, plant, and equipment is stated at original cost, less regulatory disallowances and impairments. Original cost includes: materials; labor; payroll-related costs such as taxes, pensions, and other benefits; and the cost of funds used during construction. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive of minor items of property) is capitalized. Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Financial Instruments The Company has a firm commitment that requires payment in euros. As a hedge against fluctuations in the exchange rate for euros, the Company entered into forward currency swaps. The notional amount is 15.9 million euros maturing in 2001 through 2002. At December 31, 2000, the unrecognized gain on these swaps was approximately $1.3 million. The Company's financial instruments for which the carrying amounts did not approximate fair value at December 31 were as follows: Carrying Fair Amount Value ------------------------ Long-term debt: (in millions) At December 31, 2000 $2,959 $2,912 At December 31, 1999 $2,758 $2,604 Preferred securities: At December 31, 2000 $789 $761 At December 31, 1999 $789 $680 - -------------------------------------------------------------- The fair values for securities were based on either closing market prices or closing prices of comparable instruments. Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. 2. RETIREMENT BENEFITS The Company has defined benefit, trusteed pension plans that cover substantially all employees. The Company provides certain medical care and life insurance benefits for retired employees. Substantially all these employees may become eligible for such benefits when they retire. The Company funds postretirement trusts to the extent required by the GPSC and FERC. In late 2000, the Company adopted several pension and postretirement benefits plan changes that had the II-98 NOTES (continued) Georgia Power Company 2000 Annual Report effect of increasing benefits to both current and future retirees. The effects of these changes will be to increase annual pension and postretirement benefits costs by approximately $10 million and $6 million, respectively. The measurement date for plan assets and obligations is September 30 of each year. The weighted average rates assumed in the actuarial calculations for both the pension and postretirement benefit plans were: 2000 1999 - ----------------------------------------------------------------- Discount 7.50% 7.50% Annual salary increase 5.00 5.00 Expected long-term return on plan assets 8.50 8.50 - ----------------------------------------------------------------- Pension Plan Changes during the year in the projected benefit obligations and in the fair value of plan assets were as follows: Projected Benefit Obligations --------------------------- 2000 1999 - ---------------------------------------------------------------- (in millions) Balance at beginning of year $1,205 $1,217 Service cost 32 33 Interest cost 88 80 Benefits paid (58) (57) Actuarial gain and employee transfers (14) (68) - ---------------------------------------------------------------- Balance at end of year $1,253 $1,205 ================================================================ Plan Assets --------------------------- 2000 1999 - ---------------------------------------------------------------- (in millions) Balance at beginning of year $2,107 $1,859 Actual return on plan assets 385 313 Benefits paid (58) (57) Employee transfers 30 (8) - ---------------------------------------------------------------- Balance at end of year $2,464 $2,107 ================================================================ The accrued pension costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in millions) Funded status $ 1,211 $ 902 Unrecognized transition obligation (26) (30) Unrecognized prior service cost 38 41 Unrecognized net actuarial gain (1,018) (767) - --------------------------------------------------------------- Prepaid asset recognized in the Balance Sheets $ 205 $ 146 =============================================================== Components of the plan's net periodic cost were as follows: 2000 1999 1998 - --------------------------------------------------------------- (in millions) Service cost $ 32 $ 33 $ 30 Interest cost 88 80 82 Expected return on plan assets (151) (137) (127) Recognized net actuarial gain (27) (17) (20) Net amortization (1) (1) (1) - --------------------------------------------------------------- Net pension income $ (59) $ (42) $ (36) =============================================================== Postretirement Benefits Changes during the year in the accumulated benefit obligations and in the fair value of plan assets were as follows: Accumulated Benefit Obligations --------------------------- 2000 1999 - ---------------------------------------------------------------- (in millions) Balance at beginning of year $438 $464 Service cost 7 8 Interest cost 36 30 Benefits paid (21) (19) Actuarial gain and employee transfers (28) (45) Amendments 63 - - ---------------------------------------------------------------- Balance at end of year $495 $438 ================================================================ II-99 NOTES (continued) Georgia Power Company 2000 Annual Report Plan Assets --------------------------- 2000 1999 - ---------------------------------------------------------------- (in millions) Balance at beginning of year $177 $150 Actual return on plan assets 12 11 Employer contributions 30 35 Benefits paid (21) (19) - ---------------------------------------------------------------- Balance at end of year $198 $177 ================================================================ The accrued postretirement costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in millions) Funded status $ (297) $ (261) Unrecognized transition obligation 113 122 Unrecognized prior service cost 60 - Unrecognized gain (13) - Unrecognized net actuarial loss - 10 Fourth quarter contributions 27 14 - --------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ (110) $(115) =============================================================== Components of the plans' net periodic cost were as follows: 2000 1999 1998 - --------------------------------------------------------------- (in millions) Service cost $ 7 $ 8 $ 7 Interest cost 36 30 32 Expected return on plan assets (16) (10) (9) Recognized net actuarial loss - 1 1 Net amortization 12 9 9 - ------------------------------------------------------ -------- Net postretirement cost $ 39 $ 38 $40 =============================================================== An additional assumption used in measuring the accumulated postretirement benefit obligations was a weighted average medical care cost trend rate of 7.29 percent for 2000, decreasing gradually to 5.50 percent through the year 2005, and remaining at that level thereafter. An annual increase or decrease in the assumed medical care cost trend rate of 1 percent would affect the accumulated benefit obligation and the service and interest cost components at December 31, 2000 as follows: 1 Percent 1 Percent Increase Decrease - --------------------------------------------------------------- (in millions) Benefit obligation $ 39 $ 34 Service and interest costs 3 3 =============================================================== Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides a 75 percent matching contribution up to 6 percent of an employee's base salary. Total matching contributions made to the plan for the years 2000, 1999, and 1998 were $15 million, $15 million, and $14 million, respectively. 3. CONTINGENCIES & REGULATORY MATTERS Retail Rate Order On December 18, 1998, the GPSC approved a three-year retail rate order for the Company ending December 31, 2001. Under the terms of the order, earnings are evaluated against a retail return on common equity range of 10 percent to 12.5 percent. Retail rates were decreased by $262 million on an annual basis effective January 1, 1999, and by an additional $24 million effective January 1, 2000. The order further provides for $85 million in each year, plus up to $50 million of any earnings above the 12.5 percent return during the second and third years, to be applied to accelerated amortization or depreciation of assets. Two-thirds of any additional earnings above the 12.5 percent return will be applied to rate reductions, with the remaining one-third retained by the Company. Pursuant to the order, in 2000 and 1999, the Company recorded $85 million each year in accelerated amortization of regulatory assets. In 2000, the Company also recorded the additional $50 million of accelerated amortization. The accelerated amortization is recorded in a regulatory liability account and, as mandated by the GPSC, the Company recorded $10 million of interest on the amounts in the regulatory liability account. In addition, the Company recorded $44 million and $79 million of revenue subject to refund for estimated earnings above 12.5 percent retail return on common equity in 2000 and 1999, respectively. Refunds applicable to 1999 were made to customers in 2000. The estimated 2000 refund is included in other current liabilities on the Balance Sheet. The Company will file a general rate case on July 2, 2001, in response to II-100 NOTES (continued) Georgia Power Company 2000 Annual Report which the GPSC would be expected to determine whether the rate order should be continued, modified, or discontinued. Environmental Protection Agency (EPA) Litigation On November 3, 1999, the EPA brought a civil action in the U.S. District Court for the Northern District of Georgia. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to coal-fired generating facilities at the Company's Bowen and Scherer plants. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units beginning at the point of the alleged violations. The Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. The EPA concurrently issued a notice of violation to the Company relating to these two plants. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation. The complaint and the notice of violation are similar to those brought against and issued to several other electric utilities. The complaint and the notice of violation allege that the Company failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. The Company believes that it complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition unless such costs can be recovered through regulated rates. Other Environmental Contingencies In January 1995, the Company and four other unrelated entities were notified by the EPA that they have been designated as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act with respect to a site in Brunswick, Georgia. As of December 31, 2000, the Company has recognized approximately $5 million in cumulative expenses associated with the Company's agreed upon share of removal and remedial investigation and feasibility study costs for this site. The final outcome of this matter cannot now be determined. However, based on the nature and extent of the Company's activities relating to the site, management believes that the Company's portion of any remaining remediation costs should not be material to the financial statements. In compliance with the Georgia Hazardous Site Response Act of 1993, the State of Georgia was required to compile an inventory of all known or suspected sites where hazardous wastes, constituents, or substances have been disposed of or released in quantities deemed reportable by the State. In developing this list, the State identified several hundred properties throughout the State, including 34 sites which may require environmental remediation that were either previously or are currently owned by the Company. The majority of these sites are electrical power substations and power generation facilities. The Company has remediated ten electrical substations on the list at a cumulative cost of approximately $3 million through December 31, 2000. The State has removed from the list three power generation facilities following the assessment which indicated no remediation was necessary. In addition, the Company has recognized approximately $27.5 million in cumulative expenses through December 31, 2000 for the assessment of the remaining sites on the list and the anticipated clean-up cost for 14 sites that the Company plans to remediate. Any additional costs of remediating the remaining sites cannot presently be determined until such studies are completed for each site and the State determines whether remediation is required. If all listed sites were required to be remediated, the Company could incur expenses of up to approximately $5 million in additional clean-up costs and construction expenditures of up to approximately $37 million to develop new waste management facilities or install additional pollution control devices. Nuclear Performance Standards The GPSC has adopted a nuclear performance standard for the Company's nuclear generating units under which the performance of Plants Hatch and Vogtle is evaluated every three years. The performance standard is based on each unit's capacity factor as compared to the average of all comparable U.S. nuclear units II-101 NOTES (continued) Georgia Power Company 2000 Annual Report operating at a capacity factor of 50 percent or higher during the three-year period of evaluation. Depending on the performance of the units, the Company could receive a monetary award or penalty under the performance standards criteria. In January 1997, the GPSC approved a performance award of approximately $11.7 million for performance during the 1993-1995 period. This award was collected through the retail fuel cost recovery provision and recognized in income over the 36-month period ending in December 1999. In February 2000, the GPSC approved a performance award of approximately $7.8 million for performance during the 1996-1998 period. This award is being collected through the retail fuel cost recovery provision and recognized in income over a 36-month period that began in January 2000, as mandated by the GPSC. Race Discrimination Litigation On July 28, 2000, a lawsuit alleging race discrimination was filed by three Georgia Power employees against the Company, Southern Company, and SCS in the United States District Court for the Northern District of Georgia. The lawsuit also raised claims on behalf of a purported class. The plaintiffs seek compensatory and punitive damages in an unspecified amount, as well as injunctive relief. On August 14, 2000, the lawsuit was amended to add four more plaintiffs and a new defendant, Southern Company Energy Solutions, Inc. The lawsuit is in the discovery stage. The final outcome of this case cannot now be determined. 4. COMMITMENTS Construction Program The Company is constructing Plant Dahlberg, a ten unit, 800 megawatt combustion turbine peaking power plant. Units one through eight began operation in May 2000; units nine and ten are expected to begin operation in June 2001. The Company is also constructing a 571 megawatt combined cycle unit and a 610 megawatt combined cycle unit at Plant Goat Rock that will begin operation in 2002 and in 2003, respectively, and an addition of two 566 megawatt combined cycle units at Plant Wansley, to begin operation in 2002. During 2001, the Company plans to transfer the units at Plants Dahlberg, Goat Rock, and Wansley at net book value to Southern Power Company (SPC), a new subsidiary formed by Southern Company. Significant construction of transmission and distribution facilities, and projects to upgrade and extend the useful life of generating plants and to remain in compliance with environmental requirements will continue. The Company currently estimates property additions to be approximately $1.6 billion in 2001, $1.3 billion in 2002, and $0.8 billion in 2003. If the Company transfers wholesale generation assets to SPC in 2001 as contemplated, construction expenditures for the years 2001 through 2003 will total $1.0 billion, $0.9 billion, and $0.7 billion, respectively. The construction program is subject to periodic review and revision, and actual construction costs may vary from estimates because of numerous factors, including, but not limited to, changes in business conditions, load growth estimates, environmental regulations, and regulatory requirements. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement of fossil and nuclear fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Total estimated long-term fossil and nuclear fuel commitments at December 31, 2000 were as follows: Minimum Year Obligations - ---- ----------------- (in millions) 2001 $1,006 2002 625 2003 586 2004 430 2005 342 2006 and beyond 873 - ------------------------------------------------------------- Total minimum obligations $3,862 ============================================================= Additional commitments for coal and for nuclear fuel will be required in the future to supply the Company's fuel needs. Purchased Power Commitments The Company and an affiliate, Alabama Power Company, own equally all of the outstanding capital stock of Southern Electric Generating Company (SEGCO), which II-102 NOTES (continued) Georgia Power Company 2000 Annual Report owns electric generating units with a total rated capacity of 1,020 megawatts, as well as associated transmission facilities. The capacity of the units has been sold equally to the Company and Alabama Power Company under a contract which, in substance, requires payments sufficient to provide for the operating expenses, taxes, debt service, and return on investment, whether or not SEGCO has any capacity and energy available. The term of the contract extends automatically for two-year periods, subject to either party's right to cancel upon two year's notice. The Company's share of expenses included in purchased power from affiliates in the Statements of Income is as follows: 2000 1999 1998 --------------------------------- (in millions) Energy $57 $51 $45 Capacity 30 29 30 - -------------------------------------------------------------- Total $87 $80 $75 ============================================================== Kilowatt-hours 3,835 3,338 3,146 - -------------------------------------------------------------- The Company has commitments regarding a portion of a 5 percent interest in Plant Vogtle owned by Municipal Electric Authority of Georgia (MEAG) that are in effect until the latter of the retirement of the plant or the latest stated maturity date of MEAG's bonds issued to finance such ownership interest. The payments for capacity are required whether or not any capacity is available. The energy cost is a function of each unit's variable operating costs. Except as noted below, the cost of such capacity and energy is included in purchased power from non-affiliates in the Company's Statements of Income. Capacity payments totaled $58 million, $57 million, and $56 million in 2000, 1999, and 1998, respectively. The current projected Plant Vogtle capacity payments are: Year Capacity Payments ---------------------- (in millions) 2001 $ 59 2002 58 2003 58 2004 55 2005 55 2006 and beyond 539 - ---------------------------------------------------------------- Total capacity payments $ 824 ================================================================ Portions of the payments noted above relate to costs in excess of Plant Vogtle's allowed investment for ratemaking purposes. The present value of these portions was written off in 1987 and 1990. The Company has entered into other various long-term commitments for the purchase of electricity. Estimated total long-term obligations at December 31, 2000 were as follows: Year Other Obligations ---------------------- (in millions) 2001 $ 22 2002 39 2003 41 2004 40 2005 40 2006 and beyond 154 - ---------------------------------------------------------------- Total other obligations $336 ================================================================ Operating Leases The Company has entered into coal rail car rental agreements with various terms and expiration dates. These expenses totaled $16 million for 2000, $11 million for 1999, and $13 million for 1998. At December 31, 2000, estimated minimum rental commitments for these noncancelable operating leases were as follows: Year Minimum Obligations -------------------------- (in millions) 2001 $ 15 2002 15 2003 15 2004 16 2005 14 2006 and beyond 102 - ----------------------------------------------------------------- Total minimum obligations $ 177 ================================================================= 5. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988, the Company maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at the Company's nuclear power plants. The Act provides funds up to $9.5 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $200 million by private insurance, with the remaining coverage provided by a mandatory program II-103 NOTES (continued) Georgia Power Company 2000 Annual Report of deferred premiums that could be assessed, after a nuclear incident, against all owners of nuclear reactors. The Company could be assessed up to $88 million per incident for each licensed reactor it operates but not more than an aggregate of $10 million per incident to be paid in a calendar year for each reactor. Such maximum assessment for the Company, excluding any applicable state premium taxes -- based on its ownership and buyback interests -- is $178 million per incident but not more than an aggregate of $20 million to be paid for each incident in any one year. The Company is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. Additionally, the Company has policies that currently provide decontamination, excess property insurance, and premature decommissioning coverage up to $2.25 billion for losses in excess of the $500 million primary coverage. This excess insurance is also provided by NEIL. NEIL also covers the additional costs that would be incurred in obtaining replacement power during a prolonged accidental outage at a member's nuclear plant. Members can be insured against increased costs of replacement power in an amount up to $3.5 million per week -- starting 12 weeks after the outage -- for one year and up to $2.8 million per week for the second and third years. Under each of the NEIL policies, members are subject to assessments if losses each year exceed the accumulated funds available to the insurer under that policy. The current maximum annual assessments for the Company under the three NEIL policies would be $19 million. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies should be dedicated first for the sole purpose of placing the reactor in a safe and stable condition after an accident. Any remaining proceeds are to be applied next toward the costs of decontamination and debris removal operations ordered by the NRC, and any further remaining proceeds are to be paid either to the Company or to its bond trustees as may be appropriate under the policies and applicable trust indentures. All retrospective assessments, whether generated for liability, property, or replacement power, may be subject to applicable state premium taxes. 6. JOINT OWNERSHIP AGREEMENTS Except as otherwise noted, the Company has contracted to operate and maintain all jointly owned generating facilities. The Company jointly owns the Rocky Mountain pumped storage hydroelectric plant with Oglethorpe Power Company who is the operator of the plant. The Company also jointly owns Plant McIntosh with Savannah Electric and Power Company who operates the plant. The Company and Florida Power Corporation (FPC) jointly own a combustion turbine unit (Intercession City) operated by FPC. The Company includes its proportionate share of plant operating expenses in the corresponding operating expenses in the Statements of Income. At December 31, 2000, the Company's percentage ownership and investment (exclusive of nuclear fuel) in jointly owned facilities in commercial operation were as follows: Company Accumulated Facility (Type) Ownership Investment Depreciation - -------------------------------------------------------------------- (in millions) Plant Vogtle (nuclear) 45.7% $3,301* $1,724 Plant Hatch (nuclear) 50.1 873 650 Plant Wansley (coal) 53.5 300 150 Plant Scherer (coal) Units 1 and 2 8.4 112 53 Unit 3 75.0 545 207 Plant McIntosh Common Facilities 75.0 19 2 (combustion-turbine) Rocky Mountain 25.4 169* 72 (pumped storage) Intercession City 33.3 11 1 (combustion-turbine) - -------------------------------------------------------------------- * Investment net of write-offs. 7. LONG-TERM POWER SALES AND LEASE AGREEMENTS The Company and the other integrated Southeast utilities of Southern Company have long-term contractual agreements for the sale of capacity and energy to non-affiliated utilities located outside the system's service area. These II-104 NOTES (continued) Georgia Power Company 2000 Annual Report agreements consist of firm unit power sales pertaining to capacity from specific generating units. Because energy is generally sold at cost under these agreements, it is primarily the capacity revenues that affect the Company's profitability. The Company's capacity revenues were as follows: Year Revenues Capacity ------------------------------------- (in millions) (megawatts) 2000 $ 30 124 1999 32 162 1998 32 162 ------------------------------------- Unit power from specific generating plants is being sold to Florida Power & Light Company, FPC, and Jacksonville Electric Authority. Under these agreements, approximately 102 megawatts of capacity is scheduled to be sold annually for periods after 2000 with a minimum of three years notice until the expiration of the contracts in 2010. During 2000, the Company entered into certain operating leases for portions of its generating unit capacity. Minimum future capacity revenues from noncancelable operating leases as of December 31, 2000 were as follows: Year Minimum Obligations -------------------------- (in millions) 2001 $ 41 2002 45 2003 45 2004 45 2005 5 2006 and beyond - - ----------------------------------------------------------------- Total minimum obligations $181 ================================================================= 8. INCOME TAXES At December 31, 2000, tax-related regulatory assets were $566 million and tax-related regulatory liabilities were $247 million. The assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized interest. The liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are as follows: 2000 1999 1998 ------------------------------- Total provision for income taxes: (in millions) Federal: Current $ 342 $333 $415 Deferred (34) (34) (87) Deferred investment tax credits - - 7 - ----------------------------------------------------------------- 308 299 335 - ----------------------------------------------------------------- State: Current 48 54 77 Deferred (5) (6) (13) Deferred investment tax credits 10 5 - - ----------------------------------------------------------------- Total $361 $352 $399 ================================================================= The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 2000 1999 ------------------------ (in millions) Deferred tax liabilities: Accelerated depreciation $ 1,755 $1,766 Property basis differences 683 729 Other 243 155 - ------------------------------------------------------------------ Total 2,681 2,650 - ------------------------------------------------------------------ Deferred tax assets: Other property basis differences 189 200 Federal effect of state deferred taxes 91 93 Other deferred costs 208 109 Other 37 48 - ------------------------------------------------------------------ Total 525 450 - ------------------------------------------------------------------ Net deferred tax liabilities 2,156 2,200 Portion included in current assets 27 3 - ------------------------------------------------------------------ Accumulated deferred income taxes in the Balance Sheets $ 2,183 $2,203 ================================================================== Deferred investment tax credits are amortized over the life of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $15 million in 2000 and 1999, and $22 million in 1998. At December 31, 2000, all investment tax credits available to reduce federal income taxes payable had been utilized. II-105 NOTES (continued) Georgia Power Company 2000 Annual Report A reconciliation of the federal statutory tax rate to the effective income tax rate is as follows: 2000 1999 1998 -------------------------- Federal statutory rate 35% 35% 35% State income tax, net of federal deduction 4 4 4 Non-deductible book depreciation 2 2 6 Other (2) (2) (4) - --------------------------------------------------------------- Effective income tax rate 39% 39% 41% =============================================================== Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. 9. CAPITALIZATION First Mortgage Bond Indenture Restrictions The Company's first mortgage bond indenture contains various restrictions that remain in effect as long as the bonds are outstanding. At December 31, 2000, $891 million of retained earnings and paid-in capital was unrestricted for the payment of cash dividends or any other distributions under terms of the mortgage indenture. If additional first mortgage bonds are issued, supplemental indentures in connection with those issues may contain more stringent restrictions than those currently in effect. The Company has no restrictions on the amount of indebtedness it may incur. Preferred Securities Statutory business trusts formed by the Company, of which the Company owns all the common securities, have issued mandatorily redeemable preferred securities as follows: Date of Maturity Issue Amount Rate Notes Date --------------------------------------------------- (millions) (millions) Trust I 8/1996 $225.00 7.75% $232 6/2036 Trust II 1/1997 175.00 7.60 180 12/2036 Trust III 6/1997 189.25 7.75 195 3/2037 Trust IV 2/1999 200.00 6.85 206 3/2029 Substantially all of the assets of each trust are junior subordinated notes issued by the Company in the respective approximate principal amounts set forth above. The Company considers that the mechanisms and obligations relating to the preferred securities, taken together, constitute a full and unconditional guarantee by the Company of the Trusts' payment obligations with respect to the preferred securities. The Trusts are subsidiaries of the Company, and accordingly are consolidated in the Company's financial statements. Pollution Control Bonds The Company has incurred obligations in connection with the sale by public authorities of tax-exempt pollution control revenue bonds. The Company has authenticated and delivered to trustees an aggregate of $378.8 million of its first mortgage bonds outstanding at December 31, 2000, which are pledged as security for its obligations under pollution control revenue contracts. No interest on these first mortgage bonds is payable unless and until a default occurs on the installment purchase or loan agreements. Senior Notes In February 2000 and February 2001, the Company issued unsecured senior notes. The proceeds of these issues were used to redeem higher cost long-term debt and to reduce short-term borrowing. The senior notes are, in effect, subordinated to all secured debt of the Company, including its first mortgage bonds. Bank Credit Arrangements At the beginning of 2001, the Company had unused credit arrangements with banks totaling $1.8 billion, of which $1.3 billion expires at various times during 2001, and $500 million expires at April 24, 2003. Of the total $1.8 billion in unused credit, $1.65 billion is a syndicated credit arrangement with $1.15 billion expiring April 20, 2001, and $500 million expiring April 24, 2003. Upon expiration, the $1.15 billion agreement provides the option of converting borrowings into two-year term loans. Both agreements contain stated borrowing rates but also allow for competitive bid loans. In II-106 NOTES (continued) Georgia Power Company 2000 Annual Report addition, the agreements require payment of commitment fees based on the unused portions of the commitments. Annual fees are also paid to the agent bank. Approximately $115 million of the $1.3 billion arrangements expiring during 2001 allow for two-year term loans executable upon the expiration date of the facilities. All of the arrangements include stated borrowing rates but also allow for negotiated rates. These agreements also require payment of commitment fees based on the unused portion of the commitments or the maintenance of compensating balances with the banks. These balances are not legally restricted from withdrawal. This $1.8 billion in unused credit arrangements provides liquidity support to the Company's variable rate pollution control bonds. The amount of variable rate pollution control bonds outstanding requiring that liquidity support as of December 31, 2000 was $979 million. In addition, the Company borrows under uncommitted lines of credit with banks and through a $750 million commercial paper program that has the liquidity support of committed bank credit arrangements. Average compensating balances held under these committed facilities were not material in 2000. Other Long-Term Debt Assets acquired under capital leases are recorded in the Balance Sheets as utility plant in service, and the related obligations are classified as long-term debt. At December 31, 2000 and 1999, the Company had a capitalized lease obligation for its corporate headquarters building of $87 million with an interest rate of 8.1 percent. The lease agreement provides for payments that are minimal in early years and escalate through the first 21 years of the lease. For ratemaking purposes, the GPSC has treated the lease as an operating lease and has allowed only the lease payments in cost of service. The difference between the accrued expense and the lease payments allowed for ratemaking purposes is being deferred as a cost to be recovered in the future as ordered by the GPSC. At December 31, 2000 and 1999, the interest and lease amortization deferred on the Balance Sheets are $55 million and $54 million, respectively. Assets Subject to Lien The Company's mortgage dated as of March 1, 1941, as amended and supplemented, securing the first mortgage bonds issued by the Company, constitutes a direct lien on substantially all of the Company's fixed property and franchises. Securities Due Within One Year A summary of the improvement fund requirements and scheduled maturities and redemptions of securities due within one year at December 31 is as follows: 2000 1999 ------------------- (in millions) Bond improvement fund requirements $ - $ 5 Capital lease - current portion 2 1 First mortgage bond maturities and redemptions - 100 Pollution control bond maturities and redemptions - 50 - --------------------------------------------------------------- Total long-term debt $2 $156 =============================================================== The Company's first mortgage bond indenture includes an improvement fund requirement that amounts to 1 percent of each outstanding series of bonds authenticated under the indenture prior to January 1 of each year, other than those issued to collateralize pollution control obligations. The requirement may be satisfied by June 1 of each year by depositing cash, reacquiring bonds, or by pledging additional property equal to 1 2/3 times the requirement. Redemption of Securities The Company plans to continue, to the extent possible, a program of redeeming or replacing debt and preferred securities in cases where opportunities exist to reduce financing costs. Issues may be repurchased in the open market or called at premiums as specified under terms of the issue. They may also be redeemed at face value to meet improvement fund requirements, to meet replacement provisions of the mortgage, or through use of proceeds from the sale of property pledged under the mortgage. II-107 NOTES (continued) Georgia Power Company 2000 Annual Report 10. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial information for 2000 and 1999 is as follows: Net Income After Operating Operating Dividends on Quarter Ended Revenues Income Preferred Stock - --------------------------------------------------------------------- (in millions) -------------------------------------------- March 2000 $ 992 $223 $ 94 June 2000 1,221 311 148 September 2000 1,545 537 283 December 2000 1,113 162 34 March 1999 $ 931 $224 $ 92 June 1999 1,092 299 138 September 1999 1,466 557 296 December 1999 968 115 15 - --------------------------------------------------------------------- Under the GPSC retail rate order, the Company recorded $135 million and $85 million of accelerated amortization in 2000 and 1999, respectively, which were recorded monthly as an operating expense. The fourth quarter December 1999 operating income has been restated to reflect the accelerated amortization as an operating expense rather than as amortization of premium on reacquired debt. See Note 3 to the financial statements under "Retail Rate Order" for additional information. The Company's business is influenced by seasonal weather conditions. II-108
SELECTED FINANCIAL AND OPERATING DATA 1996-2000 Georgia Power Company 2000 Annual Report - -------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $4,870,618 $4,456,675 $4,738,253 $4,385,717 $4,416,779 Net Income after Dividends on Preferred Stock (in thousands) $559,420 $541,383 $570,228 $593,996 $580,327 Cash Dividends on Common Stock (in thousands) $549,600 $543,000 $536,600 $520,000 $475,500 Return on Average Common Equity (percent) 13.66 14.02 14.61 14.53 13.73 Total Assets (in thousands) $13,133,609 $12,361,860 $12,033,618 $12,573,728 $13,006,635 Gross Property Additions (in thousands) $1,078,163 $790,464 $499,053 $475,921 $428,220 - -------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stockholder's equity $4,249,544 $3,938,210 $3,784,172 $4,019,728 $4,154,281 Preferred stock 14,569 14,952 15,527 157,247 464,611 Company obligated mandatorily redeemable preferred securities 789,250 789,250 689,250 689,250 325,000 Long-term debt 3,041,939 2,688,358 2,744,362 2,982,835 3,200,419 - -------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $8,095,302 $7,430,770 $7,233,311 $7,849,060 $8,144,311 ================================================================================================================================ Capitalization Ratios (percent): Common stockholder's equity 52.5 53.0 52.3 51.2 51.0 Preferred stock 0.2 0.2 0.2 2.0 5.7 Company obligated mandatorily redeemable preferred securities 9.7 10.6 9.5 8.8 4.0 Long-term debt 37.6 36.2 38.0 38.0 39.3 - -------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0 ================================================================================================================================ Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 A1 A1 Standard and Poor's A A+ A+ A+ A+ Fitch AA- AA- AA- AA- AA- Preferred Stock - Moody's a2 a2 a2 a2 a2 Standard and Poor's BBB+ A- A A A Fitch A A+ A+ A+ A+ Unsecured Long-Term Debt - Moody's A2 A2 A2 A2 A2 Standard and Poor's A A A A A Fitch A+ A+ A+ A+ A+ ================================================================================================================================ Customers (year-end): Residential 1,669,566 1,632,450 1,596,488 1,561,675 1,531,453 Commercial 237,977 229,524 221,180 211,672 205,087 Industrial 8,533 8,958 9,485 9,988 10,424 Other 3,159 3,060 3,034 2,748 2,645 - -------------------------------------------------------------------------------------------------------------------------------- Total 1,919,235 1,873,992 1,830,187 1,786,083 1,749,609 ================================================================================================================================ Employees (year-end): 8,855 8,961 8,371 8,354 10,346 - --------------------------------------------------------------------------------------------------------------------------------
II-109
SELECTED FINANCIAL AND OPERATING DATA 1996-2000 (continued) Georgia Power Company 2000 Annual Report - ------------------------------------------------------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------ Operating Revenues (in thousands): Residential $ 1,535,684 $1,410,099 $ 1,486,699 $ 1,326,787 $ 1,371,033 Commercial 1,620,466 1,527,880 1,591,363 1,493,353 1,486,586 Industrial 1,154,789 1,143,001 1,170,881 1,110,311 1,118,633 Other 6,399 (30,892) 49,274 47,848 47,060 - ------------------------------------------------------------------------------------------------------------------------------ Total retail 4,317,338 4,050,088 4,298,217 3,978,299 4,023,312 Sales for resale - non-affiliates 297,643 210,104 259,234 282,365 281,580 Sales for resale - affiliates 96,150 76,426 81,606 38,708 35,886 - ------------------------------------------------------------------------------------------------------------------------------ Total revenues from sales of electricity 4,711,131 4,336,618 4,639,057 4,299,372 4,340,778 Other revenues 159,487 120,057 99,196 86,345 76,001 - ------------------------------------------------------------------------------------------------------------------------------ Total $4,870,618 $4,456,675 $4,738,253 $4,385,717 $4,416,779 ============================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 20,693,481 19,404,709 19,481,486 17,295,022 17,826,451 Commercial 25,628,402 23,715,485 22,861,391 21,134,346 20,823,073 Industrial 27,543,265 27,300,355 27,283,147 26,701,685 26,191,831 Other 568,906 551,451 543,462 538,163 536,057 - ------------------------------------------------------------------------------------------------------------------------------ Total retail 74,434,054 70,972,000 70,169,486 65,669,216 65,377,412 Sales for resale - non-affiliates 6,463,723 5,060,931 6,438,891 6,795,300 7,868,342 Sales for resale - affiliates 2,435,106 1,795,243 2,038,400 1,706,699 1,180,207 - ------------------------------------------------------------------------------------------------------------------------------ Total 83,332,883 77,828,174 78,646,777 74,171,215 74,425,961 ============================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.42 7.27 7.63 7.67 7.69 Commercial 6.32 6.44 6.96 7.07 7.14 Industrial 4.19 4.19 4.29 4.16 4.27 Total retail 5.80 5.71 6.13 6.06 6.15 Sales for resale 4.43 4.18 4.02 3.78 3.51 Total sales 5.65 5.57 5.90 5.80 5.83 Residential Average Annual Kilowatt-Hour Use Per Customer 12,520 12,006 12,314 11,171 11,763 Residential Average Annual Revenue Per Customer $929.11 $872.47 $939.73 $857.01 $904.70 Plant Nameplate Capacity Ratings (year-end) (megawatts) 15,114 14,474 14,437 14,437 14,367 Maximum Peak-Hour Demand (megawatts): Winter 12,014 11,568 11,959 10,407 10,410 Summer 14,930 14,575 13,923 13,153 12,914 Annual Load Factor (percent) 61.6 58.9 58.7 57.4 62.2 Plant Availability (percent): Fossil-steam 86.1 84.3 86.0 85.8 85.2 Nuclear 91.5 89.3 91.6 88.8 89.3 - ------------------------------------------------------------------------------------------------------------------------------ Source of Energy Supply (percent): Coal 62.3 63.0 62.3 64.3 60.4 Nuclear 17.4 18.0 18.3 18.8 18.2 Hydro 0.7 0.9 2.2 2.2 2.2 Oil and gas 1.8 1.6 2.2 0.6 0.5 Purchased power - From non-affiliates 8.1 6.6 6.5 2.7 5.6 From affiliates 9.7 9.9 8.5 11.4 13.1 - ------------------------------------------------------------------------------------------------------------------------------ Total 100.0 100.0 100.0 100.0 100.0 ==============================================================================================================================
II-110 GULF POWER COMPANY FINANCIAL SECTION II-111 MANAGEMENT'S REPORT Gulf Power Company 2000 Annual Report The management of Gulf Power Company has prepared -- and is responsible for -- the financial statements and related information included in this report. These statements were prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the accounting records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of independent directors provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted according to a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Gulf Power Company in conformity with accounting principles generally accepted in the United States. /s/Travis J. Bowden Travis J. Bowden President and Chief Executive Officer /s/Ronnie R. Labrato Ronnie R. Labrato Comptroller and Chief Financial Officer II-112 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Gulf Power Company: We have audited the accompanying balance sheets and statements of capitalization of Gulf Power Company (a Maine corporation and a wholly owned subsidiary of Southern Company) as of December 31, 2000 and 1999, and the related statements of income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-123 through II-137) referred to above present fairly, in all material respects, the financial position of Gulf Power Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/Arthur Andersen LLP Atlanta, Georgia February 28, 2001 II-113 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Gulf Power Company 2000 Annual Report RESULTS OF OPERATIONS Earnings Gulf Power Company's 2000 net income after dividends on preferred stock was $51.8 million, a decrease of $1.9 million from the previous year. In 1999, earnings were $53.7 million, down $2.8 million when compared to 1998. The decrease in earnings in 2000, as well as 1999, was primarily a result of higher expenses than in the prior year. Revenues Operating revenues increased in 2000 when compared to 1999. The following table summarizes the change in operating revenues for the past two years: Increase (Decrease) Amount From Prior Year ------------------------------------- 2000 2000 1999 ------------------------------------- (in thousands) Retail -- Base Revenues $336,103 $3,771 $2,469 Regulatory cost recovery and other 226,059 45,631 1,173 - ------------------------------------------------------------------ Total retail 562,162 49,402 3,642 - ------------------------------------------------------------------ Sales for resale-- Non-affiliates 66,890 4,537 461 Affiliates 66,995 885 23,468 - ------------------------------------------------------------------ Total sales for resale 133,885 5,422 23,929 Other operating revenues 18,272 (14,604) (3,990) - ------------------------------------------------------------------ Total operating revenues $714,319 $40,220 $23,581 ================================================================== Percent change 6.0% 3.6% - ------------------------------------------------------------------ Retail revenues of $562.2 million in 2000 increased $49.4 million, or 9.6 percent, from the prior year due primarily to the recovery of higher fuel and purchased power costs. Retail base rate revenues increased $3.8 million due to increased customer growth and hotter than normal weather, offset by a $10 million permanent annual rate reduction and $6.9 million of revenues subject to refund based upon the current retail revenue sharing plan (See Note 3 to the financial statements under "Retail Revenue Sharing Plan" for further information). Retail revenues for 1999 increased $3.6 million, or 0.7 percent, when compared to 1998 due primarily to an increase in the number of retail customers served by the Company. The 2000 increase in regulatory cost recovery and other retail revenues over 1999 is primarily attributable to higher fuel and purchased power costs. The 1999 increase in regulatory cost recovery and other retail revenues over 1998 is primarily attributable to the recovery of increased purchased power capacity costs. "Regulatory cost recovery and other" includes the following: recovery provisions for fuel expense and the energy component of purchased power costs; energy conservation costs; purchased power capacity costs; and environmental compliance costs. The recovery provisions generally equal the related expenses and have no material effect on net income. See Notes 1 and 3 to the financial statements under "Revenues and Regulatory Cost Recovery Clauses" and "Environmental Cost Recovery," respectively, for further information. Sales for resale were $133.9 million in 2000, an increase of $5.4 million, or 4.2 percent, over 1999 primarily due to additional energy sales. Revenues from sales to utilities outside the service area under long-term contracts consist of capacity and energy components. Capacity revenues reflect the recovery of fixed costs and a return on investment under the contracts. Energy is generally sold at variable cost. The capacity and energy components under these long-term contracts were as follows: 2000 1999 1998 ---------------------------------------- (in thousands) Capacity $20,270 $19,792 $22,503 Energy 21,922 20,251 14,556 - ------------------------------------------------------------- Total $42,192 $40,043 $37,059 ============================================================= Capacity revenues increased slightly in 2000 due to the recovery of higher operating expenses experienced during the year. Capacity revenues had been declining in prior years due to the decreasing net investment related to these sales. This downward trend accelerated during 1999 as a result of a reduction in the authorized rate of return on the equity component of the investment. Sales to affiliated companies vary from year to year depending on demand and the availability and cost of generating resources at each company. These sales have little impact on earnings. Other operating revenues decreased in 2000 and in 1999 due primarily to the retail recovery clause adjustments for the difference between recoverable costs and the amounts actually reflected in current rates. See Notes 1 and 3 to the financial statements under "Revenues and Regulatory Cost Recovery Clauses" and "Environmental Cost Recovery," respectively, for further discussion. II-114 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 2000 Annual Report Energy Sales Kilowatt-hour sales for 2000 and the percent changes by year were as follows: KWH Percent Change ---------------------------------- 2000 2000 1999 ---------------------------------- (millions) Residential 4,790 7.1% 0.8% Commercial 3,379 4.9 3.6 Industrial 1,925 4.3 0.7 Other 19 0.0 0.0 -------- Total retail 10,113 5.8 1.7 Sales for resale Non-affiliates 1,705 9.2 16.4 Affiliates 1,917 (23.7) 42.9 -------- Total 13,735 0.7 9.0 ======================================================= In 2000, total retail energy sales increased when compared to 1999 due primarily to an increase in the total number of customers and hotter than normal weather. Total retail energy sales increased in 1999 when compared to 1998 due to increases in the number of customers. See "Future Earnings Potential" for information on the Company's initiatives to remain competitive and to meet conservation goals set by the Florida Public Service Commission (FPSC). An increase in energy sales for resale to non-affiliates of 9.2 percent in 2000 when compared to 1999 is primarily related to unit power sales under long-term contracts to other Florida utilities and bulk power sales under short-term contracts to other non-affiliated utilities. Energy sales to affiliated companies vary from year to year depending on demand and availability and cost of generating resources at each company. Expenses Total operating expenses in 2000 increased $39.5 million, or 7.1 percent, over the amount recorded in 1999 due primarily to higher fuel and purchased power expenses. In 1999, total operating expenses increased $26.8 million, or 5.1 percent, compared to 1998 due primarily to higher fuel, purchased power, and maintenance expenses offset by lower other operation expenses. Fuel expenses in 2000, when compared to 1999, increased $6.7 million, or 3.2 percent, due primarily to an increase in average fuel costs. In 1999, fuel expenses increased $11.5 million, or 5.9 percent, when compared to 1998. The increases were the result of increased generation resulting from a higher demand for energy. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated were as follows: 2000 1999 1998 ------------------------------- Total generation (millions of kilowatt-hours) 12,866 13,095 11,986 Sources of generation (percent) Coal 98.2 97.4 98.0 Oil and gas 1.8 2.6 2.0 Average cost of fuel per net kilowatt-hour generated (cents)-- 1.68 1.60 1.69 - --------------------------------------------------------------------- Purchased power expenses increased in 2000 by $25.5 million, or 44.7 percent, over 1999 and purchased power expenses for 1999 increased over 1998 by $13.2 million, or 30.2 percent, due primarily to a higher demand for energy in both years. Depreciation and amortization expense increased $2.3 million, or 3.5 percent, in 2000 when compared to 1999, due to an increase in depreciable property and the amortization of a portion of a regulatory asset, which was allowed in the current retail revenue sharing plan. The $5.5 million, or 9.2 percent, increase in 1999 compared to 1998 was due primarily to a reduction in the amortization of gains from the 1998 sale of emission allowances. Interest on long-term debt, which is included in "Interest expense", increased $1.2 million, or 5.8 percent, in 2000 when compared to 1999 due primarily to the issuance of $50 million of senior notes in August 1999. In 1999 interest on long-term debt increased $1.7 million, or 8.4 percent, when compared to 1998 due primarily to the maturity of two first mortgage bond series in 1998 which were replaced by senior notes at a slightly higher interest rate, and the issuance of $50 million of senior notes in August 1999. Effects of Inflation The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its cost of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in II-115 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 2000 Annual Report recent years, it continues to have an adverse effect on the Company because of the large investment in utility plant with long economic lives. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations, such as long-term debt and preferred securities. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors. The major factor is the ability to achieve energy sales growth while containing cost in a more competitive environment. In accordance with Financial Accounting Standards Board (FASB) Statement No. 87, Employers' Accounting for Pensions, the Company recorded non-cash income of approximately $5.8 million in 2000. Pension income in 2001 is expected to be less as a result of plan amendments. Future pension income is dependent on several factors including trust earnings and changes to the plan. The Company currently operates as a vertically integrated utility providing electricity to customers within its traditional service area located in northwest Florida. Prices for electricity provided by the Company to retail customers are set by the FPSC. Future earnings in the near term will depend upon growth in energy sales, which is subject to a number of factors. Traditionally, these factors have included weather, competition, changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the Company's service area. In early 1999, the FPSC staff and the Company became involved in discussions primarily related to reducing the Company's authorized rate of return. On October 1, 1999, the Office of Public Counsel, the Coalition for Equitable Rates, the Florida Industrial Power Users Group, and the Company jointly filed a petition to resolve the issues. The stipulation included a reduction to retail base rates of $10 million annually and provides for revenues to be shared within set ranges for 1999 through 2002. Customers receive two-thirds of any revenue within the sharing range and the Company retains one-third. Any revenue above this range is refunded to the customers. The stipulation also included authorization for the Company, at its discretion, to accrue up to an additional $5 million to the property insurance reserve and $1 million to amortize a regulatory asset related to the corporate office. The Company also filed a request to prospectively reduce its authorized ROE range from 11 to 13 percent to 10.5 to 12.5 percent in order to help ensure that the FPSC would approve the stipulation. The FPSC approved both the stipulation and the ROE request with an effective date of November 4, 1999. The Company is currently planning to seek additional rate relief to recover costs related to the Smith Unit 3 combined cycle facility currently under construction and scheduled to be placed in-service in June of 2002. For calendar year 2000, the Company's retail revenue range for sharing was $352 million to $368 million. Actual retail revenues in 2000 were $362.4 million and the Company recorded revenues subject to refund of $6.9 million. The estimated refund with interest was reflected in customer billings in February 2001. For calendar year 2001, the Company's retail revenue range for sharing is $358 million to $374 million. For calendar year 2002, there are specified sharing ranges for each month from the expected in-service date of Smith Unit 3 until the end of the year. The sharing plan will expire at the earlier of the in-service date of Smith Unit 3 or December 31, 2002. The electric utility industry in the United States is continuing to evolve as a result of regulatory and competitive factors. Among the primary agents of change has been the Energy Policy Act of 1992 (Energy Act). The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell energy generation to other utilities. Also, electricity sales for resale rates are being driven down by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. The Company is aggressively working to maintain and expand its share of wholesale sales in the southeastern power markets. In 2000, Florida's Governor appointed a 17 member study commission to look at the state's electric industry, studying issues ranging from current and future reliability of electric and natural gas supply, electric industry retail and wholesale competition, environmental impacts of energy supply, conservation, and II-116 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 2000 Annual Report tax issues. The commission's final report and recommendations are due to the Governor and legislature by December 1, 2001. The commission submitted an interim report to the state legislature that involves introducing more competition into the wholesale production of electricity in Florida. If approved by the legislature, the proposal would require utilities to turn over generating assets to an unregulated affiliate company over a 6-year transition period. The proposal would allow out of state companies to build merchant facilities and to bid on new generation needs. The effects of any proposed changes cannot presently be determined, but could have a material effect on the Company's financial statements. Although the Energy Act does not permit retail customer access, it was a major catalyst for the current restructuring and consolidation taking place within the utility industry. Numerous federal and state initiatives are in varying stages to promote wholesale and retail competition. Among other things, these initiatives allow customers to choose their electricity provider. Some states have approved initiatives that result in a separation of the ownership and/or operation of generating facilities from the ownership and/or operation of transmission and distribution facilities. While various restructuring and competition initiatives have been discussed in Florida, none have been enacted. Enactment would require numerous issues to be resolved, including significant ones relating to recovery of any stranded investments, full cost recovery of energy produced, and other issues related to the current energy crisis in California. As a result of this crisis, many states have either discontinued or delayed implementation of initiatives involving retail deregulation. The inability of a company to recover its investments, including the regulatory assets described in Note 1 to the financial statements, could have a material adverse effect on financial condition and results of operations. Continuing to be a low-cost producer could provide opportunities to increase market share and profitability in markets that evolve with changing regulation. Conversely, if the Company does not remain a low-cost producer and provide quality service, then energy sales growth could be limited, and this could significantly erode earnings. In 1996, the FPSC approved a new optional Commercial/Industrial Service Rider (CISR), which is applicable to the rate schedules for the Company's largest existing and potential customers who are able to show they have viable alternatives to purchasing the Company's energy services. The CISR, approved as a pilot program, provides the flexibility needed to enable the Company to offer its services in a more competitive manner to these customers. The publicity of the CISR ruling, increased competitive pressures, and general awareness of customer choice pilots and proposals across the country have stimulated interest on the part of customers in custom tailored offerings. The Company has participated in one-on-one discussions with many of these customers, and has negotiated and executed two Contract Service Agreements within the CISR pilot program. The pilot program was scheduled to end in 2000; however, on February 6, 2001 the FPSC approved the Company's request to remove the original 48 month limitation and allow the program to continue. Every five years the FPSC establishes numeric demand side management goals. The Company proposed numeric goals for the ten-year period from 2000 to 2009. The proposed goals consisted of the total, cost-effective winter and summer peak demand (kilowatts) and annual energy (kilowatt-hour) savings reasonably achievable from demand side management for the residential and commercial/industrial classes. The Company submitted its 2001 Demand Side Management Plan to the FPSC on December 29, 2000. The plan describes the proposed programs the Company will employ to reach the numeric goals. The plan relies heavily on innovative pricing and energy efficient construction. On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued its final rule on Regional Transmission Organizations (RTOs). The order encouraged utilities owning transmission systems to form RTOs on a voluntary basis. After participating in regional conferences with customers and other members of the public to discuss the formation of RTOs, utilities were required to make a filing with the FERC. Southern Company and its integrated utility subsidiaries, including the Company, filed on October 16, 2000, a proposal for the creation of an RTO. The proposal is for the formation of a for-profit company that would have control of the bulk power transmission system of the Company and any other participating utilities. Participants would have the option to either maintain their ownership or divest, sell, or lease their assets to the proposed RTO. If the FERC accepts the proposal as filed, the creation of II-117 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 2000 Annual Report an RTO is not expected to have a material impact on the Company's financial statements. The outcome of this matter cannot now be determined. The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA) to allow holding companies to form exempt wholesale generators to sell power largely free of regulation under PUHCA. These entities are able to own and operate power generating facilities and sell power to affiliates -- under certain restrictions. Southern Company is aggressively working to maintain and expand its share of wholesale sales in the southeastern power markets. In January 2001, Southern Company announced the formation of a new subsidiary -- Southern Power Company. The new subsidiary will own, manage, and finance wholesale generating assets in the Southeast. Southern Power will be the primary growth engine for Southern Company's market-based energy business. Energy from its assets will be marketed to wholesale customers under the Southern Company name. Compliance costs related to current and future environmental laws and regulations could affect earnings if such costs are not fully recovered. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." Also, Florida legislation adopted in 1993 that provides for recovery of prudent environmental compliance costs is discussed in Note 3 to the financial statements under "Environmental Cost Recovery." The Company is subject to the provisions of FASB Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operations is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. Exposure to Market Risks Due to cost-based rate regulation, the Company has limited exposure to market volatility in interest rates and prices of electricity. To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market. Realized gains and losses are recognized in the income statements as incurred. At December 31, 2000, exposure from these activities was not material. New Accounting Standard In June 2000, FASB issued Statement No. 138, an amendment of Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 133, as amended, establishes accounting and reporting standards for derivative instruments and for hedging activities. Statement No. 133 requires that certain derivative instruments be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in the fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company may utilize financial instruments to reduce its exposure to changes in interest rates depending on market conditions. The Company also enters into commodity related forward contracts to limit exposure to changing prices on certain fuel purchases and electricity purchases and sales. Substantially all of these bulk energy purchases and sales meet the definition of a derivative under Statement No. 133. In many cases, these transactions meet the normal purchase and sale exception and the related contracts will continue to be accounted for under the accrual method. Certain of these instruments qualify as cash flow hedges resulting in the deferral of related gains and losses in other comprehensive income until the hedged transactions occur. Any ineffectiveness will be recognized currently in net income. However, others will be required to be marked to market through current period income. The Company adopted Statement No. 133 effective January 1, 2001. The impact on net income was immaterial. The application of the new rules is still evolving and further guidance from FASB is expected, which could additionally impact the Company's financial statements. Also, as wholesale energy markets mature, future transactions could result in more volatility in net income and comprehensive income. 11-118 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 2000 Annual Report Financial Condition Overview The Company's financial condition continues to be very solid. During 2000, gross property additions were $95.8 million. Funds for the property additions were provided by operating activities. See the Statements of Cash Flows for further details. Financing Activities In 2000, there were no issuances or retirements of long-term debt. In 1999, the Company sold $50 million of senior notes and long-term bank notes totaling $27 million were retired. See the Statements of Cash Flows for further details. Composite financing rates for the years 1998 through 2000 as of year end were as follows: 2000 1999 1998 ----------------------------- Composite interest rate on long-term debt 6.2% 6.0% 6.1% Composite rate on trust preferred securities 7.3% 7.3% 7.3% Composite preferred stock dividend rate 5.1% 5.1% 5.1% - ----------------------------------------------------------------- The composite interest rate on long-term debt increased in 2000 due to higher interest rates on variable rate pollution control bonds. Capital Requirements for Construction The Company's gross property additions, including those amounts related to environmental compliance, are budgeted at $451 million for the three years beginning in 2001 ($279 million in 2001, $96 million in 2002, and $76 million in 2003). These amounts include $199.2 million for the years 2001 and 2002 for the estimated cost of a 574 megawatt combined cycle gas generating unit and related interconnections to be located in the eastern portion of the Company's service area. The unit is expected to have an in-service date of June 2002. The remaining property additions budget is primarily for maintaining and upgrading transmission and distribution facilities and generating plants. Actual construction costs may vary from this estimate because of changes in such factors as the following: business conditions; environmental regulations; load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Other Capital Requirements The Company will continue to retire higher-cost debt and preferred securities and replace these securities with lower-cost capital as market conditions and terms of the instruments permit. Environmental Matters In November 1990, the Clean Air Act Amendments of 1990 (Clean Air Act) was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- significantly affected the Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants were required in two phases. Phase I compliance began in 1995. As a result of a systemwide compliance strategy, some 50 generating units of Southern Company were brought into compliance with Phase I requirements. Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. Construction expenditures for Phase I nitrogen oxide and sulfur dioxide emissions compliance totaled approximately $300 million for Southern Company, including approximately $42 million for the Company. Phase II sulfur dioxide compliance was required in 2000. Southern Company used emission allowances and fuel switching to comply with Phase II requirements. Also, equipment to control nitrogen oxide emissions was installed on additional system fossil-fired units as necessary to meet Phase II limits and ozone non-attainment requirements for metropolitan Atlanta through 2000. Compliance for Phase II and initial ozone non-attainment requirements increased Southern Company's total construction expenditures through 2000 by approximately $100 million. Phase II compliance did not have a material impact on Gulf Power. A significant portion of costs related to the acid rain and ozone nonattainment provisions of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. II-119 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 2000 Annual Report In 1993, the Florida Legislature adopted legislation that allows a utility to petition the FPSC for recovery of prudent environmental compliance costs that are not being recovered through base rates or any other recovery mechanism. The legislation is discussed in Note 3 to the financial statements under "Environmental Cost Recovery." Substantially all of the costs for the Clean Air Act and other new environmental legislation discussed below are expected to be recovered through the Environmental Cost Recovery Clause. In July 1997, the EPA revised the national ambient air quality standards for ozone and particulate matter. This revision made the standards significantly more stringent. In the subsequent litigation of these standards, the U.S. Supreme Court recently dismissed certain challenges but found the EPA's implementation program for the new ozone standard unlawful and remanded it to the EPA. In addition, the Federal District of Columbia Circuit Court of Appeals will address other legal challenges to these standards in mid-2001. If the standards are eventually upheld, implementation could be required by 2007 to 2010. In September 1998, the EPA issued the final regional nitrogen oxide reduction rule to the states for implementation. Compliance is required by May 31, 2004. The final rule affects 21 states, including Georgia. See Note 5 to the financial statements under "Joint Ownership Agreements" related to the Company's ownership interest in Georgia Power's Plant Scherer Unit No. 3. In December 2000, the EPA completed its utility study for mercury and other hazardous air pollutants (HAPS) and issued a determination that an emission control program for mercury and, perhaps, other HAPS is warranted. The program is to be developed over the next four years under the Maximum Achievable Control Technology (MACT) provisions of the Clean Air Act. This determination is being challenged in the courts. In January 2001, the EPA proposed guidance for the determination of Best Available Retrofit Technology (BART) emission controls under the Regional Haze Regulations. Installation of BART controls will likely be required around 2010. Litigation of the BART rules is probable in the near future. Implementation of the final state rules for these initiatives could require substantial further reductions in nitrogen oxide, sulfur dioxide, mercury, and other HAPS emissions from fossil-fired generating facilities and other industries in these states. Additional compliance costs and capital expenditures resulting from the implementation of these rules and standards cannot be determined until the results of legal challenges are known, and the states have adopted their final rules. Reviews by the new administration in Washington, D.C. add to the uncertainties associated with BART guidance and the MACT determination for mercury and other HAPS. The EPA and state environmental regulatory agencies are also reviewing and evaluating various other matters including: nitrogen oxide emission control strategies for ozone non-attainment areas; additional controls for hazardous air pollutant emissions; and hazardous waste disposal requirements. The impact of any new standards will depend on the development and implementation of applicable regulations. On November 3, 1999, the EPA brought a civil action in the U.S. District Court against Alabama Power, Georgia Power, and the system service company. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to five coal-fired generating facilities in Alabama and Georgia. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The EPA concurrently issued to the integrated Southeast utilities a notice of violation related to 10 generating facilities, including the five facilities mentioned previously and the Company's Plants Crist and Scherer. See Note 5 to the financial statements under "Joint Ownership Agreements" related to the Company's ownership interest in Georgia Power's Plant Scherer Unit No. 3. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as defendants. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. These complaints and notices of violation allege that the utilities had failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August 1, 2000, the U.S. District Court 11-120 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 2000 Annual Report granted Alabama Power's motion to dismiss for lack of jurisdiction in Georgia and granted the system service company's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against Alabama Power in federal district court in Birmingham, Alabama. The EPA did not include the system service company in the new complaint. Southern Company believes that its integrated utilities complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes civil penalties of up to $27,500 per day per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur substantial costs to clean up properties. The Company conducts studies to determine the extent of any required cleanup costs and has recognized in the financial statements costs to clean up known sites. For additional information, see Note 3 to the financial statements under "Environmental Cost Recovery." Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of any such changes cannot be determined at this time. Compliance with possible additional legislation related to global climate change, electric and magnetic fields, and other environmental health concerns could significantly affect the Company. The impact of new legislation -- if any - -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electric and magnetic fields. Sources of Capital At December 31, 2000, the Company had approximately $4.4 million of cash and cash equivalents and $53.5 million of unused committed lines of credit with banks to meet its short-term cash needs. Refer to the Statements of Cash Flows for details related to the Company's financing activities. See Note 4 to the financial statements under "Bank Credit Arrangements" for additional information. The Company historically has relied on issuances of first mortgage bonds and preferred stock, in addition to pollution control revenue bonds issued for its benefit by public authorities, to meet its long-term external financing requirements. Recently, the Company's financings have consisted of unsecured debt and trust preferred securities. The Company has no restrictions on the amounts of unsecured indebtedness it may incur. However, in order to issue first mortgage bonds or preferred stock, the Company is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter. The Company's ability to satisfy all coverage requirements is such that it could issue new first mortgage bonds and preferred stock to provide sufficient funds for all anticipated requirements. Cautionary Statement Regarding Forward-Looking Information The Company's 2000 Annual Report contains forward looking and historical information. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. The Company cautions that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations; current and future litigation, including the pending EPA civil action; the extent and timing of the entry of additional competition in the markets of the Company; potential business strategies, including acquisitions or dispositions of assets or 11-121 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 2000 Annual Report businesses, which cannot be assured to be completed or beneficial; internal restructuring or other restructuring options, that may be pursued by the registrants; state and federal rate regulation in the United States; political, legal and economic conditions and developments in the United States; financial market conditions and the results of financing efforts; the impact of fluctuations in commodity prices, interest rates and customer demand; weather and other natural phenomena; the ability of the Company to obtain additional generating capacity at competitive prices; and other factors discussed elsewhere herein and in other reports (including Form 10-K) filed from time to time by the Company with the SEC. II-122 STATEMENTS OF INCOME For the Years Ended December 31, 2000, 1999, and 1998 Gulf Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues: Retail sales $562,162 $512,760 $509,118 Sales for resale -- Non-affiliates 66,890 62,354 61,893 Affiliates 66,995 66,110 42,642 Other revenues 18,272 32,875 36,865 - ----------------------------------------------------------------------------------------------------------------------------- Total operating revenues 714,319 674,099 650,518 - ----------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 215,744 209,031 197,462 Purchased power -- Non-affiliates 73,846 46,332 29,369 Affiliates 8,644 10,703 14,445 Other 117,146 114,670 119,011 Maintenance 56,281 57,830 57,286 Depreciation and amortization 66,873 64,589 59,129 Taxes other than income taxes 55,904 51,782 51,462 - ----------------------------------------------------------------------------------------------------------------------------- Total operating expenses 594,438 554,937 528,164 - ----------------------------------------------------------------------------------------------------------------------------- Operating Income 119,881 119,162 122,354 Other Income (Expense): Interest income 1,137 1,771 931 Other, net (4,126) (1,357) (2,339) - ----------------------------------------------------------------------------------------------------------------------------- Earnings Before Interest and Income Taxes 116,892 119,576 120,946 - ----------------------------------------------------------------------------------------------------------------------------- Interest and Other: Interest expense, net 28,085 26,861 25,556 Distributions on preferred securities of subsidiary 6,200 6,200 6,034 - ----------------------------------------------------------------------------------------------------------------------------- Total interest charges and other, net 34,285 33,061 31,590 - ----------------------------------------------------------------------------------------------------------------------------- Earnings Before Income Taxes 82,607 86,515 89,356 Income taxes (Note 7) 30,530 32,631 32,199 - ----------------------------------------------------------------------------------------------------------------------------- Net Income 52,077 53,884 57,157 Dividends on Preferred Stock 234 217 636 - ----------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 51,843 $ 53,667 $ 56,521 ============================================================================================================================= The accompanying notes are an integral part of these statements.
11-123 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000, 1999, and 1998 Gulf Power Company 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 52,077 $ 53,884 $ 57,157 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 69,915 68,721 69,633 Deferred income taxes and investment tax credits, net (12,516) (6,609) (4,684) Other, net 10,686 3,735 3,463 Changes in certain current assets and liabilities -- Receivables, net (20,212) (10,484) 11,308 Fossil fuel stock 13,101 (5,656) (4,917) Materials and supplies 1,055 (2,063) 609 Accounts payable 15,924 (2,023) 823 Provision for rate refund 7,203 - - Other 12,521 7,030 (18,471) - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 149,754 106,535 114,921 - ---------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (95,807) (69,798) (69,731) Other (4,432) (8,856) 5,990 - ---------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (100,239) (78,654) (63,741) - ---------------------------------------------------------------------------------------------------------------------------- Financing Activities: Increase (decrease) in notes payable, net (12,000) 23,500 (15,500) Proceeds -- Other long-term debt - 50,000 50,000 Preferred securities - - 45,000 Capital contributions from parent company 12,222 2,294 522 Retirements -- First mortgage bonds - - (45,000) Other long-term debt (1,853) (27,074) (8,326) Preferred stock - - (9,455) Payment of preferred stock dividends (234) (271) (792) Payment of common stock dividends (59,000) (61,300) (67,200) Other (22) (246) (4,167) - ---------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (60,887) (13,097) (54,918) - ---------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents (11,372) 14,784 (3,738) Cash and Cash Equivalents at Beginning of Period 15,753 969 4,707 - ---------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Period $ 4,381 $ 15,753 $ 969 ============================================================================================================================ Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $32,277 $27,670 $28,044 Income taxes (net of refunds) 42,252 29,462 38,782 - ---------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
11-124 BALANCE SHEETS At December 31, 2000 and 1999 Gulf Power Company 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------ Assets 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ (in thousands) Current Assets: Cash and cash equivalents $ 4,381 $ 15,753 Receivables -- Customer accounts receivable 69,820 55,108 Other accounts and notes receivable 2,179 4,325 Affiliated companies 15,026 7,104 Accumulated provision for uncollectible accounts (1,302) (1,026) Fossil fuel stock, at average cost 16,768 29,869 Materials and supplies, at average cost 29,033 30,088 Regulatory clauses under recovery 2,112 11,611 Other 6,543 5,354 - ------------------------------------------------------------------------------------------------------------------------------ Total current assets 144,560 158,186 - ------------------------------------------------------------------------------------------------------------------------------ Property, Plant, and Equipment: In service 1,892,023 1,853,664 Less accumulated provision for depreciation 867,260 821,970 - ------------------------------------------------------------------------------------------------------------------------------ 1,024,763 1,031,694 Construction work in progress 71,008 34,164 - ------------------------------------------------------------------------------------------------------------------------------ Total property, plant, and equipment 1,095,771 1,065,858 - ------------------------------------------------------------------------------------------------------------------------------ Other Property and Investments 4,510 1,481 - ------------------------------------------------------------------------------------------------------------------------------ Deferred Charges and Other Assets: Deferred charges related to income taxes (Note 7) 15,963 25,264 Prepaid pension costs (Note 2) 23,491 17,734 Debt expense, being amortized 2,392 2,526 Premium on reacquired debt, being amortized 15,866 17,360 Other 12,943 20,086 - ------------------------------------------------------------------------------------------------------------------------------ Total deferred charges and other assets 70,655 82,970 - ------------------------------------------------------------------------------------------------------------------------------ Total Assets $1,315,496 $1,308,495 ============================================================================================================================== The accompanying notes are an integral part of these balance sheets.
II-125 BALANCE SHEETS At December 31, 2000 and 1999 Gulf Power Company 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholder's Equity 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- (in thousands) Current Liabilities: Notes payable $ 43,000 $ 55,000 Accounts payable -- Affiliated 17,558 14,878 Other 38,153 22,581 Customer deposits 13,474 12,778 Taxes accrued -- Income taxes 3,864 4,889 Other 8,749 7,707 Interest accrued 8,324 9,255 Provision for rate refund 7,203 - Vacation pay accrued 4,512 4,199 Regulatory clauses over recovery 6,848 3,125 Other 1,584 1,836 - ---------------------------------------------------------------------------------------------------------------------------- Total current liabilities 153,269 136,248 - ---------------------------------------------------------------------------------------------------------------------------- Long-term debt (See accompanying statements) 365,993 367,449 - ---------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 7) 155,074 162,776 Deferred credits related to income taxes (Note 7) 38,255 49,693 Accumulated deferred investment tax credits 25,792 27,712 Employee benefits provisions 34,507 31,735 Other 25,992 21,333 - ---------------------------------------------------------------------------------------------------------------------------- Total deferred credits and other liabilities 279,620 293,249 - ---------------------------------------------------------------------------------------------------------------------------- Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding company junior subordinated notes (See accompanying statements) 85,000 85,000 - ---------------------------------------------------------------------------------------------------------------------------- Preferred stock (See accompanying statements) 4,236 4,236 - ---------------------------------------------------------------------------------------------------------------------------- Common stockholder's equity (See accompanying statements) 427,378 422,313 - ---------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholder's Equity $1,315,496 $1,308,495 ============================================================================================================================ The accompanying notes are an integral part of these balance sheets.
II-126 STATEMENTS OF CAPITALIZATION At December 31, 2000 and 1999 Gulf Power Company 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------ 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ (in thousands) (percent of total) Long Term Debt: First mortgage bonds -- Maturity Interest Rates -------- ------------- July 1, 2003 6.125% $ 30,000 $ 30,000 November 1, 2006 6.50% 25,000 25,000 January 1, 2026 6.875% 30,000 30,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total first mortgage bonds 85,000 85,000 - ------------------------------------------------------------------------------------------------------------------------------------ Long-term notes payable -- 7.50% due June 30, 2037 20,000 20,000 6.70% due June 30, 2038 48,073 49,926 7.05% due August 15, 2004 50,000 50,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total long-term notes payable 118,073 119,926 - ------------------------------------------------------------------------------------------------------------------------------------ Other long-term debt -- Pollution control revenue bonds -- Collateralized: 5.25% to 6.30% due 2006-2026 108,700 108,700 Variable rates (3.70% at 1/1/00) due 2024 - 20,000 Non-collateralized: Variable rates (5.10% to 5.30% at 1/1/01) due 2022-2024 60,930 40,930 - ------------------------------------------------------------------------------------------------------------------------------------ Total other long-term debt 169,630 169,630 - ------------------------------------------------------------------------------------------------------------------------------------ Unamortized debt premium (discount), net (6,710) (7,107) - ------------------------------------------------------------------------------------------------------------------------------------ Total long-term debt (annual interest requirement -- $23.2 million) 365,993 367,449 41.5% 41.8% - ------------------------------------------------------------------------------------------------------------------------------------ Cumulative Preferred Stock: $100 par value, 4.64% to 5.44% 4,236 4,236 - ------------------------------------------------------------------------------------------------------------------------------------ Total (annual dividend requirement -- $0.2 million) 4,236 4,236 0.5% 0.5% - ------------------------------------------------------------------------------------------------------------------------------------ Company Obligated Mandatorily Redeemable Preferred Securities: $25 liquidation value -- 7.00% 45,000 45,000 7.63% 40,000 40,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total (annual distribution requirement -- $6.2 million) 85,000 85,000 9.6% 9.7% - ------------------------------------------------------------------------------------------------------------------------------------ Common Stockholder's Equity: Common stock, without par value -- Authorized and outstanding - 992,717 shares in 2000 and 1999 38,060 38,060 Paid-in capital 233,476 221,254 Premium on preferred stock 12 12 Retained earnings 155,830 162,987 - ------------------------------------------------------------------------------------------------------------------------------------ Total common stockholder's equity 427,378 422,313 48.4% 48.0% - ------------------------------------------------------------------------------------------------------------------------------------ Total Capitalization $882,607 $878,998 100.0% 100.0% ==================================================================================================================================== The accompanying notes are an integral part of these statements.
11-127 STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the Years Ended December 31, 2000, 1999, and 1998 Gulf Power Company 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------ Premium on Common Paid-In Preferred Retained Stock Capital Stock Earnings Total - ------------------------------------------------------------------------------------------------------------------------------------ (in thousands) Balance at January 1, 1998 $38,060 $218,438 $12 $172,208 $428,718 Net income after dividends on preferred stock - - - 56,521 56,521 Capital contributions from parent company - 522 - - 522 Cash dividends on common stock - - - (57,200) (57,200) Other - - - (909) (909) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1998 38,060 218,960 12 170,620 427,652 Net income after dividends on preferred stock - - - 53,667 53,667 Capital contributions from parent company - 2,294 - - 2,294 Cash dividends on common stock - - - (61,300) (61,300) Balance at December 31, 1999 38,060 221,254 12 162,987 422,313 - ------------------------------------------------------------------------------------------------------------------------------------ Net income after dividends on preferred stock - - - 51,843 51,843 Capital contributions from parent company - 12,222 - - 12,222 Cash dividends on common stock - - - (59,000) (59,000) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 2000 $38,060 $233,476 $12 $155,830 $427,378 ==================================================================================================================================== The accompanying notes are an integral part of these statements.
II-128 NOTES TO FINANCIAL STATEMENTS Gulf Power Company 2000 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Gulf Power Company is a wholly owned subsidiary of Southern Company, which is the parent company of five integrated Southeast utilities, Southern Company Services (SCS), Southern Communications Services (Southern LINC), Southern Company Energy Solutions, Mirant Corporation (Mirant) - formerly Southern Energy, Inc., -- Southern Nuclear Operating Company (Southern Nuclear), and other direct and indirect subsidiaries. The integrated Southeast utilities -- Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric -- provide electric service in four states. Gulf Power Company provides electric service to the northwest panhandle of Florida. Contracts among the integrated Southeast utilities -- related to jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power --are regulated by the Federal Energy Regulatory Commission (FERC) and/or the Securities and Exchange Commission (SEC). The system service company provides, at cost, specialized services to Southern Company and subsidiary companies. Southern LINC provides digital wireless communications services to the operating companies and also markets these services to the public within the Southeast. Southern Company Energy Solutions develops new business opportunities related to energy products and services. Southern Nuclear provides services to Southern Company's nuclear power plants. Mirant acquires, develops, builds, owns, and operates power production and delivery facilities and provides a broad range of energy-related services to utilities and industrial companies in selected countries around the world. Mirant businesses include independent power projects, integrated utilities, a distribution company, and energy trading and marketing businesses outside the southeastern United States. Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company is also subject to regulation by the FERC and the Florida Public Service Commission (FPSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by the FPSC and the FERC. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from those estimates. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Related-Party Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at cost: general and design engineering, purchasing, accounting and statistical, finance and treasury, tax, information resources, marketing, auditing, insurance and pension administration, human resources, systems and procedures, and other services with respect to business and operations and power pool operations. Costs for these services amounted to $44 million, $43 million, and $40 million during 2000, 1999, and 1998, respectively. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the Company associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to the following: 2000 1999 -------------------------- (in thousands) Deferred income tax charges $ 15,963 $ 25,264 Deferred loss on reacquired debt 15,866 17,360 Environmental remediation 7,638 5,745 Vacation pay 4,512 4,199 Regulatory clauses under (over) recovery, net (4,736) 8,486 Accumulated provision for rate refunds (7,203) - Accumulated provision for property damage (8,731) (5,528) Deferred income tax credits (38,255) (49,693) Other, net (1,074) (1,255) - ------------------------------------------------------------------ Total $ (16,020) $ 4,578 ================================================================== II-129 NOTES (continued) Gulf Power Company 2000 Annual Report In the event that a portion of the Company's operations is no longer subject to the provisions of FASB Statement No. 71, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the Company would be required to determine any impairment to other assets, including plant, and write down the assets, if impaired, to their fair value. Revenues and Regulatory Cost Recovery Clauses The Company currently operates as a vertically integrated utility providing electricity to retail customers within its service area located in northwest Florida and to wholesale customers in the Southeast. Revenues are recognized as services are rendered. Unbilled revenues are accrued at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The Company's retail electric rates include provisions to annually adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. The Company also has similar retail cost recovery clauses for energy conservation costs, purchased power capacity costs, and environmental compliance costs. Revenues are adjusted monthly for differences between recoverable costs and amounts actually reflected in current rates. The Company has a diversified base of customers and no single customer or industry comprises 10 percent or more of revenues. For all periods presented, uncollectible accounts averaged significantly less than 1 percent of revenues. Depreciation and Amortization Depreciation of the original cost of plant in service is provided primarily by using composite straight-line rates, which approximated 3.8 percent in 2000, 1999, and 1998. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost -- together with the cost of removal, less salvage -- is charged to the accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Also, the provision for depreciation expense includes an amount for the expected cost of removal of facilities. Income Taxes The Company uses the liability method of accounting for income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. The Company is included in the consolidated federal income tax return of Southern Company. Property, Plant, and Equipment Property, plant, and equipment is stated at original cost. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property (exclusive of minor items of property) is charged to utility plant. Cash and Cash Equivalents Temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Financial Instruments The Company's financial instruments for which the carrying amount did not equal fair value at December 31 were as follows: Carrying Fair Amount Value --------------------------- (in thousands) Long-term debt: At December 31, 2000 $365,993 $364,697 At December 31, 1999 $367,449 $349,791 Capital trust preferred securities: At December 31, 2000 $85,000 $80,988 At December 31, 1999 $85,000 $69,092 - -------------------------------------------------------------- The fair values for long-term debt and preferred securities were based on either closing market prices or closing prices of comparable instruments. II-130 NOTES (continued) Gulf Power Company 2000 Annual Report Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when installed. Provision for Injuries and Damages The Company is subject to claims and suits arising in the ordinary course of business. As permitted by regulatory authorities, the Company provides for the uninsured costs of injuries and damages by charges to income amounting to $1.2 million annually. The expense of settling claims is charged to the provision to the extent available. The accumulated provision of $1.2 million and $1.8 million at December 31, 2000 and 1999, respectively, is included in other current liabilities in the accompanying Balance Sheets. Provision for Property Damage The Company provides for the cost of repairing damages from major storms and other uninsured property damages. This includes the full cost of major storms and other damages to its transmission and distribution lines and the cost of uninsured damages to its generation and other property. The expense of such damages is charged to the provision account. At December 31, 2000 and 1999, the accumulated provision for property damage was $8.7 million and $5.5 million, respectively. The FPSC approved annual accrual to the accumulated provision for property damage is $3.5 million, with a target level for the accumulated provision account between $25.1 and $36.0 million. The FPSC has also given the Company the flexibility to increase its annual accrual amount above $3.5 million at the Company's discretion. The Company accrued $3.5 million in 2000, $5.5 million in 1999, and $6.5 million in 1998 to the accumulated provision for property damage. The Company charged $0.3 million, $1.6 million, and $4.2 million against the provision account in 2000, 1999, and 1998 respectively. 2. RETIREMENT BENEFITS The Company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. The Company provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Trusts are funded to the extent required by the Company's regulatory commissions. In late 2000, the Company adopted several pension and postretirement benefit plan changes that had the effect of increasing benefits to both current and future retirees. The effects of these changes will be to increase the Company's annual pension and postretirement benefits costs by approximately $1.2 million and $0.6 million, respectively. The measurement date for plan assets and obligations is September 30 for each year. Pension Plan Changes during the year in the projected benefit obligations and in the fair value of plan assets were as follows: Projected Benefit Obligations --------------------------- 2000 1999 - --------------------------------------------------------------- (in thousands) Balance at beginning of year $141,967 $143,012 Service cost 4,282 4,490 Interest cost 10,394 9,440 Benefits paid (6,973) (6,862) Actuarial gain and employee transfers, net (689) (8,113) - --------------------------------------------------------------- Balance at end of year $148,981 $141,967 =============================================================== Plan Assets --------------------------- 2000 1999 - --------------------------------------------------------------- (in thousands) Balance at beginning of year $241,485 $212,934 Actual return on plan assets 43,833 35,971 Benefits paid (6,973) (6,862) Employee transfers 4,921 (558) - --------------------------------------------------------------- Balance at end of year $283,266 $241,485 =============================================================== The accrued pension costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in thousands) Funded status $ 134,286 $ 99,518 Unrecognized transition obligation (3,602) (4,323) Unrecognized prior service cost 4,121 4,495 Unrecognized net gain (111,314) (81,956) - --------------------------------------------------------------- Prepaid asset recognized in the Balance Sheets $ 23,491 $ 17,734 =============================================================== II-131 NOTES (continued) Gulf Power Company 2000 Annual Report Components of the pension plan's net periodic cost were as follows: 2000 1999 1998 - ------------------------------------------------------------------- Service cost $ 4,282 $ 4,490 $ 4,107 Interest cost 10,394 9,440 9,572 Expected return on plan assets (17,504) (15,968) (14,827) Recognized net gain (2,582) (1,579) (1,891) Net amortization (347) (347) (347) - ------------------------------------------------------------------- Net pension income $ (5,757) $ (3,964) $ (3,386) =================================================================== Postretirement Benefits Changes during the year in the accumulated benefit obligations and in the fair value of plan assets were as follows: Accumulated Benefit Obligations --------------------------- 2000 1999 - --------------------------------------------------------------- (in thousands) Balance at beginning of year $48,010 $49,303 Service cost 896 1,087 Interest cost 3,515 3,261 Benefits paid (1,462) (1,177) Actuarial gain and employee transfers, net (934) (4,464) - --------------------------------------------------------------- Balance at end of year $50,025 $48,010 =============================================================== Plan Assets --------------------------- 2000 1999 - --------------------------------------------------------------- (in thousands) Balance at beginning of year $11,196 $ 9,603 Actual return on plan assets 2,079 1,525 Employer contributions 1,575 1,245 Benefits paid (1,462) (1,177) - --------------------------------------------------------------- Balance at end of year $13,388 $11,196 =============================================================== The accrued postretirement costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in thousands) Funded status $(36,638) $(36,814) Unrecognized transition obligation 4,368 4,723 Unrecognized prior service cost 2,582 2,741 Unrecognized net loss 496 2,620 Fourth quarter contributions 316 300 - --------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $(28,876) $(26,430) =============================================================== Components of the postretirement plan's net periodic cost were as follows: 2000 1999 1998 - ---------------------------------------------------------------- Service cost $ 896 $1,087 $ 946 Interest cost 3,515 3,261 3,123 Expected return on plan assets (901) (794) (717) Transition obligation 355 356 356 Prior service cost 159 159 119 Recognized net loss 13 264 128 - ---------------------------------------------------------------- Net postretirement cost $4,037 $4,333 $3,955 ================================================================ The weighted average rates assumed in the actuarial calculations for both the pension plan and postretirement benefits were: 2000 1999 - -------------------------------------------------------- Discount 7.50% 7.50% Annual salary increase 5.00% 5.00% Long-term return on plan assets 8.50% 8.50% - -------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement benefit obligations was a weighted average medical care cost trend rate of 7.3 percent for 2000, decreasing gradually to 5.5 percent through the year 2005, and remaining at that level thereafter. II-132 NOTES (continued) Gulf Power Company 2000 Annual Report An annual increase or decrease in the assumed medical care cost trend rate of 1 percent would affect the accumulated benefit obligation and the service and interest cost components at December 31, 2000 as follows (in thousands): 1 Percent 1 Percent Increase Decrease - --------------------------------------------------------------- Benefit obligation $3,187 $2,874 Service and interest costs $278 $247 =============================================================== Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides a 75 percent matching contribution up to 6 percent of an employee's base salary. Total matching contributions made to the plan for the years 2000, 1999, and 1998 were $2.2 million, $2.0 million, and $2.0 million, respectively. Work Force Reduction Programs The Company recorded costs related to work force reduction programs of $0.6 million in 2000, $0.2 million in 1999, and $2.8 million in 1998. The Company has also incurred its pro rata share for the costs of affiliated companies' programs. The costs related to these programs were $1.2 million for 2000, $0.6 million for 1999, and $0.2 million for 1998. The Company has expensed all costs related to these work force reduction programs. 3. CONTINGENCIES AND REGULATORY MATTERS Environmental Cost Recovery In 1993, the Florida Legislature adopted legislation for an Environmental Cost Recovery Clause (ECRC), which allows a utility to petition the FPSC for recovery of all prudent environmental compliance costs that are not being recovered through base rates or any other recovery mechanism. Such environmental costs include operation and maintenance expense, emission allowance expense, depreciation, and a return on invested capital. In 1994, the FPSC approved the Company's initial petition under the ECRC for recovery of environmental costs. During 2000, 1999, and 1998, the Company recorded ECRC revenues of $9.9 million, $11.5 million, and $8.0 million, respectively. At December 31, 2000, the Company's liability for the estimated costs of environmental remediation projects for known sites was $7.6 million. These estimated costs are expected to be expended from 2001 through 2006. These projects have been approved by the FPSC for recovery through the ECRC discussed above. Therefore, the Company recorded $1.2 million in current assets and current liabilities and $6.4 million in deferred assets and deferred liabilities representing the future recoverability of these costs. Environmental Litigation On November 3, 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S. District Court against Alabama Power, Georgia Power, and SCS. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to five coal-fired generating facilities in Alabama and Georgia. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. The EPA concurrently issued to the integrated Southeast utilities a notice of violation related to 10 generating facilities, including the five facilities mentioned previously and the Company's Plants Crist and Scherer. See Note 5 under "Joint Ownership Agreements" related to the Company's ownership interest in Georgia Power's Plant Scherer Unit No. 3. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as defendants. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. These complaints and notices of violation allege that the utilities had failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. The Company believes that its integrated utilities complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash II-133 NOTES (continued) Gulf Power Company 2000 Annual Report flows, and possibly financial condition if such costs are not recovered through regulated rates. Retail Revenue Sharing Plan In early 1999, the FPSC staff and the Company became involved in discussions primarily related to reducing the Company's authorized rate of return. On October 1, 1999, the Office of Public Counsel, the Coalition for Equitable Rates, the Florida Industrial Power Users Group, and the Company jointly filed a petition to resolve the issues. The stipulation included a reduction to retail base rates of $10 million annually and provides for revenues to be shared within set ranges for 1999 through 2002. Customers receive two-thirds of any revenue within the sharing range and the Company retains one-third. Any revenue above this range is refunded to the customers. The stipulation also included authorization for the Company, at its discretion, to accrue up to an additional $5 million to the property insurance reserve and $1 million to amortize a regulatory asset related to the corporate office. The Company also filed a request to prospectively reduce its authorized ROE range from 11 to 13 percent to 10.5 to 12.5 percent in order to help ensure that the FPSC would approve the stipulation. The FPSC approved both the stipulation and the ROE request with an effective date of November 4, 1999. The Company is currently planning to seek additional rate relief to recover costs related to the Smith Unit 3 combined cycle facility scheduled to be placed in-service in June of 2002. For calendar year 2000, the Company's retail revenue range for sharing was $352 million to $368 million to be shared between the Company and its retail customers on the one-third/two-thirds basis. Actual retail revenues in 2000 were $362.4 million and the Company recorded revenues subject to refund of $6.9 million. The estimated refund with interest of $0.3 million was reflected in customer billings in February 2001. In addition to the refund the Company amortized $1 million of the regulatory assets related to the corporate office. For calendar year 2001, the Company's retail revenue range for sharing is $358 million to $374 million. For calendar year 2002, there are specified sharing ranges for each month from the expected in-service date of Smith Unit 3 until the end of the year. The sharing plan will expire at the earlier of the in-service date of Smith Unit 3 or December 31, 2002. 4. FINANCING AND COMMITMENTS Construction Program The Company is engaged in a continuous construction program, the cost of which is currently estimated to total $279 million in 2001, $96 million in 2002, and $76 million in 2003. The construction program is subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth estimates; changes in environmental regulations; increasing costs of labor, equipment, and materials; and cost of capital. At December 31, 2000, significant purchase commitments were outstanding in connection with the construction program. The Company has budgeted $199.2 million for the years 2001 and 2002 for the estimated cost of a 574 megawatt combined cycle gas generating unit to be located in the eastern portion of its service area. The unit is expected to have an in-service date of June 2002. The Company's remaining construction program is related to maintaining and upgrading the transmission, distribution, and generating facilities. Bank Credit Arrangements At December 31, 2000, the Company had $61.5 million of lines of credit with banks subject to renewal June 1 of each year, of which $53.5 million remained unused. In addition, the Company has two unused committed lines of credit totaling $61.9 million that were established for liquidity support of its variable rate pollution control bonds. In connection with these credit lines, the Company has agreed to pay commitment fees and/or to maintain compensating balances with the banks. The compensating balances, which represent substantially all of the cash of the Company except for daily working funds and like items, are not legally restricted from withdrawal. In addition, the Company has bid-loan facilities with seven major money center banks that total $130 million, of which $35 million was committed at December 31, 2000. Assets Subject to Lien The Company's mortgage, which secures the first mortgage bonds issued by the Company, constitutes a direct first lien on substantially all of the Company's fixed property and franchises. II-134 NOTES (continued) Gulf Power Company 2000 Annual Report Fuel Commitments To supply a portion of the fuel requirements of its generating plants, the Company has entered into contract commitments for the procurement of fuel. In some cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. Total estimated obligations at December 31, 2000 were as follows: Year Fuel --------- ---------------- (in millions) 2001 $139 2002 91 2003 90 2004 92 2005 93 2006-2024 473 ------------------------------------------------------------- Total commitments $978 ============================================================= Lease Agreements In 1989, the Company and Mississippi Power jointly entered into a twenty-two year operating lease agreement for the use of 495 aluminum railcars. In 1994, a second lease agreement for the use of 250 additional aluminum railcars was entered into for twenty-two years. Both of these leases are for the transportation of coal to Plant Daniel. At the end of each lease term, the Company has the option to renew the lease. In 1997, three additional lease agreements for 120 cars each were entered into for three years, with a monthly renewal option for up to an additional nine months. The Company, as a joint owner of Plant Daniel, is responsible for one half of the lease costs. The lease costs are charged to fuel inventory and are allocated to fuel expense as the fuel is used. The Company's share of the lease costs charged to fuel inventories was $2.1 million in 2000 and $2.8 million in 1999. The annual amounts for 2001 through 2005 are expected to be $1.9 million, $1.9 million, $1.9 million, $2.0 million, and $2.0 million, respectively, and after 2005 are expected to total $13.8 million. 5. JOINT OWNERSHIP AGREEMENTS The Company and Mississippi Power jointly own Plant Daniel, a steam-electric generating plant located in Jackson County, Mississippi. In accordance with the operating agreement, Mississippi Power acts as the Company's agent with respect to the construction, operation, and maintenance of the plant. The Company and Georgia Power jointly own Plant Scherer Unit No. 3. Plant Scherer is a steam-electric generating plant located near Forsyth, Georgia. In accordance with the operating agreement, Georgia Power acts as the Company's agent with respect to the construction, operation, and maintenance of the unit. The Company's pro rata share of expenses related to both plants is included in the corresponding operating expense accounts in the Statements of Income. At December 31, 2000, the Company's percentage ownership and its investment in these jointly owned facilities were as follows: Plant Scherer Plant Unit No. 3 Daniel (coal-fired) (coal-fired) ----------------------------- (in thousands) Plant In Service $185,778(1) $232,074 Accumulated Depreciation $70,207 $118,504 Construction Work in Progress $252 $2,006 Nameplate Capacity (2) (megawatts) 205 500 Ownership 25% 50% - ------------------------------------------------------------------ (1) Includes net plant acquisition adjustment. (2) Total megawatt nameplate capacity: Plant Scherer Unit No. 3: 818 Plant Daniel: 1,000 6. LONG-TERM POWER SALES AGREEMENTS The Company and the other operating affiliates have long-term contractual agreements for the sale of capacity to certain non-affiliated utilities located outside the system's service area. The unit power sales agreements are firm and pertain to capacity related to specific generating units. Because the energy is generally sold at cost under these agreements, profitability is primarily affected by revenues from capacity sales. The capacity revenues from these sales were $20.3 million in 2000, $19.8 million in 1999, and $22.5 million in 1998. II-135 NOTES (continued) Gulf Power Company 2000 Annual Report Capacity revenues increased slightly in 2000 due to the recovery of higher operating expenses experienced during the year. Unit power from specific generating plants of Southern Company is currently being sold to Florida Power Corporation (FPC), Florida Power & Light Company (FP&L), and Jacksonville Electric Authority (JEA). Under these agreements, 209 megawatts of net dependable capacity were sold by the Company during 2000. Sales will increase slightly to 210 megawatts per year in 2001 and remain close to that level, unless reduced by FP&L, FPC, and JEA for the periods after 2001 with a minimum of three years notice, until the expiration of the contracts in 2010. 7. INCOME TAXES At December 31, 2000, the tax-related regulatory assets to be recovered from customers were $16.0 million. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized allowance for funds used during construction. At December 31, 2000, the tax-related regulatory liabilities to be credited to customers were $38.3 million. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are as follows: 2000 1999 1998 ------------------------------------ (in thousands) Total provision for income taxes: Federal-- Current $37,250 $33,973 $31,746 Deferred (11,159) (6,107) (4,467) - -------------------------------------------------------------------- 26,091 27,866 27,279 - -------------------------------------------------------------------- State-- Current 5,796 5,267 5,137 Deferred (1,357) (502) (217) - -------------------------------------------------------------------- 4,439 4,765 4,920 - -------------------------------------------------------------------- Total $30,530 $32,631 $32,199 ==================================================================== The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 2000 1999 --------------------------- (in thousands) Deferred tax liabilities: Accelerated depreciation $172,646 $168,662 Other 14,262 24,272 - --------------------------------------------------------------------- Total 186,908 192,934 - --------------------------------------------------------------------- Deferred tax assets: Federal effect of state deferred taxes 8,703 9,293 Postretirement benefits 9,205 8,456 Other 14,742 12,526 - --------------------------------------------------------------------- Total 32,650 30,275 - --------------------------------------------------------------------- Net deferred tax liabilities 154,258 162,659 Less current portion, net (816) (117) - --------------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $155,074 $162,776 ===================================================================== Deferred investment tax credits are amortized over the lives of the related property with such amortization normally applied as a credit to reduce depreciation and amortization in the Statements of Income. Credits amortized in this manner amounted to $1.9 million in 2000, 1999, and 1998. At December 31, 2000, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 2000 1999 1998 ---------------------------- Federal statutory rate 35% 35% 35% State income tax, net of federal deduction 4 4 4 Non-deductible book depreciation 1 1 1 Difference in prior years' deferred and current tax rate (2) (2) (2) Other, net (1) - (2) - ---------------------------------------------------------------- Effective income tax rate 37% 38% 36% ================================================================ The Company and the other subsidiaries of Southern Company file a consolidated federal tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. II-136 NOTES (continued) Gulf Power Company 2000 Annual Report 8. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES In January 1997, Gulf Power Capital Trust I (Trust I), of which the Company owns all of the common securities, issued $40 million of 7.625 percent mandatorily redeemable preferred securities. Substantially all of the assets of Trust I are $41 million aggregate principal amount of the Company's 7.625 percent junior subordinated notes due December 31, 2036. In January 1998, Gulf Power Capital Trust II (Trust II), of which the Company owns all of the common securities, issued $45 million of 7.0 percent mandatorily redeemable preferred securities. Substantially all of the assets of Trust II are $46 million aggregate principal amount of the Company's 7.0 percent junior subordinated notes due December 31, 2037. The Company considers that the mechanisms and obligations relating to the preferred securities, taken together, constitute a full and unconditional guarantee by the Company of payment obligations with respect to the preferred securities of Trust I and Trust II. Trust I and Trust II are subsidiaries of the Company, and accordingly are consolidated in the Company's financial statements. 9. SECURITIES DUE WITHIN ONE YEAR At December 31, 2000, the Company had an improvement fund requirement of $850,000. The first mortgage bond improvement fund requirement amounts to 1 percent of each outstanding series of bonds authenticated under the indenture prior to January 1 of each year, other than those issued to collateralize pollution control revenue bond obligations. The requirement may be satisfied by depositing cash, reacquiring bonds, or by pledging additional property equal to 1 and 2/3 times the requirement. 10. COMMON STOCK DIVIDEND RESTRICTIONS The Company's first mortgage bond indenture contains various common stock dividend restrictions, which remain in effect as long as the bonds are outstanding. At December 31, 2000, retained earnings of $127 million were restricted against the payment of cash dividends on common stock under the terms of the mortgage indenture. 11. QUARTERLY FINANCIAL DATA (Unaudited) Summarized quarterly financial data for 2000 and 1999 are as follows: Net Income After Dividends Operating Operating on Preferred Quarter Ended Revenues Income Stock - -------------------------------------------------------------------- (in thousands) March 2000 $138,498 $16,007 $4,653 June 2000 182,120 30,505 12,927 September 2000 232,533 52,614 26,438 December 2000 161,168 20,755 7,825 March 1999 $134,506 $15,665 $ 4,799 June 1999 166,815 29,253 13,226 September 1999 218,264 54,429 28,582 December 1989 154,514 19,815 7,060 - -------------------------------------------------------------------- The Company's business is influenced by seasonal weather conditions and the timing of rate changes, among other factors. II-137 SELECTED FINANCIAL AND OPERATING DATA 1996-2000 Gulf Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $714,319 $674,099 $650,518 $625,856 $634,365 Net Income after Dividends on Preferred Stock (in thousands) $51,843 $53,667 $56,521 $57,610 $57,845 Cash Dividends on Common Stock (in thousands) $59,000 $61,300 $57,200 $64,600 $58,300 Return on Average Common Equity (percent) 12.20 12.63 13.20 13.33 13.27 Total Assets (in thousands) $1,315,496 $1,308,495 $1,267,901 $1,265,612 $1,308,366 Gross Property Additions (in thousands) $95,807 $69,798 $69,731 $54,289 $61,386 - ----------------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $427,378 $422,313 $427,652 $428,718 $435,758 Preferred stock 4,236 4,236 4,236 13,691 65,102 Company obligated mandatorily redeemable preferred securities 85,000 85,000 85,000 40,000 - Long-term debt 365,993 367,449 317,341 296,993 331,880 - ----------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $882,607 $878,998 $834,229 $779,402 $832,740 =================================================================================================================================== Capitalization Ratios (percent): Common stock equity 48.4 48.0 51.3 55.0 52.3 Preferred stock 0.5 0.5 0.5 1.8 7.8 Company obligated mandatorily redeemable preferred securities 9.6 9.7 10.2 5.1 - Long-term debt 41.5 41.8 38.0 38.1 39.9 - ----------------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0 =================================================================================================================================== Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 A1 A1 Standard and Poor's A+ AA- AA- AA- A+ Fitch AA-* AA- AA- AA- AA- Preferred Stock - Moody's a2 a2 a2 a2 a2 Standard and Poor's BBB+ A- A A A Fitch A* A A+ A+ A+ Unsecured Long-Term Debt - Moody's A2 A2 A2 A2 - Standard and Poor's A A A A - Fitch A+* A+ A+ A+ - =================================================================================================================================== Customers (year-end): Residential 321,731 315,240 307,077 300,257 291,196 Commercial 47,666 47,728 46,370 44,589 43,196 Industrial 280 267 257 267 278 Other 442 316 268 264 162 - ----------------------------------------------------------------------------------------------------------------------------------- Total 370,119 363,551 353,972 345,377 334,832 =================================================================================================================================== Employees (year-end): 1,327 1,339 1,328 1,328 1,384 - ----------------------------------------------------------------------------------------------------------------------------------- *Effective 1/22/01 the Fitch Security Ratings for First Mortgage Bonds, Preferred Stock, and Unsecured Long-Term Debt are A+, A-, and A respectively.
II-138 SELECTED FINANCIAL AND OPERATING DATA 1996-2000 (continued) Gulf Power Company 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------ Operating Revenues (in thousands): Residential $ 308,728 $277,311 $ 276,208 $ 277,609 $ 285,498 Commercial 181,584 165,871 160,960 164,435 164,181 Industrial 76,539 67,404 69,850 77,492 78,994 Other (4,689) 2,174 2,100 2,083 2,056 - ------------------------------------------------------------------------------------------------------------------------------ Total retail 562,162 512,760 509,118 521,619 530,729 Sales for resale - non-affiliates 66,890 62,354 61,893 63,697 63,201 Sales for resale - affiliates 66,995 66,110 42,642 16,760 17,762 - ------------------------------------------------------------------------------------------------------------------------------ Total revenues from sales of electricity 696,047 641,224 613,653 602,076 611,692 Other revenues 18,272 32,875 36,865 23,780 22,673 - ------------------------------------------------------------------------------------------------------------------------------ Total $714,319 $674,099 $650,518 $625,856 $634,365 ============================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 4,790,038 4,471,118 4,437,558 4,119,492 4,159,924 Commercial 3,379,449 3,222,532 3,111,933 2,897,887 2,808,634 Industrial 1,924,749 1,846,237 1,833,575 1,903,050 1,808,086 Other 18,730 19,296 18,952 18,101 17,815 - ------------------------------------------------------------------------------------------------------------------------------ Total retail 0,112,966 9,559,183 9,402,018 8,938,530 8,794,459 Sales for resale - non-affiliates 1,705,486 1,561,972 1,341,990 1,531,179 1,534,097 Sales for resale - affiliates 1,916,526 2,511,983 1,758,150 848,135 709,647 - ------------------------------------------------------------------------------------------------------------------------------ Total 3,734,978 13,633,138 12,502,158 11,317,844 11,038,203 ============================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.45 6.20 6.22 6.74 6.86 Commercial 5.37 5.15 5.17 5.67 5.85 Industrial 3.98 3.65 3.81 4.07 4.37 Total retail 5.56 5.36 5.41 5.84 6.03 Sales for resale 3.70 3.15 3.37 3.38 3.61 Total sales 5.07 4.70 4.91 5.32 5.54 Residential Average Annual Kilowatt-Hour Use Per Customer 14,992 14,318 14,577 13,894 14,457 Residential Average Annual Revenue Per Customer $966.26 $888.01 $907.35 $936.30 $992.17 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,188 2,188 2,188 2,174 2,174 Maximum Peak-Hour Demand (megawatts): Winter 2,154 2,085 2,040 1,844 2,136 Summer 2,285 2,161 2,146 2,032 1,961 Annual Load Factor (percent) 55.4 55.2 55.3 55.5 51.4 Plant Availability Fossil-Steam (percent): 85.2 87.2 87.6 91.0 91.8 - ------------------------------------------------------------------------------------------------------------------------------ Source of Energy Supply (percent): Coal 87.8 89.8 89.2 87.1 87.8 Oil and gas 1.6 2.5 2.0 0.4 0.5 Purchased power - From non-affiliates 7.6 5.9 5.5 3.5 2.7 From affiliates 3.0 1.8 3.3 9.0 9.0 - ------------------------------------------------------------------------------------------------------------------------------ Total 100.0 100.0 100.0 100.0 100.0 ==============================================================================================================================
II-139 MISSISSIPPI POWER COMPANY FINANCIAL SECTION II-140 MANAGEMENT'S REPORT Mississippi Power Company 2000 Annual Report The management of Mississippi Power Company has prepared -- and is responsible for -- the financial statements and related information included in this report. These statements were prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts that are based on best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that the accounting records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based upon recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of four independent directors, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors, and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls, and financial reporting matters. The internal auditors and independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted according to a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Mississippi Power Company in conformity with accounting principles generally accepted in the United States. /s/Dwight H. Evans Dwight H. Evans President and Chief Executive Officer /s/Michael W. Southern Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer II-141 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Mississippi Power Company: We have audited the accompanying balance sheets and statements of capitalization of Mississippi Power Company (a Mississippi corporation and a wholly owned subsidiary of Southern Company) as of December 31, 2000 and 1999, and the related statements of income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages 11-151 through II-166) referred to above present fairly, in all material respects, the financial position of Mississippi Power Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/Arthur Andersen LLP Atlanta, Georgia February 28, 2001 II-142 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Mississippi Power Company 2000 Annual Report RESULTS OF OPERATIONS Earnings Mississippi Power Company's 2000 net income after dividends on preferred stock of $55 million increased $0.2 million over 1999 earnings of $54.8 million, which were $0.3 million less than 1998 earnings of $55.1 million. Revenues Operating revenues for the Company in 2000 and the changes from the prior year are as follows: Increase (Decrease) Amount From Prior Year ------ ---------------------- 2000 2000 1999 --------------------------------------- (in millions) Retail -- Base Revenues $287,253 $ (5,854) $ 17,462 Fuel cost recovery and other 211,298 34,971 9,405 ---------------------------------------------------------------- Total retail 498,551 29,117 26,867 ---------------------------------------------------------------- Sales for resale -- Non-affiliates 145,931 14,927 9,779 Affiliates 27,915 8,469 1,161 ---------------------------------------------------------------- Total sales for resale 173,846 23,396 10,940 Other operating revenues 15,205 2,085 66 ---------------------------------------------------------------- Operating revenues $687,602 $54,598 $ 37,873 ================================================================== Percent change 8.6% 6.4% ------------------------------------------------------------------ Total retail revenues for 2000 increased approximately 6.2 percent when compared to 1999. The increase resulted primarily from continued growth in the service area, a positive impact of weather and additional fuel revenues. Retail revenues for 1999 reflected a 6.1 percent increase over the prior year due to the continued growth in the service area, increased fuel revenues, and a true-up of the unbilled revenue estimate. Fuel revenues generally represent the direct recovery of fuel expense including purchased power. Therefore, changes in recoverable fuel expenses are offset with corresponding changes in fuel revenues and have no effect on net income. Energy sales to non-affiliates include economy sales and amounts sold under short-term contracts. Sales for resale to non-affiliates are influenced by those utilities' own customer demand, plant availability, and the cost of their predominant fuels. Included in sales for resale to non-affiliates are revenues from rural electric cooperative associations and municipalities located in southeastern Mississippi. Energy sales to these customers increased 10.9 percent in 2000 and 10.2 percent in 1999, with the related revenues rising 10.8 percent and 12.1 percent, respectively. The customer demand experienced by these utilities is determined by factors very similar to those of the Company. Revenues from other sales outside the service area increased in 2000 and 1999 primarily due to power marketing activities. These increases were offset by increases in purchased power from non-affiliates and, as a result, had no significant effect on net income. Sales to affiliated companies within the Southern Company electric system will vary from year to year depending on demand and the availability and cost of generating resources at each company. These sales have no material impact on earnings. Below is a breakdown of kilowatt-hour sales for 2000 and the percent change for the last two years: 2000 Percent Change ------------- --------------------------- KWH 2000 1999 --------------------------- (in millions) Residential 2,286 1.7% - Commercial 2,883 1.3 8.5% Industrial 4,376 (0.7) 18.2 Other 41 2.5 0.8 ------- Total retail 9,586 0.5 10.4 Sales for Resale -- Non-affiliates 3,675 12.9 3.1 Affiliates 453 (16.2) (2.2) ------- Total 13,714 2.8 8.0 ================================================================== Total retail kilowatt-hour sales increased slightly in 2000 when compared to 1999 sales, which included an unbilled revenue true-up of approximately 3.5 percent. The increase primarily resulted from the continued growth in the service area and the positive impact of weather. Excluding the impact of the unbilled revenue true-up, all retail customer classes experienced growth in 2000 II-143 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2000 Annual Report due to the positive impact of weather, increased tourism, and continued growth in the service area. In 1999, increased tourism and strong growth impacted commercial sales, while industrial sales were impacted by increased production by several larger industrial customers, including one which was shut down in 1998 by Hurricane Georges. Expenses Total operating expenses were $565 million in 2000 reflecting an increase of $52 million or 10.1 percent over the prior year. The increase was due primarily to higher fuel and purchased power expenses. In 1999, total operating expenses increased by 6.9 percent over the prior year due primarily to higher fuel expenses. Fuel costs are the single largest expense for the Company. Fuel expenses for 2000 and 1999 increased 10.7 percent and 10.3 percent, respectively. The increase for each year was due to increased generation and a higher average cost of fuel. The increased generation was due to higher demand for energy across the Southern Company electric system. In 2000, expenses related to purchased power from non-affiliates increased 40.0 percent, while expenses related to purchased power from affiliates increased 64.7 percent which, in total, resulted in a 51 percent increase when compared to 1999. This increase consisted mostly of energy purchased for power marketing activities which was resold to non-affiliated third parties and had no significant effect on net income. Sales and purchases among the Company and its affiliates will vary from period to period depending on demand and the availability and variable production cost of each generating unit in the Southern Company electric system. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated were as follows: 2000 1999 1998 ----------------------------- Total generation (millions of kilowatt hours) 11,688 11,599 10,610 Sources of generation (percent) -- Coal 83 81 80 Gas 17 19 20 Average cost of fuel per net kilowatt-hour generated (cents) -- 1.80 1.65 1.62 - ----------------------------------------------------------------- Other operation expenses decreased 8.2 percent in 2000 primarily due to a decrease in administrative and general expenses. In 1999, other operation expense increased 13.9 percent primarily due to the amortization of costs associated with the workforce reduction plan and higher distribution expenses. Maintenance expense in 2000 increased due to additional scheduled maintenance, while maintenance expense in 1999 decreased due to reduced scheduled maintenance. In 2000, depreciation expenses increased slightly due to growth in plant investment and a new composite depreciation rate, which became effective January 2000. Comparisons of taxes other than income taxes for 2000 and 1999 show increases of 1.7 percent and 4.2 percent, respectively, due to higher municipal franchise taxes resulting from higher retail revenues. Interest on long-term debt increased in 2000 due to higher interest rates and increased debt outstanding. Effects of Inflation The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in utility plant with long economic lives. Conventional accounting for historical costs does not recognize this economic loss or the partially offsetting gain that arises through financing facilities with II-144 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2000 Annual Report fixed-money obligations, such as long-term debt and preferred securities. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of the Company's future earnings depends on numerous factors ranging from weather to energy sales growth to a less regulated and more competitive environment. Expenses are subject to constant review and cost control programs. The Company is also maximizing the utility of invested capital and minimizing the need for additional capital by refinancing, managing the size of its fuel stockpile, raising generating plant availability and efficiency, and aggressively controlling its construction budget. The Company currently operates as a vertically integrated utility providing electricity to customers within its traditional service area located in southeastern Mississippi. Prices for electricity provided by the Company to retail customers are set by the Mississippi Public Service Commission (MPSC) under cost-based regulatory principles. The Federal Energy Regulatory Commission (FERC) regulates the Company's wholesale rate schedules, power sales contracts and transmission facilities. Operating revenues will be affected by any changes in rates under the Performance Evaluation Plan (PEP) -- the Company's performance based ratemaking plan -- and the Environmental Compliance Overview Plan (ECO Plan). PEP has proven to be a stabilizing force on electric rates, with only moderate changes in rates taking place. The ECO Plan provides for recovery of costs (including costs of capital) associated with environmental projects approved by the MPSC, most of which are required to comply with Clean Air Act Amendments of 1990 (Clean Air Act) regulations. The ECO Plan is operated independently of PEP. Compliance costs related to the Clean Air Act could affect earnings if such costs cannot be recovered. The Company's 2000 ECO Plan filed in January 2000 was approved as filed, and resulted in a slight decrease in customer prices. The Company filed its 2001 ECO Plan in January 2001 and, if approved as filed, it will result in a slight increase in customer prices. Refer to Note 3 to the financial statements under "Litigation and Regulatory Matters" for additional information. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." Future earnings in the near term will depend upon growth in energy sales, which is subject to a number of factors. These factors include weather, competition, changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the Company's service area. The Company anticipates somewhat slower growth in energy sales as the tourism industry stabilizes within its service area. In addition to tourism, the healthcare and retail trade sectors will provide most of the anticipated energy growth for the commercial class of customers, while shipbuilding, chemicals and the U.S. government will provide much of the basis for anticipated growth in the industrial sector. The electric utility industry in the United States is currently undergoing a period of dramatic change as a result of regulatory and competitive factors. Among the primary agents of change has been the Energy Policy Act of 1992 (Energy Act). The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell energy generation to other utilities. Also, electricity sales for resale rates are affected by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. Although the Energy Act does not permit retail transmission access, it was a major catalyst for the current restructuring and consolidation taking place within the utility industry. Numerous federal and state initiatives are in various stages to promote wholesale and retail competition. Among other things, these initiatives allow customers to choose their electricity provider. As these initiatives materialize, the structure of the utility industry could radically change. In May 2000, the MPSC ordered that its docket reviewing restructuring of the electric industry in the State of Mississippi be suspended. The MPSC found that retail competition may not be in the public interest at this time, and ordered that no further formal hearings would be held on this subject. It found that the current regulatory structure produced reliable low cost power and "should not be changed without clear and convincing demonstration that change II-145 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2000 Annual Report would be in the public interest." The MPSC will continue to monitor retail and wholesale restructuring activities throughout the United States and reserves its right to order further formal hearings on the matter should new evidence demonstrate that retail competition would be in the public interest and all customers could receive a reduction in the total cost of their electric service. If the MPSC decides to hold future restructuring hearings on this matter, enactment would require numerous issues to be resolved, including significant ones relating to transmission, prices, and recovery of any stranded costs. The inability of the Company to recover its investment, including regulatory assets, could have a material adverse effect on the financial condition of the Company. The Company is attempting to minimize or reduce its cost exposure. The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operation is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. Continuing to be a low-cost producer could provide significant opportunities to increase market share and profitability in markets that evolve with changing regulation. Conversely, unless the Company remains a low-cost producer and provides quality service, the Company's energy sales growth could be limited, and this could significantly erode earnings. On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued its final ruling on Regional Transmission Organizations (RTOs). The order encourages utilities owning transmission systems to form RTOs on a voluntary basis. After participating in regional conferences with customers and other members of the public to discuss the formation of RTOs, utilities were required to make a filing with the FERC. On October 16, 2000, Southern Company and its integrated utilities including the Company filed a proposal for the creation of an RTO. The proposal is for the formation of a for-profit company that would have control of the bulk power transmission system of the Company and any other participating utilities. Participants would have the option to either maintain their ownership or divest, sell, or lease their assets to the proposed RTO. If the FERC accepts the proposal as filed, the creation of an RTO is not expected to have a material impact on the Company's financial statements. The outcome of this matter cannot now be determined. The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA) to allow holding companies to form exempt wholesale generators to sell power largely free of regulation under PUHCA. These entities are able to own and operate power generating facilities and sell power to affiliates - under certain restrictions. Southern Company is aggressively working to maintain and expand its share of wholesale sales in the southeastern power markets. In January 2001, Southern Company announced the formation of a new subsidiary - Southern Power Company. The new subsidiary will own, manage, and finance wholesale generating assets in the Southeast. Southern Power will be the primary growth engine for Southern Company's market-based energy business. Energy from its assets will be marketed to wholesale customers under the Southern Company name. In accordance with FASB Statement No. 87, Employers' Accounting for Pensions, the Company recorded non-cash pension income of approximately $4.2 million in 2000. Pension income in 2001 is expected to be less as a result of plan amendments. Future pension income is dependent on several factors including trust earnings and changes to the plan. For more information, see Note 2. The Company is involved in various matters being litigated. See Note 3 to the financial statements for information regarding material issues that could possibly affect future earnings. Compliance costs related to current and future environmental laws and regulations could affect earnings if such costs are not fully recovered. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." Exposure to Market Risks Due to cost-based rate regulations, the Company has limited exposure to market volatility in interest rates, commodity fuel prices, and prices of electricity. II-146 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2000 Annual Report To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market. Realized gains and losses are recognized in the income statements as incurred. At December 31, 2000, exposure from these activities was not material to the Company's financial statements. Also, based on the Company's overall interest rate exposure at December 31, 2000, a near-term 100 basis point change in interest rates would not materially affect the financial statements. New Accounting Standard In June 2000, FASB issued Statement No. 138, an amendment of Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 133, as amended, establishes accounting and reporting standards for derivative instruments and for hedging activities. Statement No. 133 requires that certain derivative instruments be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in the fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Substantially all of the Company's bulk energy purchases and sales meet the definition of a derivative under Statement No. 133. In many cases, these transactions meet the normal purchase and sale exception and the related contracts will continue to be accounted for under the accrual method. Certain of these instruments qualify as cash flow hedges resulting in the deferral of related gains and losses in other comprehensive income until the hedged transactions occur. Any ineffectiveness will be recognized currently in net income. However, others will be required to be marked to market through current period income. The Company adopted Statement No. 133 effective January 1, 2001. The impact on net income was immaterial. The application of the new rules is still evolving and further guidance from FASB is expected, which could additionally impact the Company's financial statements. Also, as wholesale energy markets mature, future transactions could result in more volatility in net income and comprehensive income. FINANCIAL CONDITION Overview The principal change in the Company's financial condition during 2000 was the addition of approximately $81 million to utility plant. Funding for these additions and other capital requirements were derived primarily from operations. The Statements of Cash Flows provide additional details. Financing Activity In March 2000, the Company issued $100 million of floating rate senior notes due March 28, 2002. The proceeds were used to prepay bank loans of $45 million maturing in November 2001 and $5 million maturing in October 2002. The balance of the $100 million was used to repay a portion of the Company's outstanding short-term debt. The Company plans to continue, to the extent possible, a program to retire higher-cost debt and replace these securities with lower-cost capital. See the Statements of Cash Flows for further details. Composite financing rates increased for the year 2000 when compared to 1998 and 1999. As of year-end , the composite rates were as follows: 2000 1999 1998 ---------------------------- Composite interest rate on long-term debt 6.41% 6.19% 6.14% Composite preferred stock dividend rate 6.33% 6.33% 6.33% Composite interest rate on preferred securities 7.75% 7.75% 7.75% ------------------------------------------------------------ In 1999, the Company signed an Agreement for Lease and a Lease Agreement with Escatawpa Funding, Limited Partnership ("Escatawpa"), that calls for the Company to design and construct, as agent for Escatawpa, a 1,064 megawatt natural gas combined cycle facility. It is anticipated that the total project will cost approximately $400 million, and upon project completion in mid 2001, the Company intends to lease the facility for an initial term of approximately 10 years. It is anticipated that the annual lease payments will approximate $32 million during the initial term. II-147 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2000 Annual Report Capital Structure At year-end 2000, the Company's ratio of common equity to total capitalization, excluding long-term debt due within one year, decreased from 50.2 percent in 1999, to 48.1 percent. Capital Requirements for Construction The Company's projected construction expenditures for the next three years total $191 million ($62 million in 2001, $60 million in 2002, and $69 million in 2003). The major emphasis within the construction program will be on the upgrade of existing facilities. Revisions to projected construction expenditures may be necessary because of factors such as changes in business conditions, revised load projections, the availability and cost of capital, changes in environmental regulations, and alternatives such as leasing. Other Capital Requirements In addition to the funds required for the Company's construction program, approximately $135 million will be required by the end of 2003 for present sinking fund requirements and maturities of long-term debt. The Company plans to continue, when economically feasible, to retire higher cost debt and preferred stock and replace these obligations with lower-cost capital if market conditions permit. Environmental Matters On November 3, 1999, the Environmental Protection Agency (EPA), brought a civil action in the U.S. District Court against Alabama Power Company, Georgia Power Company and the system service company. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to five coal-fired generating facilities in Alabama and Georgia. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The EPA concurrently issued to the integrated Southeast utilities a notice of violation related to 10 generating facilities, which includes the five facilities mentioned previously, and the Company's plants Watson and Greene County. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation, and to add Gulf Power, Savannah Electric, and the Company as defendants. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. These complaints and notices of violation allege that the utilities had failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August 1, 2000, the U.S. District Court granted Alabama Power's motion to dismiss for lack of jurisdiction in Georgia and granted the system service company's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against Alabama Power in federal district court in Birmingham, Alabama. The EPA did not include SCS in the new complaint. The Company believes that it complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes civil penalties of up to $27,500 per day per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows and possibly financial condition unless such costs can be recovered through regulated rates. In November 1990, the Clean Air Act Amendments of 1990 (Clean Air Act) were signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- significantly affected Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants were required in two phases. Phase I compliance began in 1995. As a result of a systemwide compliance strategy, some 50 generating units of Southern Company were brought into compliance with Phase I requirements. Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. Construction expenditures for Phase I nitrogen oxide and sulfur dioxide emissions compliance totaled approximately $300 million for Southern Company, including approximately $65 million for the Company. II-148 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2000 Annual Report Phase II sulfur dioxide compliance was required in 2000. Southern Company used emission allowances and fuel switching to comply with Phase II requirements. Also, equipment to control nitrogen oxide emissions was installed on additional system fossil-fired units as necessary to meet Phase II limits and ozone non-attainment requirements for metropolitan Atlanta through 2000. Compliance for Phase II and initial ozone non-attainment requirements increased the Company's total construction expenditures through 2000 by approximately $100 million. Phase II compliance did not have a material impact on the Company. The Company's ECO Plan is designed to allow recovery of costs of compliance with the Clean Air Act, as well as other environmental statutes and regulations. The MPSC reviews environmental projects and the Company's environmental policy through the ECO Plan. Under the ECO Plan, any increase in the annual revenue requirement is limited to 2 percent of retail revenues. The Company's management believes that the ECO Plan provides for recovery of the Clean Air Act costs. See Note 3 to the financial statements under "Environmental Compliance Overview Plan" for additional information. A significant portion of costs related to the acid rain and ozone non-attainment provisions of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. In July 1997, the EPA revised the national ambient air quality standards for ozone and fine particulate matter. This revision made the standards significantly more stringent. In the subsequent litigation of these standards, the U.S. Supreme Court recently dismissed certain challenges but found the EPA's implementation program for the new ozone standard unlawful and remanded it to the EPA. In addition, the Federal District of Columbia Circuit Court of Appeals will address other legal challenges to these standards in mid-2001. A decision is expected in the spring of 2001. If the standards are eventually upheld, implementation could be required by 2007 to 2010. In September 1998, the EPA issued the final regional nitrogen oxide reduction rules to the states for implementation. Compliance is required by May 31, 2004. The final rules affect 21 states that at present do not include Mississippi. The EPA is presently evaluating whether or not to bring an additional 15 states including Mississippi, under this regional nitrogen oxide rule. In December 2000, the EPA completed its utility study for mercury and other hazardous air pollutants (HAPS) and issued a determination that an emission control program for mercury and, perhaps, other HAPS is warranted. The program is to be developed over the next four years under the Maximum Achievable Control Technology (MACT) provisions of the Clean Air Act. This determination is being challenged in the courts. In January 2001, the EPA proposed guidance for the determination of Best Available Retrofit Technology (BART) emission controls under the Regional Haze Regulations. Installation of BART controls would likely be required around 2010. Litigation of the BART rules is probable in the near future. Implementation of the final state rules for these initiatives could require substantial further reductions in nitrogen oxide, sulfur dioxide, mercury, and other HAPS emissions from fossil-fired generating facilities and other industries in these states. Additional compliance costs and capital expenditures resulting from the implementation of these rules and standards cannot be determined until the results of legal challenges are known, and the states have adopted their final rules. Reviews by the new administration in Washington, D.C. add to the uncertainties associated with BART guidance and the MACT determination for mercury and other HAPS. The EPA and state environmental regulatory agencies are reviewing and evaluating various matters including: emission control strategies for ozone non-attainment areas; additional controls for hazardous air pollutant emissions; and hazardous waste disposal requirements. The impact of any new standards will depend on the development and implementation of applicable regulations. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur costs to clean up properties currently or previously owned. Upon identifying potential sites, the Company conducts studies, when possible, to determine the extent of any required cleanup costs. II-149 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 2000 Annual Report Should remediation be determined to be probable, reasonable estimates of costs to clean up such sites are developed and recognized in the financial statements. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of any such changes cannot be determined at this time. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Company. The impact of new legislation -- if any - -- will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for lawsuits alleging damages caused by electromagnetic fields or other environmental concerns. The likelihood or outcome of such potential lawsuits cannot be determined at this time. Sources of Capital To meet short-term cash needs and contingencies, the Company had at December 31, 2000 approximately $7.5 million of cash and cash equivalents and approximately $117 million of unused committed credit agreements. The Company had $56 million of short-term notes payable outstanding at year-end 2000. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will be derived from sources similar to those used in the past. These sources were primarily the issuance of first mortgage bonds and preferred securities, in addition to pollution control revenue bonds issued for the Company's benefit by public authorities. The Company also issued unsecured debt in 1998. The Company has no restrictions on the amounts of unsecured indebtedness it may incur. However, the Company is required to meet certain coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's coverage ratios are high enough to permit, at present interest rate levels, any foreseeable security sales. The amount of securities which the Company will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. Cautionary Statement Regarding Forward-Looking Information This Annual Report includes forward-looking statements in addition to historical information. Forward-looking information includes, among other things, statements concerning projected sales growth and scheduled completion of new generation. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other comparable terminology. The Company cautions that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations; current and future litigation, including the pending EPA civil action against the Company; the extent and timing of the entry of additional competition in the markets of the Company; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial; internal restructuring or other restructuring options, that may be pursued by the Company; state and federal rate regulation in the United States; political, legal and economic conditions and developments in the United States; financial market conditions and the results of financing efforts; the impact of fluctuations in commodity prices, interest rates and customer demand; weather and other natural phenomena; the ability of the Company to obtain additional generating capacity at competitive prices; and other factors discussed elsewhere herein and in other reports (including Form 10-K) filed from time to time by the Company with the SEC. II-150 STATEMENTS OF INCOME For the Years Ended December 31, 2000, 1999, and 1998 Mississippi Power Company 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues: Retail sales $498,551 $469,434 $442,567 Sales for resale -- Non-affiliates 145,931 131,004 121,225 Affiliates 27,915 19,446 18,285 Other revenues 15,205 13,120 13,054 - --------------------------------------------------------------------------------------------------------------------------------- Total operating revenues 687,602 633,004 595,131 - --------------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 191,127 172,686 156,539 Purchased power -- Non-affiliates 56,082 40,080 33,872 Affiliates 51,057 31,007 36,037 Other 115,055 125,291 109,993 Maintenance 52,750 47,085 50,404 Depreciation and amortization 50,275 49,206 47,450 Taxes other than income taxes 48,686 47,893 45,965 - --------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 565,032 513,248 480,260 - --------------------------------------------------------------------------------------------------------------------------------- Operating Income 122,570 119,756 114,871 Other Income (Expense): Interest income 347 189 863 Other, net (647) 1,675 2,498 - --------------------------------------------------------------------------------------------------------------------------------- Earnings Before Interest and Income Taxes 122,270 121,620 118,232 - --------------------------------------------------------------------------------------------------------------------------------- Interest Expense and Other: Interest expense, net 28,101 27,969 23,746 Distributions on preferred securities of subsidiary 2,712 2,712 2,712 - --------------------------------------------------------------------------------------------------------------------------------- Total interest charges and other, net 30,813 30,681 26,458 - --------------------------------------------------------------------------------------------------------------------------------- Earnings Before Income Taxes 91,457 90,939 91,774 Income taxes 34,356 34,117 34,664 - --------------------------------------------------------------------------------------------------------------------------------- Net Income 57,101 56,822 57,110 Dividends on Preferred Stock 2,129 2,013 2,005 - --------------------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 54,972 $ 54,809 $ 55,105 ================================================================================================================================= The accompanying notes are an integral part of these statements.
II-151 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000, 1999, and 1998 Mississippi Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 57,101 $ 56,822 $ 57,110 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 54,638 53,427 51,517 Deferred income taxes and investment tax credits, net 752 (4,143) 11,620 Other, net (1,747) 5,531 (12,175) Changes in certain current assets and liabilities -- Receivables, net (3,231) (39,304) (5,486) Fossil fuel stock 14,577 (9,379) (5,767) Materials and supplies (1,056) (1,903) 717 Accounts payable 1,309 1,391 (389) Other 2,952 14,206 (4,061) - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 125,295 76,648 93,086 - ----------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (81,211) (75,888) (68,231) Other (9,153) 1,009 (324) - ----------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (90,364) (74,879) (68,555) - ----------------------------------------------------------------------------------------------------------------------------- Financing Activities: Increase (decrease) in notes payable, net (1,500) 44,500 13,000 Proceeds -- Other long-term debt 100,000 59,400 103,520 Capital contributions from parent company 12,659 2,028 85 Retirements -- First mortgage bonds - - (75,000) Other long-term debt (81,405) (50,456) (13,020) Preferred stock - - (87) Payment of preferred stock dividends (2,129) (2,013) (2,005) Payment of common stock dividends (54,700) (56,100) (51,700) Other (498) (282) (2,429) - ----------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities (27,573) (2,923) (27,636) - ----------------------------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 7,358 (1,154) (3,105) Cash and Cash Equivalents at Beginning of Period 173 1,327 4,432 - ----------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Period $ 7,531 $ 173 $ 1,327 ============================================================================================================================= Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $30,570 $25,486 $26,133 Income taxes (net of refunds) 28,418 39,729 26,847 - ----------------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
II-152 BALANCE SHEETS At December 31, 2000 and 1999 Mississippi Power Company 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------- Assets 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- (in thousands) Current Assets: Cash and cash equivalents $ 7,531 $ 173 Receivables -- Customer accounts receivable 72,064 61,274 Other accounts and notes receivable 21,843 23,490 Affiliated companies 10,071 16,097 Accumulated provision for uncollectible accounts (571) (697) Fossil fuel stock, at average cost 11,220 25,797 Materials and supplies, at average cost 21,694 20,638 Other 8,320 10,013 - ---------------------------------------------------------------------------------------------------------------------------- Total current assets 152,172 156,785 - ---------------------------------------------------------------------------------------------------------------------------- Property, Plant, and Equipment: In service 1,665,879 1,601,399 Less accumulated provision for depreciation 652,891 626,841 - ---------------------------------------------------------------------------------------------------------------------------- 1,012,988 974,558 Construction work in progress 60,951 68,721 - ---------------------------------------------------------------------------------------------------------------------------- Total property, plant, and equipment 1,073,939 1,043,279 - ---------------------------------------------------------------------------------------------------------------------------- Other Property and Investments 2,268 1,389 - ---------------------------------------------------------------------------------------------------------------------------- Deferred Charges and Other Assets: Deferred charges related to income taxes 13,860 21,557 Prepaid pension costs 6,724 2,488 Debt expense, being amortized 4,628 4,355 Premium on reacquired debt, being amortized 7,168 8,154 Other 14,312 13,129 - ---------------------------------------------------------------------------------------------------------------------------- Total deferred charges and other assets 46,692 49,683 - ---------------------------------------------------------------------------------------------------------------------------- Total Assets $1,275,071 $1,251,136 ============================================================================================================================ The accompanying notes are an integral part of these balance sheets.
II-153 BALANCE SHEETS At December 31, 2000 and 1999 Mississippi Power Company 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholder's Equity 2000 1999 - --------------------------------------------------------------------------------------------------------------------------- (in thousands) Current Liabilities: Securities due within one year $ 20 $ 30,020 Notes payable 56,000 57,500 Accounts payable -- Affiliated 10,715 17,002 Other 48,146 43,105 Customer deposits 5,274 3,749 Taxes accrued -- Income taxes 8,769 6,865 Other 36,799 35,534 Interest accrued 4,482 6,733 Vacation pay accrued 5,701 5,218 Other 7,003 7,497 - --------------------------------------------------------------------------------------------------------------------------- Total current liabilities 182,909 213,223 - --------------------------------------------------------------------------------------------------------------------------- Long-term debt (See accompanying statements) 370,511 321,802 - --------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 139,909 139,564 Deferred credits related to income taxes 25,603 34,765 Accumulated deferred investment tax credits 23,481 24,695 Employee benefits provisions 34,671 34,268 Workforce reduction plan 9,734 11,272 Other 16,546 12,770 - --------------------------------------------------------------------------------------------------------------------------- Total deferred credits and other liabilities 249,944 257,334 - --------------------------------------------------------------------------------------------------------------------------- Company obligated mandatorily redeemable preferred securities of subsidiary trust holding company junior subordinated notes (See accompanying statements) 35,000 35,000 - --------------------------------------------------------------------------------------------------------------------------- Preferred stock (See accompanying statements) 31,809 31,809 - --------------------------------------------------------------------------------------------------------------------------- Common stockholder's equity (See accompanying statements) 404,898 391,968 - --------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholder's Equity $1,275,071 $1,251,136 =========================================================================================================================== The accompanying notes are an integral part of these balance sheets.
II-154 STATEMENTS OF CAPITALIZATION At December 31, 2000 and 1999 Mississippi Power Company 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------ 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ (in thousands) (percent of total) Long-Term Debt: First mortgage bonds -- Maturity Interest Rates -------- -------------- June 1, 2023 7.45% $ 35,000 $ 35,000 March 1, 2004 6.60% 35,000 35,000 December 1, 2025 6.875% 30,000 30,000 - ------------------------------------------------------------------------------------------------------------------------------ Total first mortgage bonds 100,000 100,000 - ------------------------------------------------------------------------------------------------------------------------------ Long-term notes payable -- 6.05% due May 1, 2003 35,000 35,000 6.75% due June 30, 2038 53,179 54,564 Adjustable rates (6.61% to 6.78% at 1/1/01) due 2000-2002 100,000 80,000 - ------------------------------------------------------------------------------------------------------------------------------ Total long-term notes payable 188,179 169,564 - ------------------------------------------------------------------------------------------------------------------------------ Other long-term debt -- Pollution control revenue bonds -- Collateralized: 5.65% to 5.80% due 2007-2023 - 26,785 Variable rates (3.90% at 1/1/01) due 2020-2025 - 10,600 Non-collateralized: 5.65% to 5.80% due 2007-2023 26,765 Variable rates (3.90% to 5.20% at 1/1/01) due 2020-2028 56,820 46,220 - ------------------------------------------------------------------------------------------------------------------------------ Total other long-term debt 83,585 83,605 - ------------------------------------------------------------------------------------------------------------------------------ Unamortized debt premium (discount), net (1,233) (1,347) - ------------------------------------------------------------------------------------------------------------------------------ Total long-term debt (annual interest requirement -- $23.8 million) 370,531 351,822 Less amount due within one year 20 30,020 - ------------------------------------------------------------------------------------------------------------------------------ Long-term debt excluding amount due within one year $370,511 $321,802 43.9% 41.2% - ------------------------------------------------------------------------------------------------------------------------------
II-155 STATEMENTS OF CAPITALIZATION (continued) At December 31, 2000 and 1999 Mississippi Power Company 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Company Obligated Mandatorily Redeemable Preferred Securities:(Note 8) $25 liquidation value -- 7.75% $ 35,000 $ 35,000 - ------------------------------------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $2.7 million) 35,000 35,000 4.2 4.5 - ------------------------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $100 par value 4.40% to 7.00% 31,809 31,809 - ------------------------------------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $2.0 million) 31,809 31,809 3.8 4.1 - ------------------------------------------------------------------------------------------------------------------------------- Common Stockholder's Equity: Common stock, without par value -- Authorized - 1,130,000 shares Outstanding - 1,121,000 shares in 2000 and 1999 37,691 37,691 Paid-in capital 194,161 181,502 Premium on preferred stock 326 326 Retained earnings 172,720 172,449 - ------------------------------------------------------------------------------------------------------------------------------- Total common stockholder's equity 404,898 391,968 48.1 50.2 - ------------------------------------------------------------------------------------------------------------------------------- Total Capitalization $842,218 $780,579 100.0% 100.0% =============================================================================================================================== The accompanying notes are an integral part of these statements.
II-156 STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the Years Ended December 31, 2000, 1999, and 1998 Mississippi Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------- Premium on Common Paid-In Preferred Retained Stock Capital Stock Earnings Total - ----------------------------------------------------------------------------------------------------------------------------- (in thousands) Balance at January 1, 1998 $37,691 $179,389 $327 $170,417 $387,824 Net income after dividends on preferred stock - - - 55,105 55,105 Capital contributions from parent company - 85 - - 85 Cash dividends on common stock - - - (51,700) (51,700) Other - - (1) (82) (83) - ----------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 37,691 179,474 326 173,740 391,231 Net income after dividends on preferred stock - - - 54,809 54,809 Capital contributions from parent company - 2,028 - - 2,028 Cash dividends on common stock - - - (56,100) (56,100) - ----------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 37,691 181,502 326 172,449 391,968 Net income after dividends on preferred stock - - - 54,972 54,972 Capital contributions from parent company - 12,659 - - 12,659 Cash dividends on common stock - - - (54,700) (54,700) Other - - - (1) (1) - ---------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 $37,691 $194,161 $326 $172,720 $404,898 ============================================================================================================================= The accompanying notes are an integral part of these statements.
II-157 NOTES TO FINANCIAL STATEMENTS Mississippi Power Company 2000 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Mississippi Power Company is a wholly owned subsidiary of Southern Company, which is the parent company of five integrated Southeast utilities, a system service company (SCS), Southern Communications Services (Southern LINC), Southern Company Energy Solutions, Southern Nuclear Operating Company (Southern Nuclear), Mirant Corporation -- formerly Southern Energy, Inc. -- and other direct and indirect subsidiaries. The integrated Southeast utilities -- Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company -- provide electric service in four states. Contracts among the integrated Southeast utilities -- related to jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power -- are regulated by the Federal Energy Regulatory Commission (FERC) and/or the Securities and Exchange Commission (SEC). SCS provides, at cost, specialized services to Southern Company and subsidiary companies. Southern LINC provides digital wireless communications services to the integrated Southeast utilities and also markets these services to the public within the Southeast. Southern Company Energy Solutions develops new business opportunities related to energy products and services. Southern Nuclear provides services to Southern Company's nuclear power plants. Mirant acquires, develops, builds, owns, and operates power production and delivery facilities and provides a broad range of energy-related services to utilities and industrial companies in selected countries around the world. Mirant businesses include independent power projects, integrated utilities, a distribution company, and energy trading and marketing businesses outside the southeastern United States. Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both the Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company is also subject to regulation by the FERC and the Mississippi Public Service Commission (MPSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by the respective commissions. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from those estimates. Prior years' data presented in the financial statements have been reclassified to conform with the current year presentation. Related-Party Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at cost: general and design engineering, purchasing, accounting and statistical, finance and treasury, tax, information resources, marketing, auditing, insurance and pension administration, human resources, systems and procedures, and other services with respect to business and operations and power pool operations. Costs for these services amounted to $46.2 million, $45.5 million, and $43.9 million during 2000, 1999, and 1998, respectively. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the Company associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to the following: 2000 1999 ------------------------- (in thousands) Deferred income tax charges $ 13,860 $ 21,557 Vacation pay 5,701 5,218 Premium on reacquired debt 7,168 8,154 Property damage reserve (3,519) (3,082) Deferred income tax credits (25,603) (34,765) Other, net (505) (349) - ---------------------------------------------------------------- Total $ (2,898) $ (3,267) ================================================================ II-158 NOTES (continued) Mississippi Power Company 2000 Annual Report In the event that a portion of the Company's operations is no longer subject to the provisions of FASB Statement No. 71, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the Company would be required to determine if any impairment to other assets exists, including plant, and write down the assets, if impaired, to their fair value. Revenues and Fuel Costs The Company currently operates as a vertically integrated utility providing electricity to retail customers within its traditional service area located within the state of Mississippi, and to wholesale customers in the Southeast. Revenues are recognized as services are rendered. Unbilled revenues are accrued at the end of each fiscal period. The Company's retail and wholesale rates include provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. Retail rates also include provisions to adjust billings for fluctuations in costs for ad valorem taxes and certain qualifying environmental costs. Revenues are adjusted for differences between actual allowable amounts and the amounts included in rates. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. For all periods presented, uncollectible accounts continued to average less than 1 percent of revenues. Depreciation Depreciation of the original cost of plant in service is provided primarily by using composite straight-line rates, which approximated 3.5 percent in 2000 and 3.3 percent in 1999 and 1998. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its original cost -- together with the cost of removal, less salvage -- is charged to accumulated depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected cost of removal of facilities. Income Taxes The Company uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Property, Plant and Equipment Property, plant, and equipment is stated at original cost. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits; and the estimated cost of funds used during construction, if applicable. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense except for the maintenance of coal cars and a portion of the railway track maintenance, which are charged to fuel stock. The cost of replacements of property -- exclusive of minor items of property -- is capitalized. Cash and Cash Equivalents For purposes of the Statements of Cash Flows, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Financial Instruments The Company's financial instruments for which the carrying amount did not equal fair value at December 31 were as follows: Carrying Fair Amount Value --------------------------- (in millions) Long-term debt: At December 31, 2000 $371 $362 At December 31, 1999 $353 $334 Capital trust preferred securities: At December 31, 2000 $35 $34 At December 31, 1999 $35 $30 - -------------------------------------------------------------- The fair values for long-term debt and preferred securities were based on either closing market price or closing price of comparable instruments. 11-159 NOTES (continued) Mississippi Power Company 2000 Annual Report Materials and Supplies Generally, materials and supplies include the cost of transmission, distribution, and generating plant materials. Materials are charged to inventory when purchased and then expensed or capitalized to plant, as appropriate, when used or installed. Provision for Property Damage The Company is self-insured for the cost of storm, fire, and other uninsured casualty damage to its property, including transmission and distribution facilities. As permitted by regulatory authorities, the Company accrues for the cost of such damage by charging expense and crediting an accumulated provision. The cost of repairing damage resulting from such events that individually exceed $50 thousand is charged to the accumulated provision. In 1999, an order from the MPSC increased the maximum Property Damage Reserve from $18 million to $23 million and allows an annual accrual of up to $4.6 million. In 2000, the Company provided for such costs by charges to income of $3.5 million. In 1999 and 1998, the Company provided for such costs by charges to income of $4.4 million and $1.5 million, respectively. As of December 31, 2000, the accumulated provision amounted to $3.5 million. 2. RETIREMENT BENEFITS The Company has defined benefit, trusteed, pension plans that cover substantially all employees. The Company provides certain medical care and life insurance benefits for retired employees. Substantially all these employees may become eligible for such benefits when they retire. The Company funds trusts to the extent deductible under federal income tax regulations or the extent required by regulatory authorities. In late 2000, the Company adopted several pension and postretirement benefits plan changes that had the effect of increasing benefits to both current and future retirees. The effects of these changes will be to increase annual pension and postretirement benefits costs by approximately $1.3 and $0.4 million, respectively. The measurement date for plan assets and obligations is September 30 for each year. Pension Plan Changes during the year in the projected benefit obligations and in the fair value of plan assets were as follows: Projected Benefit Obligations -------------------------- 2000 1999 - --------------------------------------------------------------------- (in thousands) Balance at beginning of year $139,930 $142,807 Service cost 4,272 4,415 Interest cost 10,196 9,377 Benefits paid (7,593) (8,050) Actuarial gain and employee transfers (1,419) (8,619) - --------------------------------------------------------------------- Balance at end of year $145,386 $139,930 ===================================================================== Plan Assets -------------------------- 2000 1999 - --------------------------------------------------------------------- (in thousands) Balance at beginning of year $221,487 $198,100 Actual return on plan assets 39,737 33,216 Benefits paid (7,593) (8,050) Employee transfers 3,017 (1,779) - --------------------------------------------------------------------- Balance at end of year $256,648 $221,487 ===================================================================== The accrued pension costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------------- (in thousands) Funded status $111,263 $ 81,557 Unrecognized transition obligation (3,269) (3,814) Unrecognized prior service cost 4,577 4,991 Unrecognized net gain (105,847) (80,246) - --------------------------------------------------------------------- Prepaid asset recognized in the Balance Sheets $ 6,724 $ 2,488 ===================================================================== II-160 NOTES (continued) Mississippi Power Company 2000 Annual Report Components of the plans' net periodic cost were as follows: 2000 1999 1998 - ------------------------------------------------------------------ (in thousands) Service cost $ 4,272 $ 4,415 $ 3,848 Interest cost 10,196 9,377 9,613 Expected return on plan assets (15,910) (14,681) (13,817) Recognized net gain (2,663) (1,721) (1,956) Net amortization (131) (131) (131) - ------------------------------------------------------------------ Net pension income $ (4,236) $ (2,741) $(2,443) ================================================================== Postretirement Benefits Changes during the year in the accumulated benefit obligations and in the fair value of plan assets were as follows: Accumulated Benefit Obligations ---------------------------- 2000 1999 - ----------------------------------------------------------------- (in thousands) Balance at beginning of year $45,390 $47,260 Service cost 830 982 Interest cost 3,309 3,105 Benefits paid (2,628) (2,256) Actuarial gain and employee transfers (1,949) (3,701) - ----------------------------------------------------------------- Balance at end of year $44,952 $45,390 ================================================================= Plan Assets ---------------------------- 2000 1999 - ------------------------------------------------------------------ (in thousands) Balance at beginning of year $14,998 $12,779 Actual return on plan assets 2,511 1,818 Employer contributions 2,961 2,657 Benefits paid (2,627) (2,256) - ----------------------------------------------------------------- Balance at end of year $17,843 $14,998 ================================================================= The accrued postretirement costs recognized in the Balance Sheets were as follows: 2000 1999 - ---------------------------------------------------------------------- (in thousands) Funded status $(27,109) $(30,392) Unrecognized transition obligation 4,275 4,621 Unrecognized net gain (6,632) (3,406) Fourth quarter contributions 1,065 931 - ---------------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $(28,401) $(28,246) ====================================================================== Components of the plans' net periodic cost were as follows: 2000 1999 1998 - -------------------------------------------------------------------- (in thousands) Service cost $ 830 $ 981 $ 806 Interest cost 3,309 3,105 3,162 Expected return on plan assets (1,235) (1,100) (989) Net amortization 346 346 346 - -------------------------------------------------------------------- Net postretirement cost $ 3,250 $ 3,332 $3,325 ==================================================================== The weighted average rates assumed in the actuarial calculations for both the pension plans and postretirement benefits were: 2000 1999 --------------------------------------------------------------- Discount 7.50% 7.50% Annual salary increase 5.00 5.00 Long-term return on plan assets 8.50 8.50 --------------------------------------------------------------- II-161 NOTES (continued) Mississippi Power Company 2000 Annual Report An additional assumption used in measuring the accumulated postretirement benefit obligation was a weighted average medical care cost trend rate of 7.29 percent for 2000, decreasing gradually to 5.50 percent through the year 2005 and remaining at that level thereafter. An annual increase or decrease in the assumed medical care cost trend rate of 1 percent would affect the accumulated benefit obligation and the service and interest cost components at December 31, 2000 as follows: 1 Percent 1 Percent Increase Decrease - ----------------------------------------------------------------- (in thousands) Benefit obligation $2,669 $2,396 Service and interest costs 242 215 - ----------------------------------------------------------------- Workforce Reduction Program In 1997, approximately one hundred employees of the Company accepted the terms of a workforce reduction plan. The cost incurred in connection with this voluntary plan was approximately $18 million. The MPSC approved the deferral and amortization of these program costs over a period not to exceed 60 months beginning no later than July 1998. As of December 31, 1999, the cost was fully amortized. Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides a 75 percent matching contribution up to 6 percent of an employee's base salary. Total matching contributions made to the plan for the years 2000, 1999, and 1998 were $2.3 million, $2.2 million, and $2.1 million, respectively. 3. LITIGATION AND REGULATORY MATTERS Environmental Litigation On November 3, 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S. District Court against Alabama Power Company, Georgia Power Company and SCS. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to five coal-fired generating facilities in Alabama and Georgia. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The Clean Air Act authorizes civil penalties of up to $27,500 per day per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. The EPA concurrently issued to the integrated Southeast utilities a notice of violation related to 10 generating facilities, which includes the five facilities mentioned previously, and the Company's plants Watson and Greene County. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation, and to add Gulf Power, Savannah Electric and the Company as defendants. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. These complaints and notices of violation allege that the utilities had failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August, 1, 2000, the U.S. District Court granted Alabama Power's motion to dismiss for lack of jurisdiction in Georgia and granted SCS's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against Alabama Power in federal district court in Birmingham, Alabama. The EPA did not include SCS in the new complaint. The Company believes that it complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows and possibly financial condition unless such costs can be recovered through regulated rates. Retail Rate Adjustment Plans The Company's retail base rates are set under a Performance Evaluation Plan (PEP) approved by the MPSC in 1994. PEP was designed with the objective that the plan would reduce the impact of rate changes on the customer and provide incentives for the Company to keep customer prices low. PEP includes a mechanism for sharing rate adjustments based on the Company's ability to maintain low rates for customers and on the Company's performance as measured by three II-162 NOTES (continued) Mississippi Power Company 2000 Annual Report indicators that emphasize price and service to the customer. PEP provides for semiannual evaluations of the Company's performance-based return on investment. Any change in rates is limited to 2 percent of retail revenues per evaluation period. PEP will remain in effect until the MPSC modifies or terminates the plan. There were no PEP retail revenue changes for 2000, 1999, or 1998. Environmental Compliance Overview Plan The MPSC approved the Company's Environmental Compliance Overview Plan (ECO Plan) in 1992. The ECO Plan establishes procedures to facilitate the MPSC's overview of the Company's environmental strategy and provides for recovery of costs (including costs of capital) associated with environmental projects approved by the MPSC. Under the ECO Plan, any increase in the annual revenue requirement is limited to 2 percent of retail revenues. However, the ECO Plan also provides for carryover of any amount over the 2 percent limit into the next year's revenue requirement. The Company conducts studies, when possible, to determine the extent of any required environmental remediation. Should such remediation be determined to be probable, reasonable estimates of costs to clean up such sites are developed and recognized in the financial statements. The Company recovers such costs under the ECO Plan as they are incurred, as provided for in the Company's 1995 ECO Plan Order. The Company filed its 2001 ECO Plan in January and, if approved as filed, it will result in a slight increase in customer prices. Approval for New Capacity In January 1998, the Company was granted a Certificate of Public Convenience and Necessity by the MPSC to build approximately 1,064 megawatts of combined cycle generation at the Company's Plant Daniel site, to be placed in service by June 2001. In December 1998, the Company requested approval to transfer the ownership rights under the certificate to Escatawpa Funding, Limited Partnership ("Escatawpa"), which will lease the facility to the Company (see Note 4, Financing and Commitments). In September 2000, the Company and the Mississippi Public Utilities Staff entered, and the MPSC in October 2000 approved, a new stipulation that modifies a January 1999 stipulation and order covering cost allocation. The 1999 stipulation and MPSC order would have excluded the new capacity from retail ratebase and would have assigned the Company's existing generating facilities entirely to the retail jurisdiction. The new stipulation and MPSC order allocates a pro-rata share of the new capacity along with the Company's existing generating capacity to the retail jurisdiction. 4. FINANCING AND COMMITMENTS Construction Program The Company is engaged in continuous construction programs, the costs of which are currently estimated to total $62 million in 2001, $60 million in 2002, and $69 million in 2003. The construction program is subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth estimates; changes in environmental regulations; increasing costs of labor, equipment and materials; and cost of capital. Significant construction will continue related to transmission and distribution facilities, and the upgrading of generating plants. Financing In 1999, the Company signed an Agreement for Lease and a Lease Agreement with Escatawpa, that calls for the Company to design and construct, as agent for Escatawpa, a 1,064 megawatt natural gas combined cycle facility. It is anticipated that the total project will cost approximately $400 million, and upon project completion in mid 2001, the Company intends to lease the facility for an initial term of approximately 10 years. It is anticipated that the annual lease payments will approximate $32 million during the initial term. Bank Credit Arrangements At December 31, 2000, the Company had total committed credit agreements with banks for approximately $117 million. At year-end 2000, the unused portion of these committed credit agreements was approximately $117 million. These credit agreements expire at various dates in 2001. Some of these agreements allow short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the Company's option. In connection with these credit arrangements, the Company II-163 NOTES (continued) Mississippi Power Company 2000 Annual Report agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. At December 31, 2000, the Company had $56 million of short-term borrowings outstanding. Assets Subject to Lien The Company's mortgage indenture dated as of September 1, 1941, as amended and supplemented, which secures the first mortgage bonds issued by the Company, constitutes a direct first lien on substantially all of the Company's fixed property and franchises. Lease Agreements In 1984, the Company and Entergy Corp. (formerly Gulf States Utilities) entered into a forty-year transmission facilities agreement whereby Entergy began paying a use fee to the Company covering all expenses relative to ownership and operation and maintenance of a 500 kV line, including amortization of its original $57 million cost. For the three years ended 2000, use fees collected under this agreement, net of related expenses, amounted to approximately $3 million each year, and are included within Other Income in the Statements of Income. In 1989, the Company entered into a twenty-two year operating lease agreement for the use of 495 aluminum railcars. In 1994, a second lease agreement for the use of 250 additional aluminum railcars was also entered into for twenty-two years. The Company has the option to purchase the 745 railcars at the greater of lease termination value or fair market value, or to renew the leases at the end of the lease term. In 1997, a third lease agreement for the use of 360 railcars was also entered into for three years, with a monthly renewal option for up to an additional nine months. All of these leases, totaling 1,105 railcars, were for the transport of coal to Plant Daniel. Gulf Power, as joint owner of Plant Daniel, is responsible for one half of the lease cost. The Company's share (50%) of the leases, charged to fuel stock, was $2.1 million in 2000, $2.8 million in 1999, and $2.8 million in 1998. The Company's annual lease payments for 2001 through 2005 will average approximately $2.0 million and after 2005, lease payments total in aggregate approximately $14 million. Fuel To supply a portion of the fuel requirements of its generating plants, the Company has entered into various long-term commitments for the procurement of fuel. In most cases, these contracts contain provisions for price escalations, minimum production levels, and other financial commitments. Total estimated obligations at December 31, 2000 were as follows: Year Fuel - ---- ---- (in millions) 2001 $ 294 2002 332 2003 313 2004 137 2005 95 2006 - 2024 131 Total commitments $1,302 Additional commitments for fuel will be required in the future to supply the Company's fuel needs. 5. JOINT OWNERSHIP AGREEMENTS The Company and Alabama Power own as tenants in common Units 1 and 2 at Plant Greene County located in Alabama. Additionally, the Company and Gulf Power own as tenants in common Units 1 and 2 at Plant Daniel located in Mississippi. At December 31, 2000, the Company's percentage ownership and investment in these jointly owned facilities were as follows: Company's Generating Total Percent Gross Accumulated Plant Capacity Ownership Investment Depreciation --------- ---------- --------- ------------- ------------ (Megawatts) (in thousands) Greene County Units 1 and 2 500 40% $63,346 $32,762 Daniel Units 1 and 2 1,000 50% $230,853 $115,472 ----------------------------------------------------------------------- The Company's share of plant operating expenses is included in the corresponding operating expenses in the Statements of Income. II-164 NOTES (continued) Mississippi Power Company 2000 Annual Report 6. LONG-TERM CAPACITY SALES AND LEASE AGREEMENTS The Company and the other utility affiliates of Southern Company have long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside the system's service area. Because the energy is generally sold at cost under these agreements, profitability is primarily affected by revenues from capacity sales. The Company's capacity revenues under these agreements were not material during the periods reported. During 2000, the Company entered into a 10 year capacity lease that begins in mid 2001. The minimum capacity lease revenue that the Company will receive will average approximately $21 million per year over the 10 year period. 7. INCOME TAXES At December 31, 2000, the tax-related regulatory assets and liabilities were $14 million and $26 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized interest. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of the federal and state income tax provisions are shown below: 2000 1999 1998 ---------------------------------- (in thousands) Total provision for income taxes Federal -- Current $28,934 $33,379 $20,500 Deferred 622 (3,973) 9,442 ----------------------------------------------------------------- 29,556 29,406 29,942 ----------------------------------------------------------------- State -- Current 4,670 4,881 2,544 Deferred 130 (170) 2,178 ----------------------------------------------------------------- 4,800 4,711 4,722 ----------------------------------------------------------------- Total $34,356 $34,117 $34,664 ================================================================= The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities are as follows: 2000 1999 ----------------------------- (in thousands) Deferred tax liabilities: Accelerated depreciation $151,278 $154,698 Basis differences 8,559 8,967 Other 24,136 23,108 --------------------------------------------------------------- Total 183,973 186,773 --------------------------------------------------------------- Deferred tax assets: Other property basis differences 17,147 21,003 Pension and other benefits 9,528 9,608 Property insurance 3,558 3,419 Unbilled fuel 5,727 4,846 Other 9,669 11,071 --------------------------------------------------------------- Total 45,629 49,947 --------------------------------------------------------------- Net deferred tax liabilities 138,344 136,826 Portion included in current assets, net 1,565 2,738 --------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $139,909 $139,564 =============================================================== Deferred investment tax credits are amortized over the lives of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $1.2 million in 2000, 1999, and 1998. At December 31, 2000, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 2000 1999 1998 ---------------------------------- Federal statutory rate 35.0% 35.0% 35.0% State income tax, net of federal deduction 3.4 3.4 3.3 Non-deductible book depreciation .6 .7 .5 Other (1.5) (1.6) (1.0) ------------------------------------------------------------------ Effective income tax rate 37.5% 37.5% 37.8% ================================================================== II-165 NOTES (continued) Mississippi Power Company 2000 Annual Report Southern Company files a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. 8. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES In February 1997, Mississippi Power Capital Trust I (Trust I), of which the Company owns all the common securities, issued $35 million of 7.75 percent mandatorily redeemable preferred securities. Substantially all of the assets of Trust I are $36 million aggregate principal amount of the Company's 7.75 percent junior subordinated notes due February 15, 2037. The Company considers that the mechanisms and obligations relating to the preferred securities, taken together, constitute a full and unconditional guarantee by the Company of the Trusts' payment obligations with respect to the preferred securities. Trust I is a subsidiary of the Company, and accordingly is consolidated in the Company's financial statements. 9. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund requirements and scheduled maturities and redemptions of long-term debt due within one year is as follows: 2000 1999 --------------------- (in thousands) Bond improvement fund requirement $1,000 $1,000 Less: Portion to be satisfied by certifying property additions 1,000 1,000 --------------------------------------------------------------- Cash sinking fund requirement - - Current portion of other long-term debt - 30,000 Pollution control bond cash sinking fund requirements 20 20 --------------------------------------------------------------- Total $20 $30,020 =============================================================== The first mortgage bond improvement fund requirement is one percent of each outstanding series authenticated under the indenture of the Company prior to January 1 of each year, other than first mortgage bonds issued as collateral security for certain pollution control obligations. The requirement must be satisfied by June 1 of each year by depositing cash or reacquiring bonds, or by pledging additional property equal to 166-2/3 percent of such requirement. 10. COMMON STOCK DIVIDEND RESTRICTIONS The Company's first mortgage bond indenture and the corporate charter contain various common stock dividend restrictions. At December 31, 2000, approximately $118 million of retained earnings was restricted against the payment of cash dividends on common stock under the most restrictive terms of the mortgage indenture or corporate charter. 11. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 2000 and 1999 are as follows: Net Income After Dividends Operating Operating On Preferred Quarter Ended Revenues Income Stock - -------------------------------------------------------------------- (in thousands) March 2000 $134,705 $18,593 $6,722 June 2000 176,028 28,130 12,232 September 2000 220,119 53,943 28,762 December 2000 156,750 21,904 7,256 March 1999 $122,435 $18,122 $7,193 June 1999 158,590 31,289 14,953 September 1999 201,594 51,609 27,313 December 1999 150,385 18,736 5,350 - -------------------------------------------------------------------- The Company's business is influenced by seasonal weather conditions and the timing of rate changes. II-166 SELECTED FINANCIAL AND OPERATING DATA 1996-2000 Mississippi Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands)* $687,602 $633,004 $595,131 $543,588 $544,029 Net Income after Dividends on Preferred Stock (in thousands) $54,972 $54,809 $55,105 $54,010 $52,723 Cash Dividends on Common Stock (in thousands) $54,700 $56,100 $51,700 $49,400 $43,900 Return on Average Common Equity (percent) 13.80 14.00 14.15 14.00 13.90 Total Assets (in thousands) $1,275,071 $1,251,136 $1,189,605 $1,166,829 $1,142,327 Gross Property Additions (in thousands) $81,211 $75,888 $68,231 $55,375 $61,314 - ----------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $404,898 $391,968 $391,231 $387,824 $383,734 Preferred stock 31,809 31,809 31,809 31,896 74,414 Company obligated mandatorily redeemable preferred securities 35,000 35,000 35,000 35,000 - Long-term debt 370,511 321,802 292,744 291,665 326,379 - ----------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $842,218 $780,579 $750,784 $746,385 $784,527 ============================================================================================================================= Capitalization Ratios (percent): Common stock equity 48.1 50.2 52.1 52.0 48.9 Preferred stock 3.8 4.1 4.2 4.3 9.5 Company obligated mandatorily redeemable preferred securities 4.2 4.5 4.7 4.7 - Long-term debt 43.9 41.2 39.0 39.0 41.6 - ----------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0 ============================================================================================================================= Security Ratings: First Mortgage Bonds - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Standard and Poor's A+ AA- AA- AA- A+ Fitch AA- AA- AA- AA- AA- Preferred Stock - Moody's a1 a1 a1 a1 a1 Standard and Poor's BBB+ A- A A A Fitch A A A+ A+ A+ ============================================================================================================================= Customers (year-end): Residential 158,253 157,592 156,530 156,650 154,630 Commercial 32,372 31,837 31,319 31,667 30,366 Industrial 517 546 587 642 639 Other 206 202 200 200 200 - ----------------------------------------------------------------------------------------------------------------------------- Total 191,348 190,177 188,636 189,159 185,835 ============================================================================================================================= Employees (year-end): 1,319 1,328 1,230 1,245 1,363 - ----------------------------------------------------------------------------------------------------------------------------- * 1999 data includes the true-up of the unbilled revenue estimates.
II-167 SELECTED FINANCIAL AND OPERATING DATA 1996-2000 (continued) Mississippi Power Company 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ---------------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands)*: Residential $ 170,729 $159,945 $157,642 $138,608 $137,055 Commercial 163,552 153,936 145,677 134,208 131,734 Industrial 159,705 151,244 135,039 140,233 141,324 Other 4,565 4,309 4,209 4,193 4,013 - ---------------------------------------------------------------------------------------------------------------------------------- Total retail 498,551 469,434 442,567 417,242 414,126 Sales for resale - non-affiliates 145,931 131,004 121,225 105,141 99,596 Sales for resale - affiliates 27,915 19,446 18,285 10,143 21,830 - ---------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 672,397 619,884 582,077 532,526 535,552 Other revenues 15,205 13,120 13,054 11,062 8,477 - ---------------------------------------------------------------------------------------------------------------------------------- Total $687,602 $633,004 $595,131 $543,588 $544,029 ================================================================================================================================== Kilowatt-Hour Sales (in thousands)*: Residential 2,286,143 2,248,255 2,248,915 2,039,042 2,079,611 Commercial 2,883,197 2,847,342 2,623,276 2,407,520 2,315,860 Industrial 4,376,171 4,407,445 3,729,166 3,981,875 3,960,243 Other 41,153 40,091 39,772 40,508 39,297 - ---------------------------------------------------------------------------------------------------------------------------------- Total retail 9,586,664 9,543,133 8,641,129 8,468,945 8,395,011 Sales for resale - non-affiliates 3,674,621 3,256,175 3,157,837 2,895,182 2,726,993 Sales for resale - affiliates 452,611 539,939 552,142 478,884 693,510 - ---------------------------------------------------------------------------------------------------------------------------------- Total 13,713,896 13,339,247 12,351,108 11,843,011 11,815,514 ================================================================================================================================== Average Revenue Per Kilowatt-Hour (cents)*: Residential 7.47 7.11 7.01 6.80 6.59 Commercial 5.67 5.41 5.55 5.57 5.69 Industrial 3.65 3.43 3.62 3.52 3.57 Total retail 5.20 4.92 5.12 4.93 4.93 Sales for resale 4.21 3.96 3.76 3.42 3.55 Total sales 4.90 4.65 4.71 4.50 4.53 Residential Average Annual Kilowatt-Hour Use Per Customer * 14,445 14,301 14,376 13,132 13,469 Residential Average Annual Revenue Per Customer * $1,078.76 $1,017.42 $1,007.68 $892.68 $887.66 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,086 2,086 2,086 2,086 Maximum Peak-Hour Demand (megawatts): Winter 2,305 2,125 1,740 1,922 2,030 Summer 2,593 2,439 2,339 2,209 2,117 Annual Load Factor (percent) 59.3 59.6 58.0 59.1 60.7 Plant Availability Fossil-Steam (percent): 92.6 91.0 90.0 92.4 91.8 - ---------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 67.8 69.4 66.5 70.5 70.4 Oil and gas 13.5 15.9 14.5 12.5 12.0 Purchased power - From non-affiliates 7.7 6.2 8.0 3.0 6.5 From affiliates 11.0 8.5 11.0 14.0 11.1 - ---------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 100.0 100.0 ================================================================================================================================== * 1999 data includes the true-up of the unbilled revenue estimates.
II-168 SAVANNAH ELECTRIC AND POWER COMPANY FINANCIAL SECTION II-169 MANAGEMENT'S REPORT Savannah Electric and Power Company 2000 Annual Report The management of Savannah Electric and Power Company has prepared--and is responsible for--the financial statements and related information included in this report. These statements were prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts that are based on the best estimates and judgments of management. Financial information throughout this annual report is consistent with the financial statements. The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that accounting records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based on a recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting controls maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the Company's internal audit staff. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. The audit committee of the board of directors, composed of five independent directors who are not employees, provides a broad overview of management's financial reporting and control functions. Periodically, this committee meets with management, the internal auditors and the independent public accountants to ensure that these groups are fulfilling their obligations and to discuss auditing, internal controls and financial reporting matters. The internal auditors and the independent public accountants have access to the members of the audit committee at any time. Management believes that its policies and procedures provide reasonable assurance that the Company's operations are conducted according to a high standard of business ethics. In management's opinion, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of Savannah Electric and Power Company in conformity with accounting principles generally accepted in the United States. /s/G. Edison Holland, Jr. /s/K. R. Willis G. Edison Holland, Jr. K. R. Willis President Vice President, and Chief Executive Officer Treasurer, Chief Financial Officer and Assistant Secretary 11-170 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Savannah Electric and Power Company: We have audited the accompanying balance sheets and statements of capitalization of Savannah Electric and Power Company (a Georgia corporation and a wholly owned subsidiary of Southern Company) as of December 31, 2000 and 1999, and the related statements of income, common stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements (pages II-179 through II-193) referred to above present fairly, in all material respects, the financial position of Savannah Electric and Power Company as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/Arthur Andersen LLP Arthur Andersen LLP Atlanta, Georgia February 28, 2001 II-171 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Savannah Electric and Power Company 2000 Annual Report RESULTS OF OPERATIONS - -------------------- Earnings Savannah Electric and Power Company's net income after dividends on preferred stock for 2000 totaled $23.0 million, representing no significant change from the prior year. In 1999, earnings were $23.1 million, representing a $0.6 million, or 2.4 percent decrease from the prior year. This was principally due to lower non-operating revenues. Revenues Total operating revenues for 2000 were $295.7 million, reflecting a 17.5 percent increase when compared to 1999. The following table summarizes the factors affecting operating revenues for the past two years: Increase (Decrease) From Prior Year ------------------------- Amount 2000 2000 1999 -------------------------------------- (in thousands) Retail -- Base Revenues $161,807 $ 9,272 $ 376 Fuel cost recovery and other 120,815 31,085 (438) ----------------------------------------------------------------- Total retail 282,622 40,357 (62) ----------------------------------------------------------------- Sales for resale -- Non-affiliates 4,748 1,353 (1,153) Affiliates 4,974 823 1,135 ----------------------------------------------------------------- Total sales for resale 9,722 2,176 (18) ----------------------------------------------------------------- Other operating revenues 3,374 1,591 (2,781) ----------------------------------------------------------------- Total operating revenues $295,718 $44,124 $(2,861) ================================================================= Percent change 17.5% (1.1)% ----------------------------------------------------------------- Retail revenues increased 16.7 percent or $40.4 million in 2000 as compared to 1999. The primary contributors to the increase were continued growth in the Company's service territory, the positive impact of weather on energy sales, and an increase in fuel revenues. Electric rates include provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. Under these fuel recovery provisions, fuel revenues generally equal fuel expenses--including the fuel component of purchased energy--and do not affect net income. However, cash flow is affected by the economic loss from untimely recovery of these receivables. The Company currently plans to make a filing with the Georgia Public Service Commission (GPSC) in early 2001 to establish a new fuel rate in order to better reflect current fuel cost and to collect the current under-recovered balance. Revenues from sales to utilities outside the service area under long-term contracts consist of capacity and energy components. Revenues from these sales were not material to the financial statements. Sales to affiliated companies within the Southern electric system vary from year to year depending on demand and the availability and cost of generating resources at each company. These energy sales do not have a significant impact on earnings. Energy Sales Changes in revenues are influenced heavily by the amount of energy sold each year. Kilowatt-hour (KWH) sales for 2000 and the percent change by year were as follows: KWH Percent Change ------------- ------------------- 2000 2000 1999 ------------- ------------------- (in millions) Residential 1,671 5.8% 2.6% Commercial 1,369 6.3 4.2 Industrial 800 12.2 (20.7) Other 137 2.5 1.1 ------- Total retail 3,977 7.1 (2.5) Sales for resale -- Non-affiliates 77 50.3 (3.3) Affiliates 89 15.1 31.8 -------- Total 4,143 7.8% (2.0)% =========================================================== Total retail energy sales in 2000 reflected increases in all customer classes. Industrial energy sales increased 12.2 percent reflecting the re-opening of an industrial facility under new ownership. Residential and commercial sales also increased reflecting weather related demand and customer growth. In 1999, total retail energy sales were down by 2.5 percent from the prior year reflecting reduced energy sales of 20.7 percent to industrial customers due to the shut-down of one industrial customer's facilities in late 1998 and II-172 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 2000 Annual Report completed construction of a steam turbine unit by another industrial customer. These reductions were partially mitigated by increased energy sales of 2.6 percent and 4.2 percent to residential and commercial customers, respectively. Expenses Total operating expenses for 2000 were $245.0 million, an increase of $42.0 million from the prior year due primarily to increases in purchased power from both affiliates and non-affiliates and generation fuel expense. The increase in fuel expense is attributable to an increase in generation and higher fuel costs. Purchased power increased due principally to higher energy costs. Other operation expense was higher reflecting increased benefit expenses. Maintenance expense increased from 1999 reflecting higher power delivery and power generation maintenance costs to support improved customer reliability and unit availability, respectively. Depreciation and amortization increased reflecting additional depreciation charges related to the GPSC accounting order. See Note 3 to the financial statements for additional information on the GPSC's 1998 accounting order. In 1999, total operating expenses were $203.0 million reflecting a slight increase of $1.4 million from the prior year. This increase was due primarily to increases in purchased power from non-affiliates and depreciation and amortization. Purchased power from non-affiliates increased due principally to higher demand for energy and increased costs associated with these power purchases. Depreciation and amortization increased reflecting additional depreciation charges related to the GPSC's accounting order. Fuel and purchased power costs constitute the single largest expense for the Company. The mix of energy supply is determined primarily by system load, the unit cost of fuel consumed, and the availability of units. The amount and sources of energy supply and the total average cost of energy supply were as follows: 2000 1999 1998 -------------------------- Total energy supply (millions of KWHs) 4,286 4,039 4,182 Sources of energy supply (percent) -- Coal 52 45 42 Oil 2 2 1 Gas 5 10 12 Purchased Power 41 43 45 Total average cost of energy supply (cents) 3.09 2.44 2.35 - ----------------------------------------------------------------- Effects of Inflation The Company is subject to rate regulation and income tax laws that are based on the recovery of historical costs. Therefore, inflation creates an economic loss because the Company is recovering its costs of investments in dollars that have less purchasing power. While the inflation rate has been relatively low in recent years, it continues to have an adverse effect on the Company because of the large investment in utility plant with long economic lives. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and trust preferred securities. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. Future Earnings Potential The results of operations for the past three years are not necessarily indicative of future earnings potential. The level of future earnings depends on numerous factors ranging from energy sales growth to a less regulated, more competitive environment. The Company currently operates as a vertically integrated utility providing electricity to customers within the traditional service area of southeastern Georgia. Prices for electricity provided by the Company to retail customers are set by the GPSC. Prices for electricity relating to jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power are set by the Federal Energy Regulatory Commission (FERC). II-173 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 2000 Annual Report Future earnings in the near term will depend upon growth in energy sales, which is subject to a number of factors. These factors include weather, competition, new short and long-term contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, and the rate of economic growth in the Company's service area. Georgia Power is currently constructing two 566 megawatt combined cycle units at Plant Wansley to begin operation in 2002. The GPSC has certified the Company's purchase of capacity from these units to serve its retail customers for approximately seven years. The electric utility industry in the United States is currently undergoing a period of dramatic change as a result of regulatory and competitive factors. Among the primary agents of change has been the Energy Policy Act of 1992 (Energy Act). The Energy Act allows independent power producers (IPPs) to access the Company's transmission network in order to sell electricity to other utilities. This enhances the incentive for IPPs to build cogeneration plants for industrial and commercial customers and sell energy generation to other utilities. Also, electricity sales for resale rates are affected by wholesale transmission access and numerous potential new energy suppliers, including power marketers and brokers. The Company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. Although the Energy Act does not permit retail customer access, it was a major catalyst for the current restructuring and consolidation taking place within the utility industry. Numerous federal and state initiatives are in varying stages to promote wholesale and retail competition. Among other things, these initiatives allow customers to choose their electricity provider. As these initiatives materialize, the structure of the utility industry could radically change. Some states have approved initiatives that result in a separation of the ownership and/or operation of generating facilities from the ownership and/or operation of transmission and distribution facilities. While the GPSC has held workshops to discuss retail competition and industry restructuring, there has been no proposed or enacted legislation to date in Georgia. Enactment would require numerous issues to be resolved, including significant ones relating to transmission pricing and recovery of costs. The GPSC continues its assessment of the range of potential stranded costs. The inability of the Company to recover its investments, including the regulatory assets described in Note 1 to the financial statements, could have a material adverse effect on the financial condition and results of operation. The Company is attempting to minimize or reduce its cost exposure. Continuing to be a low-cost producer could provide opportunities to increase market share and profitability in markets that evolve with changing regulation. Conversely, if the Company does not remain a low-cost producer and provide quality service, then energy sales growth could be limited, and this could significantly erode earnings. Rates to retail customers served by the Company are regulated by the GPSC. As part of the Company's rate settlement in 1992, it was informally agreed that the Company's earned rate of return on common equity should be 12.95 percent. In 1998, the GPSC issued a four-year accounting order settling its review of the Company's earnings. See Note 3 to the financial statements for additional information. On December 20, 1999, FERC issued its final rule on Regional Transmission Organizations (RTOs). The order encouraged utilities owning transmission systems to form RTOs on a voluntary basis. After participating in regional conferences with customers and other members of the public to discuss the formation of RTOs, utilities were required to make a filing. On October 16, 2000, Southern Company and its integrated utility subsidiaries, including the Company, filed with FERC a proposal for the creation of an RTO. The proposal is for the formation of a for-profit company that would have control of the bulk power transmission system of Southern Company and any other participating utilities. Participants would have the option to maintain their ownership, divest, sell, or lease their assets to the proposed RTO. If the FERC accepts the proposal as filed, the creation of an RTO is not expected to have a material impact on Southern Company's financial statements. The outcome of this matter cannot now be determined. The Energy Act amended the Public Utility Holding Company Act of 1935 (PUCHA) to allow holding companies to form exempt wholesale generators to sell power largely free of regulation under PUCHA. These entities are able to own and II-174 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 2000 Annual Report operate power generating facilities and sell power to affiliates--under certain restrictions. Southern Company is aggressively working to maintain and expand its share of wholesale sales in the southeastern power markets. In January 2001, Southern Company announced formation of a new subsidiary--Southern Power Company. The new subsidiary will own, manage, and finance wholesale generating assets in the Southeast. Energy from its assets will be marketed to wholesale customers under the Southern Company name. Compliance costs related to current and future environmental laws and regulations could affect earnings if such costs are not fully recovered. The Clean Air Act and other important environmental items are discussed under "Environmental Matters." The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. In the event that a portion of the Company's operations is no longer subject to these provisions, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable, and determine if any other assets have been impaired. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. New Accounting Standard In June 2000, FASB issued Statement No. 138, an amendment of Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement No. 133, as amended, establishes accounting and reporting standards for derivative instruments and for hedging activities. Statement No. 133 requires that certain derivative instruments be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in the fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company enters into commodity related forward contracts to limit exposure to changing prices on electricity purchases and sales. Substantially all of the Company's bulk energy purchases and sales meet the definition of a derivative under Statement No. 133. In many cases, these transactions meet the normal purchase and sale exception and the related contracts will continue to be accounted for under the accrual method. Certain of these instruments qualify as cash flow hedges resulting in the deferral of related gains and losses in other comprehensive income until the hedged transactions occur. Any ineffectiveness will be recognized currently in net income. However, others will be required to be marked to market through current period income. The Company adopted Statement No. 133 effective January 1, 2001. The impact on net income was immaterial to the Company. The application of the new rules is still evolving and further guidance from FASB is expected, which could further impact the Company's financial statements. Also, as wholesale energy markets mature, future transactions could result in more volatility in net income and comprehensive income. FINANCIAL CONDITION - ------------------ Overview The principal change in the Company's financial condition in 2000 was the addition of $27.3 million to utility plant. The funds needed for gross property additions are currently provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes and from financing activities. See Statements of Cash Flows for additional information. Exposure to Market Risks Due to cost-based regulation, the Company has limited exposure to market volatility in interest rate, commodity fuel prices, and prices of electricity. To mitigate residual risks relative to movements in electricity prices, the Company enters into fixed price contracts for the purchase and sale of electricity through the wholesale electricity market. At December 31, 2000, exposure from these activities was not material to the Company's financial statements. Also, based on the Company's overall interest rate exposure at December 31, 2000, a near-term 100 basis point change in interest rates would not materially affect the financial statements. II-175 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 2000 Annual Report Capital Structure As of December 31, 2000, the Company's capital structure consisted of 52.7 percent common stockholders' equity, 12.1 percent trust preferred securities, and 35.2 percent long-term debt, excluding amounts due within one year. The Company's long-term financial objective for capitalization ratios is to maintain a capital structure of common stockholders' equity at 48 percent, preferred securities at 10 percent and debt at 42 percent. Maturities and retirements of long-term debt were $0.4 million in 2000, $16.2 million in 1999, and $30.4 million in 1998. Included in the 1999 maturities and retirements is the purchase by the Company of all $15 million outstanding of its 7 7/8% Series First Mortgage Bonds due May 1, 2025. The composite interest rates and dividend rates for the years 1998 through 2000 as of year-end were as follows: 2000 1999 1998 ------------------------------- Composite interest rates on long-term debt 6.6% 6.4% 6.5% Trust preferred securities dividend rate 6.9% 6.9% 6.9% - ----------------------------------------------------------------- Capital Requirements for Construction The Company's projected construction expenditures for the next three years total $95.9 million ($32.5 million in 2001, $31.5 million in 2002, and $31.9 million in 2003). Actual construction costs may vary from this estimate because of factors such as changes in: business conditions; environmental regulations; load projections; the cost and efficiency of construction labor, equipment and materials; and the cost of capital. In addition, there can be no assurance that costs related to capital expenditures will be fully recovered. Construction and upgrading of new and existing transmission and distribution facilities and upgrading of generating plants will be continuing. Other Capital Requirements In addition to the funds needed for the construction program, approximately $51.8 million will be needed by the end of 2003 for maturities of long-term debt and present sinking fund requirements. Environmental Matters On November 3, 1999, the Environmental Protection Agency (EPA) brought a civil action in the U.S. District Court against Alabama Power, Georgia Power, and the system service company. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to five coal-fired generating facilities in Alabama and Georgia. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The EPA concurrently issued to Southern Company's integrated Southeast utilities a notice of violation related to 10 generating facilities, which includes the five facilities mentioned previously and the Company's Plant Kraft. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as defendants. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. These complaints and notices of violation allege that the utilities had failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August 1, 2000, the U.S. District Court granted Alabama Power's motion to dismiss for lack of jurisdiction in Georgia and granted the system service company's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against Alabama Power in federal district court in Birmingham, Alabama. The EPA did not include the system service company in the new complaint. Southern Company believes that its integrated utilities complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. The Clean Air Act authorizes civil penalties of up to $27,500 per day per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this matter could II-176 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 2000 Annual Report require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. In November 1990, the Clean Air Act Amendments of 1990 (Clean Air Act) were signed into law. Title IV of the Clean Air Act--the acid rain compliance provision of the law--significantly affected the Company and other subsidiaries of Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants were required in two phases. Phase I compliance began in 1995 and some 50 generating units of Southern Company were brought into compliance with Phase I requirements. Southern Company achieved Phase I sulfur dioxide compliance at the affected plants by switching to low-sulfur coal, which required some equipment upgrades. The construction expenditures for Phase I nitrogen oxide and sulfur dioxide emissions compliance totaled approximately $2 million for Savannah Electric. Phase II sulfur dioxide compliance was required in 2000. Southern Company used emission allowances and fuel switching to comply with Phase II requirements. No significant dollars for Phase II compliance have been spent by Savannah Electric. A significant portion of costs related to the acid rain and ozone non-attainment provisions of the Clean Air Act is expected to be recovered through existing ratemaking provisions. However, there can be no assurance that all Clean Air Act costs will be recovered. In July 1997, the EPA revised the national ambient air quality standards for ozone and particulate matter. This revision made the standards significantly more stringent. In the subsequent litigation of these standards, the U.S. Supreme Court recently dismissed certain challenges but found the EPA's implementation program for the new ozone standard unlawful and remanded it to the EPA. In addition, the Federal District of Columbia Circuit Court of Appeals will address other legal challenges to these standards in mid-2001. If the standards are eventually upheld, implementation could be required by 2007 to 2010. In September 1998, the EPA issued the final regional nitrogen oxide reduction rules to the states for implementation. Compliance is required by May 31, 2004. The final rule affects 21 states, including Georgia. This rule remains involved in litigation in the federal courts. In December 2000, the EPA completed its utility studies for mercury and other hazardous air pollutants (HAPS) and issued a determination that an emission control program for mercury and, perhaps, other HAPS is warranted. The program is to be developed over the next four years under the Maximum Achievable Control Technology (MACT) provisions of the Clean Air Act. This determination is being challenged in the courts. In January 2001, the EPA proposed guidance for the determination of Best Available Retrofit Technology (BART) emission controls under the Regional Haze Regulations. Installation of BART controls is expected to take place around 2010. Litigation of the BART rules is probable in the near future. Implementation of the final state rules for these initiatives could require substantial further reductions in nitrogen oxide, sulfur dioxide, mercury, and other HAPS emissions from fossil-fired generating facilities and other industries in these states. Additional compliance costs and capital expenditures resulting from the implementation of these rules and standards cannot be determined until the results of legal challenges are known, and the states have adopted their final rules. Reviews by the new administration in Washington, D.C. add to the uncertainties associated with BART guidance and the MACT determination for mercury and other HAPS. The EPA and state environmental regulatory agencies are reviewing and evaluating various other matters including: control strategies to reduce regional haze; limits on pollutant discharges to impaired waters; water intake restrictions; and hazardous waste disposal requirements. The impact of any new standards will depend on the development and implementation of applicable regulations. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and regulations, the Company could incur substantial costs to clean up properties. II-177 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 2000 Annual Report The Company conducts studies to determine the extent of any required cleanup costs and will recognize in the financial statements costs to clean up known sites. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of any such changes cannot be determined at this time. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Company. The impact of new legislation--if any--will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as the result of lawsuits alleging damages caused by electromagnetic fields. Sources of Capital At December 31, 2000, the Company had $50.1 million of unused short-term and revolving credit arrangements with banks to meet its short-term cash needs and to provide additional interim funding for the Company's construction program. Revolving credit arrangements total $20 million, of which $10 million expires April 30, 2003 and $10 million expires December 31, 2003. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulation, will be derived from sources similar to those used in the past. These sources were primarily from the issuances of first mortgage bonds, other long-term debt, and preferred stock, in addition to pollution control revenue bonds issued for the Company's benefit by public authorities, to meet long-term external financing requirements. Recently, the Company's financings have consisted of unsecured debt and trust preferred securities. The Company is required to meet certain earnings coverage requirements specified in its mortgage indenture and corporate charter to issue new first mortgage bonds and preferred stock. The Company's coverage ratios are sufficiently high to permit, at present interest rate levels, any foreseeable security sales. There are no restrictions on the amount of unsecured indebtedness allowed. The amount of securities which the Company will be permitted to issue in the future will depend upon market conditions and other factors prevailing at that time. Cautionary Statement Regarding Forward-Looking Information This Annual Report includes forward-looking statements in addition to historical information. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. The Company cautions that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. These factors include the impact of recent and future federal and state regulatory change, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which the Company is subject, as well as changes in application of existing laws and regulations; current and future litigation, including the pending EPA civil action against the Company; the extent and timing of the entry of additional competition in the markets of the Company; potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed or beneficial; internal restructuring or other restructuring options that may be pursued by the Company; state and federal rate regulation in the United States; political, legal and economic conditions and developments in the United States; financial market conditions and the results of financing efforts; the impact of fluctuations in commodity prices, interest rates and customer demand; weather and other natural phenomena; the ability of the Company to obtain additional generating capacity at competitive prices; and other factors discussed elsewhere herein and in other reports (including Form 10-K) filed from time to time by the Company with the SEC. II-178 STATEMENTS OF INCOME For the Years Ended December 31, 2000, 1999, and 1998 Savannah Electric and Power Company 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues: Retail sales $282,622 $242,265 $242,327 Sales for resale -- Non-affiliates 4,748 3,395 4,548 Affiliates 4,974 4,151 3,016 Other revenues 3,374 1,783 4,564 - --------------------------------------------------------------------------------------------------------------- Total operating revenues 295,718 251,594 254,455 - --------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 57,177 50,530 53,021 Purchased power -- Non-affiliates 25,229 14,398 9,460 Affiliates 50,111 33,398 35,687 Other 54,829 51,802 50,321 Maintenance 19,334 16,333 18,711 Depreciation and amortization (Note 3) 25,240 23,841 22,032 Taxes other than income taxes 13,116 12,690 12,342 - --------------------------------------------------------------------------------------------------------------- Total operating expenses 245,036 202,992 201,574 - --------------------------------------------------------------------------------------------------------------- Operating Income 50,682 48,602 52,881 Other Income (Expense): Interest income 252 169 384 Other, net 1,086 798 (432) - --------------------------------------------------------------------------------------------------------------- Earnings Before Interest and Income Taxes 52,020 49,569 52,833 - --------------------------------------------------------------------------------------------------------------- Interest and Other: Interest expense, net 12,737 11,938 11,855 Distributions on preferred securities of subsidiary 2,740 2,740 167 - --------------------------------------------------------------------------------------------------------------- Total interest and other, net 15,477 14,678 12,022 - --------------------------------------------------------------------------------------------------------------- Earnings Before Income Taxes 36,543 34,891 40,811 Income taxes (Note 5) 13,574 11,808 15,101 - --------------------------------------------------------------------------------------------------------------- Net Income 22,969 23,083 25,710 Dividends on Preferred Stock - - 2,066 - --------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 22,969 $ 23,083 $ 23,644 =============================================================================================================== The accompanying notes are an integral part of these statements.
II-179 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000, 1999, and 1998 Savannah Electric and Power Company 2000 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------ 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ (in thousands) Operating Activities: Net income $22,969 $23,083 $25,710 Adjustments to reconcile net income to net cash provided from operating activities -- Depreciation and amortization 26,639 25,454 23,531 Deferred income taxes and investment tax credits, net 728 (3,353) 7,011 Other, net 3,835 (47) (89) Changes in certain current assets and liabilities -- Receivables, net (23,260) (5,999) (9,875) Fossil fuel stock (31) (2,125) 221 Materials and supplies (542) (1,906) 484 Accounts payable 8,881 1,133 470 Other (4,674) 1,731 (4,859) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 34,545 37,971 42,604 - ------------------------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (27,290) (29,833) (18,071) Other (1,835) (1,715) 1,617 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (29,125) (31,548) (16,454) - ------------------------------------------------------------------------------------------------------------------------------------ Financing Activities: Increase in notes payable, net 11,100 34,300 - Proceeds -- Other long-term debt - - 30,000 Preferred securities - - 40,000 Capital contributions from parent company 1,478 1,099 - Retirements -- First mortgage bonds - (15,800) (30,000) Other long-term debt (251) (481) (478) Preferred stock - - (35,000) Payment of preferred stock dividends - - (2,556) Payment of common stock dividends (24,300) (25,200) (23,500) Other - 250 (4,798) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used for financing activities (11,973) (5,832) (26,332) - ------------------------------------------------------------------------------------------------------------------------------------ Net Change in Cash and Cash Equivalents (6,553) 591 (182) Cash and Cash Equivalents at Beginning of Period 6,553 5,962 6,144 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Period $ - $ 6,553 $ 5,962 ==================================================================================================================================== Supplemental Cash Flow Information: Cash paid during the period for -- Interest (net of amount capitalized) $13,329 $14,212 $12,198 Income taxes (net of refunds) 19,939 12,647 9,666 - ------------------------------------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these statements.
II-180 BALANCE SHEETS At December 31, 2000 and 1999 Savannah Electric and Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------- Assets 2000 1999 - ----------------------------------------------------------------------------------------------------------------- (in thousands) Current Assets: Cash and cash equivalents $ - $ 6,553 Receivables -- Customer accounts receivable 28,189 20,752 Unrecovered retail fuel clause revenue 39,632 21,089 Other accounts and notes receivable 1,412 3,505 Affiliated companies 738 1,195 Accumulated provision for uncollectible accounts (407) (237) Fossil fuel stock, at average cost 7,140 7,109 Materials and supplies, at average cost 8,944 8,402 Prepaid taxes 8,651 2,434 Other 377 435 - ----------------------------------------------------------------------------------------------------------------- Total current assets 94,676 71,237 - ----------------------------------------------------------------------------------------------------------------- Property, Plant, and Equipment: In service (Note 7) 829,270 804,096 Less accumulated provision for depreciation 382,030 360,639 - ----------------------------------------------------------------------------------------------------------------- 447,240 443,457 Construction work in progress 6,782 6,561 - ----------------------------------------------------------------------------------------------------------------- Total property, plant, and equipment 454,022 450,018 - ----------------------------------------------------------------------------------------------------------------- Other Property and Investments 2,066 1,506 - ----------------------------------------------------------------------------------------------------------------- Deferred Charges and Other Assets: Deferred charges related to income taxes (Note 5) 12,404 16,063 Cash surrender value of life insurance for deferred compensation plans 17,954 16,305 Prepaid pension costs (Note 2) - 1,201 Debt expense, being amortized 3,003 3,155 Premium on reacquired debt, being amortized 7,575 8,385 Other 2,527 2,348 - ----------------------------------------------------------------------------------------------------------------- Total deferred charges and other assets 43,463 47,457 - ----------------------------------------------------------------------------------------------------------------- Total Assets $594,227 $570,218 ================================================================================================================= The accompanying notes are an integral part of these balance sheets.
II-181 BALANCE SHEETS At December 31, 2000 and 1999 Savannah Electric and Power Company 2000 Annual Report
- -------------------------------------------------------------------------------------------------------------------------- Liabilities and Stockholder's Equity 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- (in thousands) Current Liabilities: Securities due within one year (Note 7) $ 30,698 $ 704 Notes payable 45,400 34,300 Accounts payable -- Affiliated 16,153 4,632 Other 7,738 11,118 Customer deposits 5,696 5,426 Taxes accrued -- Income taxes 3,450 3,046 Other 1,435 3,013 Interest accrued 4,541 3,237 Vacation pay accrued 2,276 2,142 Other 7,973 5,742 - -------------------------------------------------------------------------------------------------------------------------- Total current liabilities 125,360 73,360 - -------------------------------------------------------------------------------------------------------------------------- Long-term debt (See accompanying statements) 116,902 147,147 - -------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 5) 79,756 80,318 Deferred credits related to income taxes (Note 5) 16,038 19,687 Accumulated deferred investment tax credits (Note 5) 10,616 11,280 Deferred compensation plans 11,968 10,624 Employee benefits provisions (Note 2) 8,127 7,805 Other 10,466 5,150 - -------------------------------------------------------------------------------------------------------------------------- Total deferred credits and other liabilities 136,971 134,864 - -------------------------------------------------------------------------------------------------------------------------- Company obligated mandatorily redeemable preferred securities of subsidiary trusts holding company junior subordinated notes (See accompanying statements) (Note 6) 40,000 40,000 - -------------------------------------------------------------------------------------------------------------------------- Common stockholder's equity (See accompanying statements) 174,994 174,847 - -------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholder's Equity $594,227 $570,218 ========================================================================================================================== The accompanying notes are an integral part of these balance sheets.
II-182 STATEMENTS OF CAPITALIZATION At December 31, 2000 and 1999 Savannah Electric and Power Company 2000 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Long-Term Debt (Note 7): First mortgage bonds -- Maturity Interest Rates -------- -------------- July 1, 2003 6.375% $ 20,000 $ 20,000 May 1, 2006 6.90% 20,000 20,000 July 1, 2023 7.40% 24,200 24,200 - ----------------------------------------------------------------------------------------------------------------------------- Total first mortgage bonds 64,200 64,200 - ----------------------------------------------------------------------------------------------------------------------------- Long-term notes payable -- 6.88% due June 1, 2001 10,000 10,000 6.625% due March 17, 2015 30,000 30,000 Adjustable rates (6.71% to 6.86% at 1/1/01) due 2001 20,000 20,000 - ----------------------------------------------------------------------------------------------------------------------------- Total long-term notes payable 60,000 60,000 - ----------------------------------------------------------------------------------------------------------------------------- Other long-term debt -- Pollution control revenue bonds -- Non-collateralized: Variable rates (5.10% at 1/1/01) due 2016-2037 17,955 17,955 - ----------------------------------------------------------------------------------------------------------------------------- Total other long-term debt 17,955 17,955 - ----------------------------------------------------------------------------------------------------------------------------- Capitalized lease obligations 5,445 5,696 - ----------------------------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $9.8 million) 147,600 147,851 Less amount due within one year (Note 7) 30,698 704 - ----------------------------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 116,902 147,147 35.2% 40.7% - ----------------------------------------------------------------------------------------------------------------------------- Company Obligated Mandatorily Redeemable Preferred Securities (Note 6): $25 liquidation value -- 6.85% 40,000 40,000 - ----------------------------------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $2.7 million) 40,000 40,000 12.1 11.0 - ----------------------------------------------------------------------------------------------------------------------------- Common Stockholder's Equity (Note 8): Common stock, par value $5 per share -- Authorized - 16,000,000 shares Outstanding - 10,844,635 shares in 2000 and 1999 Par value 54,223 54,223 Paid-in capital 11,265 9,787 Retained earnings 109,506 110,837 - ----------------------------------------------------------------------------------------------------------------------------- Total common stockholder's equity 174,994 174,847 52.7 48.3 - ----------------------------------------------------------------------------------------------------------------------------- Total Capitalization $331,896 $361,994 100.0% 100.0% ============================================================================================================================= The accompanying notes are an integral part of these statements.
II-183 STATEMENTS OF COMMON STOCKHOLDER'S EQUITY For the Years Ended December 31, 2000, 1999, and 1998 Savannah Electric and Power Company 2000 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------- Common Paid-In Retained Stock Capital Earnings Total - --------------------------------------------------------------------------------------------------------------------------------- (in thousands) Balance at January 1, 1998 $54,223 $8,688 $112,720 $175,631 Net income after dividends on preferred stock - - 23,644 23,644 Cash dividends on common stock - - (23,500) (23,500) Other - - 90 90 - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 54,223 8,688 112,954 175,865 Net income after dividends on preferred stock - - 23,083 23,083 Capital contributions from parent company - 1,099 - 1,099 Cash dividends on common stock - - (25,200) (25,200) - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 54,223 9,787 110,837 174,847 Net income after dividends on preferred stock - - 22,969 22,969 Capital contributions from parent company - 1,478 - 1,478 Cash dividends on common stock - - (24,300) (24,300) - --------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 (Note 8) $54,223 $11,265 $109,506 $174,994 ================================================================================================================================= The accompanying notes are an integral part of these statements.
II-184 NOTES TO FINANCIAL STATEMENTS Savannah Electric and Power Company 2000 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Savannah Electric and Power Company (the Company) is a wholly owned subsidiary of Southern Company, which is the parent company of five integrated Southeast utilities, a system service company (SCS), Southern Communications Services (Southern LINC), Southern Company Energy Solutions, Southern Nuclear Operating Company (Southern Nuclear), Mirant Corporation--formerly Southern Energy, Inc.--and other direct and indirect subsidiaries. The integrated Southeast utilities provide electric service in four states. Contracts among the integrated Southeast utilities--related to jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power--are regulated by the Federal Energy Regulatory Commission (FERC) and/or the Securities and Exchange Commission. SCS provides, at cost, specialized services to Southern Company and subsidiary companies. Southern LINC provides digital wireless communications services to the integrated Southeast utilities and also markets these services to the public within the Southeast. Southern Company Energy Solutions develops new business opportunities related to energy products and services. Southern Nuclear provides services to Southern Company's nuclear power plants. Mirant acquires, develops, builds, owns and operates power production and delivery facilities, and provides a broad range of energy-related services to utilities and industrial companies in selected countries around the world. Mirant businesses include independent power projects, integrated utilities, a distribution company, and energy trading and marketing businesses outside the southeastern United States. Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The Company also is subject to regulation by the FERC and the Georgia Public Service Commission (GPSC). The Company follows accounting principles generally accepted in the United States and complies with the accounting policies and practices prescribed by the GPSC. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates, and the actual results may differ from those estimates. Certain prior years' data presented in the financial statements has been reclassified to conform with the current year presentation. Related-Party Transactions The Company has an agreement with SCS under which the following services are rendered to the Company at cost: general and design engineering, purchasing, accounting and statistical, finance and treasury, tax, information resources, marketing, auditing, insurance and pension, human resources, systems and procedures, and other administrative services with respect to business and operations and power pool operations. Costs for these services amounted to $15.1 million, $16.0 million, and $15.3 million during 2000, 1999, and 1998, respectively. Regulatory Assets and Liabilities The Company is subject to the provisions of Financial Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of Regulation. Regulatory assets represent probable future revenues to the Company associated with certain costs that are expected to be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are expected to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to: 2000 1999 -------------------------- (in thousands) Deferred income tax charges $12,404 $ 16,063 Premium on reacquired debt 7,575 8,385 Deferred income tax credits (16,038) (19,687) Storm damage reserves (2,733) (1,392) Accelerated depreciation (5,500) (3,000) - --------------------------------------------------------------- Total $(4,292) $ 369 =============================================================== In the event that a portion of the Company's operations is no longer subject to the provisions of FASB Statement No. 71, the Company would be required to write off related regulatory assets and liabilities that are not specifically recoverable through regulated rates. In addition, the Company would be required to determine if any impairment to other assets exists, including plant, and write down the assets, if impaired, to their fair value. II-185 NOTES (continued) Savannah Electric and Power Company 2000 Annual Report Revenues and Fuel Costs The Company currently operates as a vertically integrated utility providing electricity to retail customers within its traditional service area of southeastern Georgia and to wholesale customers in the Southeast. Revenues are recognized as services are rendered. Unbilled revenues are accrued at the end of each fiscal period. Fuel costs are expensed as the fuel is used. Electric rates for the Company include provisions to adjust billings for fluctuations in fuel costs, the energy component of purchased power costs, and certain other costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current regulated rates. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. For all periods presented, uncollectible accounts averaged less than 1 percent of revenues. In 2000, the GPSC approved an increase of slightly over one-third of a cent per kilowatt hour in the Company's fuel cost recovery rate. An increase of slightly over three-tenths of a cent per kilowatt-hour was approved in 1999. The Company currently plans to make a filing with the GPSC in early 2001 to establish a new fuel rate in order to better reflect current fuel costs and to collect the current under-recovered balance. Depreciation and Amortization Depreciation of the original cost of plant in service is provided primarily by using composite straight-line rates, which approximated 3.0 percent in 2000 and 1999, and 2.9 percent in 1998. When property subject to depreciation is retired or otherwise disposed of in the normal course of business, its cost--together with the cost of removal, less salvage--is charged to the accumulated provision for depreciation. Minor items of property included in the original cost of the plant are retired when the related property unit is retired. Depreciation expense includes an amount for the expected cost of removal of certain facilities. In 1998, 1999 and 2000, the Company recorded accelerated depreciation of $1.0 million, $2.0 million and $2.5 million respectively, in accordance with the GPSC's 1998 rate order. See Note 3 to the financial statements for more information. Income Taxes The Company, which is included in the consolidated federal income tax return filed by Southern Company, uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Investment tax credits utilized are deferred and amortized to income over the average lives of the related property. Allowance for Funds Used During Construction (AFUDC) AFUDC represents the estimated debt and equity costs of capital funds that are necessary to finance the construction of new facilities. While cash is not realized currently from such allowance, it increases the revenue requirement over the service life of the plant through a higher rate base and higher depreciation expense. The composite rates used by the Company to calculate AFUDC were 6.87 percent in 2000, 6.26 percent in 1999 and 8.00 percent in 1998. Property, Plant and Equipment Property, plant and equipment is stated at original cost less regulatory disallowances and impairments. Original cost includes: materials; labor; minor items of property; appropriate administrative and general costs; payroll-related costs such as taxes, pensions, and other benefits, and the estimated cost of funds used during construction. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense. The cost of replacements of property exclusive of minor items of property is capitalized. Cash and Cash Equivalents For purposes of the financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less. Materials and Supplies Generally, materials and supplies include the costs of transmission, distribution, and generating plant materials. Materials are charged to inventory II-186 NOTES (continued) Savannah Electric and Power Company 2000 Annual Report when purchased and then expensed or capitalized to plant, as appropriate, when installed. Financial Instruments The Company's financial instruments for which the carrying amounts did not equal fair value at December 31 were as follows: Carrying Fair Amount Value -------------------------- (in millions) Long-term debt: At December 31, 2000 $142 $140 At December 31, 1999 $142 $136 Trust preferred securities: At December 31, 2000 $40 $36 At December 31, 1999 $40 $31 The fair values for long-term debt and trust preferred securities were based on either closing market prices or closing prices of comparable instruments. 2. RETIREMENT BENEFITS The Company has defined benefit, trusteed, non-contributory pension plans that cover substantially all employees. The Company provides certain medical care and life insurance benefits for retired employees. Substantially all these employees may become eligible for such benefits when they retire. The Company funds trusts to the extent required by the GPSC. The measurement date for plan assets and obligations is September 30 of each year. In late 2000, the Company adopted several pension and postretirement benefit plan changes that had the effect of increasing benefits to both current and future retirees. The effects of these changes will be to increase annual pension and postretirement benefits costs by approximately $0.5 million and $0.3 million, respectively. Pension Plans Changes during the year in the projected benefit obligations and in the fair value of plan assets were as follows: Projected Benefit Obligations --------------------------- 2000 1999 - --------------------------------------------------------------- (in thousands) Balance at beginning of year $59,961 $59,207 Service cost 1,742 1,746 Interest cost 4,380 3,893 Benefits paid (3,210) (3,414) Actuarial (gain) loss and employee transfers 1,802 (1,856) Amendments 219 385 - --------------------------------------------------------------- Balance at end of year $64,894 $59,961 =============================================================== Plan Assets --------------------------- 2000 1999 - --------------------------------------------------------------- (in thousands) Balance at beginning of year $54,480 $49,630 Actual return on plan assets 10,493 8,168 Benefits paid (3,210) (3,414) Employee transfers 117 96 - --------------------------------------------------------------- Balance at end of year $61,880 $54,480 =============================================================== The accrued pension costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in thousands) Funded status $(3,014) $(5,481) Unrecognized transition obligation 89 178 Unrecognized prior service 2,929 2,996 cost Unrecognized net loss (gain) (1,127) 3,508 - --------------------------------------------------------------- (Accrued liability) prepaid asset recognized in the Balance Sheets $(1,123) $1,201 =============================================================== II-187 NOTES (continued) Savannah Electric and Power Company 2000 Annual Report Components of the plans' net periodic cost were as follows: 2000 1999 1998 - ----------------------------------------------------------------- (in thousands) Service cost $1,742 $1,746 $1,495 Interest cost 4,380 3,893 3,806 Expected return on plan assets (4,174) (4,063) (3,992) Recognized net loss - 152 2 Net amortization 376 352 334 - ----------------------------------------------------------------- Net pension cost $2,324 $2,080 $1,645 ================================================================= Postretirement Benefits Changes during the year in the accumulated benefit obligations and in the fair value of plan assets were as follows: Accumulated Benefit Obligations --------------------------- 2000 1999 - --------------------------------------------------------------- (in thousands) Balance at beginning of year $22,904 $23,556 Service cost 376 404 Interest cost 1,865 1,549 Benefits paid (963) (756) Actuarial gain and employee transfers (1,367) (1,849) Amendments 3,309 - - --------------------------------------------------------------- Balance at end of year $26,124 $22,904 =============================================================== Plan Assets --------------------------- 2000 1999 - --------------------------------------------------------------- (in thousands) Balance at beginning of year $5,254 $3,803 Actual return on plan assets 606 476 Employer contributions 2,013 1,731 Benefits paid (963) (756) - --------------------------------------------------------------- Balance at end of year $6,910 $5,254 =============================================================== The accrued postretirement costs recognized in the Balance Sheets were as follows: 2000 1999 - --------------------------------------------------------------- (in thousands) Funded status $(19,214) $(17,650) Unrecognized transition obligation 5,925 6,419 Unamortized prior service cost 3,185 - Unrecognized net loss 1,701 3,311 Fourth quarter contributions 1,493 1,336 - --------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ (6,910) $ (6,584) =============================================================== Components of the postretirement plans' net periodic cost were as follows: 2000 1999 1998 - ---------------------------------------------------------------- (in thousands) Service cost $ 376 $ 404 $ 348 Interest cost 1,865 1,549 1,528 Expected return on plan assets (429) (345) (276) Recognized net loss 66 152 104 Net amortization 618 494 494 - ---------------------------------------------------------------- Net postretirement cost $2,496 $2,254 $2,198 ================================================================ The weighted average rates assumed in the actuarial calculations for both the pension and postretirement benefit plans were: 2000 1999 - --------------------------------------------------------------- Discount 7.50% 7.50% Annual salary increase 5.00 5.00 Long-term return on plan assets 8.50 8.50 - --------------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement benefit obligations was a weighted average medical care cost trend rate of 7.29 percent for 2000, decreasing gradually to 5.50 percent through the year 2005, and remaining at that level thereafter. An annual increase or decrease in the assumed medical care cost trend rate of 1 percent would affect the accumulated benefit obligation and the service and interest cost components at December 31, 2000 as follows: II-188 NOTES (continued) Savannah Electric and Power Company 2000 Annual Report 1 Percent 1 Percent Increase Decrease - --------------------------------------------------------------- (in thousands) Benefit obligation $1,417 $1,598 Service and interest costs 110 140 =============================================================== The Company has a supplemental retirement plan for certain executive employees. The plan is unfunded and payable from the general funds of the Company. The Company has purchased life insurance on participating executives, and plans to use these policies to satisfy this obligation. Employee Savings Plan The Company also sponsors a 401(k) defined contribution plan covering substantially all employees. The Company provides a 75 percent matching contribution up to 6 percent of an employee's base salary. Total matching contributions made to the plan for the years 2000, 1999, and 1998 were $0.9 million, $0.9 million, and $0.8 million, respectively. 3. CONTINGENCIES AND REGULATORY MATTERS Environmental Litigation On November 3, 1999, the EPA brought a civil action in the U.S. District Court against Alabama Power, Georgia Power, and the system service company. The complaint alleges violations of the prevention of significant deterioration and new source review provisions of the Clean Air Act with respect to five coal-fired generating facilities in Alabama and Georgia. The civil action requests penalties and injunctive relief, including an order requiring the installation of the best available control technology at the affected units. The Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per day. The EPA concurrently issued to the integrated Southeast utilities a notice of violation related to 10 generating facilities, which includes the five facilities mentioned previously and the Company's Plant Kraft. In early 2000, the EPA filed a motion to amend its complaint to add the violations alleged in its notice of violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as defendants. The complaint and notice of violation are similar to those brought against and issued to several other electric utilities. These complaints and notices of violation allege that the utilities had failed to secure necessary permits or install additional pollution equipment when performing maintenance and construction at coal burning plants constructed or under construction prior to 1978. On August 1, 2000, the U.S. District Court granted Alabama Power's motion to dismiss for lack of jurisdiction in Georgia and granted the system service company's motion to dismiss on the grounds that it neither owned nor operated the generating units involved in the proceedings. On January 12, 2001, the EPA re-filed its claims against Alabama Power in federal district court in Birmingham, Alabama. The EPA did not include the system service company in the new complaint. Southern Company believes that its integrated utilities complied with applicable laws and the EPA's regulations and interpretations in effect at the time the work in question took place. An adverse outcome of this matter could require substantial capital expenditures that cannot be determined at this time and possibly require payment of substantial penalties. This could affect future results of operations, cash flows, and possibly financial condition if such costs are not recovered through regulated rates. Retail Regulatory Matters Rates to retail customers served by the Company are regulated by the GPSC. As part of the Company's rate settlement in 1992, it was informally agreed that the Company's earned rate of return on common equity should be 12.95 percent. In 1998, the GPSC approved a four-year accounting order for the Company. Under this order, the Company will reduce the electric rates of its small business customers by approximately $11 million over four years. The Company will also expense an additional $1.95 million in storm damage accruals and accrue an additional $8 million in depreciation on generating assets over the term of the order. The additional depreciation will be accumulated in a regulatory liability account to be available to mitigate any potential stranded costs. In addition, the Company has discretionary authority to provide up to an II-189 NOTES (continued) Savannah Electric and Power Company 2000 Annual Report additional $0.3 million per year in storm damage accruals and up to an additional $4.0 million in depreciation expense over the four years. Total storm damages accrued under the order were $1.5 million in both 2000 and 1999 and $0.75 million in 1998. No discretionary depreciation was recorded in the last three years. Over the term of the order, the Company is precluded from asking for a rate increase except upon significant changes in economic conditions, new laws, or regulations. There is a quarterly monitoring of the Company's earnings performance. 4. COMMITMENTS Construction Program The Company is engaged in a continuous construction program, currently estimated to total $32.5 million in 2001, $31.5 million in 2002, and $31.9 million in 2003. The construction program is subject to periodic review and revision, and actual construction costs may vary from the above estimates because of numerous factors. These factors include: changes in business conditions; revised load growth estimates; changes in environmental regulations; increasing costs of labor, equipment, and materials; and changes in cost of capital. The Company does not have any traditional baseload generating plants under construction. However, construction related to new and upgrading of existing transmission and distribution facilities and the upgrading of generating plants will continue. To the extent possible, the Company's construction program is expected to be financed from internal sources and from the issuance of additional long-term debt and capital contributions from Southern Company. The amounts of long-term debt and trust preferred securities that can be issued in the future will be contingent on market conditions, the maintenance of adequate earnings levels, regulatory authorizations, and other factors. Bank Credit Arrangements At the end of 2000, unused credit arrangements with four banks totaled $50.1 million and expire at various times during 2001. The Company has revolving credit arrangements of $20 million, of which $10 million expires April 30, 2003 and $10 million expires December 31, 2003. One of these agreements allows short-term borrowings to be converted into term loans, payable in 12 equal quarterly installments, with the first installment due at the end of the first calendar quarter after the applicable termination date or at an earlier date at the Company's option. In connection with these credit arrangements, the Company agrees to pay commitment fees based on the unused portions of the commitments. Assets Subject to Lien As amended and supplemented, the Company's Indenture of Mortgage, which secures the first mortgage bonds issued by the Company, constitutes a direct first lien on substantially all of the Company's fixed property and franchises. A second lien for $10 million of bank debt is secured by a portion of the Plant Kraft property and a second lien for $34 million in bank notes is secured by a portion of the Plant McIntosh property. Fuel and Purchased Power Commitments To supply a portion of the fuel requirements of its generating plants, the Company has entered into long-term commitments for the procurement of fuel. In most cases, these contracts contain provisions for price escalations, minimum purchase levels, and other financial commitments. The Company has fuel commitments of $44 million and $8 million for 2001 and 2002, respectively. The company has entered into various long-term commitments for the purchase of electricity. Estimated total long-term obligations at December 31, 2000 were as follows: Year Commitments - ---- ------------- (in thousands) 2001 $ 0 2002 9,627 2003 13,245 2004 13,261 2005 13,277 2006 and beyond 53,283 - --------------------------------------------------------------- Total commitments $102,693 =============================================================== II-190 NOTES (continued) Savannah Electric and Power Company 2000 Annual Report Operating Leases The Company has rental agreements with various terms and expiration dates. Rental expenses totaled $0.4 million for 2000, $0.5 million for 1999, and $1.1 million for 1998. At December 31, 2000, estimated future minimum lease payments for noncancelable operating leases were as follows: Rental Commitments -------------------- (in thousands) 2001 $433 2002 433 2003 433 2004 433 2005 433 2006 and thereafter $5,379 - ------------------------------------------------------------- 5. INCOME TAXES At December 31, 2000, tax-related regulatory assets and liabilities were $12.4 million and $16.0 million, respectively. The assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized interest. The liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and to unamortized investment tax credits. Details of income tax provisions are as follows: 2000 1999 1998 - ------------------------------------------------------------------ (in thousands) Total provision for income taxes Federal -- Currently payable $11,102 $12,968 $ 6,763 Deferred 75 (3,329) 5,812 - ------------------------------------------------------------------ 11,177 9,639 12,575 - ------------------------------------------------------------------ State -- Currently payable 1,744 2,193 1,327 Deferred 653 (24) 1,199 - ------------------------------------------------------------------ 2,397 2,169 2,526 - ----------------------------------------------------------------- Total $13,574 $11,808 $15,101 ================================================================== The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases, which give rise to deferred tax assets and liabilities, are as follows: 2000 1999 -------------------- (in thousands) Deferred tax liabilities: Accelerated depreciation $76,901 $76,282 Property basis differences 5,904 6,917 Other 17,807 12,031 - ---------------------------------------------------------------- Total 100,612 95,230 - ---------------------------------------------------------------- Deferred tax assets: Pension and other benefits 9,744 6,965 Other 7,662 5,777 - ---------------------------------------------------------------- Total 17,406 12,742 - ---------------------------------------------------------------- Net deferred tax liabilities 83,206 82,488 Portions included in current assets, net (3,450) (2,170) - ---------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $79,756 $80,318 ================================================================ Deferred investment tax credits are amortized over the lives of the related property with such amortization normally applied as a credit to reduce depreciation in the Statements of Income. Credits amortized in this manner amounted to $ 0.7 million in 2000, 1999 and 1998. At December 31, 2000, all investment tax credits available to reduce federal income taxes payable had been utilized. A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 2000 1999 1998 ----------------------------- Federal statutory tax rate 35% 35% 35% State income tax, net of federal income tax benefit 4 4 4 Other (2) (5) (2) ---------------------------------------------------------------- Effective income tax rate 37% 34% 37% ================================================================ Southern Company files a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. II-191 NOTES (continued) Savannah Electric and Power Company 2000 Annual Report 6. TRUST PREFERRED SECURITIES In December 1998, Savannah Electric Capital Trust I, of which the Company owns all of the common securities, issued $40 million of 6.85% mandatorily redeemable preferred securities. Substantially all of the assets of the Trust are $40 million aggregate principal amount of the Company's 6.85% junior subordinated notes due December 31, 2028. The Company considers that the mechanisms and obligations relating to the trust preferred securities, taken together, constitute a full and unconditional guarantee by the Company of payment obligations with respect to the preferred securities of Savannah Electric Capital Trust I. Savannah Electric Capital Trust I is a subsidiary of the Company, and accordingly is consolidated in the Company's financial statements. 7. LONG-TERM DEBT AND LONG-TERM DEBT DUE WITHIN ONE YEAR The Company's Indenture related to its First Mortgage Bonds is unlimited as to the authorized amount of bonds which may be issued, provided that required property additions, earnings and other provisions of such Indenture are met. Maturities and retirements of long-term debt were $0.4 million in 2000, $16.2 million in 1999 and $30.4 million in 1998. Included in the 1999 maturities and retirements is the purchase by the Company of all $15 million outstanding of its 7 7/8% Series First Mortgage Bonds due May 1, 2025. Assets acquired under capital leases are recorded as utility plant in service, and the related obligation is classified as other long-term debt. Leases are capitalized at the net present value of the future lease payments. However, for ratemaking purposes, these obligations are treated as operating leases, and as such, lease payments are charged to expense as incurred. A summary of the sinking fund requirements and scheduled maturities and redemptions of long-term debt due within one year at December 31 is as follows: 2000 1999 --------------------- (in thousands) Bond sinking fund requirement $ 642 $650 Less: Portion to be satisfied by certifying property additions 642 650 - ------------------------------------------------------------------- Cash sinking fund requirement - - Other long-term debt maturities 30,698 704 - ------------------------------------------------------------------- Total $30,698 $704 =================================================================== The first mortgage bond improvement (sinking) fund requirements amount to 1 percent of each outstanding series of bonds authenticated under the Indenture prior to January 1 of each year, other than those issued to collateralize pollution control and other obligations. The requirements may be satisfied by depositing cash or reacquiring bonds, or by pledging additional property equal to 1 2/3 times the requirements. The sinking fund requirements of first mortgage bonds were satisfied by certifying property additions in 2000 and by cash redemptions in 1999. It is anticipated that the 2001 requirement will be satisfied by certifying property additions. Sinking fund requirements and/or maturities through 2005 applicable to long-term debt are as follows: $30.7 million in 2001; $0.6 million in 2002; $20.5 million in 2003; $0.5 million in 2004; and $0.4 million in 2005. 8. COMMON STOCK DIVIDEND RESTRICTIONS The Company's Indenture contains certain limitations on the payment of cash dividends on common stock. At December 31, 2000, approximately $68 million of retained earnings was restricted against the payment of cash dividends on common stock under the terms of the Indenture. II-192 NOTES (continued) Savannah Electric and Power Company 2000 Annual Report 9. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial data for 2000 and 1999 are as follows (in thousands): Net Income After Operating Operating Dividends on Quarter Ended Revenues Income Preferred Stock - --------------------------------------------------------------------- March 2000 $52,390 $ 6,583 $ 1,643 June 2000 72,780 14,100 6,287 September 2000 98,849 24,060 12,351 December 2000 71,699 5,939 2,688 March 1999 $47,098 $ 5,315 $ 1,209 June 1999 61,692 12,173 5,268 September 1999 91,849 26,759 13,705 December 1999 50,955 4,355 2,901 - --------------------------------------------------------------------- The Company's business is influenced by seasonal weather conditions and a seasonal rate structure, among other factors. The quarterly operating income information above has been reclassified to reflect the Company's current presentation of income tax expense. 11-193 SELECTED FINANCIAL AND OPERATING DATA 1996-2000 Savannah Electric and Power Company 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ---------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $295,718 $251,594 $254,455 $226,277 $234,074 Net Income after Dividends on Preferred Stock (in thousands) $22,969 $23,083 $23,644 $23,847 $23,940 Cash Dividends on Common Stock (in thousands) $24,300 $25,200 $23,500 $20,500 $19,600 Return on Average Common Equity (percent) 13.13 13.16 13.45 13.71 14.08 Total Assets (in thousands) $594,227 $570,218 $555,799 $547,352 $544,900 Gross Property Additions (in thousands) $27,290 $29,833 $18,071 $18,846 $28,950 - ---------------------------------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $174,994 $174,847 $175,865 $175,631 $172,284 Preferred stock - - - 35,000 35,000 Company obligated mandatorily redeemable preferred securities 40,000 40,000 40,000 - - Long-term debt 116,902 147,147 163,443 142,846 164,406 - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $331,896 $361,994 $379,308 $353,477 $371,690 ============================================================================================================================ Capitalization Ratios (percent): Common stock equity 52.7 48.3 46.4 49.7 46.4 Preferred stock - - - 9.9 9.4 Company obligated mandatorily redeemable preferred securities 12.1 11.0 10.5 - - Long-term debt 35.2 40.7 43.1 40.4 44.2 - ---------------------------------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0 ============================================================================================================================ Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 A1 A1 Standard and Poor's A+ AA- AA- AA- A+ Preferred Stock - Moody's a2 a2 a2 a2 a2 Standard and Poor's BBB+ A- A A A ============================================================================================================================ Customers (year-end): Residential 115,646 112,891 110,437 109,092 106,657 Commercial 15,727 15,433 15,328 14,233 13,877 Industrial 75 67 63 64 65 Other 444 417 377 1,129 1,097 - ---------------------------------------------------------------------------------------------------------------------------- Total 131,892 128,808 126,205 124,518 121,696 ============================================================================================================================ Employees (year-end): 554 533 542 535 571 - ----------------------------------------------------------------------------------------------------------------------------
II-194 SELECTED FINANCIAL AND OPERATING DATA 1996-2000 (continued) Savannah Electric and Power Company 2000 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ---------------------------------------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $129,520 $112,371 $109,393 $ 96,587 $101,607 Commercial 102,116 88,449 86,231 78,949 80,494 Industrial 40,839 32,233 37,865 35,301 37,077 Other 10,147 9,212 8,838 8,621 8,804 - ---------------------------------------------------------------------------------------------------------------------------------- Total retail 282,622 242,265 242,327 219,458 227,982 Sales for resale - non-affiliates 4,748 3,395 4,548 3,467 1,998 Sales for resale - affiliates 4,974 4,151 3,016 2,052 3,130 - ---------------------------------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 292,344 249,811 249,891 224,977 233,110 Other revenues 3,374 1,783 4,564 1,300 964 - ---------------------------------------------------------------------------------------------------------------------------------- Total $295,718 $251,594 $254,455 $226,277 $234,074 ================================================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 1,671,089 1,579,068 1,539,792 1,428,337 1,456,651 Commercial 1,369,448 1,287,832 1,236,337 1,156,078 1,141,218 Industrial 800,150 713,448 900,012 881,261 838,753 Other 135,824 132,555 131,142 124,490 126,215 - ---------------------------------------------------------------------------------------------------------------------------------- Total retail 3,976,511 3,712,903 3,807,283 3,590,166 3,562,837 Sales for resale - non-affiliates 77,481 51,548 53,294 94,280 91,610 Sales for resale - affiliates 88,646 76,988 58,415 54,509 41,808 - ---------------------------------------------------------------------------------------------------------------------------------- Total 4,142,638 3,841,439 3,918,992 3,738,955 3,696,255 ================================================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.75 7.12 7.10 6.76 6.98 Commercial 7.46 6.87 6.97 6.83 7.05 Industrial 5.10 4.52 4.21 4.01 4.42 Total retail 7.11 6.52 6.36 6.11 6.40 Sales for resale 5.85 5.87 6.77 3.71 3.84 Total sales 7.06 6.50 6.38 6.02 6.31 Residential Average Annual Kilowatt-Hour Use Per Customer 14,593 14,100 14,061 13,231 13,771 Residential Average Annual Revenue Per Customer $1,131.08 $1,003.39 $998.94 $894.73 $960.58 Plant Nameplate Capacity Ratings (year-end) (megawatts) 788 788 788 788 788 Maximum Peak-Hour Demand (megawatts): Winter 724 719 582 625 666 Summer 878 875 846 802 811 Annual Load Factor (percent) 53.4 51.2 54.9 54.3 53.1 Plant Availability Fossil-Steam (percent): 78.5 72.8 72.9 93.7 77.6 - ---------------------------------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 51.6 44.6 41.6 34.4 27.7 Oil and gas 6.9 12.3 12.9 5.2 3.1 Purchased power - From non-affiliates 7.7 5.3 3.4 1.4 2.1 From affiliates 33.8 37.8 42.1 59.0 67.1 - ---------------------------------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 100.0 100.0 ==================================================================================================================================
II-195 PART III Items 10, 11, 12 and 13 for SOUTHERN are incorporated by reference to ELECTION OF DIRECTORS in SOUTHERN's definitive Proxy Statement relating to the 2001 Annual Meeting of Stockholders. Additionally, Items 10, 11, 12 and 13 for ALABAMA, GEORGIA, GULF and MISSISSIPPI are incorporated by reference to the Information Statements of ALABAMA, GEORGIA, GULF and MISSISSIPPI relating to each of their respective 2001 Annual Meetings of Shareholders. The ages of directors and executive officers in Item 10 set forth below are as of December 31, 2000. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Identification of directors of SAVANNAH. G. Edison Holland, Jr. President and Chief Executive Officer Age 48 Served as Director since 7-15-97 Gus H. Bell (1) Age 63 Served as Director since 7-20-99 Archie H. Davis (1) Age 59 Served as Director since 2-18-97 Walter D. Gnann (1) Age 65 Served as Director since 5-17-83 Robert B. Miller, III (1) Age 55 Served as Director since 5-17-83 Arnold M. Tenenbaum (1) Age 64 Served as Director since 5-17-77 (1) No position other than Director. Each of the above is currently a director of SAVANNAH, serving a term running from the last annual meeting of SAVANNAH's stockholder (May 17, 2000) for one year until the next annual meeting or until a successor is elected and qualified. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he or she was or is to be selected as a director or nominee, other than any arrangements or understandings with directors or officers of SAVANNAH acting solely in their capacities as such. Identification of executive officers of SAVANNAH. G. Edison Holland, Jr. President, Chief Executive Officer and Director Age 48 Served as Executive Officer since 7-15-97 Anthony R. James Vice President - Power Generation Age 50 Served as Executive Officer since 7-27-00 W. Miles Greer Vice President - Customer Operations and External Affairs Age 57 Served as Executive Officer since 11-20-85 Kirby R. Willis Vice President, Treasurer, Chief Financial Officer and Assistant Corporate Secretary Age 49 Served as Executive Officer since 1-1-94 Each of the above is currently an executive officer of SAVANNAH, serving a term running from the meeting of the directors held on July 27, 2000 for the ensuing year. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he was or is to be selected as an officer, other than any arrangements or understandings with officers of SAVANNAH acting solely in their capacities as such. Identification of certain significant employees. None. III-1 Family relationships. None. Business experience. G. Edison Holland, Jr. - President and Chief Executive Officer since 1997. He previously served as Vice President of Power Generation/Transmission and Corporate Counsel of GULF from 1995 to 1997. Served as a partner in the law firm of Beggs & Lane from 1979 to 1997. Director of SunTrust Bank of Savannah. Gus H. Bell, III - President and Chief Executive Officer of Hussey, Gay, Bell and DeYoung, Inc., (specializing in environmental, industrial, structural, architectural and civil engineering), Savannah, Georgia. Director of SunTrust Bank of Savannah. Archie H. Davis - President and Chief Executive Officer of The Savannah Bancorp and The Savannah Bank, N.A., Savannah, Georgia. Member of the Board of Directors of Thomaston Mills, Thomaston, Georgia. Walter D. Gnann - President of Walt's TV, Appliance and Furniture Co., Inc., Springfield, Georgia. Robert B. Miller, III - President of American Building Systems, Inc., Savannah, Georgia. Arnold M. Tenenbaum - President and Director of Chatham Steel Corporation. Director of First Union Bank of Georgia, First Union Bank of Savannah and Cerulean Corporation. W. Miles Greer - Vice President - Customer Operations and External Affairs since 1998. He previously served as Vice President of Marketing and Customer Service from 1994 to 1998. Responsible for customer services, transmission and distribution, engineering, system operation and external affairs. Anthony R. James - Vice President - Power Generation and Senior Production Officer since 2000. He also serves as Central Cluster Manager at GEORGIA's Plant Scherer. Responsible for operations and maintenance of Plants Kraft, Riverside and McIntosh. Kirby R. Willis - Vice President, Treasurer and Chief Financial Officer since 1994 and Assistant Corporate Secretary effective 1998. Responsible primarily for accounting, financial, labor relations, corporate services, corporate compliance, environmental and safety activities. Involvement in certain legal proceedings. None Section 16(a) Beneficial Ownership Reporting Compliance. No late filers. III-2 Item 11. EXECUTIVE COMPENSATION Summary Compensation Table. The following table sets forth information concerning any Chief Executive Officer and the four most highly compensated executive officers of SAVANNAH serving during 2000.
ANNUAL COMPENSATION LONG-TERM COMPENSATION Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 - ------------------------------------------------------------------------------------------------------------------------ G. Edison Holland, Jr. President, 2000 295,812 243,263 24,438 25,667 - 15,453 Chief Executive 1999 254,914 42,626 21,588 8,375 166,052 13,392 Officer, Director 1998 233,330 26,019 17,309 7,951 128,608 8,246 Anthony R. James4 2000 175,048 161,442 - 12,752 - 7,582 Vice President, 1999 - - - - - - 1998 - - - - - - W. Miles Greer 2000 177,013 100,923 601 13,416 - 16,982 Vice President 1999 168,713 21,322 1,874 6,130 79,476 15,150 1998 160,207 16,054 13 4,901 69,000 13,179 Kirby R. Willis Vice President, 2000 162,279 97,394 4,908 8,785 - 12,159 Chief Financial 1999 156,068 19,546 259 5,028 79,476 11,767 Officer, Treasurer 1998 155,236 15,554 13 4,748 69,000 10,581 Lewis A. Jeffers5 2000 142,850 96,835 2,856 7,543 - 7,245 Vice President 1999 134,538 19,023 379 3,809 63,146 6,972 1998 - - - - - -
1 Tax reimbursement by SAVANNAH on certain personal benefits, including membership fees of $11,669 for Mr. Holland, Jr. in 1998. 2 Payouts made in 1999 and 2000 for the four-year performance periods ending December 31, 1998 and 1999, respectively. 3 SAVANNAH contributions to the Employee Savings Plan (ESP), Employee Stock Ownership Plan (ESOP), Supplemental Benefit Plan (SBP) or Above-market earnings on deferred compensation (AME) and tax sharing benefits paid to participants who elected receipt of dividends on SOUTHERN's common stock held in the ESP are as follows:
Name ESP ESOP SBP or AME ESP Tax Benefit Sharing - ---- --- ---- ---------- ----------------------- G. Edison Holland, Jr. $6,853 $810 $7,790 $489 Anthony R. James 6,772 810 - - W. Miles Greer 7,525 810 8,647 - Kirby R. Willis 5,954 810 5,395 - Lewis A. Jeffers 6,435 810 - -
4 Mr. James was named an executive officer effective July 27, 2000. 5 Mr. Jeffers was named an executive officer of SAVANNAH effective November 2, 1999 and transferred to ALABAMA effective June 24, 2000. III-3 STOCK OPTION GRANTS IN 2000 Stock Option Grants. The following table sets forth all stock option grants to the named executive officers of SAVANNAH during the year ending December 31, 2000.
Individual Grants Grant Date Value # of % of Total Securities Options Exercise Underlying Granted to or Options Employees in Base Price Expiration Grant Date Name Granted6 Fiscal Year7 ($/Sh)6 Date6 Present Value($)8 ----------------------------------------------------------------------------------------------------------------- SAVANNAH G. Edison Holland, Jr. 25,667 0.4 23.25 02/18/2010 147,842 Anthony R. James 12,752 0.2 23.25 02/18/2010 73,452 W. Miles Greer 13,416 0.2 23.25 02/18/2010 77,276 Kirby R. Willis 8,785 0.1 23.25 02/18/2010 50,602 Lewis A. Jeffers 7,543 0.1 23.25 02/18/2010 43,448
6 Performance Stock Plan grants were made on February 18, 2000, and vest annually at a rate of one-third on the anniversary date of the grant. Grants fully vest upon termination as a result of death, total disability, or retirement and expire five years after retirement, three years after death or total disability, or their normal expiration date if earlier. The exercise price is the average of the high and low fair market value of SOUTHERN's common stock on the date granted. Options may be transferred to family members, family trusts, and family limited partnerships. 7 A total of 6,977,038 stock options were granted in 2000. 8 Value was calculated using the Black-Scholes option valuation model. The actual value, if any, ultimately realized depends on the market value of SOUTHERN's common stock at a future date. Significant assumptions are shown below:
Risk-free Dividend Discount for forfeiture risk: Volatility rate of return opportunity Term before after vesting vesting - ------------------------------------------------------------------------------------------------------------------- Black-Scholes Assumptions 22.14% 6.52% 50% 10 years 7.79% 12.40% These assumptions reflect the effects of cash dividend equivalents paid to participants under the Performance Dividend Plan assuming targets are met.
III-4 AGGREGATED STOCK OPTION EXERCISES IN 2000 AND YEAR-END OPTION VALUES Aggregated Stock Option Exercises. The following table sets forth information concerning options exercised during the year ending December 31, 2000 by the named executive officers and the value of unexercised options held by them as of December 31, 2000.
Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at Fiscal Fiscal Year-End (#) Year-End($)9 Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise (#) Realized($)10 Unexercisable Unexercisable - ------------------------------------------------------------------------------------------------------------- SAVANNAH G. Edison Holland, Jr. 18,323 220,862 32,261/33,900 325,274/310,486 Anthony R. James - - 8,456/17,259 77,991/157,055 W. Miles Greer 8,654 76,354 10,235/19,136 93,074/171,646 Kirby R. Willis 4,038 37,604 13,574/13,720 128,819/120,111 Lewis A. Jeffers - - 1,270/10,082 8,493/92,410 9 This column represents the excess of the fair market value of SOUTHERN's common stock of $33.25 per share, as of December 31, 2000, above the exercise price of the options. The Exercisable column reports the "value" of options that are vested and therefore could be exercised. The Unexercisable column reports the "value" of options that are not vested and therefore could not be exercised as of December 31, 2000. 10 The "Value Realized" is ordinary income, before taxes, and represents the amount equal to the excess of the fair market value of the shares at the time of exercise above the exercise price.
III-5 DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE Pension Plan Table. The following table sets forth the estimated annual pension benefits payable at normal retirement age under SOUTHERN's qualified Pension Plan, as well as non-qualified supplemental benefits, based on the stated compensation and years of service with the SOUTHERN system for Messrs. Holland, James and Jeffers. Compensation for pension purposes is limited to the average of the highest three of the final 10 years' compensation -- base salary plus the excess of annual and long-term incentive compensation over 25 percent of base salary (reported under column titled "Salary", "Bonus", and "Long-Term Incentive Payouts" in the Summary Compensation Table on page III-3). The amounts shown in the table were calculated according to the final average pay formula and are based on a single life annuity without reduction for joint and survivor annuities (although married employees are required to have their pension benefits paid in one of various joint and survivor annuity forms, unless the employee elects otherwise with the spouse's consent) or computation of the Social Security offset which would apply in most cases. This offset amounts to one-half of the estimated Social Security benefit (primary insurance amount) in excess of $3,900 per year times the number of years of accredited service, divided by the total possible years of accredited service to normal retirement age.
Years of Accredited Service Remuneration 15 20 25 30 35 40 - ------------ ----------------------------------------------------------------- $ 100,000 $ 25,500 $ 34,000 $ 42,500 $ 51,000 $ 59,500 $ 68,000 300,000 76,500 102,000 127,500 153,000 178,500 204,000 500,000 127,500 170,000 212,500 255,000 297,500 340,000 700,000 178,500 238,000 297,500 357,000 416,500 476,000 900,000 229,500 306,000 382,500 459,000 535,500 612,000 1,100,000 280,500 374,000 467,500 561,000 654,500 748,000 1,300,000 331,500 442,000 552,500 663,000 773,500 884,000
As of December 31, 2000, the applicable compensation levels and years of accredited service for SAVANNAH's named executives are presented in the following table: Compensation Accredited Name Level Years of Service G. Edison Holland, Jr.9 $431,348 17 Anthony R. James 246,604 21 W. Miles Greer10 237,392 16 Kirby R. Willis 225,952 26 Lewis A. Jeffers 197,400 21 9 The number of accredited years of service includes 9 years and 3 months credited to Mr. Holland pursuant to a supplemental pension agreement. 10 The number of accredited years of service includes 7 years and 6 months credited to Mr. Greer pursuant to a supplemental pension agreement. III-6 Effective January 1, 1998, SAVANNAH merged its pension plan into the SOUTHERN Pension Plan. SAVANNAH also has in effect a supplemental executive retirement plan for certain of its executive employees. The plan is designed to provide participants with a supplemental retirement benefit, which, in conjunction with social security and benefits under SOUTHERN's qualified pension plan, will equal 70 percent of the highest three of the final 10 years' average annual earnings (excluding incentive compensation). The following table sets forth the estimated combined annual pension benefits under SOUTHERN's pension and SAVANNAH's supplemental executive retirement plans in effect during 2000 which are payable to Messrs Greer and Willis, upon retirement at the normal retirement age after designated periods of accredited service and at a specified compensation level. Years of Accredited Service Remuneration 15 25 35 - -------------------------- -- -- -- $150,000 105,000 105,000 105,000 180,000 126,000 126,000 126,000 210,000 147,000 147,000 147,000 260,000 182,000 182,000 182,000 280,000 196,000 196,000 196,000 300,000 210,000 210,000 210,000 350,000 245,000 245,000 245,000 400,000 280,000 280,000 280,000 430,000 301,000 301,000 301,000 460,000 322,000 322,000 322,000 Compensation of Directors. Standard Arrangements. The following table presents compensation paid to the directors during 2000 for service as a member of the board of directors and any board committee(s), except that employee directors received no fees or compensation for service as a member of the board of directors or any board committee. At the election of the director, all or a portion of the cash retainer may be payable in SOUTHERN's common stock, and all or a portion of the total fees may be deferred under the Deferred Compensation Plan until membership on the board is terminated. Cash Retainer Fee $10,000 Stock Retainer Fee 50 shares per quarter Meeting Fees: $750 for each Board or Committee meeting attended Effective January 1, 1997, the Outside Directors Pension Plan (the "Plan") was terminated and benefits payable under the Plan were frozen. Non-employee directors serving as of January 1, 1997 were given a one-time election to receive a Plan benefit buy-out equal to the actuarial present value of future Plan benefits or receive benefits under the terms of the Plan at the annual retainer rate in effect on December 31, 1996. Directors who elected to receive the benefit buy-out were required to defer receipt of that amount under the Deferred Compensation Plan until termination from board membership. Directors who elected to continue to participate under the terms of the Plan are entitled to benefits upon retirement from the board on the retirement date designated in the respective companies' by-laws. The annual benefit payable is based upon length of service and varies from 75 percent of the annual retainer in effect on December 31, 1996 if the participant has at least 60 months of service on the board of one or more system companies, to 100 percent if the participant has at least 120 months of such service. Payments will continue for the greater of the lifetime of the participant or 10 years. III-7 Other Arrangements. No director received other compensation for services as a director during the year ending December 31, 2000 in addition to or in lieu of that specified by the standard arrangements specified above. Employment Contracts and Termination of Employment and Change in Control Arrangements. - ------------------------------------------------------------------------ SAVANNAH has adopted SOUTHERN's Change in Control Plan which is applicable to certain of its officers, and has entered into individual change in control agreements with its most highly compensated executive officers. If an executive is involuntarily terminated, other than for cause, within two years following a change in control of SOUTHERN the agreements provide for: o lump sum payment of two or three times annual compensation, o up to five years' coverage under group health and life insurance plans, o immediate vesting of all stock options, stock appreciation rights, and restricted stock previously granted, o payment of any accrued long-term and short-term bonuses and dividend equivalents, and o payment of any excise tax liability incurred as a result of payments made under any individual agreements. A SOUTHERN change in control is defined under the agreements as: o acquisition of at least 20 percent of the SOUTHERN's stock, o a change in the majority of the members of the SOUTHERN's board of directors, o a merger or other business combination that results in SOUTHERN's shareholders immediately before the merger owning less than 65 percent of the voting power after the merger, or o a sale of substantially all the assets of SOUTHERN. A change in control of SAVANNAH is defined under the agreements as: o acquisition of at least 50 percent of SAVANNAH's stock, o a merger or other business combination unless SOUTHERN controls the surviving entity or o a sale of substantially all the assets of SAVANNAH. If a change in control affects only a subsidiary of SOUTHERN, these payments would only be made to executives of the affected subsidiary who are involuntarily terminated as a result of that change in control. SOUTHERN also has amended its short- and long-term incentive plans to provide for pro-rata payments at not less than target-level performance if a change in control occurs and the plans are not continued or replaced with comparable plans. Report on Repricing of Options. None. Compensation Committee Interlocks and Insider Participation. None. III-8 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership of Certain Beneficial Owners. SOUTHERN is the beneficial owner of 100% of the outstanding common stock of SAVANNAH.
- ---------------------------------------------------------------------------------------------------------- Amount and Name and Address Nature of Percent of Beneficial Beneficial of Title of Class Owner Ownership Class - ---------------------------------------------------------------------------------------------------------- Common Stock The Southern Company 100% 270 Peachtree Street, N.W. Atlanta, Georgia 30303 Registrant: SAVANNAH 10,844,635
Security Ownership of Management. The following table shows the number of shares of SOUTHERN common stock owned by the SAVANNAH's directors, nominees and executive officers as of December 31, 2000. It is based on information furnished by the directors, nominees and executive officers. The shares owned by all directors, nominees and executive officers as a group constitute less than one percent of the total number of shares outstanding on December 31, 2000. Name of Directors, Nominees and Number of Shares Executive Officers Title of Class Beneficially Owned (1) (2) - ------------------ -------------- -------------------------- Gus H. Bell, III SOUTHERN Common 246 Archie H. Davis SOUTHERN Common 495 Walter D. Gnann SOUTHERN Common 2,689 G. Edison Holland, Jr. SOUTHERN Common 43,848 Robert B. Miller, III SOUTHERN Common 1,770 Arnold M. Tenenbaum SOUTHERN Common 1,124 Anthony R. James SOUTHERN Common 25,065 W. Miles Greer SOUTHERN Common 18,605 Kirby R. Willis SOUTHERN Common 23,240 The directors, nominees and executive officers as a group SOUTHERN Common 117,083 (1) As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security and/or investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). (2) The shares shown include shares of SOUTHERN common stock of which certain directors and executive officers have the right to acquire beneficial ownership within 60 days pursuant to the Executive Stock Plan and/or Performance Stock Plan, as follows: Mr. Greer, 14,707 shares; Mr. Holland, 40,817 shares; Mr. James 12,707 shares, and Mr. Willis, 16,503 shares. III-9 Changes in control. SOUTHERN and SAVANNAH know of no arrangements which may at a subsequent date result in any change in control. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with management and others. Mr. Archie Davis is President of The Savannah Bank, N.A., Savannah, Georgia. During 2000, this bank furnished a number of regular banking services in the ordinary course of business to SAVANNAH. SAVANNAH intends to maintain normal banking relations with the aforesaid bank in the future. Certain business relationships. None. Indebtedness of management. None. Transactions with promoters. None. III-10 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report on this Form 10-K: (1) Financial Statements: Reports of Independent Public Accountants on the financial statements for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed under Item 8 herein. The financial statements filed as a part of this report for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed under Item 8 herein. (2) Financial Statement Schedules: Reports of Independent Public Accountants as to Schedules for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are included herein on pages IV-12 through IV-17. Financial Statement Schedules for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed in the Index to the Financial Statement Schedules at page S-1. (3) Exhibits: Exhibits for SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed in the Exhibit Index at page E-1. (b) Reports on Form 8-K during the fourth quarter of 2000 were as follows: SOUTHERN filed Current Reports on Form 8-K: Date of event: November 27, 2000 Items reported: Items 5 and 7 Date of event: December 6, 2000 Items reported: Items 5 and 7 IV-1 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. THE SOUTHERN COMPANY By: H. Allen Franklin, President and Chief Executive Officer By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. H. Allen Franklin President and Chief Executive Officer (Principal Executive Officer) Gale E. Klappa Financial Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) W. Dean Hudson Vice President, Comptroller and Chief Accounting Officer (Principal Accounting Officer) Directors: Daniel P. Amos L. G. Hardman III Dorrit J. Bern Donald M. James Thomas F. Chapman Zack T. Pate H. Allen Franklin Gerald J. St. Pe' By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. ALABAMA POWER COMPANY By: Elmer B. Harris, President and Chief Executive Officer By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. Elmer B. Harris President, Chief Executive Officer and Director (Principal Executive Officer) William B. Hutchins, III Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Art P. Beattie Vice President and Comptroller (Principal Accounting Officer) Directors: Whit Armstrong John T. Porter H. Allen Franklin Robert D. Powers R. Kent Henslee Andreas Renschler Carl E. Jones, Jr. C. Dowd Ritter James K. Lowder James H. Sanford Wallace D. Malone, Jr. John Cox Webb, IV Thomas C. Meredith James W. Wright William V. Muse By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 IV-2 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. GEORGIA POWER COMPANY By: David M. Ratcliffe, President and Chief Executive Officer By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. David M. Ratcliffe President, Chief Executive Officer and Director (Principal Executive Officer) Thomas A. Fanning Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Cliff S. Thrasher Vice President, Comptroller and Chief Accounting Officer (Principal Accounting Officer) Directors: Daniel P. Amos James R. Lientz, Jr. Juanita P. Baranco G. Joseph Prendergast William A. Fickling, Jr. William Jerry Vereen H. Allen Franklin Carl Ware L. G. Hardman III E. Jenner Wood, III By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. GULF POWER COMPANY By: Travis J. Bowden, President and Chief Executive Officer By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. Travis J. Bowden President, Chief Executive Officer and Director (Principal Executive Officer) Ronnie R. Labrato Comptroller and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: Fred C. Donovan, Sr. W. Deck Hull, Jr. H. Allen Franklin Barbara H. Thames By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 IV-3 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. MISSISSIPPI POWER COMPANY By: Dwight H. Evans, President and Chief Executive Officer By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. Dwight H. Evans President, Chief Executive Officer and Director (Principal Executive Officer) Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: Robert S. Gaddis George A. Schloegel Linda T. Howard Philip J. Terrell Aubrey K. Lucas Gene Warr Malcolm Portera By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. SAVANNAH ELECTRIC AND POWER COMPANY By: G. Edison Holland, Jr., President and Chief Executive Officer By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof. G. Edison Holland, Jr. President, Chief Executive Officer and Director (Principal Executive Officer) Kirby R. Willis Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: Gus H. Bell, III Robert B. Miller, III Archie H. Davis Arnold M. Tenenbaum Walter D. Gnann By: Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 28, 2001 IV-4 Exhibit 21. Subsidiaries of the Registrants.* Jurisdiction of Name of Company Organization - ----------------------------------------------------- -- --------------------- The Southern Company Delaware Southern Company Capital Trust I Delaware Southern Company Capital Trust II Delaware Southern Company Capital Trust III Delaware Southern Company Capital Trust IV Delaware Southern Company Capital Trust V Delaware Southern Company Capital Trust VI Delaware Southern Company Capital Trust VII Delaware Southern Company Capital Trust VIII Delaware Southern Company Capital Trust IX Delaware Alabama Power Company Alabama Alabama Power Capital Trust I Delaware Alabama Power Capital Trust II Delaware Alabama Power Capital Trust III Delaware Alabama Power Capital Trust IV Delaware Alabama Power Capital Trust V Delaware Alabama Property Company Alabama Southern Electric Generating Company Alabama Georgia Power Company Georgia Georgia Power Capital Trust I Delaware Georgia Power Capital Trust II Delaware Georgia Power Capital Trust III Delaware Georgia Power Capital Trust IV Delaware Georgia Power Capital Trust V Delaware Georgia Power Capital Trust VI Delaware Georgia Power L.P. Holdings Corp. Georgia Georgia Power Capital, L.P. Delaware Piedmont-Forrest Corporation Georgia Southern Electric Generating Company Alabama Gulf Power Company Maine Gulf Power Capital Trust I Delaware Gulf Power Capital Trust II Delaware Gulf Power Capital Trust III Delaware Mississippi Power Company Mississippi Mississippi Power Capital Trust I Delaware Mississippi Power Capital Trust II Delaware Mississippi Power Capital Trust III Delaware Savannah Electric and Power Company Georgia Savannah Electric Capital Trust I Delaware - ----------------------------------------------------- -- --------------------- *This information is as of December 31, 2000. In addition, the list omits certain subsidiaries pursuant to paragraph (b)(21)(ii) of Regulation S-K Item 601. IV-5 ARTHUR ANDERSEN LLP Exhibit 23(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 28, 2001 on the financial statements of The Southern Company and its subsidiaries and the related financial statement schedule, included in this Form 10-K, into The Southern Company's previously filed Registration Statement File Nos. 2-78617, 33-3546, 33-30171, 33-54415, 33-57951, 33-58371, 33-60427, 333-09077, 333-44127, 333-44261, 333-64871 and 333-31808. /s/ Arthur Andersen LLP Atlanta, Georgia March 22, 2001 IV-6 ARTHUR ANDERSEN LLP Exhibit 23(b) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 28, 2001 on the financial statements of Alabama Power Company and the related financial statement schedule, included in this Form 10-K, into Alabama Power Company's previously filed Registration Statement File No. 333-67453. /s/ Arthur Andersen LLP Birmingham, Alabama March 22, 2001 IV-7 Exhibit 23(c) ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 28, 2001 on the financial statements of Georgia Power Company and the related financial statement schedule, included in this Form 10-K, into Georgia Power Company's previously filed Registration Statement File No. 333-75193. /s/ Arthur Andersen LLP Atlanta, Georgia March 22, 2001 IV-8 Exhibit 23(d) ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 28, 2001 on the financial statements of Gulf Power Company and the related financial statement schedule, included in this Form 10-K, into Gulf Power Company's previously filed Registration Statement File Nos. 33-50165 and 333-42033. /s/ Arthur Andersen LLP Atlanta, Georgia March 22, 2001 IV-9 ARTHUR ANDERSEN LLP Exhibit 23(e) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 28, 2001 on the financial statements of Mississippi Power Company and the related financial statement schedule, included in this Form 10-K, into Mississippi Power Company's previously filed Registration Statement File No. 333-45069. /s/ Arthur Andersen LLP Atlanta, Georgia March 22, 2001 IV-10 ARTHUR ANDERSEN LLP Exhibit 23(f) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 28, 2001 on the financial statements of Savannah Electric and Power Company and the related financial statement schedule, included in this Form 10-K, into Savannah Electric and Power Company's previously filed Registration Statement File No. 333-46171. /s/ Arthur Andersen LLP Atlanta, Georgia March 22, 2001 IV-11 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE To The Southern Company: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of The Southern Company and its subsidiaries included in this Form 10-K, and have issued our report thereon dated February 28, 2001. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to The Southern Company and its subsidiaries (page S-2) is the responsibility of The Southern Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP Atlanta, Georgia February 28, 2001 IV-12 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE To Alabama Power Company: We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of Alabama Power Company included in this Form 10-K, and have issued our report thereon dated February 28, 2001. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Alabama Power Company (page S-3) is the responsibility of Alabama Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Birmingham, Alabama February 28, 2001 IV-13 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE To Georgia Power Company: We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of Georgia Power Company included in this Form 10-K, and have issued our report thereon dated February 28, 2001. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Georgia Power Company (page S-4) is the responsibility of Georgia Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Atlanta, Georgia February 28, 2001 IV-14 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE To Gulf Power Company: We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of Gulf Power Company included in this Form 10-K, and have issued our report thereon dated February 28, 2001. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Gulf Power Company (page S-5) is the responsibility of Gulf Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Atlanta, Georgia February 28, 2001 IV-15 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE To Mississippi Power Company: We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of Mississippi Power Company included in this Form 10-K, and have issued our report thereon dated February 28, 2001. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Mississippi Power Company (page S-6) is the responsibility of Mississippi Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Atlanta, Georgia February 28, 2001 IV-16 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE To Savannah Electric and Power Company: We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of Savannah Electric and Power Company included in this Form 10-K, and have issued our report thereon dated February 28, 2001. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Savannah Electric and Power Company (page S-7) is the responsibility of Savannah Electric and Power Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Atlanta, Georgia February 28, 2001 IV-17 INDEX TO FINANCIAL STATEMENT SCHEDULES Schedule Page II Valuation and Qualifying Accounts and Reserves 2000, 1999 and 1998 The Southern Company and Subsidiary Companies................ S-2 Alabama Power Company........................................ S-3 Georgia Power Company........................................ S-4 Gulf Power Company........................................... S-5 Mississippi Power Company.................................... S-6 Savannah Electric and Power Company.......................... S-7 Schedules I through V not listed above are omitted as not applicable or not required. Columns omitted from schedules filed have been omitted because the information is not applicable or not required. S-1
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Thousands of Dollars) Additions ---------------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period ------------------------------ ------------------------ -------------- ------------------- ----------------- -------------- Provision for uncollectible accounts 2000................... $21,834 $31,329 $39 $31,403 (Note) $21,799 1999................... 11,268 35,476 - 24,910 (Note) 21,834 1998................... 9,613 31,707 - 30,052 (Note) 11,268 - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-2
ALABAMA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Thousands of Dollars) Additions --------------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period ---------------------------------- -------------------------- --------------- ------------------ ----------------- --------------- Provision for uncollectible accounts 2000........................ $4,117 $9,093 $- $ 6,973 (Note) $6,237 1999........................ 1,855 13,995 - 11,733 (Note) 4,117 1998........................ 2,272 7,702 - 8,119 (Note) 1,855 - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-3
GEORGIA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Thousands of Dollars) Additions --------------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period ----------------------------------- ----------------------- -------------- ------------------ ----------------- ---------------- Provision for uncollectible accounts 2000.......................... $7,000 $10,794 $- $12,694 (Note) $5,100 1999.......................... 5,500 14,406 - 12,906 (Note) 7,000 1998.......................... 3,000 17,856 - 15,356 (Note) 5,500 8,888 ($3 - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-4
GULF POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Thousands of Dollars) Additions -------------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period ------------------------------------ ------------------------ --------------- ------------------ ---------------- --------------- Provision for uncollectible accounts 2000.......................... $1,026 $2,702 $- $2,426 (Note) $1,302 1999.......................... 996 2,230 - 2,200(Note) 1,026 1998.......................... 796 2,288 - 2,088 (Note) 996 - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-5
MISSISSIPPI POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Thousands of Dollars) Additions -------------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period ------------------------------------ ------------------------- -------------- ------------------ ---------------- --------------- Provision for uncollectible accounts 2000.......................... $697 $1,156 $14 $1,296 (Note) $571 1999.......................... 621 1,964 - 1,888 (Note) 697 1998.......................... 698 1,510 31 1,618 (Note) 621 - ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-6
SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Thousands of Dollars) Additions ------------------------------------- Balance at Beginning Charged to Charged to Other Balance at End Description of Period Income Accounts Deductions of Period -------------------------------------- ---------------------- ------------ ------------------ --------------- ----------------- Provision for uncollectible accounts 2000.......................... $237 $999 $- $829 (Note) $407 1999.......................... 284 594 - 641 (Note) 237 1998.......................... 354 417 - 487 (Note) 284 - ------------------- Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written off.
S-7
EXHIBIT INDEX The following exhibits indicated by an asterisk preceding the exhibit number are filed herewith. The balance of the exhibits have heretofore been filed with the SEC, respectively, as the exhibits and in the file numbers indicated and are incorporated herein by reference. The exhibits marked with a pound sign are management contracts or compensatory plans or arrangements required to be filed herewith and required to be identified as such by Item 14 of Form 10-K. Reference is made to a duplicate list of exhibits being filed as a part of this Form 10-K, which list, prepared in accordance with Item 601 of Regulation S-K of the SEC, immediately precedes the exhibits being physically filed with this Form 10-K. (1) Underwriting Agreements GEORGIA (c) - Distribution Agreement dated November 29, 1995 between GEORGIA and Lehman Brothers Inc.; Donaldson, Lufkin & Jenrette Securities Corporation; J. P. Morgan Securities Inc.; Salomon Brothers Inc and Smith Barney Inc. relating to $300,000,000 First Mortgage Bonds Secured Medium-Term Notes. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1995, as Exhibit 1(c).) (3) Articles of Incorporation and By-Laws SOUTHERN (a) 1 - Composite Certificate of Incorporation of SOUTHERN, reflecting all amendments thereto through January 5, 1994. (Designated in Registration No. 33-3546 as Exhibit 4(a), in Certificate of Notification, File No. 70-7341, as Exhibit A and in Certificate of Notification, File No. 70-8181, as Exhibit A.) (a) 2 - By-laws of SOUTHERN as amended effective October 21, 1991, and as presently in effect. (Designated in Form U-1, File No. 70-8181, as Exhibit A-2.) ALABAMA (b) 1 - Charter of ALABAMA and amendments thereto through August 10, 1998.(Designated in Registration Nos. 2-59634 as Exhibit 2(b), 2-60209 as Exhibit 2(c), 2-60484 as Exhibit 2(b), 2-70838 as Exhibit 4(a)-2, 2-85987 as Exhibit 4(a)-2, 33-25539 as Exhibit 4(a)-2, 33-43917 as Exhibit 4(a)-2, in Form 8-K dated February 5, 1992, File No. 1-3164, as Exhibit 4(b)-3, in Form 8-K dated July 8, 1992, File No. 1-3164, as Exhibit 4(b)-3, in Form 8-K dated October 27, 1993, File No. 1-3164, as Exhibits 4(a) and 4(b), in Form 8-K dated November 16, 1993, File No. 1-3164, as Exhibit 4(a), in Certificate of Notification, File No. 70-8191, as Exhibit A, in ALABAMA's Form 10-K for the year ended December 31, 1997, File No. 1-3164, as Exhibit 3(b)2 and Form 8-K dated August 10, 1998, File No. 1-3164, as Exhibit 4.4.) * (b) 2 - Amendment to Charter of ALABAMA dated January 10, 2001. E-1 (b) 3 - By-laws of ALABAMA as amended effective July 23, 1993, and as presently in effect.(Designated in Form U-1, File No. 70-8191, as Exhibit A-2.) GEORGIA (c) 1 - Charter of GEORGIA and amendments thereto through January 26, 1998.(Designated in Registration Nos. 2-63392 as Exhibit 2(a)-2, 2-78913 as Exhibits 4(a)-(2) and 4(a)-(3), 2-93039 as Exhibit 4(a)-(2), 2-96810 as Exhibit 4(a)-2, 33-141 as Exhibit 4(a)-(2), 33-1359 as Exhibit 4(a)(2), 33-5405 as Exhibit 4(b)(2), 33-14367 as Exhibits 4(b)-(2) and 4(b)-(3), 33-22504 as Exhibits 4(b)-(2), 4(b)-(3) and 4(b)-(4), in GEORGIA's Form 10-K for the year ended December 31, 1991, File No. 1-6468, as Exhibits 4(a)(2) and 4(a)(3), in Registration No. 33-48895 as Exhibits 4(b)-(2) and 4(b)-(3), in Form 8-K dated December 10, 1992, File No. 1-6468 as Exhibit 4(b), in Form 8-K dated June 17, 1993, File No. 1-6468, as Exhibit 4(b), in Form 8-K dated October 20, 1993, File No. 1-6468, as Exhibit 4(b) and in GEORGIA's Form 10-K for the year ended December 31, 1997, File No. 1-6468, as Exhibit 3(c)2.) * (c) 2 - Amendment to Charter of GEORGIA dated February 16, 2001. * (c) 3 - By-laws of GEORGIA as amended effective November 15, 2000, and as presently in effect. GULF (d) 1 - Restated Articles of Incorporation of GULF and amendments thereto through January 28, 1998. (Designated in Registration No. 33-43739 as Exhibit 4(b)-1, in Form 8-K dated January 15, 1992, File No. 0-2429, as Exhibit 1(b), in Form 8-K dated August 18, 1992, File No. 0-2429, as Exhibit 4(b)-2, in Form 8-K dated September 22, 1993, File No. 0-2429, as Exhibit 4, in Form 8-K dated November 3, 1993, File No. 0-2429, as Exhibit 4 and in GULF's Form 10-K for the year ended December 31, 1997, File No. 0-2429, as Exhibit 3(d)2.) * (d) 2 - Amendment to Articles of Incorporation of GULF dated February 9, 2001. * (d) 3 - By-laws of GULF as amended effective July 28, 2000, and as presently in effect. MISSISSIPPI (e) 1 - Articles of Incorporation of MISSISSIPPI, articles of merger of Mississippi Power Company (a Maine corporation) into MISSISSIPPI and articles of amendment to the articles of incorporation of MISSISSIPPI through December 31, 1997. (Designated in Registration No. 2-71540 as Exhibit 4(a)-1, in Form U5S for 1987, File No. 30-222-2, as Exhibit B-10, in Registration No. 33-49320 as Exhibit 4(b)-(1), in Form 8-K dated August 5, 1992, File No. 0-6849, as Exhibits 4(b)-2 and 4(b)-3, in Form 8-K dated August 4, 1993, File No. 0-6849, as Exhibit 4(b)-3, in Form 8-K dated August 18, 1993, File No. 0-6849, as Exhibit 4(b)-3 and in MISSISSIPPI's Form 10-K for the year ended December 31, 1997, File No. 0-6849, as Exhibit 3(e)2.) E-2 * (e) 2 - Amendment to Articles of Incorporation of MISSISSIPPI dated March 8, 2001. (e) 3 - By-laws of MISSISSIPPI as amended effective April 2, 1996, and as presently in effect. (Designated in Form U5S for 1995, File No. 30-222-2, as Exhibit B-10.) SAVANNAH (f) 1 - Charter of SAVANNAH and amendments thereto through December 2, 1998. (Designated in Registration Nos. 33-25183 as Exhibit 4(b)-(1), 33-45757 as Exhibit 4(b)-(2), in Form 8-K dated November 9, 1993, File No. 1-5072, as Exhibit 4(b) and in SAVANNAH's Form 10-K for the year ended December 31, 1998, as Exhibit 3(f)2.) * (f) 2 - By-laws of SAVANNAH as amended effective May 17, 2000, and as presently in effect. (4) Instruments Describing Rights of Security Holders, Including Indentures SOUTHERN (a) 1 - Subordinated Note Indenture dated as of February 1, 1997, among SOUTHERN, Southern Company Capital Funding, Inc. and Bankers Trust Company, as Trustee, and indentures supplemental thereto dated as of February 4, 1997. (Designated in Registration Nos. 333-28349 as Exhibits 4.1 and 4.2 and 333-28355 as Exhibit 4.2.) (a) 2 - Subordinated Note Indenture dated as of June 1, 1997, among SOUTHERN, Southern Company Capital Funding, Inc. and Bankers Trust Company, as Trustee, and indentures supplemental thereto through that dated as of December 23, 1998. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526, as Exhibit (4)(a)2, in Form 8-K dated June 18, 1998, File No. 1-3526, as Exhibit 4.2 and in Form 8-K dated December 18, 1998, File No. 1-3526, as Exhibit 4.4.) (a) 3 - Amended and Restated Trust Agreement of Southern Company Capital Trust I dated as of February 1, 1997. (Designated in Registration No. 333-28349 as Exhibit 4.6) (a) 4 - Amended and Restated Trust Agreement of Southern Company Capital Trust II dated as of February 1, 1997. (Designated in Registration No. 333-28355 as Exhibit 4.6) (a) 5 - Amended and Restated Trust Agreement of Southern Company Capital Trust III dated as of June 1, 1997. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526, as Exhibit (4)(a)5.) (a) 6 - Amended and Restated Trust Agreement of Southern Company Capital Trust IV dated as of June 1, 1998. (Designated in Form 8-K dated June 18, 1998, File No. 1-3526, as Exhibit 4.5.) E-3 (a) 7 - Amended and Restated Trust Agreement of Southern Company Capital Trust V dated as of December 1, 1998. (Designated in Form 8-K dated December 18, 1998, File No. 1-3526, as Exhibit 4.7A.) (a) 8 - Capital Securities Guarantee Agreement relating to Southern Company Capital Trust I dated as of February 1, 1997. (Designated in Registration No. 333-28349 as Exhibit 4.10) (a) 9 - Capital Securities Guarantee Agreement relating to Southern Company Capital Trust II dated as of February 1, 1997. (Designated in Registration No. 333-28355 as Exhibit 4.10) (a) 10 - Preferred Securities Guarantee Agreement relating to Southern Company Capital Trust III dated as of June 1, 1997. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526, as Exhibit (4)(a)8.) (a) 11 - Preferred Securities Guarantee Agreement relating to Southern Company Capital Trust IV dated as of June 1, 1998. (Designated in Form 8-K dated June 18, 1998, File No. 1-3626, as Exhibit 4.8.) (a) 12 - Preferred Securities Guarantee Agreement relating to Southern Company Capital Trust V dated as of December 1, 1998. (Designated in Form 8-K dated December 18, 1998, File No. 1-3526, as Exhibit 4.11A.) ALABAMA (b) 1 - Indenture dated as of January 1, 1942, between ALABAMA and The Chase Manhattan Bank (formerly Chemical Bank), as Trustee, and indentures supplemental thereto through that dated as of December 1, 1994. (Designated in Registration Nos. 2-59843 as Exhibit 2(a)-2, 2-60484 as Exhibits 2(a)-3 and 2(a)-4, 2-60716 as Exhibit 2(c), 2-67574 as Exhibit 2(c), 2-68687 as Exhibit 2(c), 2-69599 as Exhibit 4(a)-2, 2-71364 as Exhibit 4(a)-2, 2-73727 as Exhibit 4(a)-2, 33-5079 as Exhibit 4(a)-2, 33-17083 as Exhibit 4(a)-2, 33-22090 as Exhibit 4(a)-2, in ALABAMA's Form 10-K for the year ended December 31, 1990, File No. 1-3164, as Exhibit 4(c), in Registration Nos. 33-43917 as Exhibit 4(a)-2, 33-45492 as Exhibit 4(a)-2, 33-48885 as Exhibit 4(a)-2, 33-48917 as Exhibit 4(a)-2, in Form 8-K dated January 20, 1993, File No. 1-3164, as Exhibit 4(a)-3, in Form 8-K dated February 17, 1993, File No. 1-3164, as Exhibit 4(a)-3, in Form 8-K dated March 10, 1993, File No. 1-3164, as Exhibit 4(a)-3, in Certificate of Notification, File No. 70-8069, as Exhibits A and B, in Form 8-K dated June 24, 1993, File No. 1-3164, as Exhibit 4, in Certificate of Notification, File No. 70-8069, as Exhibit A, in Form 8-K dated November 16, 1993, File No. 1-3164, as Exhibit 4(b), in Certificate of Notification, File No. 70-8069, as Exhibits A and B, in Certificate of Notification, File No. 70-8069, as Exhibit A, in Certificate of Notification, File No. 70-8069, as Exhibit A and in Form 8-K dated November 30, 1994, File No. 1-3164, as Exhibit 4.) E-4 (b) 2 - Subordinated Note Indenture dated as of January 1, 1996, between ALABAMA and The Chase Manhattan Bank (formerly Chemical Bank), as Trustee, and indenture supplemental thereto dated as of January 1, 1996. (Designated in Certificate of Notification, File No. 70-8461, as Exhibits E and F.) (b) 3 - Subordinated Note Indenture dated as of January 1, 1997, between ALABAMA and The Chase Manhattan Bank, as Trustee, and indentures supplemental thereto through that dated as of February 25, 1999. (Designated in Form 8-K dated January 9, 1997, File No. 1-3164, as Exhibits 4.1 and 4.2 and in Form 8-K dated February 18, 1999, File No. 3164, as Exhibit 4.2.) (b) 4 - Senior Note Indenture dated as of December 1, 1997, between ALABAMA and The Chase Manhattan Bank, as Trustee, and indentures supplemental thereto through that dated May 18, 2000. (Designated in Form 8-K dated December 4, 1997, File No. 1-3164, as Exhibits 4.1 and 4.2, in Form 8-K dated February 20, 1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated April 17, 1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated August 11, 1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated September 8, 1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated September 16, 1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated October 7, 1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated October 28, 1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated November 12, 1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated May 19, 1999, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated August 13, 1999, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated September 21, 1999, File No. 1-3164, as Exhibit 4.2 and in Form 8-K dated May 11, 2000, File No. 1-3164, as Exhibit 4.2.) (b) 5 - Amended and Restated Trust Agreement of Alabama Power Capital Trust I dated as of January 1, 1996. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit D.) (b) 6 - Amended and Restated Trust Agreement of Alabama Power Capital Trust II dated as of January 1, 1997. (Designated in Form 8-K dated January 9, 1997, File No. 1-3164, as Exhibit 4.5.) (b) 7 - Amended and Restated Trust Agreement of Alabama Power Capital Trust III dated as of February 1, 1999. (Designated in Form 8-K dated February 18, 1999, File No. 1-3164, as Exhibit 4.5.) (b) 8 - Guarantee Agreement relating to Alabama Power Capital Trust I dated as of January 1, 1996. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit G.) (b) 9 - Guarantee Agreement relating to Alabama Power Capital Trust II dated as of January 1, 1997. (Designated in Form 8-K dated January 9, 1997, File No. 1-3164, as Exhibit 4.8.) (b) 10 - Guarantee Agreement relating to Alabama Power Capital Trust III dated as of February 1, 1999. (Designated in Form 8-K dated February 18, 1999, File No. 1-3164, as Exhibit 4.8.) E-5 GEORGIA (c) 1 - Indenture dated as of March 1, 1941, between GEORGIA and The Chase Manhattan Bank (formerly Chemical Bank), as Trustee, and indentures supplemental thereto dated as of March 1, 1941, March 3, 1941 (3 indentures), March 6, 1941 (139 indentures), March 1, 1946 (88 indentures) and December 1, 1947, through October 15, 1995. (Designated in Registration Nos. 2-4663 as Exhibits B-3 and B-3(a), 2-7299 as Exhibit 7(a)-2, 2-61116 as Exhibit 2(a)-3 and 2(a)-4, 2-62488 as Exhibit 2(a)-3, 2-63393 as Exhibit 2(a)-4, 2-63705 as Exhibit 2(a)-3, 2-68973 as Exhibit 2(a)-3, 2-70679 as Exhibit 4(a)-(2), 2-72324 as Exhibit 4(a)-2, 2-73987 as Exhibit 4(a)-(2), 2-77941 as Exhibits 4(a)-(2) and 4(a)-(3), 2-79336 as Exhibit 4(a)-(2), 2-81303 as Exhibit 4(a)-(2), 2-90105 as Exhibit 4(a)-(2), 33-5405 as Exhibit 4(a)-(2), 33-14367 as Exhibits 4(a)-(2) and 4(a)-(3), 33-22504 as Exhibits 4(a)-(2), 4(a)-(3) and 4(a)-(4), 33-32420 as Exhibit 4(a)-(2), 33-35683 as Exhibit 4(a)-(2), in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 4(a)(3), in Form 10-K for the year ended December 31, 1991, File No. 1-6468, as Exhibit 4(a)(5), in Registration No. 33-48895 as Exhibit 4(a)-(2), in Form 8-K dated August 26, 1992, File No. 1-6468, as Exhibit 4(a)-(3), in Form 8-K dated September 9, 1992, File No. 1-6468, as Exhibits 4(a)-(3) and 4(a)-(4), in Form 8-K dated September 23, 1992, File No. 1-6468, as Exhibit 4(a)-(3), in Form 8-A dated October 12, 1992, as Exhibit 2(b), in Form 8-K dated January 27, 1993, File No. 1-6468, as Exhibit 4(a)-(3), in Registration No. 33-49661 as Exhibit 4(a)-(2), in Form 8-K dated July 26, 1993, File No. 1-6468, as Exhibit 4, in Certificate of Notification, File No. 70-7832, as Exhibit M, in Certificate of Notification, File No. 70-7832, as Exhibit C, in Certificate of Notification, File No. 70-7832, as Exhibits K and L, in Certificate of Notification, File No. 70-8443, as Exhibit C, in Certificate of Notification, File No. 70-8443, as Exhibit C, in Certificate of Notification, File No. 70-8443, as Exhibit E, in Certificate of Notification, File No. 70-8443, as Exhibit E, in Certificate of Notification, File No. 70-8443, as Exhibit E, in GEORGIA's Form 10-K for the year ended December 31, 1994, File No. 1-6468, as Exhibits 4(c)2 and 4(c)3, in Certificate of Notification, File No. 70-8443, as Exhibit C, in Certificate of Notification, File No. 70-8443, as Exhibit C, in Form 8-K dated May 17, 1995, File No. 1-6468, as Exhibit 4 and in GEORGIA's Form 10-K for the year ended December 31, 1995, File No. 1-6468, as Exhibits 4(c)2, 4(c)3, 4(c)4, 4(c)5 and 4(c)6.) (c) 2 - Subordinated Note Indenture dated as of August 1, 1996, between GEORGIA and The Chase Manhattan Bank, as Trustee, and indentures supplemental thereto through January 1, 1997. (Designated in Form 8-K dated August 21, 1996, File No. 1-6468, as Exhibits 4.1 and 4.2 and in Form 8-K dated January 9, 1997, File No. 1-6468, as Exhibit 4.2.) (c) 3 - Subordinated Note Indenture dated as of June 1, 1997, between GEORGIA and The Chase Manhattan Bank, as Trustee, and indentures supplemental thereto through that dated as of February 25, 1999. (Designated in Certificate of Notification, File No. 70-8461, as Exhibits D and E and Form 8-K dated February 17, 1999, File No. 1-6468, as Exhibit 4.4.) E-6 (c) 4 - Senior Note Indenture dated as of January 1, 1998, between GEORGIA and The Chase Manhattan Bank, as Trustee, and indentures supplemental thereto through that dated as of February 23, 2001. (Designated in Form 8-K dated January 21, 1998, File No. 1-6468, as Exhibits 4.1 and 4.2, in Forms 8-K each dated November 19, 1998, File No. 1-6468, as Exhibit 4.2, in Form 8-K dated March 3, 1999, File No. 1-6469 as Exhibit 4.2, in Form 8-K dated February 15, 2000, File No. 1-6469 as Exhibit 4.2, in Form 8-K dated January 26, 2001, File No. 1-6469 as Exhibits 4.2(a) and 4.2(b) and in Form 8-K dated February 16, 2001, File No. 1-6469 as Exhibit 4.2.) (c) 5 - Amended and Restated Trust Agreement of Georgia Power Capital Trust I dated as of August 1, 1996. (Designated in Form 8-K dated August 21, 1996, File No. 1-6468, as Exhibit 4.5.) (c) 6 - Amended and Restated Trust Agreement of Georgia Power Capital Trust II dated as of January 1, 1997. (Designated in Form 8-K dated January 9, 1997, File No. 1-6468, as Exhibit 4.5.) (c) 7 - Amended and Restated Trust Agreement of Georgia Power Capital Trust III dated as of June 1, 1997. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit C.) (c) 8 - Amended and Restated Trust Agreement of Georgia Power Capital Trust IV dated as of February 1, 1999. (Designated in Form 8-K dated February 17, 1999, as Exhibit 4.7-A) (c) 9 - Guarantee Agreement relating to Georgia Power Capital Trust I dated as of August 1, 1996. (Designated in Form 8-K dated August 21, 1996, File No. 1-6468, as Exhibit 4.8.) (c) 10 - Guarantee Agreement relating to Georgia Power Capital Trust II dated as of January 1, 1997. (Designated in Form 8-K dated January 9, 1997, File No. 1-6468, as Exhibit 4.8.) (c) 11 - Guarantee Agreement relating to Georgia Power Capital Trust III dated as of June 1, 1997. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit F.) (c) 12 - Guarantee Agreement relating to Georgia Power Capital Trust IV dated as of February 1, 1999. (Designated in Form 8-K dated February 17, 1999, as Exhibit 4.11-A.) GULF (d) 1 - Indenture dated as of September 1, 1941, between GULF and The Chase Manhattan Bank (formerly The Chase Manhattan Bank (National Association)), as Trustee, and indentures supplemental thereto through November 1, 1996. (Designated in Registration Nos. 2-4833 as Exhibit B-3, 2-62319 as Exhibit 2(a)-3, 2-63765 as Exhibit 2(a)-3, 2-66260 as Exhibit 2(a)-3, 33-2809 as Exhibit 4(a)-2, E-7 33-43739 as Exhibit 4(a)-2, in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 4(b), in Form 8-K dated August 18, 1992, File No. 0-2429, as Exhibit 4(a)-3, in Registration No. 33-50165 as Exhibit 4(a)-2, in Form 8-K dated July 12, 1993, File No. 0-2429, as Exhibit 4, in Certificate of Notification, File No. 70-8229, as Exhibit A, in Certificate of Notification, File No. 70-8229, as Exhibits E and F, in Form 8-K dated January 17, 1996, File No. 0-2429, as Exhibit 4, in Certificate of Notification, File No. 70-8229, as Exhibit A, in Certificate of Notification, File No. 70-8229, as Exhibit A and in Form 8-K dated November 6, 1996, File No. 0-2429, as Exhibit 4.) (d) 2 - Subordinated Note Indenture dated as of January 1, 1997, between GULF and The Chase Manhattan Bank, as Trustee, and indentures supplemental thereto through that dated as of January 1, 1998. (Designated in Form 8-K dated January 27, 1997, File No. 0-2429, as Exhibits 4.1 and 4.2, in Form 8-K dated July 28, 1997, File No. 0-2429, as Exhibit 4.2 and in Form 8-K dated January 13, 1998, File No. 0-2429, as Exhibit 4.2.) (d) 3 - Senior Note Indenture dated as of January 1, 1998, between GULF and The Chase Manhattan Bank, as Trustee, and indenture supplemental thereto dated as of August 24, 1999. (Designated in Form 8-K dated June 17, 1998, File No. 0-2429, as Exhibits 4.1 and 4.2 and in Form 8-K dated August 17, 1999, File No. 0-2429, as Exhibit 4.2.) (d) 4 - Amended and Restated Trust Agreement of Gulf Power Capital Trust I dated as of January 1, 1997. (Designated in Form 8-K dated January 27, 1997, File No. 0-2429, as Exhibit 4.5.) (d) 5 - Amended and Restated Trust Agreement of Gulf Power Capital Trust II dated as of January 1, 1998. (Designated in Form 8-K dated January 13, 1998, File No. 0-2429, as Exhibit 4.5.) (d) 6 - Guarantee Agreement relating to Gulf Power Capital Trust I dated as of January 1, 1997. (Designated in Form 8-K dated January 27, 1997, File No. 0-2429, as Exhibit 4.8.) (d) 7 - Guarantee Agreement relating to Gulf Power Capital Trust II dated as of January 1, 1998. (Designated in Form 8-K dated January 13, 1998, File No. 0-2429, as Exhibit 4.8.) MISSISSIPPI (e) 1 - Indenture dated as of September 1, 1941, between MISSISSIPPI and Bankers Trust Company, as Successor Trustee, and indentures supplemental thereto through December 1, 1995. (Designated in Registration Nos. 2-4834 as Exhibit B-3, 2-62965 as Exhibit 2(b)-2, 2-66845 as Exhibit 2(b)-2, 2-71537 as Exhibit 4(a)-(2), 33-5414 as Exhibit 4(a)-(2), 33-39833 as Exhibit 4(a)-2, in MISSISSIPPI's Form 10-K for the year ended December 31, 1991, File No. 0-6849, as Exhibit 4(b), in Form 8-K dated August 5, 1992, File No. 0-6849, as Exhibit 4(a)-2, in Second Certificate of Notification, File No. 70-7941, as Exhibit I, in MISSISSIPPI's Form 8-K dated February 26, 1993, File No. 0-6849, as Exhibit 4(a)-2, in Certificate of Notification, File No. 70-8127, as Exhibit A, in Form 8-K dated June 22, 1993, File No. 0-6849, as Exhibit 1, in Certificate of Notification, File No. 70-8127, as Exhibit A, in Form 8-K dated March 8, 1994, File No. 0-6849, as Exhibit 4, in Certificate of Notification, File No. 70-8127, as Exhibit C and in Form 8-K dated December 5, 1995, File No. 0-6849, as Exhibit 4.) E-8 (e) 2 - Senior Note Indenture dated as of May 1, 1998 between MISSISSIPPI and Bankers Trust Company, as Trustee and indentures supplemental thereto through March 28, 2000. (Designated in Form 8-K dated May 14, 1998, File No. 0-6849, as Exhibits 4.1, 4.2(a) and 4.2(b) and in Form 8-K dated March 22, 2000, File No. 0-6849, as Exhibit 4.2.) (e) 3 - Subordinated Note Indenture dated as of February 1, 1997, between MISSISSIPPI and Bankers Trust Company, as Trustee, and indenture supplemental thereto dated as of February 1, 1997. (Designated in Form 8-K dated February 20, 1997, File No. 0-6849, as Exhibits 4.1 and 4.2.) (e) 4 - Amended and Restated Trust Agreement of Mississippi Power Capital Trust I dated as of February 1, 1997. (Designated in Form 8-K dated February 20, 1997, File No. 0-6849, as Exhibit 4.5.) (e) 5 - Guarantee Agreement relating to Mississippi Power Capital Trust I dated as of February 1, 1997. (Designated in Form 8-K dated February 20, 1997, File No. 0-6849, as Exhibit 4.8.) SAVANNAH (f) 1 - Indenture dated as of March 1, 1945, between SAVANNAH and The Bank of New York, New York, as Trustee, and indentures supplemental thereto through May 1, 1996. (Designated in Registration Nos. 33-25183 as Exhibit 4(a)-(1), 33-41496 as Exhibit 4(a)-(2), 33-45757 as Exhibit 4(a)-(2), in SAVANNAH's Form 10-K for the year ended December 31, 1991, File No. 1-5072, as Exhibit 4(b), in Form 8-K dated July 8, 1992, File No. 1-5072, as Exhibit 4(a)-3, in Registration No. 33-50587 as Exhibit 4(a)-(2), in Form 8-K dated July 22, 1993, File No. 1-5072, as Exhibit 4, in Form 8-K dated May 18, 1995, File No. 1-5072, as Exhibit 4 and in Form 8-K dated May 23, 1996, File No. 1-5072, as Exhibit 4.) (f) 2 - Senior Note Indenture dated as of March 1, 1998 between SAVANNAH and The Bank of New York, as Trustee and indenture supplemental thereto dated as of March 1, 1998. (Designated in Form 8-K dated March 9, 1998, File No. 1-5072, as Exhibits 4.1 and 4.2.) (f) 3 - Subordinated Note Indenture dated as of December 1, 1998, between SAVANNAH and The Bank of New York, as Trustee, and indenture supplemental thereto dated as of December 9, 1998. (Designated in Form 8-K dated December 3, 1998, File No. 1-5072, as Exhibit 4.3 and 4.4.) (f) 4 - Amended and Restated Trust Agreement of Savannah Electric Capital Trust I dated as of December 1, 1998. (Designated in Form 8-K dated December 3, 1998, File No. 1-5072, as Exhibit 4.7.) E-9 (f) 5 - Guarantee Agreement relating to Savannah Electric Capital Trust I dated as of December 1, 1998. (Designated in Form 8-K dated December 3, 1998, File No. 1-5072, as Exhibit 4.11.) (10) Material Contracts SOUTHERN (a) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN and Amendment No. 1 dated as of September 6, 1985 between SCS and SOUTHERN. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1984, File No. 1-3526, as Exhibit 10(a) and in SOUTHERN's Form 10-K for the year ended December 31, 1985, File No. 1-3526, as Exhibit 10(a)(3).) (a) 2 - Service contract dated as of July 17, 1981, between SCS and Mirant. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1985, File No. 1-3526, as Exhibit 10(a)(2).) (a) 3 - Service contract dated as of March 3, 1988, between SCS and SAVANNAH. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1987, File No. 1-5072, as Exhibit 10-p.) (a) 4 - Service contract dated as of January 15, 1991, between SCS and Southern Nuclear. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1991, File No. 1-3526, as Exhibit 10(a)(4).) (a) 5 - Service contract dated as of December 12, 1994, between SCS and Mobile Energy Services Company, Inc. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)58.) * (a) 6 - Interchange contract dated February 17, 2000, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, SPC and SCS. (a) 7 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2 dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. (Designated in Registration No. 2-59634 as Exhibit 5(c), in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(d)(2) and in ALABAMA's Form 10-K for the year ended December 31, 1994, File No. 1-3164, as Exhibit 10(b)18.) (a) 8 - Joint Committee Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. (Designated in Registration No. 2-61116 as Exhibit 5(d).) (a) 9 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of January 6, 1975, between GEORGIA and OPC. (Designated in Form 8-K for January, 1975, File No. 1-6468, as Exhibit (b)(1).) E-10 (a) 10 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of January 6, 1975, between GEORGIA and OPC. (Designated in Form 8-K for January, 1975, File No. 1-6468, as Exhibit (b)(3).) (a) 11 - Revised and Restated Integrated Transmission System Agreement dated as of November 12, 1990, between GEORGIA and OPC. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(g).) (a) 12 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of March 26, 1976, between GEORGIA and OPC. (Designated in Certificate of Notification, File No. 70-5592, as Exhibit A.) (a) 13 - Plant Hal Wansley Operating Agreement dated as of March 26, 1976, between GEORGIA and OPC. (Designated in Certificate of Notification, File No. 70-5592, as Exhibit B.) (a) 14 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. (Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit (b)(1).) (a) 15 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. (Designated in Form 8-K for February 1977, File No. 1-6468, as Exhibit (b)(2).) (a) 16 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase and Ownership Participation Agreement dated as of August 27, 1976 and Amendment No. 1 dated as of January 18, 1977, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-5792, as Exhibit B-1 and in Form 8-K for January 1977, File No. 1-6468, as Exhibit (B)(3).) (a) 17 - Alvin W. Vogtle Nuclear Units Number One and Two Operating Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-5792, as Exhibit B-2.) (a) 18 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase, Amendment, Assignment and Assumption Agreement dated as of November 16, 1983, between GEORGIA and MEAG. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1983, File No. 1-6468, as Exhibit 10(k)(4).) (a) 19 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA and MEAG. (Designated in Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(2).) (a) 20 - Plant Hal Wansley Operating Agreement dated as of August 27, 1976, between GEORGIA and MEAG. (Designated in Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(4).) (a) 21 - Nuclear Operating Agreement between Southern Nuclear and GEORGIA dated as of July 1, 1993. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526, as Exhibit 10(a)21.) E-11 (a) 22 - Pseudo Scheduling and Services Agreement between GEORGIA and MEAG dated as of April 8, 1997. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526, as Exhibit 10(a)22.) (a) 23 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of April 19, 1977, between GEORGIA and Dalton. (Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit (b)(3).) (a) 24 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton. (Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit (b)(7).) (a) 25 - Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement dated as of May 15, 1980, Amendment No. 1 dated as of December 30, 1985, Amendment No. 2 dated as of July 1, 1986, Amendment No. 3 dated as of August 1, 1988 and Amendment No. 4 dated as of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-3, in SOUTHERN's Form 10-K for the year ended December 31, 1987, File No. 1-3526, as Exhibit 10(o)(2), in SOUTHERN's Form 10-K for the year ended December 31, 1989, File No. 1-3526, as Exhibit 10(n)(2) and in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)54.) (a) 26 - Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of May 15, 1980, Amendment No. 1 dated as of December 3, 1985 and Amendment No. 2 dated as of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-4, in SOUTHERN's Form 10-K for the year ended December 31, 1987, File No. 1-3526, as Exhibit 10(o)(4) and in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)55.) (a) 27 - Plant Robert W. Scherer Purchase, Sale and Option Agreement dated as of May 15, 1980, between GEORGIA and MEAG. (Designated in Form U-1, File No. 70-6481, as Exhibit B-1.) (a) 28 - Plant Robert W. Scherer Purchase and Sale Agreement dated as of May 16, 1980, between GEORGIA and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-2.) (a) 29 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of March 1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988, between GEORGIA and GULF. (Designated in Form U-1, File No. 70-6573, as Exhibit B-4, in SOUTHERN's Form 10-K for the year ended December 31, 1987, as Exhibit 10(o)(2) and in SOUTHERN's Form 10-K for the year ended December 31, 1989, as Exhibit 10(n)(2).) (a) 30 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA and GULF. (Designated in Form U-1, File No. 70-6573, as Exhibit B-5.) E-12 (a) 31 - Plant Robert W. Scherer Unit No. Four Amended and Restated Purchase and Ownership Participation Agreement by and among GEORGIA, FP&L and JEA, dated as of December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. (Designated in Form U-1, File No. 70-7843, as Exhibit B-1 and in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)60.) (a) 32 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA, dated as of December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. (Designated in Form U-1, File No. 70-7843, as Exhibit B-2 and in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)61.) (a) 33 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988, File No. 1-5072, as Exhibit 10(d).) (a) 34 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988, File No. 1-5072, as Exhibit 10(e).) (a) 35 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988, File No. 1-5072, as Exhibit 10(f).) (a) 36 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18, 1988, between OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1988, File No. 1-6468, as Exhibit 10(x).) (a) 37 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1988, File No. 1-6468, as Exhibit 10(y).) (a) 38 - Purchase and Ownership Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. (Designated in Form U-1, File No. 70-7609, as Exhibit B-1.) (a) 39 - Operating Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. (Designated in Form U-1, File No. 70-7609, as Exhibit B-2.) E-13 (a) 40 - Transmission Facilities Agreement dated February 25, 1982, Amendment No. 1 dated May 12, 1982 and Amendment No. 2 dated December 6, 1983, between Gulf States and MISSISSIPPI. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1981, File No. 0-6849, as Exhibit 10(f), in MISSISSIPPI's Form 10-K for the year ended December 31, 1982, File No. 0-6849, as Exhibit 10(f)(2) and in MISSISSIPPI's Form 10-K for the year ended December 31, 1983, File No. 0-6849, as Exhibit 10(f)(3).) (a) 41 - Long Term Transaction Service Agreement between GEORGIA and OPC dated as of February 26, 1999. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)46.) (a) 42 - Revised and Restated Coordination Services Agreement between and among GEORGIA, OPC and Georgia Systems Operations Corporation dated as of September 10, 1997. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526, as Exhibit 10(a)48.) (a) 43 - Amended and Restated Nuclear Managing Board Agreement for Plant Hatch and Plant Vogtle among GEORGIA, OPC, MEAG and Dalton dated as of July 1, 1993. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)49.) (a) 44 - Integrated Transmission System Agreement, Power Sale and Coordination Umbrella Agreement between GEORGIA and OPC dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(ff).) (a) 45 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and Dalton dated as of December 7, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(gg).) (a) 46 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and MEAG dated as of December 7, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(hh).) (a) 47 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1992, File No. 1-3526, as Exhibit 10(a)53.) (a) 48 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)56.) (a) 49 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)57.) E-14 (a) 50 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)58.) (a) 51 - Operating Agreement for the Joseph M. Farley Nuclear Plant between ALABAMA and Southern Nuclear dated as of December 23, 1991. (Designated in Form U-1, File No. 70-7530, as Exhibit B-7.) # * (a) 52 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1, 2001. (a) 53 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Five. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)61 and in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)61.) * (a) 54 - Amendment Number Six to The Southern Company Employee Savings Plan. (a) 55 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Three. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)62 and in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)63.) * (a) 56 - Amendment Number Four to The Southern Company Employee Stock Ownership Plan. * (a) 57 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 2000. * (a) 58 - Southern Company Performance Pay Plan (Shareholder Approved) effective January 1, 2000. # * (a) 59 - The Deferred Compensation Plan for the Directors of The Southern Company, Amended and Restated effective February 19, 2001. # (a) 60 - The Southern Company Outside Directors Pension Plan. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)77.) # * (a) 61 - The Southern Company Deferred Compensation Plan, Amended and Restated effective February 23, 2001. # (a) 62 - The Southern Company Outside Directors Stock Plan and First Amendment thereto. (Designated in Registration No. 33-54415 as Exhibit 4(c) and in SOUTHERN's Form 10-K for the year ended December 31, 1995, File No. 1-3526, as Exhibit 10(a)79.) E-15 # * (a) 63 - Outside Directors Stock Plan for Subsidiaries of The Southern Company, Amended and Restated effective January 1, 2000. # * (a) 64 - The Southern Company Performance Dividend Plan, Amended and Restated effective December 11, 2000. (a) 65 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through Amendment Number Four. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1996, File No. 1-3526, as Exhibit 10(a)83, in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526, as Exhibit 10(a)79, in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)71 and in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)72.) * (a) 66 - Amendment Number Five and Amendment Number Six to The Southern Company Pension Plan. # * (a) 67 - The Southern Company Performance Stock Plan, Amended and Restated effective January 1, 2000. # * (a) 68 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective July 10, 2000. # (a) 69 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through Amendment Number Seven. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526, as Exhibit 10(a)82, in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)76 and in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)76.) # * (a) 70 - Amendment Number Eight to The Southern Company Performance Sharing Plan. # * (a) 71 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective July 10, 2000. * (a) 72 - Southern Company Change in Control Severance Plan, Amended and Restated effective July 10, 2000. # * (a) 73 - Southern Company Executive Change in Control Severance Plan, Amended and Restated effective July 10, 2000. # (a) 74 - Deferred Compensation Agreement between SOUTHERN, GEORGIA and Henry Allen Franklin and First Amendment and Assignment to SCS. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)80 and in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)84.) # (a) 75 - Deferred Compensation Agreement between SOUTHERN, Southern Nuclear and William G. Hairston III. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)81.) E-16 # (a) 76 - Deferred Compensation Agreement between SOUTHERN, GEORGIA and Warren Y. Jobe. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)82.) # (a) 77 - Deferred Compensation Agreement between SOUTHERN, Southern Energy Resources, Inc. and Gale E. Klappa and First Amendment and Assignment to SCS. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)87.) # (a) 78 - Deferred Compensation Agreement between SOUTHERN, Southern Energy Resources, Inc. and S. Marce Fuller. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)88.) # * (a) 79 - Amended and Restated Change in Control Agreement between SOUTHERN, GULF and Travis J. Bowden. # * (a) 80 - Amended and Restated Change in Control Agreement between SOUTHERN, SCS and A. W. Dahlberg. # * (a) 81 - Amended and Restated Change in Control Agreement between SOUTHERN, MISSISSIPPI and Dwight H. Evans. # (a) 82 - Change in Control Agreement between SOUTHERN, ALABAMA and Banks Harry Farris. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)88.) # * (a) 83 - Amended and Restated Change in Control Agreement between SOUTHERN, SCS and Henry Allen Franklin. # * (a) 84 - Amended and Restated Change in Control Agreement between SOUTHERN, Southern Nuclear and William G. Hairston, III. # * (a) 85 - Amended and Restated Change in Control Agreement between SOUTHERN, ALABAMA and Elmer B. Harris. # * (a) 86 - Amended and Restated Change in Control Agreement between SOUTHERN, SAVANNAH and G. Edison Holland, Jr. # * (a) 87 - Amended and Restated Change in Control Agreement between SOUTHERN, SCS and C. Alan Martin. # * (a) 88 - Amended and Restated Change in Control Agreement between SOUTHERN, SCS and Charles Douglas McCrary. # * (a) 89 - Amended and Restated Change in Control Agreement between SOUTHERN, GEORGIA and David M. Ratcliffe. # * (a) 90 - Amended and Restated Change in Control Agreement between SOUTHERN, SCS and Stephen A. Wakefield. E-17 # * (a) 91 - Amended and Restated Change in Control Agreement between SOUTHERN, SCS and W. Lawrence Westbrook. # * (a) 92 - Amended and Restated Change in Control Agreement between SOUTHERN, SCS and Gale E. Klappa. # (a) 93 - Change in Control Agreement between SOUTHERN, Southern Energy Resources, Inc. and S. Marce Fuller and First Amendment thereto. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1999, File No. 1-3526, as Exhibit 10(a)103.) # * (a) 94 - Deferred Compensation Agreement between SOUTHERN and William L. Westbrook. # * (a) 95 - Deferred Compensation Agreement between SOUTHERN and Alfred W. Dahlberg, III. # * (a) 96 - Southern Company Change in Control Benefit Plan Determination Policy, effective July 10, 2000. # * (a) 97 - Change in Control Agreement between SOUTHERN, SCS and Robert H. Haubein, Jr.. # * (a) 98 - Deferred Compensation Agreement between SOUTHERN, SCS and Stephen A. Wakefield. # * (a) 99 - Deferred Compensation Agreement between SOUTHERN and Wayne T. Dalke. # * (a) 100 - Master Separation and Distribution Agreement dated as of September 1, 2000 between SOUTHERN and Mirant. # * (a) 101 - Indemnification and Insurance Matters Agreement dated as of September 1, 2000 between SOUTHERN and Mirant. # * (a) 102 - Tax Indemnification Agreement dated as of September 1, 2000 among SOUTHERN and its affiliated companies and Mirant and its affiliated companies. # * (a) 103 - Southern Company Deferred Compensation Trust Agreement dated as of January 1, 2001 between Wachovia Bank, N.A., SOUTHERN, SCS, ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, Southern Communications, Energy Solutions, Mirant and Southern Nuclear. # * (a) 104 - Deferred Stock Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Reliance Trust Company, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. # * (a) 105 - Deferred Cash Compensation Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Wachovia Bank, N.A, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. E-18 ALABAMA (b) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN and Amendment No. 1 dated as of September 6, 1985 between SCS and SOUTHERN. See Exhibit 10(a)1 herein. * (b) 2 - Interchange contract dated February 17, 2000, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, SPC and SCS. See Exhibit 10(a)6 herein. (b) 3 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2 dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)7 herein. (b) 4 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)33 herein. (b) 5 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (b) 6 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (b) 7 - Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Certificate of Notification, File No. 70-7212, as Exhibit B.) (b) 8 - 1991 Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Form U-1, File No. 70-7873, as Exhibit B-1.) (b) 9 - Purchase and Ownership Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. See Exhibit 10(a)38 herein. (b) 10 - Operating Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. See Exhibit 10(a)39 herein. (b) 11 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. See Exhibit 10(a)47 herein. (b) 12 - Operating Agreement for the Joseph M. Farley Nuclear Plant between ALABAMA and Southern Nuclear dated as of December 23, 1991. See Exhibit 10(a)51 herein. # * (b) 13 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1, 2001. See Exhibit 10(a)52 herein. (b) 14 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Five. See Exhibit 10(a)53 herein. E-19 * (b) 15 - Amendment Number Six to The Southern Company Employee Savings Plan. See Exhibit 10(a)54 herein. (b) 16 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Three. See Exhibit 10(a)55 herein. * (b) 17 - Amendment Number Four to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)56 herein. * (b) 18 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)57 herein. * (b) 19 - Southern Company Performance Pay Plan (Shareholder Approved) effective January 1, 2000. See Exhibit 10(a)58 herein. # * (b) 20 - The Southern Company Deferred Compensation Plan, Amended and Restated effective February 23, 2001. See Exhibit 10(a)61 herein. # (b) 21 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)60 herein. # * (b) 22 - Outside Directors Stock Plan for Subsidiaries of The Southern Company, Amended and Restated effective January 1, 2000. See Exhibit 10(a)63 herein. (b) 23 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through Amendment Number Four. See Exhibit 10(a)65 herein. * (b) 24 - Amendment Number Five and Amendment Number Six to The Southern Company Pension Plan. See Exhibit 10(a)66 herein. # * (b) 25 - The Southern Company Performance Stock Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)67 herein. # * (b) 26 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)68 herein. # * (b) 27 - The Southern Company Performance Dividend Plan, Amended and Restated effective December 11, 2000. See Exhibit 10(a)64 herein. # (b) 28 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through Amendment Number Seven. See Exhibit 10(a)69 herein. # * (b) 29 - Amendment Number Eight to The Southern Company Performance Sharing Plan. See Exhibit 10(a)70 herein. # * (b) 30 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)71 herein. E-20 * (b) 31 - Southern Company Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)72 herein. # (b) 32 - Southern Company Executive Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)73 herein. # (b) 33 - Change in Control Agreement between SOUTHERN, ALABAMA and Banks Harry Farris. See Exhibit 10(a)82 herein. # * (b) 34 - Amended and Restated Change in Control Agreement between SOUTHERN, ALABAMA and Elmer B. Harris. See Exhibit 10(a)85 herein. # (b) 35 - Supplemental Pension Agreement between ALABAMA, GULF and Travis J. Bowden. (Designated in ALABAMA's Form 10-K for the year ended December 31, 1998, File No. 1-3164, as Exhibit 10(b)40.) # * (b) 36 - Deferred Compensation Plan for Directors of Alabama Power Company, Amended and Restated as of January 1, 2000. # * (b) 37 - Southern Company Change in Control Benefit Plan Determination Policy, effective July 10, 2000. See Exhibit 10(a)96 herein. # * (b) 38 - Southern Company Deferred Compensation Trust Agreement dated as of January 1, 2001 between Wachovia Bank, N.A., SOUTHERN, SCS, ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, Southern Communications, Energy Solutions, Mirant and Southern Nuclear. See Exhibit 10(a)103 herein. # * (b) 39 - Deferred Stock Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Reliance Trust Company, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(b) 104 herein. # * (b) 40 - Deferred Cash Compensation Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Wachovia Bank, N.A, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(a)105 herein. GEORGIA (c) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN and Amendment No. 1 dated as of September 6, 1985, between SCS and SOUTHERN. See Exhibit 10(a)1 herein. * (c) 2 - Interchange contract dated February 17, 2000, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, SPC and SCS. See Exhibit 10(a)6 herein. (c) 3 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2 dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)7 herein. (c) 4 - Joint Committee Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)8 herein. E-21 (c) 5 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of January 6, 1975, between GEORGIA and OPC. See Exhibit 10(a)9 herein. (c) 6 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of January 6, 1975, between GEORGIA and OPC. See Exhibit 10(a)10 herein. (c) 7 - Revised and Restated Integrated Transmission System Agreement dated as of November 12, 1990, between GEORGIA and OPC. See Exhibit 10(a)11 herein. (c) 8 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of March 26, 1976, between GEORGIA and OPC. See Exhibit 10(a)12 herein. (c) 9 - Plant Hal Wansley Operating Agreement dated as of March 26, 1976, between GEORGIA and OPC. See Exhibit 10(a)13 herein. (c) 10 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. See Exhibit 10(a)14 herein. (c) 11 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of August 27, 1976, between GEORGIA, MEAG and Dalton. See Exhibit 10(a)15 herein. (c) 12 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase and Ownership Participation Agreement dated as of August 27, 1976 and Amendment No. 1 dated as of January 18, 1977, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)16 herein. (c) 13 - Alvin W. Vogtle Nuclear Units Number One and Two Operating Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)17 herein. (c) 14 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase, Amendment, Assignment and Assumption Agreement dated as of November 16, 1983, between GEORGIA and MEAG. See Exhibit 10(a)18 herein. (c) 15 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)19 herein. (c) 16 - Plant Hal Wansley Operating Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)20 herein. (c) 17 - Nuclear Operating Agreement between Southern Nuclear and GEORGIA dated as of July 1, 1993. See Exhibit 10(a)21 herein. (c) 18 - Pseudo Scheduling and Services Agreement between GEORGIA and MEAG dated as of April 8, 1997. See Exhibit 10(a)22 herein. (c) 19 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of April 19, 1977, between GEORGIA and Dalton. See Exhibit 10(a)23 herein. E-22 (c) 20 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton. See Exhibit 10(a)24 herein. (c) 21 - Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement dated as of May 15, 1980, Amendment No. 1 dated as of December 30, 1985, Amendment No. 2 dated as of July 1, 1986, Amendment No. 3 dated as of August 1, 1988 and Amendment No. 4 dated as of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)25 herein. (c) 22 - Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of May 15, 1980, Amendment No. 1 dated as of December 3, 1985 and Amendment No. 2 dated as of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)26 herein. (c) 23 - Plant Robert W. Scherer Purchase, Sale and Option Agreement dated as of May 15, 1980, between GEORGIA and MEAG. See Exhibit 10(a)27 herein. (c) 24 - Plant Robert W. Scherer Purchase and Sale Agreement dated as of May 16, 1980, between GEORGIA and Dalton. See Exhibit 10(a)28 herein. (c) 25 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of March 1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988, between GEORGIA and GULF. See Exhibit 10(a)29 herein. (c) 26 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA and GULF. See Exhibit 10(a)30 herein. (c) 27 - Plant Robert W. Scherer Unit No. Four Amended and Restated Purchase and Ownership Participation Agreement by and among GEORGIA, FP&L and JEA dated as of December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. See Exhibit 10(a)31 herein. (c) 28 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA dated as of December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. See Exhibit 10(a)32 herein. (c) 29 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)33 herein. (c) 30 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (c) 31 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (c) 32 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18, 1988, between OPC and GEORGIA. See Exhibit 10(a)36 herein. E-23 (c) 33 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between OPC and GEORGIA. See Exhibit 10(a)37 herein. (c) 34 - Long Term Transaction Service Agreement between GEORGIA and OPC dated as of February 26, 1999. See Exhibit 10(a)41 herein. (c) 35 - Revised and Restated Coordination Services Agreement between and among GEORGIA, OPC and Georgia Systems Operations Corporation dated as of September 10, 1997. See Exhibit 10(a)42 herein. (c) 36 - Amended and Restated Nuclear Managing Board Agreement for Plant Hatch and Plant Vogtle among GEORGIA, OPC, MEAG and Dalton dated as of July 1, 1993. See Exhibit 10(a)43 herein. (c) 37 - Integrated Transmission System Agreement, Power Sale and Coordination Umbrella Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)44 herein. (c) 38 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and Dalton dated as of December 7, 1990. See Exhibit 10(a)45 herein. (c) 39 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and MEAG dated as of December 7, 1990. See Exhibit 10(a)46 herein. (c) 40 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA. See Exhibit 10(a)48 herein. (c) 41 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)49 herein. (c) 42 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)50 herein. (c) 43 - Certificate of Limited Partnership of Georgia Power Capital. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit B.) (c) 44 - Amended and Restated Agreement of Limited Partnership of Georgia Power Capital, dated as of December 1, 1994. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit C.) (c) 45 - Action of General Partner of Georgia Power Capital creating the Series A Preferred Securities. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit D.) (c) 46 - Guarantee Agreement of GEORGIA dated as of December 1, 1994, for the benefit of the holders from time to time of the Series A Preferred Securities. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit G.) E-24 # * (c) 47 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1, 2001. See Exhibit 10(a)52 herein. (c) 48 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Five. See Exhibit 10(a)53 herein. * (c) 49 - Amendment Number Six to The Southern Company Employee Savings Plan. See Exhibit 10(a)54 herein. (c) 50 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Three. See Exhibit 10(a)55 herein. * (c) 51 - Amendment Number Four to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)56 herein. * (c) 52 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)57 herein. * (c) 53 - Southern Company Performance Pay Plan (Shareholder Approved) effective January 1, 2000. See Exhibit 10(a)58 herein. # * (c) 54 - The Southern Company Deferred Compensation Plan, Amended and Restated effective February 23, 2001. See Exhibit 10(a)61 herein. # (c) 55 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)60 herein. # * (c) 56 - Outside Directors Stock Plan for Subsidiaries of The Southern Company, Amended and Restated effective January 1, 2000. See Exhibit 10(a)63 herein. (c) 57 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through Amendment Number Four. See Exhibit 10(a)65 herein. * (c) 58 - Amendment Number Five and Amendment Number Six to The Southern Company Pension Plan. See Exhibit 10(a)66 herein. # * (c) 59 - The Southern Company Performance Stock Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)67 herein. # * (c) 60 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)68 herein. # * (c) 61 - The Southern Company Performance Dividend Plan, Amended and Restated effective December 11, 2000. See Exhibit 10(a)64 herein. # (c) 62 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through Amendment Number Seven. See Exhibit 10(a)69 herein. E-25 # * (c) 63 - Amendment Number Eight to The Southern Company Performance Sharing Plan. See Exhibit 10(a)70 herein. # * (c) 64 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)71 herein. * (c) 65 - Southern Company Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)72 herein. # * (c) 66 - Southern Company Executive Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)73 herein. # (c) 67 - Deferred Compensation Agreement between SOUTHERN, GEORGIA and Henry Allen Franklin and First Amendment and Assignment to SCS. See Exhibit 10(a)74 herein. # (c) 68 - Deferred Compensation Agreement between SOUTHERN, GEORGIA and Warren Y. Jobe. See Exhibit 10(a)76 herein. # * (c) 69 - Amended and Restated Change in Control Agreement between SOUTHERN, GEORGIA and David M. Ratcliffe. See Exhibit 10(a)89 herein. # (c) 70 - Supplemental Pension Agreement between GEORGIA and Warren Y. Jobe. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1998, File No. 1-6468, as Exhibit 10(c)77.) # * (c) 71 - Deferred Compensation Plan For Directors of Georgia Power Company, Amended and Restated Effective February 21, 2001. # * (c) 72 - Southern Company Change in Control Benefit Plan Determination Policy, effective July 10, 2000. See Exhibit 10(a)96 herein. # * (c) 73 - Southern Company Deferred Compensation Trust Agreement dated as of January 1, 2001 between Wachovia Bank, N.A., SOUTHERN, SCS, ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, Southern Communications, Energy Solutions, Mirant and Southern Nuclear. See Exhibit 10(a)103 herein. # * (c) 74 - Deferred Stock Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Reliance Trust Company, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(a)104 herein. # * (c) 75 - Deferred Cash Compensation Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Wachovia Bank, N.A, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10 (a)105 herein. GULF (d) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN and Amendment No. 1 dated as of September 6, 1985, between SCS and SOUTHERN. See Exhibit 10(a)1 herein. E-26 * (d) 2 - Interchange contract dated February 17, 2000, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, SPC and SCS. See Exhibit 10(a)6 herein. (d) 3 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of March 1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988, between GEORGIA and GULF. See Exhibit 10(a)29 herein. (d) 4 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA and GULF. See Exhibit 10(a)30 herein. (d) 5 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF, FP&L and JEA. See Exhibit 10(a)48 herein. (d) 6 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)33 herein. (d) 7 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (d) 8 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (d) 9 - Agreement between GULF and AEC, effective August 1, 1985. (Designated in GULF's Form 10-K for the year ended December 31, 1985, File No. 0-2429, as Exhibit 10(g).) # * (d) 10 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)52 herein. (d) 11 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Five. See Exhibit 10(a)53 herein. * (d) 12 - Amendment Number Six to The Southern Company Employee Savings Plan. See Exhibit 10(a)54 herein. (d) 13 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Three. See Exhibit 10(a)55 herein. * (d) 14 - Amendment Number Four to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)56 herein. * (d) 15 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)57 herein. E-27 * (d) 16 - Southern Company Performance Pay Plan (Shareholder Approved) effective January 1, 2000. See Exhibit 10(a)58 herein. # * (d) 17 - The Southern Company Deferred Compensation Plan, Amended and Restated effective February 23, 2001. See Exhibit 10(a)61 herein. # (d) 18 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)60 herein. # * (d) 19 - Outside Directors Stock Plan for Subsidiaries of The Southern Company, Amended and Restated effective January 1, 2000. See Exhibit 10(a)63 herein. (d) 20 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through Amendment Number Four. See Exhibit 10(a)65 herein. * (d) 21 - Amendment Number Five and Amendment Number Six to The Southern Company Pension Plan. See Exhibit 10(a)66 herein. # * (d) 22 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)71 herein. * (d) 23 - Southern Company Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)72 herein. # * (d) 24 - Southern Company Executive Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)73 herein. # * (d) 25 - Amended and Restated Change in Control Agreement between SOUTHERN, GULF and Travis J. Bowden. See Exhibit 10(a)79 herein. # * (d) 26 - The Southern Company Performance Stock Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)67 herein. # * (d) 27 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)68 herein. # * (d) 28 - The Southern Company Performance Dividend Plan, Amended and Restated effective December 11, 2000. See Exhibit 10(a)64 herein. # (d) 29 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through Amendment Number Seven. See Exhibit 10(a)69 herein. # * (d) 30 - Amendment Number Eight to The Southern Company Performance Sharing Plan. See Exhibit 10(a)70 herein. # (d) 31 - Supplemental Pension Agreement between SAVANNAH, GULF and G. Edison Holland, Jr. (Designated in GULF's Form 10-K for the year ended December 31, 1998, File No. 0-2429, as Exhibit 10(d)35.) E-28 # (d) 32 - Supplemental Pension Agreement between ALABAMA, GULF and Travis J. Bowden. See Exhibit 10(b)35 herein. # * (d) 33 - Deferred Compensation Plan For Directors of Gulf Power Company, Amended and Restated Effective January 1, 2000 and First Amendment thereto. # * (d) 34 - Southern Company Change in Control Benefit Plan Determination Policy, effective July 10, 2000. See Exhibit 10(a)96 herein. # * (d) 35 - Southern Company Deferred Compensation Trust Agreement dated as of January 1, 2001 between Wachovia Bank, N.A., SOUTHERN, SCS, ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, Southern Communications, Energy Solutions, Mirant and Southern Nuclear. See Exhibit 10(a)103 herein. # * (d) 36 - Deferred Stock Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Reliance Trust Company, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(a)104 herein. # * (d) 37 - Deferred Cash Compensation Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Wachovia Bank, N.A, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(a)105 herein. MISSISSIPPI (e) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN and Amendment No. 1 dated as of September 6, 1985, between SCS and SOUTHERN. See Exhibit 10(a)1 herein. * (e) 2 - Interchange contract dated February 17, 2000, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, SPC and SCS. See Exhibit 10(a)6 herein. (e) 3 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)33 herein. (e) 4 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (e) 5 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (e) 6 - Transmission Facilities Agreement dated February 25, 1982, Amendment No. 1 dated May 12, 1982 and Amendment No. 2 dated December 6, 1983, between Gulf States and MISSISSIPPI. See Exhibit 10(a)40 herein. (e) 7 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. See Exhibit 10(a)47 herein. E-29 # * (e) 8 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1, 2001. See Exhibit 10(a)52 herein. (e) 9 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Five. See Exhibit 10(a)53 herein. * (e) 10 - Amendment Number Six to The Southern Company Employee Savings Plan. See Exhibit 10(a)54 herein. (e) 11 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Three. See Exhibit 10(a)55 herein. * (e) 12 - Amendment Number Four to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)56 herein. (e) 13 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)57 herein. * (e) 14 - Southern Company Performance Pay Plan (Shareholder Approved) effective January 1, 2000. See Exhibit 10(a)58 herein. # * (e) 15 - The Southern Company Deferred Compensation Plan, Amended and Restated effective February 23, 2001. See Exhibit 10(a)61 herein. # (e) 16 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)60 herein. # * (e) 17 - Outside Directors Stock Plan for Subsidiaries of The Southern Company, Amended and Restated effective January 1, 2000. See Exhibit 10(a)63 herein. (e) 18 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through Amendment Number Four. See Exhibit 10(a)65 herein. * (e) 19 - Amendment Number Five and Amendment Number Six to The Southern Company Pension Plan. See Exhibit 10(a)66 herein. # * (e) 20 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)71 herein. * (e) 21 - Southern Company Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)72 herein. # * (e) 22 - Southern Company Executive Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)73 herein. # * (e) 23 - Amended and Restated Change in Control Agreement between SOUTHERN, MISSISSIPPI and Dwight H. Evans. See Exhibit 10(a)81 herein. E-30 # * (e) 24 - The Southern Company Performance Stock Plan, Amended and Restated effective January 1,2000. See Exhibit 10(a)67 herein. # * (e) 25 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)68 herein. # * (e) 26 - The Southern Company Performance Dividend Plan, Amended and Restated effective December 11, 2000. See Exhibit 10(a)64 herein. # (e) 27 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through Amendment Number Seven. See Exhibit 10(a)69 herein. # * (e) 28 - Amendment Number Eight to The Southern Company Performance Sharing Plan. See Exhibit 10(a)70 herein. # (e) 29 - Deferred Compensation Plan for Directors of Mississippi Power Company, Amended and Restated Effective January 1, 2000. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1999, File No. 0-6849, as Exhibit 10(e)37.) # * (e) 30 - Amendment Number One to the Deferred Compensation Plan for Directors of Mississippi Power Company. # * (e) 31 - Southern Company Change in Control Benefit Plan Determination Policy, effective July 10, 2000. See Exhibit 10(a)96 herein. # * (e) 32 - Southern Company Deferred Compensation Trust Agreement dated as of January 1, 2001 between Wachovia Bank, N.A., SOUTHERN, SCS, ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, Southern Communications, Energy Solutions, Mirant and Southern Nuclear. See Exhibit 10(a)103 herein. # * (e) 33 - Deferred Stock Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Reliance Trust Company, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(a)104 herein. # * (e) 34 - Deferred Cash Compensation Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Wachovia Bank, N.A, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(a)105 herein. SAVANNAH (f) 1 - Service contract dated as of March 3, 1988, between SCS and SAVANNAH. See Exhibit 10(a)3 herein. * (f) 2 - Interchange contract dated February 17, 2000, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, SPC and SCS. See Exhibit 10(a)6 herein. (f) 3 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)33 herein. E-31 (f) 4 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (f) 5 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (f) 6 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)49 herein. (f) 7 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated December 15, 1992. See Exhibit 10(a)50 herein. # * (f) 8 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)52 herein. (f) 9 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Five. See Exhibit 10(a)53 herein. * (f) 10 - Amendment Number Six to The Southern Company Employee Savings Plan. See Exhibit 10(a)54 herein. (f) 11 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all amendments thereto through Amendment Number Three. See Exhibit 10(a)55 herein. * (f) 12 - Amendment Number Four to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)56 herein. # * (f) 13 - Supplemental Executive Retirement Plan of SAVANNAH, Amended and Restated effective October 26, 2000. # * (f) 14 - Deferred Compensation Plan for Key Employees of SAVANNAH, Amended and Restated effective October 26, 2000. (f) 15 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)57 herein. * (f) 16 - Southern Company Performance Pay Plan (Shareholder Approved) effective January 1, 2000. See Exhibit 10(a)58 herein. # (f) 17 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)60 herein. # * (f) 18 - Deferred Compensation Plan for Directors of SAVANNAH, Amended and Restated effective October 26, 2000. # * (f) 19 - Outside Directors Stock Plan for Subsidiaries of The Southern Company, Amended and Restated effective January 1, 2000. See Exhibit 10(a)63 herein. E-32 (f) 20 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through Amendment Number Four. See Exhibit 10(a)65 herein. * (f) 21 - Amendment Number Five and Amendment Number Six to The Southern Company Pension Plan. See Exhibit 10(a)66 herein. # * (f) 22 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)76 herein. * (f) 23 - Southern Company Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)72 herein. # * (f) 24 - Southern Company Executive Change in Control Severance Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)73 herein. # * (f) 25 - Amended and Restated Change in Control Agreement between SOUTHERN, SAVANNAH and G. Edison Holland, Jr. See Exhibit 10(a)86 herein. # * (f) 26 - The Southern Company Deferred Compensation Plan, Amended and Restated effective February 23, 2001. See Exhibit 10(a)61 herein. # * (f) 27 - The Southern Company Performance Stock Plan, Amended and Restated effective January 1, 2000. See Exhibit 10(a)67 herein. # * (f) 28 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective July 10, 2000. See Exhibit 10(a)68 herein. # * (f) 29 - The Southern Company Performance Dividend Plan, Amended and Restated effective December 11, 2000. See Exhibit 10(a)64 herein. # (f) 30 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through Amendment Number Seven. See Exhibit 10(a)69 herein. # * (f) 31 - Amendment Number Eight to The Southern Company Performance Sharing Plan. See Exhibit 10(a)70 herein. # (f) 32 - Supplemental Pension Agreement between SAVANNAH, GULF and G. Edison Holland, Jr. See Exhibit 10(d)31 herein. # * (f) 33 - Southern Company Change in Control Benefit Plan Determination Policy, effective July 10, 2000. See Exhibit 10(a)96 herein. # * (f) 34 - Agreement for supplemental pension benefits between SAVANNAH and William Miles Greer. # * (f) 35 - Agreement crediting additional service between SAVANNAH and William Miles Greer. # * (f) 36 - Southern Company Deferred Compensation Trust Agreement dated as of January 1, 2001 between Wachovia Bank, N.A., SOUTHERN, SCS, ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH, Southern Communications, Energy Solutions, Mirant and Southern Nuclear. See Exhibit 10(a)103 herein. E-33 # * (f) 37 - Deferred Stock Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Reliance Trust Company, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(a)104 herein. # * (f) 38 - Deferred Cash Compensation Trust Agreement for Directors of SOUTHERN and its subsidiaries, dated as of January 1, 2000, between Wachovia Bank, N.A, SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH. See Exhibit 10(a)105 herein. (21) Subsidiaries of Registrants SOUTHERN * (a) - Subsidiaries of Registrant is contained herein at page IV-5. ALABAMA * (b) - Subsidiaries of Registrant is contained herein at page IV-5. GEORGIA * (c) - Subsidiaries of Registrant is contained herein at page IV-5. GULF * (d) - Subsidiaries of Registrant is contained herein at page IV-5. MISSISSIPPI * (e) - Subsidiaries of Registrant is contained herein at page IV-5. SAVANNAH * (f) - Subsidiaries of Registrant is contained herein at page IV-5. (23) Consents of Experts and Counsel SOUTHERN * (a) - The consent of Arthur Andersen LLP is contained herein at page IV-6. ALABAMA * (b) - The consent of Arthur Andersen LLP is contained herein at page IV-7. GEORGIA * (c) - The consent of Arthur Andersen LLP is contained herein at page IV-8. E-34 GULF * (d) - The consent of Arthur Andersen LLP is contained herein at page IV-9. MISSISSIPPI * (e) - The consent of Arthur Andersen LLP is contained herein at page IV-10. SAVANNAH * (f) - The consent of Arthur Andersen LLP is contained herein at page IV-11. (24) Powers of Attorney and Resolutions SOUTHERN * (a) - Power of Attorney and resolution. ALABAMA * (b) - Power of Attorney and resolution. GEORGIA * (c) - Power of Attorney and resolution. GULF * (d) - Power of Attorney and resolution. MISSISSIPPI * (e) - Power of Attorney and resolution. SAVANNAH * (f) - Power of Attorney and resolution. E-35
EX-3 2 x3b2.txt Articles of Amendment to Joint Agreement Between Alabama Power Company and Birmingham Electric Company Prescribing the Terms and Conditions of Merger Of Birmingham Electric Company Into and With Alabama Power Company STATE OF ALABAMA ) ) JEFFERSON COUNTY ) We, Elmer B. Harris and William E. Zales, Jr. respectively the President and Corporate Secretary of Alabama Power Company, a corporation, do hereby certify that, at a meeting of the Board of Directors of said corporation duly called and held at the office of said corporation in the City of Birmingham, Alabama, on the 28th day of July, 2000, at 10:15 o'clock A.M., Central Time, a majority and quorum of Directors being present, the following resolutions were duly adopted by said Board of Directors: RESOLVED: That, in connection with the proposed spin-off by Southern Company of Southern Energy, Inc., there be and hereby is called a special meeting of the shareholders of the Company for the purpose of considering and acting upon (a) a proposal to approve an amendment to the Charter of the Company to confer voting rights to the holders of the Company's preferred stock, the adoption of which the Board hereby recommends, and (b) such other proposals, including other amendments to the Company's Charter, as the officers shall determine in their discretion and cause to be specified in the notice of such meeting; and RESOLVED FURTHER: That the date, time and location of such special meeting, and any record date with respect thereto, shall be as determined by the officers in their discretion and caused by them to be specified in the notice of such meeting; and RESOLVED FURTHER: That the officers of the Company be and hereby are authorized to solicit proxies or consents from the shareholders of the Company for use in connection with such special meeting and to employ such broker-dealers, dealer-managers, proxy solicitors or other parties and to incur such costs and expenses (including payments to shareholders who vote affirmatively) in soliciting such proxies as the officers shall consider necessary or appropriate; and RESOLVED FURTHER: That, in connection with the foregoing authorization and to carry out its purposes and intents, the officers of the Company be and they hereby are authorized to take any and all actions on behalf of the Company as they shall consider necessary or appropriate, including execution and filing of any applications or other documents with the Securities and Exchange Commission and other regulatory authorities and execution and delivery of agreements with broker-dealers, dealer-managers, proxy solicitors or other parties. And we do further certify that pursuant to such resolutions so adopted at such meeting of the Board of Directors of Alabama Power Company, a special meeting of the shareholders of the corporation was duly held at the office of said corporation in the City of Birmingham, Alabama, on Thursday, the 14th day of December, 2000, 10:30 o'clock A.M., Central Time, for the purpose of considering taking action, in the manner provided by law, upon the aforesaid proposal and upon such other proposal or proposals as were set forth in the notice of such and for the transaction of any and all business in connection therewith, including the following amendment to the Joint Agreement Between Alabama Power Company and Birmingham Electric Company Prescribing the Terms and Conditions of Merger Of Birmingham Electric Company and Into and With Alabama Power Company, dated as of October 21, 1952 (as amended, the "Charter"): (1) The first paragraph of Section C, "Voting Powers", of Article IX is hereby deleted in its entirety and replaced with the following: "At all elections of directors of the consolidated corporation, the holders of preferred stock and Class A preferred stock shall have full voting rights with the holders of common stock, all voting together as a single class; each holder of preferred stock and Class A preferred stock with a stated value of $100 being entitled to two-fifths vote for each share thereof standing in his name, each holder of Class A preferred stock with a stated value of $25 per share being entitled to one-tenth vote for each share thereof standing in his name, each holder of Class A preferred stock with a stated value of $100,000 being entitled to 400 votes for each share thereof standing in his name and each holder of common stock being entitled to one vote for each share thereof standing in his name. On all other matters, except on matters in respect of which the laws of the State of Alabama shall provide that all stockholders shall have the right to vote irrespective of whether such right shall have been relinquished by any of such stockholders and except as otherwise herein provided, the holders of common stock shall have the exclusive right to vote. Notwithstanding the foregoing, whenever and as often as four quarterly dividends payable on the preferred stock or Class A preferred stock of any class shall be in default, in whole or in part, the holders of the preferred stock and Class A preferred stock of all classes shall have the exclusive right, voting separately and as a single class, to vote for and to elect the smallest number of directors that shall constitute a majority of the then authorized number of directors of the consolidated corporation. In the event of defaults entitling the preferred stock and the Class A preferred stock to vote as aforesaid, the holders of common stock shall have the exclusive right, voting separately and as a class, to vote for and to elect the greatest number of directors that shall constitute a minority of the then authorized number of directors of the consolidated corporation. In each such instance in which the holders of the preferred stock and the Class A preferred stock are entitled to vote separately and as a single class or to vote together with the holders of the common stock, other than for the election of directors, the relative voting power of the various classes of stock shall be computed as hereinafter provided. These additional voting rights of the holders of the preferred stock and Class A preferred stock shall cease, however, when all defaults in the payment of dividends on their stock shall have been cured, and such dividends shall be declared and paid out of any funds legally available therefor as soon as, in the judgment of the Board of Directors, is reasonably practicable."; and (2) The lead in language (preceding clause (a)) to the last paragraph of Section C, "Voting Powers", of Article IX, is hereby deleted in its entirety and replaced with the following: "For the purposes of the foregoing provisions, other than when the holders of the preferred stock, the Class A preferred stock and the common stock vote together as a single class for the election of directors, the preferred stock and the Class A preferred stock of all classes shall be deemed to be a single class, and the relative voting power of each class of preferred stock, Class A preferred stock and common stock shall be determined as follows:" We do further certify that notice in compliance with applicable laws and the Bylaws of Alabama Power Company of the time, place and purpose of said meeting of shareholders was given to each shareholder of Alabama Power Company as follows: to those shareholders of record at the close of business on November 8, 2000 with respect to the 1988 Auction Preferred Stock and to those shareholders of record at the close of business on October 30, 2000 with respect to all other classes of preferred stock and common stock of Alabama Power Company, in each case addressed to each shareholder at his, her or its address as it appeared on the stock transfer books of the corporation, with postage thereon prepaid and deposited in the United States mail; and that at said meeting the holders of a majority of the total outstanding shares of preferred stock having voting powers on such proposal and a majority of the total outstanding shares of the common stock having voting powers on such proposal were present in person or represented by proxy; and We do further certify that at the close of business on each of October 30, 2000 and November 8, 2000, Alabama Power Company had 475,115 shares of Preferred Stock, par value $100 per share (the "$100 Preferred Stock"), issued and outstanding, and 8,500,200 shares of Class A Preferred Stock, par value $1 per share (the "Class A Preferred Stock"), issued and outstanding (collectively, the "Preferred Stock"), and 5,608,955 shares of common stock issued and outstanding (the "Common Stock"). All of such outstanding shares of Preferred Stock were entitled to vote on the above proposal as a single class, each share of $100 Preferred Stock and each share of Class A Preferred Stock with a stated value of $100 per share being counted as one, each share of Class A Preferred Stock with a stated value of $25 per share being counted as one-quarter, and each share of Class A Preferred Stock with a stated value of $100,000 per share being counted as 1,000. The adoption of the above proposal required the affirmative vote in favor thereof of (i) the holders of a majority of the shares of the Common Stock of Alabama Power Company voting at the meeting and (ii) the holders of a majority of the shares of Preferred Stock voting at the meeting, voting as a single class; and We do further certify that at said meeting all of the 5,608,955 shares of common stock outstanding voted affirmatively for the adoption of the proposal, and of the total shares of Preferred Stock voting at the meeting (counting shares of Preferred Stock as described above) 1,505,832 shares voted affirmatively for the adoption of the proposal, 462,101 shares voted against the proposal and 127,473 shares abstained, such affirmative votes being sufficient for the adoption of the proposal. We, Elmer B. Harris and William E. Zales, Jr., as President and Corporate Secretary, respectively, of Alabama Power Company, do hereby make this report of such meeting and certify that such amendment, as set forth above, was duly adopted in accordance with the applicable provisions of the Alabama Business Corporation Act; and we do further certify that the proceedings of said meeting of the Board of Directors and said special meeting of shareholders were reduced to writing and that the same are hereby certified by Elmer B. Harris, the President, and William E. Zales, Jr. the Corporate Secretary, of Alabama Power Company, under its corporate seal. IN WITNESS WHEREOF, we, Elmer B. Harris, and William E. Zales, as President and Corporate Secretary, respectively, of Alabama Power Company, do hereunto set our hands and seal of such corporation on the 14th day of December, 2000. ELMER B. HARRIS President, Alabama Power Company WILLIAM E. ZALES, JR. Corporate Secretary, Alabama Power Company UNITED STATES OF AMERICA ) STATE OF ALABAMA ) MONTGOMERY COUNTY ) I, Jim Bennett, Secretary of State of the State of Alabama, do hereby certify that the foregoing pages numbered 1 to 4, both inclusive, to which this certificate is attached, contain a full, true and correct copy of the Certificate of Resolutions of Board of Directors and Shareholders of Alabama Power Company, as the same was certified by the President and Secretary of such Alabama Power Company under its corporation seal and filed in this, the office of Secretary of State of Alabama, on the ____ day of January, 2001. In Testimony Whereof, I have hereunto set my hand and caused the Great Seal of the State of Alabama to be hereunto affixed at the Capitol in the City of Montgomery, on this the _____ day of January in the year of our Lord, Two Thousand and One. (Seal) JIM BENNETT Secretary of State of the State of Alabama EX-3 3 x3c2.txt TO ALL TO WHOM THESE PRESENTS MAY COME -- GREETING: WHEREAS, GEORGIA POWER COMPANY, a corporation created and existing under the laws of Georgia, has filed in this office in terms of law a petition asking that its charter be amended to provide to the holders of its preferred stock the right to vote at all elections of directors, with each share of Preferred Stock entitled to one vote and each share of Class A Preferred Stock entitled to one-quarter vote, voting with its common stock as single class; and WHEREAS, Georgia Power Company has complied with all the requirements of the law in such cases made and provided. THEREFORE, the State of Georgia hereby amends the first paragraph of Paragraph III, Subparagraph 14.C of the charter of said Georgia Power Company to read as follows: At all elections of directors of the Consolidated Corporation, the holders of Preferred Stock and Class A Preferred Stock shall have full voting rights with the holders of Common Stock, all voting together as a single class; each holder of Preferred Stock being entitled to one vote for each share thereof standing in his name, each holder of Class A Preferred Stock being entitled to one-quarter vote for each share thereof standing in his name and each holder of Common Stock being entitled to one vote for each share thereof standing in his name. On all other matters, except on matters in respect of which the laws of the State of Georgia shall provide that all stockholders shall have the right to vote irrespective of whether such right shall have been relinquished by any of such stockholders and except as otherwise herein provided, the holders of Common Stock shall have the exclusive right to vote. Notwithstanding the foregoing, whenever and as often as four quarterly dividends payable on the Preferred Stock or Class A Preferred Stock of any class shall be in default, in whole or in part, the holders of the Preferred Stock and Class A Preferred Stock of all classes shall have the exclusive right, voting separately from any other kind of stock and as a single class (each share of Preferred Stock being counted as one and each share of Class A Preferred Stock being counted as one-quarter), to vote for and to elect the smallest number of directors that shall constitute a majority of the then authorized number of directors of the Consolidated Corporation, and, in all matters other than the election of directors, each holder of one or more shares of Preferred Stock shall be entitled to one vote for each such share of stock held by him and each holder of one or more shares of Class A Preferred Stock shall be entitled to one-quarter vote for each such share of stock held by him. In the event of defaults entitling the Preferred Stock and Class A Preferred Stock to vote as aforesaid, the holders of Common Stock shall have the exclusive right, voting separately and as a class, to vote for and to elect the greatest number of directors that shall constitute a minority of the then authorized number of directors of the Consolidated Corporation, and, in all matters other than the election of directors, each holder of Common Stock shall be entitled to one vote for each such share of stock held by him. These additional voting rights of the holders of the Preferred Stock and Class A Preferred Stock shall cease, however, when all defaults in the payment of dividends on their stock shall have been cured, and such dividends shall be declared and paid out of any funds legally available therefor as soon as, in the judgment of the Board of Directors, is reasonably practicable. THEREFORE, the State of Georgia hereby amends the last paragraph of Paragraph III, Subparagraph 14.C of the charter of said Georgia Power Company to read as follows: For the purposes of the foregoing provisions, other than when the holders of the Preferred Stock, the Class A Preferred Stock and the Common Stock vote together as a single class for the election of directors, the Preferred Stock and the Class A Preferred Stock of all classes shall be deemed to be a single class, each share of Preferred Stock being counted as one and each share of Class A Preferred Stock being counted as one-quarter. IN WITNESS WHEREOF, these presents have been signed by the Secretary of State and the great seal has been attached hereto at the State Capitol in Atlanta, Georgia, on this 16th day of February, 2001. Secretary of State PETITION FOR FORTY-NINTH AMENDMENT TO CHARTER TO THE SECRETARY OF STATE OF THE STATE OF GEORGIA: The petition of Georgia Power Company, a corporation of Fulton County, in said State, respectfully shows: I. It is a street and suburban railroad, electric light and power and steam heat corporation, incorporated under the above name on June 26, 1930, and its charter has been amended on the following dates: (1) May 1, 1933, (2) March 31, 1941, (3) November 20, 1947, (4) October 18, 1949, (5) July 25, 1950, (6) February 6, 1953, (7) April 3, 1953, (8) October 7, 1954, (9) September 6, 1961, (10) October 27, 1961, (11) November 16, 1962, (12) November 15, 1963, (13) October 2, 1964, (14) September 10, 1965, (15) July 8, 1966, (16) September 8, 1967, (17) September 6, 1968, (18) September 5, 1969, (19) March 13, 1970, (20) April 10, 1970, (21) September 9, 1970, (22) February 19, 1971, (23) October 27, 1972, (24) October 24, 1975, (25) October 29, 1975, (26) July 2, 1976, (27) February 23, 1979, (28) June 26, 1981, (29) September 16, 1982, (30) November 21, 1984, (31) November 26, 1984, (32) November 30, 1984, (33) April 18, 1985, (34) September 26, 1985, (35) December 6, 1985, (36) July 16, 1986, (37) August 21, 1986, (38) June 2, 1987, (39) July 20, 1987, (40) August 19, 1987, (41) November 5, 1991, (42) January 28, 1992, (43) June 1, 1992, (44) July 27, 1992, (45) December 15, 1992, (46) June 28, 1993, (47) October 25, 1993 and (48) January 26, 1998. II. All of the authorized shares of the capital stock of the Company are without nominal or par value, and the authorized and outstanding shares of capital stock of the Company outstanding at December 14, 2000, the date of the written consent signed by the sole common stock shareholder of the Company hereinafter referred to, are as follows: Outstanding Authorized Number of Number of Shares Kind of Stock Shares $4.60 Preferred Stock 500,000 145,689 Undesignated Preferred Stock 4,500,000 ---------- Undesignated Class A Preferred Stock 50,000,000 ---------- Common Stock 15,000,000 7,761,500 III. The Company desires an amendment to its charter to modify Subparagraph 14.C of Paragraph III to provide to the holders of Preferred Stock and Class A Preferred Stock the right to vote at all elections of directors of the Company, with each share of Preferred Stock entitled to one vote and each share of Class A Preferred Stock entitled to one-quarter vote, voting with the holder or holders of the Company's Common Stock as a single class; such voting rights shall be in addition to any special voting rights that holders of Preferred Stock and Class A Preferred Stock currently have in accordance with state law and provisions of the charter (all other terms and provisions of the charter to remain unchanged). To that end, the Company requests that the first paragraph of Paragraph III, Subparagraph 14.C of its charter be amended to read as follows: At all elections of directors of the Consolidated Corporation, the holders of Preferred Stock and Class A Preferred Stock shall have full voting rights with the holders of Common Stock, all voting together as a single class; each holder of Preferred Stock being entitled to one vote for each share thereof standing in his name, each holder of Class A Preferred Stock being entitled to one-quarter vote for each share thereof standing in his name and each holder of Common Stock being entitled to one vote for each share thereof standing in his name. On all other matters, except on matters in respect of which the laws of the State of Georgia shall provide that all stockholders shall have the right to vote irrespective of whether such right shall have been relinquished by any of such stockholders and except as otherwise herein provided, the holders of Common Stock shall have the exclusive right to vote. Notwithstanding the foregoing, whenever and as often as four quarterly dividends payable on the Preferred Stock or Class A Preferred Stock of any class shall be in default, in whole or in part, the holders of the Preferred Stock and Class A Preferred Stock of all classes shall have the exclusive right, voting separately from any other kind of stock and as a single class (each share of Preferred Stock being counted as one and each share of Class A Preferred Stock being counted as one-quarter), to vote for and to elect the smallest number of directors that shall constitute a majority of the then authorized number of directors of the Consolidated Corporation, and, in all matters other than the election of directors, each holder of one or more shares of Preferred Stock shall be entitled to one vote for each such share of stock held by him and each holder of one or more shares of Class A Preferred Stock shall be entitled to one-quarter vote for each such share of stock held by him. In the event of defaults entitling the Preferred Stock and Class A Preferred Stock to vote as aforesaid, the holders of Common Stock shall have the exclusive right, voting separately and as a class, to vote for and to elect the greatest number of directors that shall constitute a minority of the then authorized number of directors of the Consolidated Corporation, and, in all matters other than the election of directors, each holder of Common Stock shall be entitled to one vote for each such share of stock held by him. These additional voting rights of the holders of the Preferred Stock and Class A Preferred Stock shall cease, however, when all defaults in the payment of dividends on their stock shall have been cured, and such dividends shall be declared and paid out of any funds legally available therefor as soon as, in the judgment of the Board of Directors, is reasonably practicable. In addition, the Company requests that the last paragraph of Paragraph III, Subparagraph 14.C of its charter be amended to read as follows: For the purposes of the foregoing provisions, other than when the holders of the Preferred Stock, the Class A Preferred Stock and the Common Stock vote together as a single class for the election of directors, the Preferred Stock and the Class A Preferred Stock of all classes shall be deemed to be a single class, each share of Preferred Stock being counted as one and each share of Class A Preferred Stock being counted as one-quarter. IV. This petition for the proposed amendment has been duly authorized by the action of at least a majority of the capital stock of the Company outstanding and entitled by the terms of its charter or state law to act for that purpose. The entire capital stock of the Company entitled to act has given written consent to this amendment. V. Petitioner respectfully presents this, its petition for an amendment to its charter, as heretofore amended, and asks that the same be granted as herein prayed for and that all other rights, powers and privileges contained in its original charter, as heretofore amended, and such as are incident to like corporations under the laws of Georgia, do continue and remain of force and be approved and confirmed. GEORGIA POWER COMPANY By: _____________________ President Attest: - ------------------------- Vice President and Corporate Secretary Date: February 16, 2001 CERTIFIED ABSTRACT FROM THE MINUTES OF THE BOARD OF DIRECTORS OF GEORGIA POWER COMPANY WITH RESPECT TO PETITION FOR FORTY-NINTH AMENDMENT TO ITS CHARTER On motion, duly made and seconded, the following resolution was unanimously adopted by the Board of Directors of the Company: RESOLVED: That, in connection with the proposed tax-free spin-off by The Southern Company of Southern Energy, Inc., it is desirable and in the best interests of the Company to seek the approval of the Company's shareholders to amend the Company's charter, as heretofore amended (the "Charter"), to provide to the holders of Preferred Stock and Class A Preferred Stock the right to vote at all elections of directors of the Company, with each share of Preferred Stock entitled to one vote and each share of Class A Preferred Stock entitled to one-quarter vote, voting with the holder or holders of the Company's Common Stock as a single class; such voting rights shall be in addition to any special voting rights that holders of Preferred Stock and Class A Preferred Stock currently have in accordance with state law and provisions of the Charter, and this Board of Directors does hereby authorize and approve such amendment; RESOLVED FURTHER: That, as selected by the officers of the Company pursuant to authority granted by this Board of Directors, October 30, 2000 be and hereby is fixed as the record date for the determination of the holder of common stock entitled to approve such amendment, and only the holder of common stock of record at the close of business on October 30, 2000 will be entitled to approve such amendment; RESOLVED FURTHER: That, if the holder of record of the Company's outstanding common stock approves the proposal to amend the Charter, the President or any Vice President and the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company be, and they hereby are, authorized and directed to make application to the Secretary of State of the State of Georgia that the Charter of Georgia Power Company, as constituted by the Joint Agreement, dated May 12, 1930, and certified by the Honorable George H. Carswell, Secretary of State of Georgia, under date of June 26, 1930, as heretofore amended by certificates of the Honorable Secretary of State dated (1) May 1, 1933, (2) March 31, 1941, (3) November 20, 1947, (4) October 18, 1949, (5) July 25, 1950, (6) February 6, 1953, (7) April 3, 1953, (8) October 7, 1954, (9) September 6, 1961, (10) October 27, 1961, (11) November 16, 1962, (12) November 15, 1963, (13) October 2, 1964, (14) September 10, 1965, (15) July 8, 1966, (16) September 8, 1967, (17) September 6, 1968, (18) September 5, 1969, (19) March 13, 1970, (20) April 10, 1970, (21) September 9, 1970, (22) February 19, 1971, (23) October 27, 1972, (24) October 24, 1975, (25) October 29, 1975, (26) July 2, 1976, (27) February 23, 1979, (28) June 26, 1981, (29) September 16, 1982, (30) November 21, 1984, (31) November 26, 1984, (32) November 30, 1984, (33) April 18, 1985, (34) September 26, 1985, (35) December 6, 1985, (36) July 16, 1986, (37) August 21, 1986, (38) June 2, 1987, (39) July 20, 1987, (40) August 19, 1987, (41) November 5, 1991, (42) January 28, 1992, (43) June 1, 1992, (44) July 27, 1992, (45) December 15, 1992, (46) June 28, 1993, (47) October 25, 1993 and (48) January 26, 1998, be further amended by modifying Subparagraph 14.C of Paragraph III to add voting rights (as described above) in all elections of directors to holders of Preferred Stock and Class A Preferred Stock (all other terms and provisions of the Charter to remain unchanged); and that the officers of the Company be, and they hereby are, authorized and empowered to take all such other action as any one of them may deem necessary or desirable to effect said amendment; RESOLVED FURTHER: That the Secretary of the Company shall certify under the seal of the Company a copy of these resolutions and attach it to the petition for forty-ninth amendment to the Charter to be filed with the Secretary of State of the State of Georgia; and RESOLVED FURTHER: That the officers of the Company be, and they hereby are, authorized and directed to do and perform all such acts, matters and things on behalf of the Company as they shall consider necessary and appropriate to carry out the proposals described in the foregoing resolutions in the manner provided by law and otherwise to consummate the transactions contemplated thereby. I, Judy M. Anderson, Secretary of Georgia Power Company, do hereby certify that the foregoing is a true and correct copy of a resolution duly and regularly adopted at a meeting of the board of directors of Georgia Power Company, duly held on November 15, 2000, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Given under my official signature and the seal of said Company this 16th day of February, 2001. Secretary (SEAL) CERTIFIED ABSTRACT FROM THE CONSENT OF THE SOLE SHAREHOLDER OF GEORGIA POWER COMPANY WITH RESPECT TO PETITION FOR FORTY-NINTH AMENDMENT TO ITS CHARTER The following resolution was adopted by the unanimous written consent of the holder of all of the outstanding shares of the Company's common stock: RESOLVED: That the actions of the Board of Directors of the Company taken on November 15, 2000 to amend the Company's Charter to provide to the holders of Preferred Stock and Class A Preferred Stock the right to vote at all elections of directors of the Company, with each share of Preferred Stock entitled to one vote and each share of Class A Preferred Stock entitled to one-quarter vote, voting with the holder or holders of the Company's Common Stock as a single class; such voting rights being in addition to any special voting rights that holders of Preferred Stock and Class A Preferred Stock currently have in accordance with state law and provisions of the Charter are hereby confirmed ratified and approved. I, Judy M. Anderson, Secretary of Georgia Power Company, do hereby certify that the foregoing is a true and correct copy of a resolution duly adopted by written consent of the sole common stock shareholder of Georgia Power Company on December 14, 2000, and that said resolution has not since been rescinded but is still in full force and effect. Given under my official signature and the seal of said Company this 16th day of February, 2001. Secretary (SEAL) EX-3 4 x3c3.txt BYLAWS OF GEORGIA POWER COMPANY As Amended Effective November 15, 2000 Seal SECTION 1. The corporate seal shall be circular in form and bear the name of the Company in the margin and the year of organization and the word "Seal" in the center. Stockholders' Meetings SECTION 2. The annual meeting of the stockholders shall be held, upon notice as hereinafter provided, at the principal office of the Company in the City of Atlanta, County of Fulton, State of Georgia, on the third Wednesday in the month of May in each year, if not a legal holiday, and if a legal holiday, then on the next secular day following, when the stockholders entitled to vote thereon shall elect by plurality vote the Board of Directors, and transact such other business as may be brought before the meeting. At the annual meeting any business may be transacted irrespective of whether the notice calling such meeting shall have contained a reference thereto. SECTION 3. Special meetings of the stockholders shall be held, upon notice as hereinafter provided, at the principal office of the Company in the City of Atlanta, County of Fulton, State of Georgia, except such meetings as the Chairman of the Board or the President or the Board of Directors expressly determine shall be held elsewhere within or without the State of Georgia, but within the United States, in which case meetings may be held, upon notice as hereinafter provided, at such other place or places as the Chairman of the Board or the President or the Board of Directors may determine. SECTION 4. At all meetings of the stockholders, the holders of capital stock of the Company representing a majority of the aggregate number of votes entitled to be cast at the meeting, present in person or represented by proxy, shall constitute a quorum requisite for the transaction of business, except as otherwise required by the Charter or by law. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting, until the requisite amount of voting stock shall be present, except as otherwise required by the Charter or by law. At such adjourned meeting at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted at the meeting originally notified. SECTION 5. Each stockholder entitled to vote in accordance with the charter or any amendment thereof and in accordance with the provisions of these Bylaws or of any action taken pursuant thereto shall be entitled, in person or by proxy, to the vote provided by the Charter for each share of stock entitled to vote held by such stockholder. Except where the transfer books of the Company shall have been closed or a date shall have been fixed as the record date for the determination of its stockholders entitled to vote, as hereinafter provided, no share of stock shall be voted on at any election for Directors which shall have been transferred on the books of the Company within twenty days next preceding such election of Directors. The vote for Directors, and, upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. All elections shall be by and all questions decided by plurality vote except as otherwise provided by the Charter and/or by the laws of the State of Georgia. SECTION 6. Written notice of the annual meeting shall be mailed to each stockholder entitled to vote thereat, at such address as appears on the stock books of the Company, at least ten days prior to the meeting. It shall be the duty of every stockholder to furnish to the Secretary of the Company or to the Transfer Agent, if any, of the class or series of stock owned by him, his post office address and to notify said Secretary or Transfer Agent of any change therein. SECTION 7. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or by the President, and shall be called by the Chairman of the Board or by the President or the Secretary upon the order in writing of a majority of or by resolution of the Board of Directors or at the request in writing of stockholders owning one-fourth of the entire capital stock of the Company issued and outstanding and entitled to vote. Such request or order shall state the purpose or purposes of the proposed meeting. On failure by the Chairman of the Board or the President or the Secretary to call such special meeting when duly requested, the makers of such request or order may call such special meeting over their own signatures. SECTION 8. Written notice of a special meeting of stockholders, stating the time and place and object thereof, shall, unless waived in writing, be mailed, postage prepaid, or delivered, at least ten days before such meeting, to each stockholder entitled to vote thereat, at such address as appears on the books of the Company. No business may be transacted at such meeting except that referred to in said notice, or in a supplemental notice given also in compliance with the provisions hereof, or such other business as may be germane or supplementary to that stated in said notice or notices. SECTION 9. No stockholder shall be entitled to notice of any meeting of stockholders with respect to any shares registered in his name after the date upon which notice of such meeting is required by law or these Bylaws to have been mailed or otherwise given to stockholders. Directors SECTION 10. The affairs of the Company shall be managed by a Board of Directors consisting of not less than five nor more than the maximum number allowed by law, who shall be elected annually by the stockholders entitled to vote, to hold office for one year and until their successors are elected and qualify except that any Director who is a full-time employee of the Company shall cease to be a Director upon termination of his employment as a full-time employee or upon his retirement from active duty under the Company's pension plan; provided that in the event of failure to hold such annual meeting of the stockholders or to hold such election at such meeting, such election may be held at any special meeting of the stockholders called for the purpose and the Directors then in office shall continue in office until their successors shall have been duly elected and qualified. If the stockholders at such annual meeting or at any special meeting called for the election of Directors shall not elect a full Board of Directors at such election, the Directors elected may elect the remaining Directors in the manner provided below for the filling of vacancies. In addition to the Directors authorized by the first paragraph of this section, there may also be one or more honorary members of the Board of Directors consisting of retired employees of the Company or of any affiliated company or companies who were serving as regular members of the Board of Directors at the time of their retirement from active duty under the Company's pension plan, or of any other former members of the Board who did not wish to continue or were unable to continue as regular members of the Board, or of any other persons whose services as such will be of value to the Company. Any such retired employee or other former member of the Board or other person may, on the recommendation of the Chief Executive Officer of the Company, be elected as an Honorary Director at any Board of Directors' meeting by the vote of the majority of the entire Board then in office or at any meeting of the stockholders by the vote of the holders of the majority of the stock issued and outstanding and entitled to vote at such meeting. An Honorary Director so chosen shall hold office until the next annual meeting of stockholders. Honorary Directors shall receive notices of all meetings of the Board of Directors and shall receive the customary fee or salary and expense reimbursement or allowance for attending meetings and may participate in an advisory capacity in all discussions and deliberations of the Board of Directors, but will not have the right to vote. Such Honorary Directors shall not be counted in determining compliance with the number of Directors authorized by the first paragraph of this section or in determining the existence of a quorum. No person shall be eligible to serve as a Director or as an Honorary Director after his 70th birthday; provided, however, that such provision shall not apply to any person so long as such person shall serve as a member of the Independent Litigation Committee established and designated by the Board of Directors on September 17, 1986. Any Director of the Company may resign at any time by giving written notice to the Chairman of the Board or the President or the Secretary of the Company. Such resignation shall take effect at the time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Each Director who is not an employee-director of the Company shall tender his resignation from the Board of Directors when a change occurs in his principal business association prior to normal retirement, excluding Directors serving on the Board of Directors as of November 15, 2000. Upon receipt of a tender of resignation in accordance with the foregoing statement, the Board of Directors, in its sole discretion, shall determine whether such resignation shall be accepted. SECTION 11. In case of any vacancies in the Board of Directors through death, resignation, disqualification, or any cause other than by reason of removal, the remaining Directors, if less than a quorum, by affirmative vote of a majority thereof, or if a quorum, by a majority vote of such quorum, may elect a successor or successors, and the Director or Directors so chosen shall hold office until the next annual election and until their successor or successors shall be elected and qualified. SECTION 12. In addition to the powers and authorities expressly conferred upon it by the statute, by the charter and by these Bylaws, the Board may exercise all such powers of the Company and do all such lawful acts and things as may be done by the Company as are not by statute or by the charter or by these Bylaws directed or required to be exercised or done by the stockholders. SECTION 13. A majority of the Board shall constitute a quorum and shall be competent to do all acts which the Board can do. SECTION 14. Any and all of the Directors may at any time be removed without cause assigned by the vote of the holders of a majority in number of all of the outstanding stock entitled to vote, given at a meeting called for the purpose of considering such action. Meetings of the Board of Directors SECTION 15. The newly elected Board of Directors may meet at such place and time as shall be fixed by the vote of the stockholders at the meeting at which such newly elected board was elected, for the purpose of organization or otherwise, and no notice of such meeting shall be necessary to the elected Directors in order legally to constitute the meeting, provided a quorum shall be present, or they may meet at such place and time as shall be stated in a notice given to such Directors either personally or by mail or telegram two days prior to such meeting or as shall be fixed by the consent in writing of all the Directors. SECTION 16. Regular meetings of the Board may be held without notice at such time and place as shall from time to time be determined by the Board. SECTION 17. Special meetings of the Board may be called by the Chairman of the Board or the President, on two days' notice to each Director, by delivered letter, by mail or by telegram or by personal communication either over the telephone or otherwise; special meetings shall be called by the Secretary in like manner and on like notice, on the written request of two Directors or on the request of the Chairman of the Board or the President. SECTION 18. Directors shall be entitled to a fee for attendance at each regular or special meeting of the Board, or a committee of the Board, and/or to a monthly or annual fee or salary provided that no fees or salaries shall be paid to those Directors who are officers or employees, other than retired employees, who are on a fixed basis of compensation from the Company or any subsidiary or affiliated company and who have duties and responsibilities to such companies other than those arising from the office of Director. Directors shall be reimbursed for actual expenses, if any, incurred in attending meetings of the Board of Directors and in otherwise performing duties as such Directors or in lieu thereof to an allowance for expenses. The amount of fee for salary paid to Directors and expense allowance, if any, shall be fixed by the Board of Directors. Executive and Other Committees SECTION 19. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate an executive committee and one or more other committees, each consisting of three or more directors, each of which committees may act by a majority of its members. Such executive committee shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Company when the Board is not meeting; and each other committee shall have such powers of the Board and otherwise as are provided in the resolution establishing such committee. Provided, however, notwithstanding anything to the contrary herein, the executive committee and all other committees established by the Board shall have no power or authority (1) to amend the Charter or the Bylaws; (2) to adopt a plan of merger or consolidation; (3) to sell, lease, exchange or otherwise dispose of all or substantially all of the assets and property of the Company; or (4) to voluntarily dissolve or revoke a voluntary dissolution of the Company. Unless otherwise specifically permitted by the Board of Directors, the rules promulgated by these Bylaws with respect to meetings of Directors, notice, quorums, voting and other procedures at such meeting shall be applicable to meetings of the executive and any other committee established by the Board of Directors, except that special meetings of any such committees may be called on one day's notice to all members of such committee. Officers SECTION 20. The officers of the Company shall be chosen by the Board of Directors at its first meeting after the meeting of stockholders at which such board has been elected. The executive officers shall be a President, one or more Vice Presidents as said Board of Directors may from time to time determine, and in the discretion of the Board of Directors, a Chairman of the Board. The administrative officers shall be a Secretary, a Treasurer and a Comptroller, and such Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers as the Board of Directors may from time to time determine. Any two or more offices may be held by the same person, except the offices of President and Secretary. The Chairman of the Board and the President shall be chosen from among the Board of Directors, but the other officers need not be members of the Board. SECTION 21. The Board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. SECTION 22. The officers of the Company shall hold office at the pleasure of the Board, until their successors are chosen and qualified. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors with or without cause. Powers and Duties of the Chairman of the Board SECTION 23. The Chairman of the Board shall preside at all meetings of Directors and stockholders. Unless otherwise provided by the Board, under the supervision of and subject to the Board of Directors, he shall have the general control and management of the business and affairs of the Company; and he shall perform and do all acts and things incident to the position of Chairman of the Board and such other duties as may be assigned to him from time to time by the Board of Directors. Unless otherwise provided by the Board, the Chairman of the Board shall have full power and authority on behalf of the Company to execute any stockholder's consent and to attend and act and to vote in person or by proxy at any meetings of stockholders of any corporation in which the Company may own stock, and at any such meeting shall possess and may exercise any and all the rights and powers incident to the ownership of such stock and which, as the owner thereof, the Company might have possessed and exercised if present. The Board of Directors by resolution from time to time may confer like powers upon any other person or persons. Powers and Duties of the President SECTION 24. The President shall do and perform all acts and things incident to the position of President and such other duties as may be assigned to him from time to time by the Board of Directors or the Chairman of the Board. In the absence or inability to act of the Chairman of the Board, he shall act in his stead. In the event the office of Chairman of the Board has not been filled by the Board of Directors, or in the event it is specifically provided for by the Board, the President shall have the powers and duties attributed to the office of Chairman of the Board under the other provisions of these Bylaws. Powers and Duties of Vice Presidents SECTION 25. The Vice Presidents shall perform such duties on behalf of the Company as may be respectively assigned to them from time to time by the Board of Directors or the Chairman of the Board. In the absence or inability to act of the President, any one of the Vice Presidents may act in his stead. Notwithstanding any other provision of these Bylaws, under emergency conditions existing in case of catastrophe wrought by war affecting the territory, facilities or personnel of the Company, in the event of the absence, death or inability to act of the Chairman of the Board, the powers and duties of the Chairman of the Board shall, until the end of the emergency or until prior action by the Board of Directors, devolve successively upon the President and such other officers as shall have been designated in a resolution adopted by the Board of Directors, and in accordance with the order of succession set forth therein. Power and Duties of the Secretary SECTION 26. It shall be the duty of the Secretary to act as custodian of the minutes of all meetings of the Board of Directors and of the stockholders and of any committees of the Board of Directors which keep formal minutes; he shall attend to the giving and serving of all notices of the Company; he shall attest the seal of the Company upon all contracts and instruments executed under such seal and shall affix or cause to be affixed the seal of the Company thereto and to all certificates of shares of the capital stock. He shall have charge of the corporate records and other corporate matters, of the stock certificate book, transfer book and stock ledger, and such other books and papers as the Board of Directors or the Chairman of the Board may direct. He shall perform such other duties as may be assigned to him from time to time by the Board of Directors or the Chairman of the Board Powers and Duties of the Treasurer SECTION 27. It shall be the duty of the Treasurer to have the care and custody of all the funds and securities of the Company. He shall be accountable for the receipts and disbursements of the funds of the Company. He shall endorse checks, drafts and other instruments for the payment of money for deposit or collection when necessary or proper and shall deposit the same to the credit of the Company in such depositories as the Board of Directors may designate; he shall perform all acts incident to the position of Treasurer, and such other duties as may be assigned to him from time to time by the Board of Directors or the Chairman of the Board. Powers and Duties of the Comptroller SECTION 28. It shall be the duty of the Comptroller to maintain adequate records of all assets, liabilities, and accounting transactions of the Company; he shall have charge of the installation and supervision of all accounting and statistical records, financial and statistical statements and reports, and the supervision of the accounting methods and systems in use by all departments and shall perform such other duties as may be assigned to him from time to time by the Board of Directors or the Chairman of the Board. Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers SECTION 29. An Assistant Secretary or an Assistant Treasurer or an Assistant Comptroller shall, in the absence or disability or at the request of the Secretary or Treasurer or Comptroller, respectively, perform the duties of the Secretary or Treasurer or Comptroller, respectively, and shall perform such other duties as may, from time to time, be assigned to him by the Board of Directors or the Chairman of the Board. The performance of any such duty shall be conclusive evidence of his right to act. Duties of Officers May Be Delegated SECTION 30. In case of the absence of an officer of the Company, or for any other reason deemed sufficient, the Board of Directors or the Chairman of the Board may delegate, for the time being, the powers or duties, or any of them of such officer to any other officer, or to any Director. Transfer Agents and Registrars SECTION 31. The Board of Directors may appoint one or more Transfer Agents or Transfer Clerks and Registrars, and may require all stock certificates and certificates representing any rights or options to be signed by such Transfer Agents or Transfer Clerks acting on behalf of the Company and by such Registrars. Certificates of Stock SECTION 32. The certificates of stock of the Company shall be of such form and devise as the Board of Directors may elect; they shall be numbered and shall be entered in the books of the Company and registered as they are issued. They shall exhibit the names of the registered holders and shall certify the number of shares owned by the person in whose name issued, and shall be signed by, or in the name of the Company by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall be sealed with the corporate seal of the Company, which signatures and seal, in the case of certificates signed by a Transfer Agent or Transfer Clerk and a Registrar, may be facsimile. In case any officer or officers who shall have signed any such certificate or certificates, or whose facsimile signature shall appear thereon, shall cease to be such officer or officers of the Company, whether because of death, resignation or otherwise, and before such certificate or certificates shall have been delivered by the Company, such certificate or certificates may nevertheless be adopted by the Company and be issued and delivered with the same force and effect as though the person or persons who signed such certificate or certificates, or whose facsimile signature appears thereon, had not ceased to be such officer or officers of the Company, and the issuance and delivery of any such certificate or certificates shall be conclusive evidence of such adoption. Transfers of Stock SECTION 33. Transfers of stock shall be made on the books of the Company only by the person named in the certificate or by attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before the new certificate shall be issued. SECTION 34. The Board of Directors shall have the power to prescribe a period not exceeding 50 days prior to any meeting of the stockholders or the date for payment of any dividend or the date for the allotment of rights of the date when any change or conversion or exchange of capital stock shall go into effect, during which no transfer of stock on the books of the Company may be made, or may fix a day not more than 50 days prior to the holding of any such meeting of stockholders or such date when any change or conversion or exchange of capital stock shall go into effect, as a day as of which stockholders of record entitled to notice of and to vote at such meeting of stockholders, or such date for payment of any dividend or such date for the allotment of rights or such date when any change or conversion or exchange of capital stock shall go into effect, shall be determined, and only stockholders of record on such day entitled to notice or to vote at such meeting of stockholders or entitled to receive payment of any such dividend or to any such allotment of rights or to exercise the rights in respect of any change, conversion or exchange of capital stock, as the case may be, notwithstanding any transfer of any stock on the books of the Company after any such record date fixed as aforesaid; provided, however, that in the case of any meeting of stockholders, such period prescribed or day fixed, as aforesaid, shall not be less than ten days prior to such meeting of stockholders. Registered Stockholders SECTION 35. The Company shall be entitled to treat the holder of record of any share or shares of stock or of any right or rights or option or options as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share, right or option on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Georgia. Lost, Stolen or Destroyed Certificates SECTION 36. No certificate of shares of stock of the Company shall be issued in place of any certificate alleged to have been lost or stolen or destroyed, except upon the submission of proper proof by the owner and the delivery to the Company of a bond of indemnity against such lost or stolen or destroyed certificate and except under such regulations and restrictions as the Board of Directors may prescribe. Annual Report and Inspection of Books SECTION 37. The Chairman of the Board and the President shall make and present to the annual meeting of stockholders a report showing a Balance Sheet and Income Statement for the preceding fiscal year. A copy of such report shall be mailed to each stockholder of the Company at least fifteen days in advance of the annual meeting of the Company. Such report may also contain such other information and may be in such detail as the Chairman of the Board and the President and the Board of Directors may determine in their absolute discretion. The stockholders of the Company entitled to vote, by a majority vote at any meeting duly called, or in case such stockholders shall fail to act, the Board of Directors, shall have the power from time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Company (other than the stock ledger) or any of them, shall be open to the inspection of stockholders; and no stockholder shall have any right to inspect any account or book or document of the Company, except as conferred by statute or authorized by the Board of Directors or by a resolution of such stockholders. Depositories, Checks and Notes SECTION 38. The Board of Directors are authorized to select such Depositories as they shall deem proper for the funds of the Company. All checks, drafts and demands for money against such deposited funds and all notes of the Company shall be signed by such officers or persons as the Board of Directors may from time to time designate. Fiscal Year SECTION 39. The fiscal year shall begin the first day of January in each year, and shall end on the thirty-first day of December of such year. Notices SECTION 40. Whenever under the provisions of these Bylaws notice is required to be given to any director, officer or stockholder, it shall not be construed to mean personal notice, unless otherwise provided in these Bylaws, but such notice may be given in writing, by mail, by depositing the same in the post office or letter box, in a postpaid wrapper, addressed to such stockholder, officer or director at such address as appears on the books of the Company, or, in default in other address, to such director, officer or stockholder at the General Post Office in the City of Atlanta, Georgia, and such notice shall be deemed to be given at the time when the same shall be thus mailed. Notice need not be given of any adjourned meeting, special or regular, of stockholders or directors other than by announcement at the meeting which is being adjourned. Any stockholder, director or officer may waive any notice required to be given by statute or under the provisions of the Certificate of Incorporation or under these Bylaws, and such waiver shall be deemed equivalent to the notice so required; provided, always, that such waiver shall be in writing and signed by such stockholder, officer or director, or by his duly authorized attorney, whether before or after the meeting or the time stated therein, notice of which is being waived. Indemnification and Related Matters SECTION 41. Each person who is or was a director or officer of the Company or is or was an employee of the Company holding one or more positions of management through and inclusive of department managers (but not positions below the level of department managers) (such positions being hereinafter referred to as "Management Positions") and who was or is a party or was or is threatened to be made a party to any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Company or is or was an employee of the Company holding one or more Management Positions, or is or was serving at the request of the Company as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall be indemnified by the Company as a matter of right against any and all expenses (including attorneys' fees) actually and reasonably incurred by him and against any and all claims, judgments, fines, penalties, liabilities and amounts paid in settlement actually incurred by him in defense of such claim, action, suit or proceeding, including appeals, to the full extent permitted by applicable law. The indemnification provided by this Section shall inure to the benefit of the heirs, executors and administrators of such person. Expenses (including attorneys' fees) incurred by a director or officer of the Company or employee of the Company holding one or more Management Positions with respect to the defense of any such claim, action, suit or proceeding may be advanced by the Company prior to the final disposition of such claim, action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of an under taking by or on behalf of such person to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the Company under this Section or otherwise; provided, however, that the advancement of such expenses shall not be deemed to be indemnification unless and until it shall ultimately be determined that such person is entitled to be indemnified by the Company. The Company may purchase and maintain insurance at the expense of the Company on behalf of any person who is or was a director, officer, employee, or agent of the Company, or any person who is or was serving at the request of the Company as a director (or the equivalent), officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability or expense (including attorneys' fees) asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability or expense under this Section or otherwise. Without limiting the generality of the foregoing provisions, no present or future director or officer of the Company, or his heirs, executors, or administrators, shall be liable for any act, omission, step, or conduct taken or had in good faith, which is required, authorized, or approved by any order or orders issued pursuant to the Public Utility Holding Company Act of 1935, the Federal Power Act, or any federal or state statute or municipal ordinance regulating the Company or its parent by reason of their being holding or investment companies, public utility companies, public utility holding companies, or subsidiaries of public utility holding companies. In any action, suit, or proceeding based on any act, omission, step, or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the foregoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not being applicable to the particular class of plaintiff, each such director and officer, and his heirs, executors, and administrators, shall be reimbursed for, or indemnified against, all expenses and liabilities incurred by him or imposed on him, in connection with, or arising out of, any such action, suit, or proceeding based on any act, omission, step, or conduct taken or had in good faith as in this paragraph described. Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, and attorneys' fees. The foregoing rights shall not be exclusive of any other rights to which any such director or officer or employee may otherwise be entitled and shall be available whether or not the director or officer or employee continues to be a director or officer or employee at the time of incurring any such expenses and liabilities. If any word, clause or provision of the Bylaws or any indemnification made under this Section 41 shall for any reason be determined to be invalid, the provisions of the Bylaws shall not otherwise be affected thereby but shall remain in full force and effect. The masculine pronoun, as used in the Bylaws, means the masculine and feminine wherever applicable. Amendments SECTION 42. The Bylaws of the Company may be altered, amended or repealed at any meeting of the Board of Directors, by the vote of a majority of the entire Board then in office, or at any meeting of the stockholders by the vote of the holders of the majority of the stock issued and outstanding and entitled to vote at such meeting, in accordance with the provisions of the Charter and of these Bylaws. EX-3 5 x3d2.txt Exhibit A Articles of Amendment to the Articles of Incorporation of Gulf Power Company The first paragraph under the "Voting Powers" section is hereby deleted in its entirety and replaced with the following: At all elections of directors of the corporation, the holders of preferred stock and Class A preferred stock shall have full voting rights with the holders of common stock, all voting together as a single class; each holder of preferred stock being entitled to one vote for each share thereof standing in his name, each holder of Class A preferred stock being entitled to one-quarter vote for each share thereof standing in his name and each holder of common stock being entitled to one vote for each share thereof standing in his name. On all other matters, except on matters in respect of which the laws of the State of Maine shall provide that all stockholders shall have the right to vote irrespective of whether such right shall have been relinquished by any of such stockholders and except as otherwise herein provided, the holders of common stock shall have the exclusive right to vote. Notwithstanding the foregoing, whenever and as often as four quarterly dividends payable on the preferred stock or Class A preferred stock of any series shall be in default, in whole or in part, the holders of the preferred stock and Class A preferred stock of all series shall have the exclusive right, voting separately and as a single class, to vote for and to elect the smallest number of directors that shall constitute a majority of the then authorized number of directors of the corporation, and, in all matters other than the election of directors, the holders of the preferred stock and Class A preferred stock shall be entitled to vote together with the holders of common stock. In the event of defaults entitling the preferred stock and Class A preferred stock to vote as aforesaid, the holders of common stock shall have the exclusive right, voting separately and as a class, to vote for and to elect the greatest number of directors that shall constitute a minority of the then authorized number of directors of the corporation, and, in all matters other than the election of directors, the holders of common stock shall be entitled to vote together with the holders of preferred stock and Class A preferred stock. In each instance in which the holders of the preferred stock and Class A preferred stock are entitled to vote separately and as a single class or to vote together with the holders of the common stock, other than for the election of directors, the relative voting power of the various series of stock shall be computed as hereinafter provided. These additional voting rights of the holders of the preferred stock and Class A preferred stock, however, shall cease when all defaults in the payment of dividends on their stock shall have been cured, and such dividends shall be declared and paid out of any funds legally available therefor as soon as, in the judgment of the Board of Directors, is reasonably practicable. The lead in language (preceding clause (a)) to the last paragraph of the "Voting Powers" section is hereby deleted in its entirety and replaced with the following: For the purposes of the foregoing provisions, other than when the holders of the preferred stock, the Class A preferred stock and the common stock vote together as a single class for the election of directors, the preferred stock and the Class A preferred stock of all series shall be deemed to be a single class, and the relative voting power of each series of preferred stock, Class A preferred stock and common stock shall be determined as follows: EX-3 6 x3d3.txt GULF POWER COMPANY BY-LAWS Section 1. The annual meeting of the stockholders of the corporation for the election of directors and for the transaction of such other corporate business as may properly come before such meeting shall be held at the corporation's office at Augusta, in the State of Maine, or at such other place within or without the State of Maine as the Board of Directors may determine, on the last Tuesday in June in each year; provided, however, that the Board of Directors may fix an earlier day for such annual meeting of stockholders in any particular year; and provided further that, if the day fixed for such annual meeting of stockholders is a legal holiday, such meeting shall be held on the first day thereafter which is not a legal holiday. Section 2. Special meetings of the stockholders of the corporation may be held at such time and at such place within or without the State of Maine as may be determined by the President or the Board of Directors or Executive Committee, or stockholders holding one-fourth of the then outstanding capital stock entitled to vote. Section 3. Notice of the time, place and purpose of every meeting of stockholders shall be mailed by the Secretary or the officer performing his duties at least ten days before the meeting to each stockholder of record entitled to vote, at his post office address as shown by the records of the corporation, but meetings may be held without notice if all stockholders entitled to vote are present or if notice is waived before or after the meeting by those not present. No stockholder shall be entitled to notice of any meeting of stockholders with respect to any shares registered in his name after the date upon which notice of such meeting is required by law or by these by-laws to have been mailed or otherwise given to stockholders. Section 4. Subject to the provisions of the articles of incorporation, as amended, the holders of a majority of the stock of the corporation entitled to vote, present in person or by proxy, shall constitute a quorum, but less than a quorum shall have power to adjourn. At all meetings of stockholders, each stockholder entitled to vote may vote and otherwise act either in person or by proxy. Section 5. The stock of the corporation shall be transferable or assignable on the books of the corporation by the holders in person or by attorney on the surrender of the certificates therefor duly endorsed. The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation and registered as they are issued. They shall exhibit the name of the registered holder and shall certify the number of shares owned by him and shall be signed by, or in the name of the corporation by, the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, and shall be sealed with the corporate seal of the corporation. Where such certificate is signed by a Transfer Agent or by a Transfer Clerk acting on behalf of the corporation and by a Registrar, the signature of any such President, Vice-President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary and the seal of the corporation may be facsimile. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates, shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the corporation and the issuance and delivery of any such certificate or certificates shall be conclusive evidence of such adoption. The stock transfer books of the corporation may be closed by order of the Board of Directors for such period, not to exceed sixty days previous to any meeting of the stockholders or previous to the payment of any dividend upon the stock of the corporation, as the Board may determine, during which time no transfer of stock upon the books of the Corporation shall be made, and said books shall be re-opened the day following the date fixed for such meeting or for the payment of such dividend. If the stock transfer books of the corporation are ordered closed by the Board of Directors, every stockholder who appears of record at the time of closing said books shall be entitled to vote at the meeting or to receive the dividend on account of which the said books were ordered closed. In lieu of providing for the closing of the stock transfer books of the corporation, the Board of Directors may fix a date not exceeding sixty days preceding the date of any meeting of stockholders, or any dividend payment date, as the record date for the determination of the stockholders entitled to notice of and to vote at such meeting, or entitled to receive such dividend, as the case may be. If the stock transfer books of the corporation are not ordered closed by the Board of Directors or if the Board of Directors does not fix a date of record in lieu thereof, every stockholder who appears of record on the date of a stockholders' meeting shall be entitled to vote at such meeting and every stockholder who appears of record on the date specified by the Board of Directors in their declaration of a dividend shall be entitled to such dividend. Section 6. Upon receipt by this corporation of evidence, satisfactory to the Board of Directors, of the loss, destruction or mutilation of any certificate of stock of this corporation and, if required by the Board of Directors, upon receipt of indemnity satisfactory to the Board of Directors and upon surrender and cancellation of such certificate, if mutilated, the Board of Directors may, if it so determines, direct the officers of this corporation to execute and deliver a new certificate of like tenor and for the same number of shares of the same class of stock to be issued in lieu of such lost, destroyed or mutilated certificate. Section 7. The affairs of this corporation shall be managed by a Board consisting of not less than six directors, nor more than fifteen directors, their number to be fixed at the annual or any special meeting of the stockholders, who shall be elected annually by the stockholders entitled to vote, to hold office until their successors are elected and qualify. Directors need not be stockholders. A majority of the members of the Board then in office shall constitute a quorum. Vacancies in the Board of Directors may be filled by the Board at any meeting, except that vacancies arising from the election of fewer directors than the total number fixed shall be filled at a meeting of the stockholders called for the purpose of filling such vacancies, or by the Board of Directors under special authorization from the stockholders. Any and all of the directors may at any time be removed without cause assigned by the vote of the holders of a majority in number of all of the outstanding stock entitled to vote given at a meeting called for the purpose of considering such action. The foregoing provisions of this Section 7 relating to the election of directors and to the filling of vacancies in the Board of Directors shall be subject to the provisions of the Articles of Incorporation, as amended. A person being a full-time executive employee of the corporation or its parent company or any affiliated company when first elected a director of the corporation (hereinafter sometimes referred to as an "employee-director") shall not be eligible for election as a director when he ceases to be an executive employee, whether by reason of resignation, retirement or other cause. Any employee-director shall resign as a director effective on the date he ceases to be an executive employee. A person not an employee-director shall not be eligible to serve as a director of the corporation (1) after his 70th birthday, (2) one year after permanent separation from the business or professional organization with which he was primarily associated when first elected a director, (3) one year after any other material change in his primary occupation or executive position from that which he pursued or held when first elected a director, or (4) one year after moving his principal residence outside the service area in which he was a resident when first elected a director, whichever event first occurs. The application to an individual of any provision of this paragraph may be waived by the Board of Directors. Any such waiver shall only be effective on a year-to-year basis. The provisions of this paragraph, with the exception of item (1) above, shall apply only to those individuals elected as a member of the Board of Directors after the annual meeting of this Board held July 26, 1996. Any employee-director who is not eligible for election as a director by reason of the foregoing provisions shall be eligible for election and re-election by the Board of Directors as an advisory director, upon the recommendation of the Chief Executive Officer of the corporation, for a term ending at the first meeting of the Board of Directors following the annual meeting of stockholders next following such election. Any person eligible for election as an advisory director must be one whose services as such will be, in the opinion of the Board of Directors, of value to the corporation. An advisory director shall be entitled to notice of and to attend and advise but not to vote at, meetings of the Board of Directors, and of any committees thereof to which he shall be appointed, nor shall he be counted in determining the existence of a quorum, and for his services may be paid, in the discretion of the Board of Directors, compensation and reimbursement of expenses on the same basis as if he were a director. Section 8. The annual meeting of the Board of Directors shall be held as soon as practicable after the annual meeting of the stockholders. Other meetings of the Board of Directors shall be held at the times fixed by resolution of the Board or upon call of the Chairman of the Board, the President or a Vice-President or any person upon whom powers have devolved pursuant to Section 12 hereof. The Secretary or officer performing his duties shall give at least two days' notice of all meetings of Directors, provided that a meeting may be held without notice immediately after the annual election of Directors, and notice need not be given of regular meetings held at times fixed by resolution of the Board. Meetings may be held at any time without notice if all the Directors are present or if those not present waive notice either before or after the meeting. Notice by mail or telegraph to the usual business or residence address of the director shall be sufficient. The purpose of special meetings of the Board of Directors need not be stated in such notice unless required by law and unless otherwise indicated in the notice any and all business may be transacted at a special meeting of the Board of Directors. Section 9. The Board of Directors, as soon as may be convenient after the election of directors in each year, may appoint one of their number Chairman of the Board and shall appoint one of their number President of the corporation, and shall also appoint one or more Vice-presidents, a Secretary, a Clerk and a Treasurer, none of whom need be members of the Board, and shall, from time to time, appoint such other officers as they may deem proper. The same person may be appointed to more than one office. The term of office of all officers shall be for one year and until their respective successors are chosen and qualified, but any officer may be removed from office at any time by the Board of Directors without cause assigned. Vacancies in the offices shall be filled by the Board of Directors. Section 10. The Board of Directors, as soon as may be after the election in each year, may appoint an executive committee to consist of the President and such number of directors as the Board may from time to time determine. Such committee shall have and may exercise all of the powers of the Board during the intervals between its meetings which may be lawfully delegated, subject to such limitations as may be provided by a resolution of the Board. The Board shall have the power at any time to change the membership of such committee and to fill vacancies in it. The executive committee may make rules for the conduct of its business and may appoint such committees and assistants as it may deem necessary. The Board may, from time to time, determine by resolution the number of members of such committee required to constitute a quorum. The Board shall designate the Chairman of the executive committee and the proceedings of the executive committee shall from time to time be reported to the Board of Directors. Section 11. Unless otherwise designated as separate offices by the Board of Directors, the President shall be the Chief Executive Officer of the corporation; he shall preside at all meetings of the stockholders and directors; he shall have general supervision of the business of the corporation; shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the rights of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer of the corporation. He shall, unless otherwise ordered, execute bonds, deeds, mortgages, and other contracts, and when required shall cause the seal of the corporation to be affixed thereto and shall sign certificates of stock. He shall be ex officio a member of all standing committees, and shall submit to the stockholders at their annual meeting a report of the year's business. Should the offices of President and Chief Executive Officer be held by different persons, the above duties shall be as delegated to each office by the Board of Directors. Section 12. Notwithstanding the provisions of Section 9 hereof, in the event of the absence or inability of the President to act, the powers and duties of the President shall, subject to the control of the Board of Directors, devolve successively upon such other persons as shall have been designated in a resolution adopted by the Board of Directors, and in accordance with the order of succession set forth therein. Section 13. The Secretary shall attend all sessions of the Board and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for standing committees when required. He shall give or cause to be given notice of all meetings of the stockholders and the Board of Directors, and of standing committees when required, and shall perform such other duties as may be prescribed by the Board of Directors or the President under whose supervision he shall act. He shall keep in safe custody the seal of the Corporation, and when authorized, affix the same to any instrument requiring a seal, and attest the signatures thereof, when directed or required to do so. Section 14. The Treasurer shall have the custody of the corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation, in such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President, and to the directors at the regular meetings of the Board or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. He shall give the corporation a bond for the faithful performance of the duties of his office, and for the restoration to the corporation in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind, in his possession or under his control belonging to the corporation. Section 15. It shall be the duty of the Comptroller to supervise and be responsible for accounting transactions of the corporation; to have charge of the installation and supervision of all accounting and statistical records, the preparation of all financial and statistical statements and reports, and the accounting methods, systems and forms in use by all departments; he shall perform such other duties as may be assigned to him from time to time by the President. Section 16. One or more Assistant Secretaries or Assistant Treasurers or Assistant Comptrollers may be elected by the Board or appointed by the President to hold office until the next annual meeting of the Board of Directors and until their successors are elected or appointed, but may be removed at any time. They shall perform any or all of the duties of the Secretary or Treasurer, or Comptroller as the case may be, and such other duties as may be assigned to them from time to time. Section 17. The Clerk of the corporation shall be a resident of Maine, and shall be sworn to the faithful performance of his duties. He need not be a stockholder. He shall keep a full and accurate record of all stockholders' meetings, shall keep an office in said Augusta as required by law, and shall have the custody of all books and papers belonging to the corporation which are located in said office. He shall receive as compensation for his services in acting as proxy at annual meetings, keeping an office in Maine, preparing records of annual meetings and furnishing the Secretary with duplicate copies of same and of necessary blanks and forms at proper times the sum of fifty dollars annually, payable in advance. He shall receive a reasonable compensation for all additional services. In the absence of the Clerk, a Clerk pro tempore may be chosen, who shall be a resident of Maine, and shall be duly sworn. Section 18. In the case of the absence of any officer of the corporation, or for any other reason that the Board may deem sufficient, the Board may delegate the powers or duties of such officers to any other officer or to any director, for the time being. Section 19. If the office of any director becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the remaining directors then in office, even though less than a quorum, by a majority vote may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred; but vacancies in the Board of Directors arising from the election of fewer directors than the total number fixed shall be filled in the manner prescribed by Section 7 thereof. Section 20. The Board of Directors shall have power to authorize the payment of compensation to the directors for services to the corporation, including fees for attendance at meetings of the Board of Directors, of the executive committee and all other committees and to determine the amount of such compensation and fees. Section 21. A. Indemnity To the fullest extent permitted by law, the Company shall indemnify each person made, or threatened to be made, a party to any threatened, pending, or completed claim, action, suit or proceeding, whether civil or criminal, administrative or investigative, and whether by or in the right of the Company or otherwise, by reason of the fact that such person, or such person's testator or intestate, is or was a director, officer or was an employee of the Company holding one or more management positions through and inclusive of managers (but not positions below the level of managers) (such positions being hereinafter referred to as "Management Positions") or is or was serving at the request of the Company as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in any capacity at the request of the Company, against all loss and expense actually or reasonably incurred by him including, without limiting the generality of the foregoing, judgments, fines, penalties, liabilities, sanctions, and amounts paid in settlement and attorneys fees and disbursements actually and necessarily incurred by him in defense of such action or proceeding, or any appeal therefrom. The indemnification provided by this Section shall inure to the benefit of the heirs, executors and administrators of such person. In any case in which a director, officer of the Company or employee of the Company holding one or more Management Positions requests indemnification with respect to the defense of any such claim, action, suit or proceedings, the Company may advance expenses (including attorney's fees) incurred by such person prior to the final disposition of such claim, action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of a written undertaking by or on behalf of such person to repay amounts advanced if it shall ultimately be determined that such person was not entitled to be indemnified by the Company under this Section or otherwise; provided, however, that the advancement of such expenses shall not be deemed to be indemnification unless and until it shall ultimately be determined that such person is entitled to be indemnified by the Company. Such a person claiming indemnification shall be entitled to indemnification upon a determination that no judgment or other final adjudication adverse to such person has established that such person's acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or such person personally obtained an economic benefit including a financial profit or other advantage to which such person was not legally entitled. Without limiting the generality of the foregoing provision, no former, present or future director or officer of the Company or employee of the Company holding one or more management positions, or his heirs, executors or administrators, shall be liable for any undertaking entered into by the Company or its subsidiaries or affiliates as required by the Securities and Exchange Commission pursuant to any rule or regulation of the Securities and Exchange Commission now or hereafter in effect or orders issued pursuant to the Public Utility Holding Company Act of 1935, the Federal Power Act, or any undertaking entered into by the Company due to environmental requirements including all legally enforceable environmental compliance obligations imposed by federal, state or local statute, regulation, permit, judicial or administrative decree, order and judgment or other similar means, or any undertaking entered into by the Company pursuant to any approved Company compliance plan or any federal or state or municipal ordinance which directly or indirectly regulates the Company, or its parent by reason of their being holding or investment companies, public utility companies, public utility holding companies or subsidiaries of public utility holding companies. The foregoing rights shall not be exclusive of any other rights to which any such director, officer or employee may otherwise be entitled and shall be available whether or not the director, officer or employee continues to be a director, officer or employee at the time of incurring any such expenses and liabilities. If any word, clause or provision of the By-laws or any indemnification made under this Section 21 shall for any reason be determined to be invalid, the remaining provisions of the By-Laws shall not otherwise be affected thereby but shall remain in full force and effect. The masculine pronoun, as used in the By-Laws, means the masculine and feminine wherever applicable. B. Insurance The Company may purchase and maintain insurance on behalf of any person described in Section 21 against any liability or expense (including attorney fees) which may be asserted against such person whether or not the Company would have the power to indemnify such person against such liability or expense under this Section 21 or otherwise. Section 22. The Board of Directors are authorized to select such depositaries as they shall deem proper for the funds of the corporation. All checks and drafts against such deposited funds shall be signed by such officers or such other persons as may be specified by the Board of Directors. Section 23. The corporate seal shall be circular in form, and shall have inscribed thereon the name of the corporation, followed by the word "Maine" and shall have the word "Seal" inscribed in the center thereof. Section 24. A director of this corporation shall not be disqualified by his office from dealing or contracting with the corporation, either as vendor, purchaser or otherwise, nor shall any transaction or contract of this corporation be void or voidable by reason of the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder or director is in any way interested in such transaction or shall be authorized, ratified or approved either (a) by vote of a majority of a quorum of the Board of Directors or the executive committee, without counting in such majority or quorum any directors so interested or being a member of a firm so interested or a shareholder or director of a corporation so interested, or (b) by vote at a stockholders' meeting of the holders of a majority of all the outstanding shares of the stock of the corporation entitled to vote or by a writing or writings signed by a majority of such holders; nor shall any director be liable to account to the corporation for any profit realized by him from or through any transaction or contract of this corporation authorized, ratified or approved as aforesaid, by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder or director was interested in such transaction or contract. Nothing herein contained shall create any liability in the events above described or prevent the authorization, ratification or approval of such contracts or transactions in any other manner provided by law. Section 25. These by-laws may be altered or amended (a) by a majority vote of the outstanding stock entitled to vote at any annual meeting or upon notice at any special meeting of stockholders, or (b) at any meeting of the Board of Directors by a majority vote of the entire Board then in office. EX-3 7 x3e2.txt Exhibit A Articles of Amendment to the Articles of Incorporation of Mississippi Power Company The first paragraph under the "Voting Powers" section of Paragraph Fourth is hereby deleted in its entirety and replaced with the following: At all elections of directors of the corporation, the holders of preferred stock shall have full voting rights with the holders of common stock, all voting together as a single class; each holder of preferred stock being entitled to one-half vote for each share thereof standing in his name and each holder of common stock being entitled to one vote for each share thereof standing in his name. On all other matters, except on matters in respect of which the laws of the State of Mississippi shall provide that all stockholders shall have the right to vote irrespective of whether such right shall have been relinquished by any of such stockholders and except as otherwise herein provided, the holders of common stock shall have the exclusive right to vote. Notwithstanding the foregoing, whenever and as often as four quarterly dividends payable on the preferred stock of any series shall be in default, in whole or in part, the holders of the preferred stock of all series shall have the exclusive right, voting separately and as a single class, to vote for and to elect the smallest number of directors that shall constitute a majority of the then authorized number of directors of the corporation, and, in all matters other than the election of directors, each holder of one or more shares of preferred stock shall be entitled to one vote for each such share of stock held by him. In the event of defaults entitling the preferred stock to vote as aforesaid, the holders of common stock shall have the exclusive right, voting separately and as a class, to vote for and to elect the greatest number of directors that shall constitute a minority of the then authorized number of directors of the corporation, and, in all matters other than the election of directors, each holder of common stock shall be entitled to one vote for each such share held by him. These additional voting rights of the holders of the preferred stock, however, shall cease when all defaults in the payment of dividends on their stock shall have been cured, and such dividends shall be declared and paid out of any funds legally available therefor as soon as, in the judgment of the Board of Directors, is reasonably practicable. EX-3 8 x3f2.txt ------------------------------------------------- BY LAWS of Savannah Electric and Power Company ------------------------------------------------- as Amended to May 17, 2000 ------------------------------------- BYLAWS of Savannah Electric and Power Company ------------------------------------- ARTICLE I Name The name of this Corporation shall be Savannah Electric and Power Company. ARTICLE II Stockholders' Meeting All meetings of the Stockholders shall be held at the principal office of the Corporation in Savannah, Georgia, unless some other place in Georgia is stated in the call. ARTICLE III Annual Meetings The annual meeting of the Stockholders of this Corporation shall be held on the third Tuesday in May in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding Tuesday not a legal holiday. In the event that such annual meeting is omitted by oversight or otherwise on the date herein provided therefor, a subsequent meeting may be held in place thereof, and any business transacted or elections held at such meeting shall be as valid as if transacted or held at the annual meeting. Such subsequent meeting shall be called in the same manner and as provided for special Stockholders' meetings. ARTICLE IV Special Meetings Special meetings of the Stockholders of this Corporation shall be held whenever the Chairman of the Board, the President or a Vice President, a majority of the Board of Directors, or the holders of at least one-fourth (1/4) part in interest of the capital stock issued and outstanding and entitled to vote thereat shall make application therefor to the Secretary or an Assistant Secretary, stating the time, place and purpose of the meeting applied for. Special meetings of the Stockholders shall also be held following the accrual of the rights of the Preferred Stock of the Corporation, voting as a class, to elect the smallest number of Directors of this Corporation necessary to constitute a majority of the members of the Board of Directors, whenever required to be held in accordance with the provisions of the Charter of the Corporation and/or any resolution of the Stockholders setting forth the powers, preferences, etc. of the various classes of stock of the Corporation. ARTICLE V Notice of Stockholders' Meetings Notice of all Stockholders' meetings, stating the time and place, and, in the case of special meetings, the objects for which such meetings are called, shall be given by the Secretary or an Assistant Secretary, by mail, to each Stockholder of record entitled to vote at said meeting at his or her registered address, at least ten (10) days prior to the date of the meeting, and the person giving such notice shall make affidavit in relation thereto; provided that notice of any such meeting shall be deemed to be sufficiently given to any Stockholder who, while the provisions of the Trading with the Enemy Act (Public Act No. 91 of the Sixty-fifth Congress of the United States of America, as now or hereafter amended) shall be operative, shall appear from the stock books to be or shall be known to the Corporation to be an "enemy" or "ally of enemy" as defined in the said Act and whose address appearing on such stock books is outside the United States, or the mailing to whom of notice shall at the time be prohibited by any other law of the United States of America or by any executive order or regulation issued or promulgated by any officer or agency of the United States of America (a) if, at least ten (10) days prior to the date of the meeting, a copy of the notice of the meeting shall be mailed to any person or agency who by any such law, order or regulation shall have been duly designated to receive such notice or duly designated or appointed as custodian of the property of such Stockholder; or (b) if a brief notice of such meeting, including, in the case of a special meeting, either a brief statement of the objects for which such meeting is called or a statement as to where there may be obtained a copy of a written notice containing a statement of such objects, shall be published by the Corporation at least once, not less than ten (10) days before the meeting in a daily newspaper published in the English language and of general circulation in the City of Savannah, Georgia; provided further, however, that notice of any Stockholders' meeting stating that an increase of the stock or an issuance of bonds will be considered, shall be published in a daily newspaper published in the English language and of general circulation in the City of Savannah, Georgia, once a week for four weeks prior to the time of holding such meeting. Any meeting at which all the Stockholders are present, either in person or represented by proxy, or of which those not present in person have waived notice in writing, shall be a legal meeting for the transaction of business, notwithstanding that notice has not been given as hereinbefore provided. ARTICLE Vl Waiver of Notice Notice of any Stockholders' meeting may be waived by any Stockholder. ARTICLE VII Quorum At any meeting of the Stockholders a majority in interest of all the capital stock issued and outstanding and entitled to vote, represented by Stockholders of record in person or by proxy, shall constitute a quorum, but a less interest may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the capital stock represented thereat shall decide any question brought before such meeting, unless the question is one upon which, by express provision of law or of the Charter of this Corporation or these Bylaws, a larger or different vote is required, in which case such express provision shall govern and control the decision of such question. The provisions of this Article are subject to the provisions of the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. ARTICLE VIII Proxy and Voting Stockholders of record may vote at any meeting either in person or by proxy in writing, which shall be filed with the Secretary of the meeting before being voted. The voting powers of the respective classes of stock of the Company shall be as provided in the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. ARTICLE IX Board of Directors A Board of not less than five nor more than fifteen Directors shall be chosen by ballot at the Annual Meeting of the Stockholders or at any meeting held in lieu thereof as hereinbefore provided. The number of Directors for each corporate year shall be fixed by vote at the meeting when elected, but the Stockholders may, at a special meeting called for the purpose during any such year, increase or decrease (within the limits above specified) the number of Directors as thus fixed and if necessary elect Directors to complete the number so fixed. A majority of the Directors shall be citizens and residents of Georgia. Each Director shall serve until the next Annual Meeting of the Stockholders and until his successor is duly elected and qualified. Directors need not be Stockholders of the Corporation. A non-employee Director shall become ineligible to serve as a Director (a) after his 70th birthday; (b) one year after permanent separation from the business or professional organization with which he was primarily associated when first elected as a Director; (c) one year after any other material change in his primary occupation or executive position from that which he pursued or held when first elected as a Director; or (d) one year after moving his principal residence outside the service area in which he was a resident when first elected a Director. The provisions of this paragraph shall apply to all such non-employee Directors regardless of the date of first election as a Director. The provisions of this Article are subject to the provisions of the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of Company. ARTICLE X Powers of Directors The Board of Directors shall have the entire management of the business of the Corporation. In the management and control of the property, business and affairs of the Corporation, the Board of Directors is hereby vested with all the powers possessed by the Corporation itself, so far as this delegation of authority is not inconsistent with the laws of the State of Georgia, with the Charter of the Corporation or with these Bylaws. The Board of Directors shall have power to determine what constitutes net earnings, profits and surplus, respectively, what amount shall be reserved for working capital and for any other purposes, and what amount shall be declared as dividends, and such determination by the Board of Directors shall be final and conclusive. ARTICLE XI Executive and Other Committees The Board of Directors may elect from their number an Executive Committee of not less than three or more than seven members, which Committee may exercise the powers of the Board of Directors in the management of the business of the Corporation when the Board is not in session. The Executive Committee shall report its action to the Board of Directors for approval. The Executive Committee may make rules for the holding and conduct of its meetings and the keeping of the records thereof. The Board of Directors may likewise elect or appoint from their number other committees from time to time, the number composing such committees and the powers conferred upon the same to be determined by vote of the Board of Directors. ARTICLE XII Meetings Regular meetings of the Board of Directors shall be held at such places and at such times as the Board may by vote from time to time determine, and if so determined no notice thereof need be given. Special meetings of the Board of Directors may be held at any time or place whenever called by the Chairman of the Board, the President, a Vice President, the Secretary, an Assistant Secretary, or five or more Directors, reasonable notice thereof being given to each Director by the Secretary or an Assistant Secretary or officer calling the meeting, or at any time without formal notice provided all the Directors are present, or those not present have waived notice thereof in writing. Such special meetings shall be held at such times and places as the notice thereof or waiver shall specify. ARTICLE XIII Quorum A majority of the total number of members of the Board of Directors as constituted for the time being, but not less than three, shall constitute a quorum for the transaction of business, but a less number may adjourn any meeting from time to time and the same may be held as adjourned without further notice. When a quorum is present at any meeting, a majority vote of the members in attendance thereat shall decide any questions brought before such meeting, except as otherwise provided by law, by the Charter of this Corporation or by these Bylaws. ARTICLE XIV Officers The officers of this Corporation shall be a Chairman of the Board, subject to Article XVII hereof, and a President, one or more Vice Presidents, a Secretary and a Treasurer. All officers shall be elected by the Board of Directors after its election by the Stockholders, and a regular meeting may be held without notice for this purpose immediately after the Annual Meeting of the Stockholders and at the same place. ARTICLE XV Additional Officers and Agents The Board of Directors at its discretion may appoint a General Manager, one or more Assistant Treasurers and one or more Assistant Secretaries, and such other officers or agents as it may deem advisable and prescribe the duties thereof. ARTICLE XVI Eligibility of Officers The Chairman of the Board, if any, and the President, shall each be a Director of the Corporation. The Vice Presidents, Secretary and Treasurer and such other officers as may be appointed may be but need not be Directors of the Corporation. The same person may hold the offices of Secretary and Treasurer. ARTICLE XVII Chairman of the Board The Corporation may, in the discretion of the Board of Directors, have a Chairman of the Board who, in such case, shall be the chief executive officer of the Corporation and, as such, shall have supervision of its policies, business, and affairs, and such other powers and duties as are commonly incident to the office of chief executive officer. He shall preside at the meetings of the Board of Directors and may call meetings of the Board of Directors and of any committee thereof, whenever he deems it necessary and he shall call to order and act as chairman of all meetings of the Stockholders of the Corporation. In addition, he shall have such other powers and duties as the Board of Directors shall designate from time to time. The Chairman of the Board, unless some other person is thereunto specifically authorized by vote of the Board of Directors, shall have power to sign all bonds, deeds and contracts of the Corporation. Should the Board of Directors determine not to have, or upon a vacancy occurring in such office fail to elect, a Chairman of the Board, such office shall cease to exist pending subsequent action by the Board of Directors recreating such office. ARTICLE XVIII President The President shall, subject to the supervision of the Chairman of the Board, have the direction of and responsibility for, the operations of the Corporation, and such other powers and duties as are commonly incident to that office. He shall also have such other powers and duties as the Board of Directors shall designate from time to time and, in the absence of the Chairman of the Board, or should such office fail to exist, shall have the powers and duties of the Chairman of the Board. The President or a Vice President, unless some other person is thereunto specifically authorized by vote of the Board of Directors, shall have power to sign all certificates of stock, bonds, deeds and contracts of the Corporation. ARTICLE XIX Vice Presidents A Vice President shall perform the duties and have the powers of the Chairman of the Board and the President during the absence or disability of the Chairman of the Board (or the nonexistence of said office) and the President and shall have power to sign all certificates of stock, bonds, deeds and contracts of the Corporation, and shall perform such other duties and have such other powers as the Board of Directors shall from time to time designate. ARTICLE XX Secretary The Secretary shall be present at all meetings of the Stockholders, of the Board of Directors and of the Executive Committee, and shall keep accurate records of the proceedings at such meetings in books provided for that purpose. He shall perform all the duties commonly incident to his office and shall perform such other duties and have such other powers as the Board of Directors shall from time to time designate. In the absence of the Secretary, an Assistant Secretary or a Secretary pro tempore shall perform his duties. The Secretary, Assistant Secretary or Secretary pro tempore shall be sworn. ARTICLE XXI Treasurer The Treasurer, subject to the order of the Board of Directors, shall have the care and custody of the money, funds, valuable papers and documents of the Corporation (other than his own bond, which shall be in the custody of the President), and shall have and exercise under the supervision of the Board of Directors, all the powers and duties commonly incident to his office, and shall give bond in such form and with such sureties as shall be required by the Board of Directors. He shall deposit all funds of the Corporation in such bank or banks, trust company or trust companies, or with such firm or firms doing a banking business as the Board of Directors shall designate. He may endorse for deposit or collection all checks, notes, et cetera, payable to the Corporation or to its order, may accept drafts on behalf of the Corporation, and shall, together with the President or a Vice President, sign all certificates of stock. He shall keep accurate books of account of the Corporation's transactions, which shall be the property of the Corporation, and, together with all its property in his possession, shall be subject at all times to the inspection and control of the Board of Directors. The Treasurer shall hold his office during the pleasure of the Board of Directors, and shall in every way be subject to their orders. All checks, notes, drafts or other obligations for the payment of money shall be signed by the Treasurer (except as the Board of Directors shall otherwise specifically order) and, with the exception of checks for the payment of not exceeding $10,000 (which require one signature) and notes, shall be countersigned as a condition to their validity by the Chairman of the Board or the President or such other officer or agent as the Board of Directors shall by resolution direct; notes shall be countersigned as a condition to their validity only by such officer or agent as the Board of Directors shall by resolution direct. Checks for the total amount of any payroll may be drawn in accordance with the foregoing provisions and deposited in a special fund. Checks upon this fund may be drawn by such person as the Treasurer shall designate, and need not be countersigned. The Directors may appoint one or more Assistant Treasurers with such powers and duties, including the powers and duties of the Treasurer as herein stated, as to them shall seem best. ARTICLE XXII Removals The Stockholders may, at any meeting called for the purpose, by vote of a majority of the capital stock issued and outstanding, remove any Director or other officer elected by them and elect his successor. The Board of Directors may, by vote of not less than a majority of the entire Board, remove from office any officer or agent elected or appointed by them. The provisions of this Article are subject to the provisions of the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. ARTICLE XXIII Vacancies If the office of any Director or officer or agent, one or more, becomes vacant by reason of death, resignation, removal, disqualification or otherwise, the remaining Directors, although less than a quorum, may, by a majority vote, choose a successor or successors who shall hold office for the unexpired term, but vacancies in the Board of Directors may be filled for the unexpired term by the Stockholders at a meeting called for that purpose, unless such vacancy shall have been filled by the Directors. The provisions of this Article are subject to the provisions of the Charter of the Company and/or any resolution of the Stockholders setting forth the powers, preferences, etc., of the various classes of stock of the Company. ARTICLE XXIV Capital Stock The amount of capital stock shall be as fixed in the Charter of this Corporation or as the same may be increased or decreased from time to time in accordance with the provisions of law. ARTICLE XXV Certificates of Stock Every Stockholder shall be entitled to a certificate or certificates of stock of the Company in form prescribed by the Board of Directors, duly numbered and sealed with the corporate seal of the Company, and setting forth the number and kind of shares represented thereby to which each Stockholder is entitled. Such certificates shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company. The Board of Directors may also appoint one or more Transfer Agents and/or Registrars for its stock of any class or classes and may require stock certificates to be counter-signed and/or registered by one or more of such Transfer Agents and/or Registrars. If certificates of capital stock of the Company are signed by a Transfer Agent or by a Registrar, the signature of the officers of the Company and the seal of the Company thereon may be facsimiles, engraved, printed or otherwise reproduced. Any provisions of these Bylaws with reference to the signing and sealing of stock certificates shall include, in cases above permitted, such facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Company, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Company, such certificate or certificates may nevertheless be adopted by the Board of Directors of the Company and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Company. ARTICLE XXVI Transfer of Stock Shares of stock may be transferred by delivery of the certificate, accompanied either by an assignment in writing on the back of the certificate, or by a written power of attorney to sell, assign and transfer the same, signed by the owner of the certificate. No transfer shall affect the right of the Corporation to pay any dividend due upon the stock, or to treat the holder of record as the holder in fact until such transfer is recorded upon the books of the Corporation or a new certificate is issued to the person to whom it has been so transferred. It shall be the duty of every Stockholder to notify the Corporation of his post office address. ARTICLE XXVII Record Dates The Board of Directors or the Executive Committee may fix in advance (a) a date, not less than ten (10) nor more than forty-five (45) days preceding the date of any meeting of the Stockholders, as a record date for the determination of Stockholders entitled to notice of and to vote at any such meeting or any adjournment thereof; (b) a date, not less than ten (10) nor more than thirty (30) days prior to the date for the payment of any dividend, or other distribution, or the date for the allotment of rights, or the date when any change, conversion or exchange of capital stock (including any exchange of stock upon a merger, consolidation or sale of all, or substantially all, of the assets of the Corporation) shall go into effect, as a record date for the determination of the Stockholders entitled to receive payment of any such dividend, or distribution, or to any such allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of capital stock, as the case may be; and (c) a date, not less than ten (10) nor more than forty-five (45) days preceding the date for the taking of any other lawful corporate action not covered by the foregoing, as a record date for the determination of Stockholders entitled to act thereon and/or receive the benefit thereof; notwithstanding, in any such case, any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. ARTICLE XXVIII Loss of Certificates In case of the loss, mutilation or destruction of a certificate of stock, a duplicate certificate may be issued therefor upon such terms as the Board of Directors shall prescribe. ARTICLE XXIX Seal The seal of this Corporation shall consist of a flat faced circular die with the words and figures "Savannah Electric and Power Company Corporate Seal 1921 Georgia" cut or engraved thereon. ARTICLE XXX Facsimile Signatures on Bonds and Debentures The signatures of any officer of this Corporation executing a corporate bond, debenture or other debt security of the Corporation or attesting the corporate seal thereon, or upon any interest coupons annexed to any such corporate bond, debenture or other debt security of the Corporation, and the corporate seal affixed to any such bond, debenture or other debt security of the Corporation, may be facsimiles, engraved or printed, provided that such bond, debenture or other debt security of the Corporation is authenticated or countersigned with the manual signature of an authorized officer of the corporate trustee designated by the indenture or other agreement under which said security is issued or of an authenticating agent appointed by such corporate trustee to act in its behalf or by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer or officers whose signature or signatures, whether manual or facsimile, shall have been used on any corporate bond, debenture or other debt security shall cease to be an officer or officers of the Corporation for any reason before the same has been delivered by the Corporation, such bond, debenture or other debt security may nevertheless be issued and delivered as though the person or persons whose signatures were used thereon had not ceased to be such officer or officers. ARTICLE XXXI Indemnification and Related Matters Each person who is or was a director or officer of the Corporation or is or was an employee of the Corporation holding one or more positions of management through and inclusive of department managers (but not positions below the level of department managers) (such positions being hereinafter referred to as "Management Positions") and who was or is a party or was or is threatened to be made a party to any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation or is or was an employee of the Corporation holding one or more Management Positions, or is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall be indemnified by the Corporation as a matter of right against any and all expenses (including attorneys' fees) actually and reasonably incurred by him and against any and all claims, judgments, fines, penalties, liabilities and amounts paid in settlement actually incurred by him in defense of such claim, action, suit or proceeding, including appeals, to the full extent permitted by applicable law. The indemnification provided by this Article shall inure to the benefit of the heirs, executors and administrators of such person. Expenses (including attorneys' fees) incurred by a director or officer of the Corporation or employee of the Corporation holding one or more Management Positions with respect to the defense of any such claim, action, suit or proceeding may be advanced by the Corporation prior to the final disposition of such claim, action, suit or proceeding, as authorized by the Board of Directors in the specific case, upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the Corporation under this Article or otherwise; provided, however, that the advancement of such expenses shall not be deemed to be indemnification unless and until it shall ultimately be determined that such person is entitled to be indemnified by the Corporation. The Corporation may purchase and maintain insurance at the expense of the Corporation on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or any person who is or was serving at the request of the Corporation as a director (or the equivalent), officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability or expense (including attorneys' fees) asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability or expense under this Article or otherwise. Without limiting the generality of the foregoing provisions, no present or future director or officer of the Corporation, or employee of the Corporation holding one or more Management Positions, or his heirs, executors, or administrators, shall be liable for any act, omission, step, or conduct taken or had in good faith, or for any undertaking entered into by the Corporation or its subsidiaries or affiliates which is required, authorized, or approved by any order or orders issued pursuant to the Public Utility Holding Company Act of 1935, the Federal Power Act, or any undertaking entered into by the Corporation due to environmental requirements including all legally enforceable environmental compliance obligations imposed by federal, state or local statute, regulation, permit, judicial or administrative decree, order and judgment or other similar means, or any undertaking entered into by the Corporation pursuant to any approved compliance plan, or any federal or state statute or municipal ordinance regulating the Corporation or its parent by reason of their being holding or investment companies, public utility companies, public utility holding companies, or subsidiaries of public utility holding companies. In any action, suit, or proceeding based on any act, omission, step, or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the foregoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not being applicable to the particular class of plaintiff, each such director and officer, or employee holding a Management Position, and his heirs, executors, and administrators, shall be reimbursed for, or indemnified against, all expenses and liabilities incurred by him or imposed on him, in connection with, or arising out of, any such action, suit, or proceeding based on any act, omission, step, or conduct taken or had in good faith as in this paragraph described. Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs, and attorneys' fees. The foregoing rights shall not be exclusive of any other rights to which any such director or officer or employee may otherwise be entitled and shall be available whether or not the director or officer or employee continues to be a director or officer or employee at the time of incurring any such expenses and liabilities. If any word, clause or provision of the Bylaws or any indemnification made under this Article shall for any reason be determined to be invalid, the provisions of the Bylaws shall not otherwise be affected thereby but shall remain in full force and effect. The masculine pronoun, as used in the Bylaws, means the masculine and feminine wherever applicable. ARTICLE XXXII Amendments The By-laws of the Company may be altered, amended or repealed (a) at any meeting of the Board of Directors by the vote of a majority of the entire Board then in office, or (b) by the vote of the holders of a majority of that part of the capital stock of the Company having voting powers which is represented in person or by proxy at any annual meeting of stockholders or at any special meeting called for that purpose (provided that a lawful quorum of stockholders be there represented in person or by proxy), or (c) without a meeting by the written consent of the holders of all of the issued and outstanding capital stock of the Company having voting powers; provided, however, that the Board of Directors shall not have power to alter, amend or repeal the provisions of Article VII or Article XXXI of the By-laws and provided, further, that an alteration, amendment or repeal of any other provision of the By-laws by the Board of Directors shall cease to be effective unless submitted to and ratified or approved at the next annual or special meeting at which a lawful quorum of stockholders is represented in person or by proxy by the vote of the holders of a majority of that part of the capital stock of the Company having voting powers which is represented in person or by proxy at such meeting ### EX-10 9 x10a6.txt Exhibit 10(a)6 Southern Company Services, Inc. Original Sheet No. 1 First Revised Rate Schedule FERC No. 138 SOUTHERN COMPANY SYSTEM INTERCOMPANY INTERCHANGE CONTRACT ARTICLE I - RECITALS Section 1.1: This contract is made and entered into this17th day of February, 2000, by and between Alabama Power Company, a corporation organized and existing under the laws of the State of Alabama with its principal office in Birmingham, Alabama; Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia with its principal office in Atlanta, Georgia; Gulf Power Company, a corporation organized and existing under the laws of the State of Maine with its principal office in Pensacola, Florida; Mississippi Power Company, a corporation organized and existing under the laws of the State of Mississippi with its principal office in Gulfport, Mississippi; Savannah Electric and Power Company, a corporation organized and existing under the laws of the State of Georgia with its principal office in Savannah, Georgia; and New Power Company, a corporation organized and existing under the laws of the State of ___________ with its principal office in ___________, ___________, all such companies being hereinafter collectively referred to as the "OPERATING COMPANIES"; and Southern Company Services, Inc., a subsidiary service company under the Public Utility Holding Company Act of 1935 ("AGENT" or "SCSI"). Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 Southern Company Services, Inc. Original Sheet No. 2 First Revised Rate Schedule FERC No. 138 WITNESSETH: Section 1.2: WHEREAS, the common stock of the OPERATING COMPANIES is owned by The Southern Company, a public utility holding company organized and operating pursuant to the provisions of the Public Utility Holding Company Act of 1935 ("the Act"); and Section 1.3: WHEREAS, the OPERATING COMPANIES can be operated as an integrated electric utility system pursuant to the standards of the Act; and Section 1.4: WHEREAS, the OPERATING COMPANIES have so operated their respective electric facilities and conducted interconnected electric operations pursuant to and in accordance with the provisions of interchange contracts, the most recent of which being The Southern Company System Intercompany Interchange Contract dated October 31, 1988, as amended ("the 1989 Contract"); and Section 1.5: WHEREAS, the OPERATING COMPANIES desire to replace the 1989 Contract with an amended and restated contract to incorporate in one document the numerous amendments subsequently made thereto and also to make further revisions to reflect appropriate modifications to the current arrangement. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 2 Southern Company Services, Inc. Original Sheet No. 3 First Revised Rate Schedule FERC No. 138 Section 1.6: WHEREAS, all of the OPERATING COMPANIES (including New Power Company) will share in all of the benefits and burdens of this IIC, including complying with operating, dispatch and reserve requirements, participating in opportunity sales transactions, and bearing responsibility for their portion of purchases. Section 1.7: NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter stated, the OPERATING COMPANIES agree and contract as follows: ARTICLE II - TERM OF CONTRACT Section 2.1: This contract will be referred to as the Southern Company System Intercompany Interchange Contract ("IIC"). Except as provided in Section 2.2, the IIC shall become effective on April 18, 2000, and shall continue in effect from year to year thereafter subject to termination as provided hereinafter. When this IIC has become effective, it shall supersede and replace the 1989 Contract, and references to a section of such superseded interchange contract in other agreements of the OPERATING COMPANIES shall be taken to mean reference to the section of substantially like import in this IIC. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 3 Southern Company Services, Inc. Original Sheet No. 4 First Revised Rate Schedule FERC No. 138 Section 2.2: Section 3.5 of the Allocation Methodology and Periodic Rate Computation Manual to the 1989 Contract contained a provision pertaining to the treatment of Operation and Maintenance ("O&M") expenses for units that were projected to operate at less than a ten percent (10%) annual capacity factor ("Ten Percent Rule"). The Ten Percent Rule is eliminated in Section 3.4 of this Manual, which change directly affects the dispatch of system resources. In the event the Federal Energy Regulatory Commission ("FERC") does not allow Section 3.4 of this Manual to take effect without refund obligation, those provisions of Section 3.5 of the Manual of the 1989 Contract setting forth the Ten Percent Rule shall continue in effect until Section 3.4 of this Manual is approved at the conclusion of the proceeding. Section 2.3: This IIC may be terminated at any time by mutual agreement of the OPERATING COMPANIES or may be terminated at any time by any OPERATING COMPANY by its giving to each of the other OPERATING COMPANIES and the AGENT written notice of its election to so terminate its participation in this IIC at least five (5) years prior to the date of termination. This IIC shall continue in full force and effect as to each OPERATING COMPANY until terminated as hereinabove provided. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 406001.4 4 Southern Company Services, Inc. Original Sheet No. 5 First Revised Rate Schedule FERC No. 138 ARTICLE III - PRINCIPAL OBJECTIVES OF INTERCOMPANY INTERCHANGE CONTRACT Section 3.1: The purpose of this IIC is to provide the contractual basis for the continued operation of the electric facilities of the OPERATING COMPANIES in such a manner as to achieve the maximum possible economies consistent with the highest practicable reliability of service, with the reasonable utilization of natural resources and effect on the environment, and to provide a basis for equitably sharing among the OPERATING COMPANIES the costs associated with the operation of facilities that are used for the mutual benefit of all the OPERATING COMPANIES. Section 3.2: It is recognized that reliability of service and economy of operation require that the energy supply to the system be controlled from a centralized dispatching office and that this will require adequate communication facilities and the provision of economic dispatch computer facilities and automatic controls of generation. Section 3.3: It is recognized that the IIC provides for the retention of lowest cost energy resources by each OPERATING COMPANY for its own customers. Energy in excess of that necessary to meet each OPERATING COMPANY's requirements is delivered to the Pool as Interchange Energy and may include: (i) energy generated from fossil fired generating plants and combustion turbines; and (ii) purchased energy. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 5 Southern Company Services, Inc. Original Sheet No. 6 First Revised Rate Schedule FERC No. 138 Section 3.4: It is recognized that, under this IIC, each OPERATING COMPANY will share in the benefits and pay its share of the costs of coordinated operations as agreed upon in accordance with the terms hereof. All costs and revenues associated with wholesale transactions under this IIC will be shared among all OPERATING COMPANIES (including New Power Company) on a comparable basis through the application of the governing procedures and methodologies to all such OPERATING COMPANIES. Section 3.5: It is recognized by the OPERATING COMPANIES that coordinated electric operation contemplates minimum cost of power supply upon the interconnected system at all times, consistent with service requirements and other operating limitations. Benefits of integrated operation accruing to the respective OPERATING COMPANIES are predicated upon cooperative efforts toward this objective and are so reflected in all IIC determinations. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 6 Southern Company Services, Inc. Original Sheet No. 7 First Revised Rate Schedule FERC No. 138 ARTICLE IV - ESTABLISHMENT OF OPERATING COMMITTEE AND DESIGNATION OF AGENT TO ACT UNDER DIRECTION OF OPERATING COMMITTEE Section 4.1 - Establishment of Operating Committee: A designated representative from each of the OPERATING COMPANIES, together with a designated representative of the AGENT who shall act as chairman, shall form and constitute an Operating Committee to meet at frequent intervals and determine the methods of operation hereunder. Section 4.2 - Duties of Operating Committee: The Operating Committee's areas of responsibility include such matters as developing the concepts, terms and conditions of this IIC; providing guidance and direction to the AGENT regarding economic power system operations and the costs associated therewith; reviewing and recommending generation expansion plans for approval by the respective OPERATING COMPANIES; and other power system matters that relate to the overall coordinated operation of the Southern electric system. Each OPERATING COMPANY representative has one vote and all decisions must be unanimous. Section 4.3 - Designation of AGENT: SCSI, as a party to this IIC, is designated as AGENT of the OPERATING COMPANIES for administrative and coordination functions. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 7 Southern Company Services, Inc. Original Sheet No. 8 First Revised Rate Schedule FERC No. 138 Section 4.4 - Duties of AGENT: The AGENT will perform such services and will represent the OPERATING COMPANIES, or any of them, in all things to be done by their agent in the execution of and operation under existing contracts with nonaffiliated utilities or entities (hereinafter referred to as "OTHERS"), or contracts supplemental thereto, and under any other contracts in which SCSI has been designated to act as AGENT for the OPERATING COMPANIES. The OPERATING COMPANIES have certain contracts with OTHERS that provide for the purchase and/or sale of capacity and/or energy by the OPERATING COMPANIES. The AGENT will make the payments associated with purchases under these contracts and under any other contracts or arrangements under which it acts as agent for the OPERATING COMPANIES in accordance with their terms. Each OPERATING COMPANY will reimburse the AGENT for its portion of such total payments in accordance with the arrangement in effect with respect to the particular contract. Similarly, the AGENT will collect the payments due for sales under these contracts and under any other contracts or arrangements under which it acts as agent and will distribute such payments among the OPERATING COMPANIES in accordance with the arrangement in effect with respect to the particular contract. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 8 Southern Company Services, Inc. Original Sheet No. 9 First Revised Rate Schedule FERC No. 138 Section 4.5 - Term of Agency: The provisions of this IIC providing for authority for the AGENT to act on behalf of the OPERATING COMPANIES, or any of them, shall be deemed to refer, insofar as applicable, to all contracts under which the AGENT acts as AGENT for the OPERATING COMPANIES and notwithstanding anything to the contrary in ARTICLE II hereof, this IIC shall continue in effect insofar as it pertains to other contracts under which the AGENT acts as agent for the OPERATING COMPANIES during the life of any of the said contracts. The OPERATING COMPANIES may, however, designate a new agent to act hereunder by giving thirty (30) days written notice thereof to the AGENT whereupon such new agent shall be the AGENT hereunder. ARTICLE V - OPERATION AND MAINTENANCE OF THE OPERATING COMPANIES' ELECTRIC FACILITIES Section 5.1: The OPERATING COMPANIES agree to maintain their respective electric facilities in good operating condition and to operate such facilities in coordination with those of the other OPERATING COMPANIES as an integrated electric system in accordance with determinations made from time to time by the Operating Committee in order that an adequate power supply shall be available to meet Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 9 Southern Company Services, Inc. Original Sheet No. 10 First Revised Rate Schedule FERC No. 138 the requirements of the customers of the respective parties hereto at the lowest cost consistent with a high degree of service reliability. ARTICLE VI - INCORPORATION OF THE ALLOCATION METHODOLOGY AND PERIODIC RATE COMPUTATION MANUAL Section 6.1 - Incorporation of Manual: The mechanics and methods for determining the charges for capacity and energy purchased and sold between the OPERATING COMPANIES, the monthly capability requirement determinations, and the monthly billings and payments between the OPERATING COMPANIES are described in detail in the Allocation Methodology and Periodic Rate Computation Manual ("Manual") attached hereto and incorporated herein by reference. The Manual also supplies more detailed explanation of provisions of this IIC and is necessary to effectuate its intent. Section 6.2 - Purpose of Manual: The Manual contains a description of the methodology and procedure used to calculate the charges for the services provided for in this IIC. The OPERATING COMPANIES recognize that the cost of providing such services Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 10 Southern Company Services, Inc. Original Sheet No. 11 First Revised Rate Schedule FERC No. 138 will change during the term of this IIC due to changes in loads, investment and expenses and the addition of electric facilities. Thus, in order for the OPERATING COMPANIES to share equitably in the cost of the services to be provided under this IIC, it will be necessary to revise or update, on a periodic basis, the cost, expense, load and investment figures utilized in the derivation of the charges for the services to be provided. The Manual will serve as a formula rate allowing periodic revision of the charges to reflect changes in the cost of providing the services contemplated by this IIC. Section 6.3 - Charges to be Shown on Informational Schedules: The Manual provides that charges derived by application of the formula rate will be shown on Informational Schedules. The Informational Schedules will be revised on a periodic basis to reflect application of the formula rate contained in the Manual. Section 6.4 - Revision of Charges and Regulatory Filings: Since the charges for the services provided for in this IIC will be computed in accordance with the formula rate method and procedures established in the Manual, it is contemplated that revisions in such charges will not be changes in rates which would require a filing and suspension under the Federal Power Act and the applicable Rules and Regulations of the FERC. The initial Informational Schedules will be submitted to the FERC, or its successor in Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 11 Southern Company Services, Inc. Original Sheet No. 12 First Revised Rate Schedule FERC No. 138 interest, for informational purposes to show the application of the formula rate and the resulting charges. In addition, work papers will be included with the initial Informational Schedules showing a detailed application of the formula rate contained in the Manual. Revised Informational Schedules will be submitted to the FERC for informational purposes only. Section 6.5 - Timing of Revisions to Charges: It is contemplated that charges, computed in accordance with the formula rate contained in the Manual, will be revised annually. It shall be the responsibility of the AGENT to obtain the data and figures required from the respective OPERATING COMPANIES for utilization in the formula rates. The AGENT will also be responsible for calculating the revised charges to be shown on the Informational Schedules, which will be submitted to the Operating Committee for review and confirmation. Section 6.6 - Revision of Manual: The Operating Committee will review the Manual periodically to determine whether revisions to the formula rate are necessary to meet changed or changing conditions. If the Operating Committee determines that revisions to the formula rate are appropriate or necessary, it will revise the Manual accordingly. In such event, it will be the responsibility of the AGENT to file the revised Manual with Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 12 Southern Company Services, Inc. Original Sheet No. 13 First Revised Rate Schedule FERC No. 138 the FERC, or its successor in interest, in order to obtain timely approval or acceptance thereof. ARTICLE VII - INTERCHANGE CAPACITY TRANSACTIONS BETWEEN THE OPERATING COMPANIES Section 7.1 - Provision for Sharing of Temporary Surpluses or Deficits of Capacity Between Operating Companies: The coordinated operation of the integrated electric system creates a pool of power, referred to herein as "the Pool," to which OPERATING COMPANIES commit their surplus power and from which OPERATING COMPANIES receive their deficit power. The OPERATING COMPANIES recognize that in a given year one or more of them may have a temporary surplus or deficit of capacity as a result of coordinated planning or other circumstances. It is the purpose of this IIC to allocate equitably between the OPERATING COMPANIES such temporary surplus or deficit capacity so that each OPERATING COMPANY will share in the burdens and benefits of coordination of the integrated electric system. The OPERATING COMPANIES agree to purchase and sell such temporary surplus and deficit capacity among themselves on a monthly basis. The amount of capacity to be purchased or sold by the respective OPERATING COMPANIES is determined by the formula methodology set out in ARTICLE IV of the Manual. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 13 Southern Company Services, Inc. Original Sheet No. 14 First Revised Rate Schedule FERC No. 138 Section 7.2 - Charge for Monthly Capacity Transactions Among the OPERATING COMPANIES: The OPERATING COMPANIES recognize that capacity reserves in the Pool are predominantly made up of peaking plant or equivalent resources. Accordingly, the monthly charge for capacity transactions among the OPERATING COMPANIES will be based on the most recently acquired peaking plant resource that is available for year-round operation and scheduling. Each OPERATING COMPANY's monthly charge for capacity sold to the Pool is developed in accordance with the formula rate set out in ARTICLE V of the Manual. The monthly capacity charge for each OPERATING COMPANY, as developed in accordance with such formula rate, will be shown on Informational Schedules. The selling OPERATING COMPANIES will make capacity available monthly to the Pool for purposes of reserve sharing at the charge shown on such Informational Schedules, and the buying OPERATING COMPANIES will purchase capacity at the average cost of peaking capacity to the Pool. ARTICLE VIII - INTERCHANGE ENERGY TRANSACTIONS BETWEEN THE OPERATING COMPANIES Section 8.1 - Provision for Interchange Energy: Coordinated electric system operation, utilizing the concept of centralized integrated electric system economic dispatch, results in energy transfers among the OPERATING COMPANIES. Such energy transfers are Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 14 Southern Company Services, Inc. Original Sheet No. 15 First Revised Rate Schedule FERC No. 138 accounted for on an hourly basis and are referred to as Interchange Energy. The methodology for determining the amount of Interchange Energy supplied to or purchased from the Pool is set out in ARTICLE II of the Manual. Interchange Energy is composed of two categories designated as: (i) Associated Interchange Energy (energy purchased or delivered to serve an OPERATING COMPANY's requirements); and (ii) Opportunity Interchange Energy (energy purchased or delivered to meet an OPERATING COMPANY's opportunity transactions). Section 8.2 - Charge for Interchange Energy: The charge for Interchange Energy sales by an OPERATING COMPANY during any hour will be based on the variable costs of the generating resources that are considered as having supplied the Interchange Energy. The methodology for determining the charges for Associated and Opportunity Interchange Energy sales to the Pool during any hour is set out in ARTICLE III of the Manual. ARTICLE IX - PROVISION FOR OTHER INTERCHANGE TRANSACTIONS Section 9.1 - Assignable Energy: Assignable Energy is defined as energy acquired from internal sources or from OTHERS for a purpose other than economic dispatch. Assignable Energy is assigned to one or more of the OPERATING COMPANIES Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 15 Southern Company Services, Inc. Original Sheet No. 16 First Revised Rate Schedule FERC No. 138 consistent with the purpose for which it is acquired. Such assignment will be accomplished by first identifying the beneficiary (or beneficiaries) of the Assignable Energy and then determining the appropriate share for each such Operating Company. For example, these shares might be based on a Peak Period Load Ratio (PPLR) in proportion to the PPLRs of other beneficiaries or relative participation in a bilateral sale. Once assigned, Assignable Energy will not be delivered to the Pool unless it becomes economically usable on the integrated electric system. Section 9.2 - Hydroelectric Operation During Periods of Minimum Steam Operations: During certain periods of the year when unusually good flow conditions prevail, certain steam generating units may be taken out of service to increase the utilization of hydro energy. The OPERATING COMPANY having such hydro generation may elect to take a fossil fired generating unit out of service. In the alternative, if another OPERATING COMPANY takes a fossil fired generating unit out of service for the purpose of utilizing such hydro energy, the energy rate between the two OPERATING COMPANIES for that transaction will be the average of the operation and maintenance cost of such hydro energy and the variable cost of the fossil fired generating unit, or as otherwise agreed upon by the two OPERATING COMPANIES. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 16 Southern Company Services, Inc. Original Sheet No. 17 First Revised Rate Schedule FERC No. 138 Section 9.3 - Tie-Line Frequency Regulation by Hydro Capacity: Tie-line load control and frequency regulation by hydro involves additional costs because of increased expenditures associated with such regulation. The charge for these transactions is computed in accordance with the formula rate contained in ARTICLE VI of the Manual. Section 9.4 - Pool Transactions with OTHERS: Capacity and energy transactions with OTHERS that are entered into on behalf of all OPERATING COMPANIES will be governed by the following principles: Section 9.4.1 - Pool Purchases of Capacity and Energy: The AGENT (or an individual OPERATING COMPANY for the AGENT) may periodically purchase capacity and energy from nonassociated sources for the benefit of the integrated electric system. Such Pool purchases will initially be allocated at cost to all OPERATING COMPANIES in proportion to their Peak-Period Load Ratios (as provided for in ARTICLE X of this IIC). Purchases so allocated may be sold as Interchange Energy when they are economically usable on the integrated electric system. Adjustments may thereafter be made in order to reconcile any inequitable effects of this process among the OPERATING COMPANIES, with the intent being that none of the individual OPERATING COMPANIES should be adversely impacted by a purchase that benefits Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 17 Southern Company Services, Inc. Original Sheet No. 18 First Revised Rate Schedule FERC No. 138 the system as a whole. These impacts will be determined through a system simulation that calculates each Operating Company's cost of generation that is avoided by the purchase. This avoided cost will be compared on an hourly basis to the cost of the purchase. To the extent the avoided cost exceeds the purchase cost, the effect is "positive" (i.e., cost savings) for that hour. These hourly results will be summed to determine the effect on each Operating Company for the day. In situations where individual Operating Companies are adversely impacted by a purchase that benefits the system as a whole, such adverse impacts will be offset through a proportional reduction in the positive net benefits realized by the other Operating Companies. Section 9.4.2 - Pool Sales of Capacity and Energy: The AGENT may from time to time arrange for the sale to OTHERS of capacity and energy available on the integrated electric system at rates provided for in contracts or at rates mutually agreed upon. The capacity and/or energy obligation for the sale, as well as the associated cost, is allocated to each OPERATING COMPANY on a Peak-Period Load Ratio basis (as provided for in Article X of this IIC). Payments by OTHERS are also distributed to the respective OPERATING COMPANIES on the basis of the Peak-Period Load Ratios. ARTICLE X - UTILIZATION OF PEAK-PERIOD LOAD RATIOS Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 18 Southern Company Services, Inc. Original Sheet No. 19 First Revised Rate Schedule FERC No. 138 Section 10.1 - Certain Allocations and Payments to be Based on Peak-Period Load Ratios: The AGENT is responsible for the annual development of Peak-Period Load Ratios for each of the OPERATING COMPANIES and such values shall be submitted to the Operating Committee for review and confirmation. These Ratios will be utilized for allocation of certain costs, payments, receipts and other obligations as provided for in this IIC or the Manual. The procedure and methodology for developing the Peak- Period Load Ratios are set out in ARTICLE I of the Manual and the values for such Ratios are shown on an Informational Schedule. Section 10.2 - Other Uses of Peak-Period Load Ratios: It is agreed that the Peak-Period Ratios shown on Informational Schedule No. 1 may be used, if appropriate, by the OPERATING COMPANIES to reimburse the AGENT for other expenses and costs not contemplated by this IIC. ARTICLE XI - TRANSMISSION SERVICE Section 11.1 - Applicability of Network Integration Transmission Service: Network Integration Transmission Service ("Network Service") provides for the integration, economic dispatch and regulation of current and planned Network Resources to serve Network Load. Since the OPERATING COMPANIES integrate, economically Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 19 Southern Company Services, Inc. Original Sheet No. 20 First Revised Rate Schedule FERC No. 138 dispatch and regulate their generating resources to serve their native load pursuant to this IIC, the associated use of the transmission system is in the nature of Network Service. The OPERATING COMPANIES' native load is specifically included in the determination of Load Ratio Shares used to derive the charge for Network Service under the Open Access Transmission Tariff, and therefore the OPERATING COMPANIES are bearing a cost responsibility for transactions hereunder comparable to that assigned to other Network Customers. Section 11.2 - Transmission Service for Other Transactions: To the extent the OPERATING COMPANIES require transmission service associated with transactions that are entered into for purposes other than serving native load customers, such transmission service will be obtained pursuant to the Open Access Transmission Tariff and/or from other transmission providers. ARTICLE XII - BILLING AND PAYMENT Section 12.1 - Recording and Billing of Energy Transactions: Each OPERATING COMPANY shall transmit to the AGENT daily all data and information necessary to develop the monthly bill for the various energy transactions contemplated by this IIC. Each OPERATING COMPANY will transmit such data and information to the Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 20 Southern Company Services, Inc. Original Sheet No. 21 First Revised Rate Schedule FERC No. 138 AGENT for each hour of the year to provide for such accounting and billing. All these data are recorded by the AGENT as required to meet the provisions of this IIC and to permit application of appropriate interchange charges. The OPERATING COMPANIES are responsible for an arithmetical check of all figures submitted. The AGENT is responsible for assembling all of the data and information and for determining amounts of various classes of energy delivered to and received from the Pool. The AGENT prepares intercompany energy billing for each month in accordance with the provisions of this IIC. The bills shall contain such details as required to permit review and verification by the OPERATING COMPANIES. Section 12.2 - Month-End Adjustment of Daily Energy Determinations: At the close of each month, the AGENT allocates energy from nonassociated sources to the OPERATING COMPANIES and determines the amounts of various classes of energy moved in interchange, based upon daily conditions. The sum of the daily totals in interchange does not exactly equal corresponding amounts determined by month-end meter readings because of certain minor transactions that are neither metered nor recorded daily. Such differences in energy receipts and deliveries are billed or credited to each OPERATING COMPANY at the average cost of Interchange Energy to the Pool for the month. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 21 Southern Company Services, Inc. Original Sheet No. 22 First Revised Rate Schedule FERC No. 138 Section 12.3 - Billing of Capacity Transactions: The AGENT prepares a monthly bill to the OPERATING COMPANIES for all capacity transactions contemplated by this IIC. The bill shall contain such details as required to permit review and verification by the OPERATING COMPANIES. Section 12.4 - Billing and Payment Date: The AGENT renders all bills provided for in this IIC not later than the 10th day of the billing month. All payments by the OPERATING COMPANIES are made by the 20th day of the billing month. Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 22 Southern Company Services, Inc. Original Sheet No. 23 First Revised Rate Schedule FERC No. 138 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages. ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY By Signature on Original By Signature on Original --------------------- --------------------- Its _____________________ Its GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY By Signature on Original By Signature on Original --------------------- --------------------- Its ____________________ Its GULF POWER COMPANY SOUTHERN COMPANY SERVICES, INC. By Signature on Original By Signature on Original --------------------- ---------------------- Its ____________________ Its [NEW POWER COMPANY] By [In formation] -------------- Its Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000 Issued on: June 20, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERCP. 61,259 23 EX-10 10 x10a52.txt SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN Amended and Restated TROUTMAN SANDERS LLP Bank of America Plaza 600 Peachtree Street, N.E., Suite 5200 Atlanta, Georgia 30308 (404) 885-3000 Effective January 1, 2001 SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN Purposes The purposes of the Southern Company Executive Productivity Improvement Plan (the "Plan") are to provide a financial incentive which will focus the efforts of certain executives on areas that will have a direct and significant influence on corporate performance and to provide the potential for levels of compensation that will enhance the Employing Companies' abilities to attract, retain and motivate such executives. In order to achieve these objectives, the Plan will be based upon corporate performance. This Plan is intended to meet the requirements of Code Section 162(m) related to the deductibility of Awards paid to Participants subject thereto. This Amendment and Restatement shall be effective as of January 1, 2001. ARTICLE I Definitions For purposes of the Plan, the following terms shall have the following meanings unless a different meaning is plainly required by the context: 1.1 "Annual Salary" shall mean base salary or wages paid to a Participant before deductions for taxes, social security, etc., including all amounts contributed by an Employing Company to The Southern Company Flexible Benefits Plan on behalf of a Participant, amounts contributed by any Employing Company to The Southern Company Employee Savings Plan as Elective Employer Contributions, as said term is defined in Section 4.1 therein, pursuant to the Participant's exercise of his deferral option made in accordance with Section 401(k) of the Internal Revenue Code, and amounts contributed to the Southern Company Deferred Compensation Plan, but excluding all awards under the Southern Company Performance Pay Plan, the Southern Company Performance Pay Plan (Shareholder Approved) and the Southern Company Executive Productivity Improvement Plan, overtime pay, shift differential and substitution pay. For Computation Periods beginning on or before January 1, 1998, Annual Salary shall be the Participant's Annual Salary as of the first day of the Computation Period. For Computation Periods beginning January 1, 1999 and thereafter, Annual Salary shall be the weighted average Annual Salary determined as of the last day of each of the four years within the Computation Period. 1.2 "Average ROE" shall mean the mathematical result obtained by (a) calculating the return on equity for each year in the Computation Period, (b) adding the return on equity calculations for all years in the Computation Period; and (c) dividing the total by the number of years in the Computation Period. 1.3 "Award" shall mean the Award Opportunity or Award Units multiplied by the Performance Unit Value determined under Sections 3.2 and 3.4 of the Plan and, for Equity Participants only, then converted into Restricted Stock Units as determined under Section 3.5 of the Plan. 1.4 "Award Opportunity" shall mean the award opportunity determined under Section 3.1 of the Plan. 1.5 "Award Unit" shall mean the unit opportunity determined under Section 3.3 of the Plan. 1.6 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc. 1.7 "Change in Control Benefit Plan Determination Policy" shall mean the change in control benefit plan determination policy, as approved by the Board of Directors, as it may be amended from time to time in accordance with the provisions therein. 1.8 "Chief Executive Officer" shall mean the individual designated as such by the Board of Directors of an Employing Company and of Southern Company. 1.9 "Committee" or "Compensation Committee" shall mean the Compensation Committee of the Board of Directors of Southern Company or the Employing Company. 1.10 "Common Stock" shall mean the common stock of Southern Company. 1.11 "Computation Period" shall mean a four-year period commencing on the first day of the initial year of participation and thereafter it shall mean a four-year period commencing the first day of January each year made up of the ROE Computation Period and the TSR Computation Period, if any, respectively. 1.12 "Employing Company" shall mean Southern Company Services, Inc., or any other affiliate or subsidiary (direct or indirect) of Southern Company, which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. 1.13 "Equity Participant" shall mean a Participant who is designated by the Committee to have his Award calculated using Restricted Stock Units. 1.14 "Executive Employee" shall mean any person who is currently employed by an Employing Company who is a "covered employee" as that term is defined in Section 162(m) of the Internal Revenue Code (the "Code") and who is designated as an Executive Employee by the Compensation Committee for purposes of participating in the Plan and such other persons employed by an Employing Company as the Compensation Committee in its discretion shall designate to participant in the Plan. 1.15 "Fair Market Value" shall mean the average of the high and low prices at which a share of Common Stock shall have been traded on the respective measurement date, such as the first and last days of a Computation Period, or on the next preceding trading day if such date was not a trading date, as reported on the New York Stock Exchange Composite Transactions Listing, or as otherwise determined by the Committee. In no event shall the Fair Market Value equal less than the par value of the Common Stock. 1.16 "Grade Level" shall mean the evaluation assigned under the job evaluation system. For Computation Periods beginning on or before January 1, 1998, Grade Level shall be the Participant's Grade Level as of the first day of the Computation Period. For Computation Periods beginning January 1, 1999 and thereafter, Grade Level shall be the weighted average Grade Level determined as of the last day of each of the four years within the Computation Period. 1.17 "Grade Level Value" shall mean the assigned dollar value within the Annual Salary range for a Grade Level in a Computation Period, upon which awards are based. 1.18 "Non-Adopting Employer" shall mean any subsidiary or affiliate of Southern Company which is not an Employing Company. 1.19 "Participant" shall mean an Executive Employee who satisfies the criteria referred to in Article II at the beginning of a Computation Period. 1.20 "Payment Date" shall mean the date the check evidencing the Award is endorsed by an authorized person of an Employing Company. 1.21 "Percentage of Total Award" shall have the meaning ascribed in Exhibits B and E hereof. 1.22 "Plan" shall mean the Southern Company Executive Productivity Improvement Plan, as described herein or as may be amended from time to time. 1.23 "Prior Plan" shall mean the Plan as amended and restated effective January 1, 1995. 1.24 "Restricted Stock Units" shall mean the number of shares of Common Stock deemed to have been awarded to the Equity Participant during a TSR Computation Period for the sole purpose of providing the Equity Participant with the opportunity to receive an Award which incorporates the appreciation on the Common Stock during the TSR Computation Period. 1.25 "Southern Company" shall mean The Southern Company. 1.26 "ROE Computation Period" shall have the meaning ascribed in Section 3.1 hereof. 1.27 "ROE Peer Group Companies" shall mean the companies set forth on Exhibit C attached hereto and as may be revised from time to time by the Committee to reflect mergers, acquisitions, reorganizations, etc. of such companies. 1.28 "Termination for Cause" or "Cause" shall mean the termination of a Participant's employment by an Employing Company under any of the following circumstances: (a) The Participant willfully neglects or refuses to discharge his or her duties to the Employing Company as an employee or refuses to comply with any lawful and reasonable instructions given to him or her by the Employing Company without reasonable excuse; (b) The Participant is guilty of gross misconduct. For purposes of this Plan, the following acts shall constitute gross misconduct: (i) any act involving fraud or dishonesty or breach of appropriate regulations of competent authorities; (ii) the carrying out of any activity or the making of any statement which would prejudice or impair the good name and standing of the Company or any Employing Company or would bring the Company or any Employing Company into contempt, ridicule or would reasonably shock or offend any community in which the Company or any Employing Company is located; (iii) attendance at work in a state of intoxication or otherwise being found in possession at his or her workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (iv) assault or other act of violence against any employee or other person during the course of the Participant's employment; and (v) conviction of any felony or misdemeanor involving moral turpitude. 1.29 "Total Shareholder Return" or "TSR" shall mean the total amount an investor would receive by investing $100 per quarter in Common Stock or in TSR Peer Group Common Stock, as the case may be, as determined by measuring the total dividends which would have been paid on such Common Stock or TSR Peer Group Common Stock by reinvesting such dividends on a quarterly basis in additional shares of Common Stock or TSR Peer Group Common Stock, as the case may be, and the total gain or loss on such Common Stock or Peer Group Common Stock as if such stock had been sold at the closing price on the last day of the respective Computation Period. 1.30 "TSR Computation Period" shall have the meaning ascribed in Section 3.3 hereof. 1.31 "TSR Peer Group Common Stock" shall mean the common stock of the Peer Group Companies. 1.32 "TSR Peer Group Companies" shall mean those companies considered part of the peer group of Southern Company for a Computation Period as determined and designated by the Committee and as set forth on a schedule adopted by the Committee and provided to the Plan Administrator. The Committee shall establish the TSR Peer Group Companies within the first ninety (90) days of a Computation Period. The Committee shall have the discretion to change the TSR Peer Group Companies at any time during a Computation Period. The Committee shall also have the discretion to determine whether or not such change shall apply to Participants subject to the limitations of Section 162(m) of the Code 1.33 "Value of Performance Unit" shall have the meaning ascribed in Exhibits B and E attached hereto. Where the context requires, words in the masculine gender shall include the feminine and neuter genders, words in the singular shall include the plural, and words in the plural shall include the singular. ARTICLE II Participants 2.1 Participation. Participation in the Plan shall be limited to Executive Employees of the Employing Companies. 2.2 Reduction in Grade Level. Any Participant who ceases to be an Executive Employee prior to the close of a Computation Period shall receive an Award for the Computation Period ending on December 31st of the year in which such Participant ceased to be an Executive Employee and shall forfeit any Award for any other Computation Periods that have not closed as of the date the Participant ceases to be an Executive Employee. 2.3 Termination of Employment. If a Participant's employment is terminated by reason of death, disability or retirement, such Participant or his or her estate shall be eligible to receive an Award for the Computation Period ending in the year of such death, disability or retirement unless such death, disability or retirement shall have occurred on January 1 in which case the Participant or his or her estate shall only be entitled to an Award for the Computation Period ending December 31 of the previous year. Any Participant who terminates employment for any other reason shall receive only any unpaid Award for a completed Computation Period and shall not be eligible to receive an Award for the Computation Period ending in the year of such termination of employment. 2.4 Transfer to Non-Adopting Employer. Notwithstanding the provisions of Section 2.3 above, in the case of an individual transferring from an Employing Company to a Non-Adopting Employer, any Award paid for any Computation Period not yet closed as of the date of a Participant's transfer shall be paid to the Participant by the Employing Company from which the Participant is transferring on the following basis: (i) 100% of the Award for the Computation Period ending in the year of transfer; (ii) 75% of the Award for the Computation Period ending in the first year following the year of transfer; (iii) 50% of the Award for the Computation Period ending in the second year following the year of transfer; and (iv) 25% of the Award for the Computation Period ending in the third year following the year of transfer. Such transferring Participant shall receive no award for any Computation Period which has not begun on the date of the Participant's transfer or if such Participant shall no longer be in an eligible Grade Level after such transfer. Any Awards payable under this Section 2.4 shall be based on the Grade Level at the time of transfer. 2.5 Transfer from Non-Adopting Employer. In the case of an individual transferring from a Non-Adopting Employer to an Employing Company whose Grade Level and length of service at the Non-Adopting Employer would have caused the Employee to have been a Participant in the Plan if the Non-Adopting Employer were an Employing Company and whose Grade Level after the transfer would enable the Employee to participate in the Plan, such individual shall be deemed to have been employed by an Employing Company while employed with the Non-Adopting Employer and shall, for any Computation Period ending after such transfer, be deemed a Participant in the Plan as if the Non-Adopting Employer was an Employing Company. Any Awards payable under this Section 2.5 shall be based on the Grade Levels at the Employing Company. 2.6 Termination for Cause. Notwithstanding any other provision of this Plan, a Participant whose employment is Terminated for Cause shall forfeit any and all unpaid Awards under this Plan. 2.7 Promotion. The administration of Awards for Participants who are promoted or transferred from one Grade Level included in the Plan to another Grade Level included in the Plan shall be based on the Participant's Grade Level Value on the last day of the Computation Period for which an Award is being granted. For the Computation Periods ending December 31, 1995, December 31, 1996, December 31, 1997 and December 31, 1998 a Participant's Grade Level Value for determining Awards shall be the Participant's Grade Level Value on January 1, 1995. 2.8 Maximum Award. Notwithstanding any other provision of this Plan, the maximum Award for any Computation Period payable to any Participant shall be two million dollars ($2,000,000). 2.9 1995 Participants. Any individual who initially becomes a Participant in the Plan as of January 1, 1995 shall be considered to have been participating in the Plan as of January 1, 1993 for purposes of determining benefits payable for any Computation Period that began or begins on or after January 1, 1993 and such Participant will therefore be eligible for an Award equal to seventy-five percent (75%) of the Award Opportunity for the Computation Period ending December 31, 1995. 2.10 Post-1995 Participants. In the case of an individual who becomes a Participant subsequent to January 1, 1995, said Participant will participate in each Computation Period which ends not less than two (2) years after becoming a Participant. ARTICLE III Corporate Financial Performance Award 3.1 ROE Computation Period. For Computation Period years beginning before January 1, 1997 (the "ROE Computation Period"), the Award Opportunity for each Participant shall be based upon either his Grade Level Value (as determined based on his Grade Level at the beginning of such period) or, in the Committee's discretion, upon his Annual Salary at the beginning of such period and in either case shall range from fifteen percent (15%) to sixty-five percent (65%) of such Grade Level Value or Annual Salary, as applicable. The Award Opportunity for each Grade Level or Annual Salary shall be determined in accordance with the chart set forth in Exhibit A hereof. The Committee shall have the discretion to change the Award Opportunity for a Computation Period. Additionally, the Committee shall have the discretion to determine whether such change applies to Participants subject to the limitations of Section 162(m) of the Code. 3.2 ROE Ranking. Each Award Opportunity granted in the ROE Computation Period shall be multiplied by the Value of Performance Unit factor and the Percentage of Total Award factor set forth in Exhibit B hereof, which is based on Southern Company's Average ROE ranking during the ROE Computation Period as compared to the Average ROE ranking of the ROE Peer Group Companies to determine a Participant's Award. The return on common equity of the ROE Peer Group Companies shall be determined annually by an independent certified public accountant based on generally accepted accounting principles and shall be properly adjusted and annualized by such accountant so that each ROE Peer Group Company return on common equity may be accurately compared to that of Southern Company. 3.3 TSR Computation Period. For Computation Period years beginning on or after January 1, 1997 (the "TSR Computation Period"), the Award Units for each Participant shall be based upon either his Grade Level Value or, in the Committee's discretion, upon his Annual Salary and, in either case shall range from fifteen percent (15%) to sixty-five percent (65%) of such Grade Level Value or Annual Salary, as applicable. The Award Units for each Grade Level or Annual Salary shall be determined in accordance with the charts set forth in Exhibit D hereof. The Committee shall have the discretion to change the Award Units for a Computation Period. Additionally, the Committee shall have the discretion to determine whether such change applies to Participants subject to the limitations of Section 162(m) of the Code. 3.4 TSR Ranking. Each Award Unit granted in the TSR Computation Period shall be multiplied by the Value of Performance Unit factor and the Percentage of Total Award factor set forth in Exhibit E hereof which is based on Total Shareholder Return of Southern Company as compared to the Total Shareholder Return for the TSR Peer Group Companies. The Total Shareholder Return of Southern Company and the TSR Peer Group Companies shall be determined annually by an independent certified public accountant and shall be properly adjusted and amortized by such accountant so that each TSR Peer Group Company's total shareholder return may be accurately compared to that of Southern Company. 3.5 Restricted Stock Unit Conversion. Notwithstanding Sections 3.3 and 3.4, the Award for Equity Participants during the TSR Computation Period shall be determined as follows: (a) determine the number of Award Units pursuant to Section 3.3; (b) multiply the Award Units by the percentage of the Award that is to be converted (as determined by the Committee in its sole discretion) ("Adjusted Award Units"); (c) divide the Adjusted Award Units by the Fair Market Value of the Common Stock on January 1 of the applicable TSR Computation Period to determine the number of Restricted Stock Units available during the TSR Computation Period; (d) multiply the Restricted Stock Units by the Value of the Performance Unit factor and the Percentage of Total Award factor as set forth in Section 3.4 of the Plan ("Total Restricted Stock Units"); (e) convert the Total Restricted Stock Units by multiplying such portion of the Total Restricted Stock Units by the Fair Market Value of Common Stock on the last day of the TSR Computation Period. Notwithstanding any prior provision of Section 3.5, no Award payable under Section 3.5 shall be paid in common stock. The Award shall equal the Total Restricted Stock Units converted pursuant to subsection (e) above. Notwithstanding anything in the Plan to the contrary, the Committee shall have the sole discretion to determine who will be designated an Equity Participant and what percentage of an Award to an Equity Participant shall be converted to Restricted Stock Units. The Equity Participant shall have no ownership rights associated with the Restricted Stock Units (including the right to any dividends on Common Stock). The Restricted Stock Units shall be used solely for the purpose of measurement. 3.6 Insufficient Earnings. Notwithstanding the above provisions, an Award will not be granted, awarded or paid for any Computation Period ending with the calendar year in which the current earnings of Southern Company are less than the amount necessary to fund the dividends on its Common Stock at the rate such dividends were paid for the immediately preceding calendar year. 3.7 Extraordinary Income. In the exercise of negative discretion, the Compensation Committee may calculate the Award for one or more Computation Period(s) without regard to any extraordinary income item (but not loss) otherwise recorded by Southern Company or any Employing Company, provided such determination that an item of income is extraordinary is made by the Committee prior to the close of the Computation Period. 3.8 Payment. The Awards will be paid in cash for Participants and in one-half in cash and one-half in Common Stock (pursuant to Section 3.5 (e) and (f) above) for Equity Participants, as soon as is practicable after all evaluations are completed. An Award payment may not be deferred under this Plan. In the event an Award was deferred under the Prior Plan, such deferral shall be governed by the terms of the Prior Plan. ARTICLE IV Change in Control The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control of Southern Company or an Employing Company and the benefits to be provided hereunder in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein. ARTICLE V Miscellaneous Provisions 5.1 No Assignment. Neither the Participant, his beneficiary, nor his personal representative shall have any rights to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payments of this Plan shall be void and have no effect. 5.2 No Reserve. The Employing Company shall not reserve or otherwise set aside funds for the payments of Awards deferred in accordance with the Prior Plan. 5.3 Plan Amendment. Except for the provisions of Article IV hereof, which may not be amended, modified or terminated following a "Southern Change in Control," "Subsidiary Change in Control" or a "Southern Termination" (as such terms are defined in the Change in Control Benefit Plan Determination Policy), the Plan may be amended, modified, or terminated by the Board of Directors in its sole discretion at any time and from time to time; provided, however, that no such amendment, modification, or termination shall impair any rights to payments which have been deferred under the Prior Plan prior to such amendment, modification, or termination. 5.4 Additional Benefits. It is expressly understood and agreed that the Awards made in accordance with the Plan are in addition to any other benefits or compensation to which a Participant may be entitled or for which he may be eligible, whether funded or unfunded, by reason of his employment with the Employing Company. 5.5 Withholding. There shall be deducted from the payment of each Award under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Employing Company to such governmental authority for the account of the person entitled to such distribution. 5.6 Effect On Other Benefits. Any Awards paid to a Participant while employed by an Employing Company shall not be considered in the calculation of the Participant's benefits under any other employee welfare or pension benefit plan maintained by an Employing Company, unless otherwise specifically provided therein. 5.7 Governing Law. This Plan, and all its rights under it, shall be governed by and construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officers, hereby amends and restates the Southern Company Executive Productivity Improvement Plan this ____ day of ______________, 2001 to be effective January 1, 2001. SOUTHERN COMPANY SERVICES, INC. By: ------------------------------- Its: ------------------------------- Attest: By: -------------------------------------------- Its: -------------------------------------------- SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT A Award Opportunity Grade Level Value Award Opportunity Percentage of Grade Level Value or Annual Salary President/CEO 50/65% 15 50% 14 45% 13 40% 12 35% 11 30% 10 25% 9 25% 8 20% 7 15% SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT B AWARD PERCENTAGE SCHEDULE Position Ranking Value of Performance Unit 12-14 15-17 18-20 $ Companies Companies Companies - ---------------- --------- --------- --------- $2.00 Top Top Top 1.80 1.0 1.0 1.0 1.60 2.0 2.0 2.0 1.40 2.5 3.0 3.0 1.20 3.0 4.0 4.0 1.00 4.0 4.5 5.0 .90 4.5 5.0 6.0 .80 5.0 6.0 7.0 .70 6.0 7.0 8.0 .60 6.5 8.0 9.0 .50 7.0 8.5 10.0 0 Below 7.0 Below 8.5 Below 10 Percentage Of Total Award Factor Computation Period Ending Factor December 31, 1997 75% December 31, 1998 50% December 31, 1999 25% Thereafter 0% SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT C ROE Peer Group Companies Allegheny Energy, Inc. Alliant Energy Corporation Ameren Corporation American Electric Power Company Baltimore Gas & Electric Company BEC Energy Carolina Power & Light Company Central & South West Corporation CILCORP. Inc. Cinergy Corporation Cleco Corporation Conectiv CIV CMS Energy Corporation Commonwealth Energy System Consolidated Edison, Inc. Dominion Resources, Inc. DPL, Inc. DQE, Inc. DTE Energy Company Duke Energy Corporation Eastern Utilities Associates Edison International Energy East Corporation Entergy Corporation FirstEnergy Corporation Florida Progress Corporation FPL Group, Inc. GPU, Inc. Hawaiian Electric Industries, Inc. Houston Industries, Inc. IDACORP, Inc. Illinova Corporation Interstate Energy Corporation IPALCO Enterprises, Inc. Washington Water Power Co. Western Resources, Inc. WPS Resources Corp. Kansas City Power & Light Company Keyspan Energy Corporation LG&E Energy Corporation MDU Resources MidAmerican Energy Holdings Co. Minnesota Power Company Montana Power Company Nevada Power Co. New Century Energies, Inc. New England Electric System Niagara Mohawk Power Corp. NIPSCO Industries, Inc. Northeast Utilities Co. Northern States Power Co. OGE Energy Corp. Orange & Rockland Utilities, Inc. PG&E Corp. PacifiCorp PECO Energy Co. Pinnacle West Capital Corp. Potomac Electric Power Co. PP&L Resources, Inc. Public Service Co. of New Mexico Public Service Enterprise Group, Inc. Puget Sound Energy, Inc. Rochester Gas & Electric Corp. SCANA Corp. Sierra Pacific Resources SIGCORP, Inc. TECO Energy, Inc. Texas Utilities Company Unicom Corp. Unisource Energy Corp. United Illuminating Company UtiliCorp. United, Inc. Wisconsin Energy Corp. SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT D Award Units Grade Level Value Award Units Percentage of Grade Level Value or Annual Salary President/CEO 50/65% 15 50% 14 45% 13 40% 12 35% 11 30% 10 25% 9 25% 8 20% 7 15% SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT E Performance Unit Factor* Value of Unit Percentile of Southern TSR vs. Investor Utility $ 2.00 90th and above $ 1.50 70th $ 1.00 50th $ .50 30th $ .00 Below 30th *The Value of Unit for performance levels falling between the percentiles listed above shall be interpolated on a straight line basis for any given calendar year. Percentage Of Total Award Factor Computation Period Ending Factor December 31, 1997 25% December 31, 1998 50% December 31, 1999 75% Thereafter 100% EX-10 11 x10a54.txt SIXTH AMENDMENT TO THE SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN WHEREAS, the Employee Savings Plan Committee ("Committee") heretofore adopted the amendment and restatement of The Southern Company Employee Savings Plan ("Plan"), effective as of January 1, 1997; WHEREAS, Southern Energy Resources, Inc. ("SERI"), an Employing Company under the Plan, will become the employer of certain individuals currently employed by Southern Company Energy Marketing, L.P. ("SCEM") following a reorganization of SCEM; WHEREAS, the Southern Company ("Southern") anticipates that in 2001 it will distribute pro rata to the Southern shareholders all of the stock of Southern Energy, Inc. ("SEI") held by Southern pursuant to a tax-free spin-off under Section 355 of the Internal Revenue Code; WHEREAS, in connection with such transaction, Southern and SEI have entered into an Employee Matters Agreement ("Agreement") to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, benefit plans and programs, and certain employment matters; WHEREAS, the Committee desires to amend the Plan to exclude the former employees of SCEM from participating in the Plan by virtue of their employment with SERI; WHEREAS, the Committee desires to amend the Plan to address the spin-off of SEI from Southern, including making such changes as are necessary pursuant to the Agreement; WHEREAS, the Committee desires to amend the Plan to make certain other technical changes and to reflect recent changes in the law; and WHEREAS, the Committee is authorized pursuant to Section 15.1 of the Plan to amend the Plan at any time, provided that the amendment does not involve a substantial increase in cost to any Employing Company or is necessary or desirable to comply with the laws and regulations applicable to the Plan. NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be effective as of the dates indicated: 1. Sections 2.20 and 2.21 of the Plan shall be eliminated in their entirety, effective as of January 1, 2001. Each subsequent Section in Article II shall remain as currently numbered until such time as the Plan is amended and restated. 2. Section 2.27 of the Plan shall be amended to read as follows, effective as of December 22, 2000: 2.27 "Eligible Employee" shall mean an Employee who is employed by an Employing Company and (a) who was eligible to be included in the Plan on January 1, 1991, or (b) who is a regular full-time, regular part-time, or cooperative education employee other than: (1) an Employee who is treated as such solely by reason of the "leased employee" rules of Code Section 414(n) such that, pursuant to an agreement between an Employing Company and any other person, such individual has performed services for the Employing Company (or the Employing Company and related persons as described in Code Section 414(n)(6)) on a substantially full-time basis for a period of at least one year and such services were performed under the primary direction or control of the Employing Company; (2) any Employee who is represented by a collective bargaining agent unless the representatives of his bargaining unit and the Employing Company mutually agree to participation in the Plan subject to its terms by members of his bargaining unit; (3) an individual who is a cooperative education employee and who first performs an Hour of Service on or after January 1, 1995; (4) an individual who is classified by the Employing Company as a temporary employee (who was not eligible to be included in the Plan on January 1, 1991) or an independent contractor, regardless of whether such classification is determined to be in error. Effective September 1, 1998, any individual classified by the Employing Company as a temporary employee shall be excluded from the Plan, regardless of any prior inclusion in the Plan and regardless of whether the "temporary employee" classification is determined to be in error; and (5) an individual, who would otherwise be eligible to participate in the Plan by virtue of his employment by SERI, but who (i) was an employee of SCEM on December 22, 2000, (ii) was hired by SERI on or after December 23, 2000, and who was a former employee of SCEM, or (iii) was hired by SERI on or after December 23, 2000, who is employed in the Americas Group and whose job function is indicated on Exhibit A attached hereto. 3. Paragraph (5) of Section 2.27 of the Plan shall be amended to read as follows, effective as of the Group Status Change Date as defined in the Agreement: (5) an individual who is employed by SERI. 4. Section 2.48 of the Plan shall be amended to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 2.48 "Participant" shall mean (a) an Eligible Employee who has elected to participate in the Plan as provided in Article III and whose participation in the Plan at the time of reference has not been terminated as provided in the Plan, (b) an Employee or former Employee who has ceased to be a Participant under (a) above, but for whom an Account is maintained under the Plan, (c) an Eligible Employee who has made a Rollover Contribution to this Plan to the extent that the Provisions of the Plan apply to such Rollover Contribution of the Eligible Employee, and (d) an Employee or former Employee for whom a Transferred ESOP Account is maintained under the Plan. 5. The second paragraph of Section 2.66, "Year of Service", including subsections (a) and (b) of such paragraph, shall be eliminated in its entirety, effective as of January 1, 2001. 6. Two new definition Sections shall be added to the Plan to read as follows, effective as of December 22, 2000: 2.67 "SCEM" shall mean Southern Company Energy Marketing, L.P. 2.68 "SERI" shall mean Southern Energy Resources, Inc. 7. Five new definition Sections shall be added to the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 2.69 "SEI" shall mean Southern Energy, Inc., any subsidiary of Southern Energy, Inc., or any successor thereto. 2.70 "SEI Stock" shall mean the common stock of SEI. 2.71 "SEI Stock Account" shall mean the total amount credited to the Account of a Participant as described in Section 9.1(c). 2.72 "SEI Stock Fund" shall mean the fund established to hold SEI Stock as described in Section 8.8. 2.73 "Transferred ESOP Account" shall mean the total amount credited to the Account of a Participant as described in Section 9.1(d). 8. Section 3.1 of the Plan shall be amended to read as follows, effective as of January 1, 2001: 3.1 Eligibility Requirements. Each Eligible Employee who was an active Participant on December 31, 2000 shall continue to be an active Participant in the Plan on January 1, 2001, provided he remains an Eligible Employee. Each other Eligible Employee may elect to participate in the Plan as of any Enrollment Date after the Employee's first day of employment as an Eligible Employee or as soon as administratively practicable thereafter. An Eligible Employee shall make an election to participate by authorizing deductions from or reduction of his Compensation as contributions to the Plan in accordance with Article IV, and directing the investment of such contributions in accordance with Article VIII. Such Compensation deduction and/or reduction authorization and investment direction shall be made in accordance with the procedures established by the Committee. 9. Section 3.2 of the Plan shall be amended to read as follows, effective as of January 1, 2001: 3.2 Participation upon Reemployment. If an Employee terminates his employment with an Affiliated Employer and is subsequently reemployed as an Eligible Employee, he may elect to become an active Participant in the Plan as of the date of his reemployment or as soon as administratively practicable thereafter. 10. Sections 3.5 through 3.9 of the Plan shall be deleted in their entirety, and Section 3.10 shall be renumbered as Section 3.5, effective as of January 1, 2001. 11. Section 6.1 of the Plan shall be amended to read as follows, effective as of January 1, 2000: 6.1 Section 415 Limitations. Notwithstanding any provision of the Plan to the contrary, the total Annual Additions allocated to the Account (and the accounts under all defined contribution plans maintained by an Affiliated Employer) of any Participant for any Limitation Year in accordance with Code Section 415 and the regulations thereunder, which are incorporated herein by this reference, shall not exceed the lesser of the following amounts: (a) twenty-five percent (25%) of the Participant's compensation (as defined in Code Section 415(c)(3) and any rulings and regulations thereunder) in the Limitation Year; or (b) $30,000 (as adjusted pursuant to Code Section 415(d)(1)(C)). The Annual Addition for any Plan Year beginning before January 1, 1987 shall not be recomputed to treat all Voluntary Participant Contributions as an Annual Addition. 12. Section 6.3 of the Plan shall be amended to read as follows, effective as of January 1, 2000: 6.3 Combination of Plans. If an Employee participates in more than one defined contribution plan maintained by an Affiliated Employer and his Annual Additions exceed the limitations of Section 6.1, corrective adjustments shall be made first under this Plan and then, to the extent necessary, under The Southern Company Performance Sharing Plan and then, to the extent necessary, under The Southern Company Employee Stock Ownership Plan. 13. A new Section 8.8 shall be added to the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 8.8 SEI Stock Fund. All SEI Stock received by the Plan pursuant to Sections 9.1(c) and 9.1(d) shall be held in a "SEI Stock Fund." Participants may direct investments out of the SEI Stock Fund and into the other Investment Funds in accordance with the procedures of this Article VIII. However, Participants may not direct investments into the SEI Stock Fund and, should a Participant elect to direct investments out of the SEI Stock Fund, he may not again direct any amount attributable to such investments back into the SEI Stock Fund. In no event shall the SEI Stock Fund remain as an Investment Fund under the Plan later than the end of the calendar quarter which includes the five-year anniversary of the date SEI Stock is first held in the SEI Stock Fund. 14. New subsections (c) and (d) shall be added to Section 9.1 of the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: (c) Upon the distribution by the Southern Company to its shareholders of the SEI Stock held by the Southern Company pursuant to a tax-free spin-off under Code Section 355 or such similar transaction, the Committee shall establish a subaccount known as a Participant's "SEI Account" to reflect the Participant's interest in the SEI Stock received by the Plan (other than SEI Stock transferred to the Plan as described in Section 9.1(d)) pursuant to such transaction. To the extent that shares of SEI Stock are attributable to Common Stock in a Participant's subaccounts which reflect Elective Employer Contributions, Voluntary Participant Contributions, Employer Matching Contributions, Rollover Contributions, and amounts in a Participant's SEPCO Transferred Account, the shares of SEI Stock attributable to each shall retain their character as Elective Employer Contributions, Voluntary Participant Contributions, Employer Matching Contributions, Rollover Contributions, and amounts in a Participant's SEPCO Transferred Account, respectively, and the Committee shall establish and maintain such bookkeeping accounts as it deems necessary to account for such SEI Stock, and any subsequent earnings or losses attributable thereto, under this Plan. (d) Upon the transfer to the Plan of the SEI Stock distributed to The Southern Company Employee Stock Ownership Plan ("ESOP") in connection with a transaction described in Section 9.1(c), the Committee shall establish a subaccount known as a Participant's "Transferred ESOP Account" to reflect the Participant's interest in the Plan attributable to the SEI Stock transferred to the Plan from the ESOP. The Committee shall establish and maintain separate bookkeeping accounts within the Transferred ESOP Account for amounts attributable to the SEI Stock that was distributed on Common Stock which had been held in the ESOP for more than two years as of the date of transfer, amounts attributable to SEI Stock that was distributed on Common Stock which had been held in the ESOP for more than one year but less than two years as of the date of transfer, and amounts attributable to SEI Stock that was distributed on Common Stock which had been held in the ESOP for less than one year as of the date of transfer, respectively. 15. Subsection (a) of Section 11.1 of the Plan shall be amended to read as follows, effective as of the Group Status Change Date as defined in the Agreement: (a) Subject to the provisions of Article XII, this Section 11.1, and Sections 11.2 through 11.6, a Participant may make withdrawals from his Account effective as of any Valuation Date in the order of priority listed below: (1) All or a portion of the value of his Account attributable to Voluntary Participant Contributions (not including any earnings or appreciation thereon) made prior to January 1, 1987; (2) All amounts described above, plus all or a portion of the value of his Account attributable to Voluntary Participant Contributions, plus a ratable portion of the earnings and/or appreciation on Voluntary Participant Contributions; (3) All amounts described above, plus effective April 1, 1997, all or a portion of the value of his Account attributable to Rollover Contributions (including earnings and appreciation thereon); (4) All amounts described above, plus the value of his Transferred ESOP Account as described in Section 9.1(d); provided, however, that the amount in his Transferred ESOP Account attributable to SEI Stock that was distributed on Common Stock which had been held in the ESOP for less than two years as of the date of transfer may not be distributed until the first day of the month following the two-year anniversary of the date such Common Stock was contributed to the ESOP; (5) All amounts described above, plus up to fifty percent (50%) of the value of his Account attributable to Employer Matching Contributions (including earnings and appreciation thereon) allocated to his Account; provided, however, that said Participant shall have participated in the Plan for not less than sixty (60) months at the time of the withdrawal; (6)(A) For Participants who have not attained age 59 1/2 or separated from service with the Affiliated Employers (within the meaning of Code Section 401(k)(2)(B)(i)(I)), all amounts described above, plus all or a portion of the value of his Account attributable to Elective Employer Contributions (not including any earnings or appreciation thereon for Plan Years beginning after December 31, 1988); and (B) For Participants who have attained age 59 1/2 or separated from service with the Affiliated Employers (within the meaning of Code Section 401(k)(2)(B)(i)(I)), all amounts described above, plus all or a portion of the value of his Account attributable to any earnings or appreciation on Elective Employer Contributions. For purposes of this Section 11.1, any individual who becomes a Participant solely because a Transferred ESOP Account is established on behalf of such individual shall be treated as participating in the Plan as of the date such Transferred ESOP Account is established. 16. The reference to "Section 11.1(a)(5)(A)" in Section 11.6 shall be replaced by "Section 11.1(a)(6)(A)", effective as of the Group Status Change Date as defined in the Agreement: 17. Subsection (c) of Section 11.7 of the Plan shall be amended to read as follows, effective as of January 1, 2001: (c) The principal amount of a loan shall be obtained pro rata from each Investment Fund in which the Participant's Account is invested at that time such loan is obtained. 18. The phrase "and/or SEI Stock" shall be added following the reference to "Common Stock" in paragraph (2) of subsection (a) of Section 12.1, effective as of the Group Status Change Date as defined in the Agreement. 19. Section 12.11 of the Plan shall be amended to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 12.11 Form of Payment. All distributions under this Article XII shall be made in the form of cash, provided that the person entitled to such distribution may demand that the portion of any distribution which is attributable to Common Stock or SEI Stock be distributed in the form of such Common Stock or SEI Stock, respectively, to the extent of the whole number of shares in the Participant's Account, with a cash adjustment for any fractional shares. 20. A new sentence shall be added to the end of Section 14.3 of the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: Procedures similar to those described above shall also apply to voting the SEI Stock credited to each Participant's Account. 21. The phrase "or SEI Stock Fund" shall be added to the end of the first sentence of Section 14.4 of the Plan, effective as of the Group Status Change Date as defined in the Agreement. 22. The phrase ", as provided in regulations prescribed by the Secretary of the Treasury" shall be added to the end of the last sentence of Section 15.1 of the Plan, effective as of September 5, 2000. 23. A new Section 15.4 shall be added to the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 15.4 Transfer of Plan Assets. Notwithstanding any provision of the Plan to the contrary, upon the distribution by the Southern Company to its shareholders of the SEI Stock held by the Southern Company pursuant to a tax-free spin-off under Code Section 355 or such similar transaction, the Accounts of certain Participants who shall be identified in accordance with the Employee Matters Agreement entered into between the Southern Company and SEI ("Agreement") shall be transferred to a retirement plan established by SEI which is intended to constitute a qualified retirement plan under Code Section 401(a). The Committee shall determine the time of such transfers and shall establish such rules and procedures as its deems necessary or appropriate to effect the transfers, except that all actions with respect to the transfers shall be taken in a manner consistent with the Agreement. 24. Section 16.4 of the Plan shall be deleted in its entirety, effective as of January 1, 2000. 25. A new sentence shall be added to the end of Section 18.5 of the Plan to read as follows, effective as of September 5, 2000. Notwithstanding the foregoing, any optional form of benefit provided under this Plan solely as a result of the merger of the SEPCO Plan into this Plan shall be eliminated to the extent permitted and in accordance with the regulations prescribed by the Secretary of the Treasury under Code Section 411(d)(6), provided that the elimination of such optional form of benefit shall not be effective before the earlier of (a) the 90th day after the Participant receives a summary of material modification describing the elimination of such optional form of benefit or (b) January 1, 2002. 26. Southern Energy Resources, Inc. shall be removed as an Employing Company in Appendix A of the Plan, effective as of the Group Status Change Date as defined in the Agreement. 27. Except as amended herein by this Sixth Amendment, the Plan shall remain in full force and effect as amended and restated by the Company prior to the adoption of this Sixth Amendment. IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly authorized members of the Employee Savings Plan Committee, has adopted this Sixth Amendment to The Southern Company Employee Savings Plan this ____ day of ___________________, 2000. EMPLOYEE SAVINGS PLAN COMMITTEE: EX-10 12 x10a56.txt FOURTH AMENDMENT TO THE SOUTHERN COMPANY EMPLOYEE STOCK OWNERSHIP PLAN WHEREAS, the Employee Stock Ownership Plan Committee ("Committee") heretofore adopted the amendment and restatement of The Southern Company Employee Stock Ownership Plan ("Plan"), effective as of January 1, 1997; WHEREAS, Southern Energy Resources, Inc. ("SERI"), an Employing Company under the Plan, will become the employer of certain individuals currently employed by Southern Company Energy Marketing, L.P. ("SCEM") following a reorganization of SCEM; WHEREAS, the Southern Company ("Southern") anticipates that in 2001 it will distribute pro rata to the Southern shareholders all of the stock of Southern Energy, Inc. ("SEI") held by Southern pursuant to a tax-free spin-off under Section 355 of the Internal Revenue Code; WHEREAS, in connection with such transaction, Southern and SEI have entered into an Employee Matters Agreement ("Agreement") to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, benefit plans and programs, and certain employment matters; WHEREAS, the Committee desires to amend the Plan to exclude the former employees of SCEM from participating in the Plan by virtue of their employment with SERI; WHEREAS, the Committee desires to amend the Plan to address the spin-off of SEI from Southern, including making such changes as are necessary pursuant to the Agreement; WHEREAS, the Committee desires to amend the Plan to make certain other technical changes and to reflect recent changes in the law; and WHEREAS, the Committee is authorized pursuant to Section 11.1 of the Plan to amend the Plan at any time, provided that the amendment does not involve a substantial increase in cost to any Employing Company or is necessary or desirable to comply with the laws and regulations applicable to the Plan. NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be effective as of the dates indicated: 1. Sections 2.14 and 2.15 of the Plan shall be eliminated in their entirety, effective as of January 1, 2001. Each subsequent Section in Article II shall remain as currently numbered until such time as the Plan is amended and restated. 2. Section 2.20 of the Plan shall be amended to read as follows, effective as of December 22, 2000: 2.20 "Eligible Employee" shall mean an Employee who is employed by an Employing Company and (a) who was eligible to be included in the Plan on January 1, 1991, or (b) who is a regular full-time, regular part-time, or cooperative education employee other than: (1) an Employee who is treated as such solely by reason of the "leased employee" rules of Code Section 414(n) such that, pursuant to an agreement between an Employing Company and any other person, such individual has performed services for the Employing Company (or the Employing Company and related persons as described in Code Section 414(n)(6)) on a substantially full-time basis for a period of at least one year and such services were performed under the primary direction or control of the Employing Company; (2) any Employee who is represented by a collective bargaining agent unless the representatives of his bargaining unit and the Employing Company mutually agree to participation in the Plan subject to its terms by members of his bargaining unit; (3) an individual who is a cooperative education employee and who first performs an Hour of Service on or after January 1, 1995; (4) an individual who is classified by the Employing Company as a temporary employee (who was not eligible to be included in the Plan on January 1, 1991) or an independent contractor, regardless of whether such classification is determined to be in error. Effective September 1, 1998, any individual classified by the Employing Company as a temporary employee shall be excluded from the Plan, regardless of any prior inclusion in the Plan and regardless of whether the "temporary employee" classification is determined to be in error; (5) an Employee who is described in Section 3.8 of the Plan; or (6) an individual, who would otherwise be eligible to participate in the Plan by virtue of his employment by SERI, but who (i) was an employee of SCEM on December 22, 2000, (ii) was hired by SERI on or after December 23, 2000, and who was a former employee of SCEM, or (iii) was hired by SERI on or after December 23, 2000, who is employed in the Americas Group and whose job function is indicated on Exhibit A attached hereto. 3. Paragraph (6) of Section 2.20 of the Plan shall be amended to read as follows, effective as of the Group Status Change Date as defined in the Agreement: (6) an individual who is employed by SERI. 4. Two new definition Sections shall be added to the Plan to read as follows, effective as of December 22, 2000: 2.53 "SCEM" shall mean Southern Company Energy Marketing, L.P. 2.54 "SERI" shall mean Southern Energy Resources, Inc. 5. Two new definition Sections shall be added to the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 2.55 "SEI" shall mean Southern Energy, Inc., any subsidiary of Southern Energy, Inc., or any successor thereto. 2.56 "SEI Stock" shall mean the common stock of SEI. 6. A new sentence shall be added to Section 6.2 of the Plan to read as follows, effective as of January 1, 2000. Notwithstanding the foregoing, in no event shall a Participant who is employed by SCEM or SERI on December 31, 2000 receive an allocation of Common Stock for the Plan Year ending on such date. 7. Section 6.3 of the Plan shall be amended to read as follows, effective as of January 1, 2000: 6.3 Section 415 Limitations. Notwithstanding any provision of the Plan to the contrary, the total Annual Additions allocated to the Account (and the accounts under all defined contribution plans maintained by an Affiliated Employer) of any Participant for any Limitation Year in accordance with Code Section 415 and the regulations thereunder, which are incorporated herein by this reference, shall not exceed the lesser of the following amounts: (a) twenty-five percent (25%) of the Participant's compensation (as defined in Code Section 415(c)(3) and any rulings and regulations thereunder) in the Limitation Year; or (b) $30,000 (as adjusted pursuant to Code Section 415(d)(1)(C)). The Annual Addition for any Plan Year beginning before January 1, 1987 shall not be recomputed to treat all employee contributions as an Annual Addition. 8. Section 6.5 of the Plan shall be amended to read as follows, effective as of January 1, 2000: 6.5 Combination of Plans. If an Employee participates in more than one defined contribution plan maintained by an Affiliated Employer and his Annual Additions exceed the limitations of Section 6.3, corrective adjustments shall be made first under The Southern Company Employee Savings Plan and then, to the extent necessary, under The Southern Company Performance Sharing Plan and then, to the extent necessary, under this Plan. 9. The second sentence of the second paragraph of Section 6.6 of the Plan shall be amended as follows, effective as of the Group Status Change Date as defined in the Agreement: Except as provided in Section 6.10, if a dividend or other distribution on the Common Stock allocated to a Participant's Account is of property other than cash or additional shares of Common Stock, the Trustee shall sell such property for an amount not less than its fair market value as determined by the Trustee and reinvest the proceeds of such sale in shares of Common Stock pursuant to this Section 6.6. 10. A new Section 6.10 shall be added to the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 6.10 Transfer of SEI Stock. Upon the distribution by the Southern Company to its shareholders of the SEI Stock held by the Southern Company pursuant to a tax-free spin-off under Code Section 355 or such similar transaction, all SEI Stock received by the Plan on behalf of a Participant shall be transferred to a "Transferred ESOP Account" established for such Participant under The Southern Company Employee Savings Plan. The transfer of SEI Stock shall be made contemporaneously with or as soon as administratively practicable following such transaction. 11. The phrase ", as provided in regulations prescribed by the Secretary of the Treasury" shall be added to the end of the last sentence of Section 11.1 of the Plan, effective as of September 5, 2000. 12. A new Section 11.4 shall be added to the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 11.4 Transfer of Plan Assets. Notwithstanding any provision of the Plan to the contrary, upon the distribution by the Southern Company to its shareholders of the SEI Stock held by the Southern Company pursuant to a tax-free spin-off under Code Section 355 or such similar transaction, the Accounts of certain Participants may be transferred to a retirement plan established by SEI which is intended to constitute a qualified retirement plan under Code Section 401(a) pursuant to the Employee Matters Agreement entered into between the Southern Company and SEI ("Agreement"). The Participants whose Accounts shall be transferred, if any, shall be identified in accordance with the Agreement. The Committee shall determine the time of such transfers and shall establish such rules and procedures as its deems necessary or appropriate to effect the transfers, except that all actions with respect to the transfers shall be taken in a manner consistent with the Agreement. 13. Section 12.4 of the Plan shall be deleted in its entirety, effective as of January 1, 2000. 14. Southern Energy Resources, Inc. shall be removed as an Employing Company in Appendix A of the Plan, effective as of the Group Status Change Date as defined in the Agreement. 15. Except as amended herein by this Fourth Amendment, the Plan shall remain in full force and effect as amended and restated by the Company prior to the adoption of this Fourth Amendment. IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly authorized members of the Employee Stock Ownership Plan Committee, has adopted this Fourth Amendment to The Southern Company Employee Stock Ownership Plan this ____ day of ___________________, 2000. EMPLOYEE STOCK OWNERSHIP PLAN COMMITTEE: EX-10 13 x10a57.txt SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Troutman Sanders LLP Bank of America Plaza, Suite 5200 600 Peachtree Street, N.E. Atlanta, Georgia 30308 Effective January 1, 2001 SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Purposes The purposes of the Amended and Restated Performance Pay Plan are to focus the attention and efforts of employees on goals which have a direct and significant influence on individual, Business Unit and corporate performance; to improve the correlation between pay and performance for the achievement of individual, Business Unit, and corporate goals; and to provide the potential for levels of compensation that will enhance the ability of the Business Units to attract, retain, and motivate employees. In order to achieve these objectives, the Performance Pay Plan is intended to pay additional compensation to eligible employees based upon individual, Business Unit and corporate performance. Such compensation shall be paid out of the general assets of Southern Company. No benefits under the Performance Pay Plan shall be deferred under this Plan or held in trust for the benefit of eligible employees. The Performance Pay Plan is not intended to be an employee benefit plan or any other plan subject to regulation by the Employee Retirement Income Security Act of 1974, as amended. The Performance Pay Plan was established effective January 1, 1989. It has subsequently been amended and restated effective January 1, 1991, January 1, 1993, January 1, 1996, and January 1, 2000. The Board of Directors of Southern Company Services, Inc. now desires to amend and restate the Performance Pay Plan to provide for a pro-rated Award upon the termination of the employment of a Participant under a career transition plan adopted by an Employing Company. The effective date of this amendment and restatement (the "Restatement Effective Date") of the Performance Pay Plan shall be January 1, 2001. ARTICLE I Definitions For purposes of the Performance Pay Plan, the following terms shall have the following meanings, unless a different meaning is plainly required by the context: 1.1 "Annual Salary" shall mean base salary or wages paid to an Employee before deductions for taxes, social security, etc., including all amounts contributed on an Employee's behalf by a Business Unit to the Southern Company Flexible Benefits Plan, any amounts contributed on an Employee's behalf by any Business Unit to the Southern Company Employee Savings Plan as Elective Employer Contributions, as said term is defined in Section 4.1 therein, pursuant to an Employee's exercise of any deferral option made in accordance with Section 401(k) of the Internal Revenue Code, and amounts contributed on an Employee's behalf to the Southern Company Deferred Compensation Plan, but excluding all awards under the Southern Company Performance Pay Plan, the Southern Company Performance Pay Plan (Shareholder Approved), and the Southern Company Executive Productivity Improvement Plan, overtime pay, shift differential and substitution pay. Annual Salary of an Employee shall be determined as of the last day of the Performance Period, except that the Annual Salary of an employee who terminates before the last day of the Performance Period shall be determined as of his date of termination. The Annual Salary of an Employee who commences service during a Performance Period and the Annual Salary of an Employee who terminates his employment for one of the reasons set forth in Section 2.1(c)(i)-(iv) and (e) shall be prorated based upon his date of commencement or termination of service with his Business Unit in accordance with the provisions of the Plan. With respect to Covered Employees, "Annual Salary" shall be defined in the Covered Employee Plan established by a Business Unit for the benefit of Covered Employees. 1.2 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc. 1.3 "Business Unit" shall mean an Employing Company or an organizational unit established by the CEO (which may consist of a portion of one Employing Company or portions of more than one Employing Company) and designated from time to time to be eligible to participate under the Plan. A Business Unit shall not consist of any portion of a Non-Adopting Company. In the event more than one Business Unit covers the same Employee, the CEO shall assign the Employee to a particular Business Unit for purposes of determining the amount of an Incentive Pay Award for a Performance Period. 1.4 "Business Unit Component" shall mean the weight given to the Business Unit Goal in the determination of the Incentive Pay Award as established by the CEO for a Performance Period and as set forth on a schedule adopted by the CEO and provided to the Plan Administrator. 1.5 "Business Unit Goal" shall mean the goal or goals that are established by the CEO for each Performance Period for each Business Unit and as set forth on a Schedule adopted by the CEO and provided to the Plan Administrator. 1.6 "Business Unit Goal Performance Percentage" shall mean the percentage of the Business Unit Goal attained during a Performance Period. 1.7 "CEO" shall mean the Chief Executive Officer of Southern Company. 1.8 "Change in Control Benefit Plan Determination Policy" shall mean the change in control benefit plan determination policy, as approved by the Board of Directors, as it may be amended from time to time in accordance with the provisions therein. 1.9 "Committee" shall mean the Compensation Committee of the Southern Board. 1.10 "Covered Employee" shall mean an employee of a Business Unit who is covered by a collective bargaining agreement between the Business Unit and a union or other employee representative and who participates in a Covered Employee Plan. 1.11 "Covered Employee Plan" shall mean a performance based plan established for the benefit of Covered Employees by a Business Unit pursuant to a collective bargaining agreement and is maintained in conjunction with this Performance Pay Plan. The Covered Employee Plan may or may not mirror the provisions of the Plan. 1.12 "Effective Date" shall mean January 1, 1989. The "Restatement Effective Date" shall mean January 1, 2001. 1.13 "Employee" shall mean each active full-time and regular part-time employee of a Business Unit who is receiving Annual Salary, regardless of their classification as an exempt or non-exempt employee. The term "Employee" shall not include any person who is a temporary employee, cooperative employee, a contractor of a Business Unit or an employee covered by a collective bargaining agreement except that such a collective bargaining employee may be eligible to participate in a Covered Employee Plan as a Covered Employee pursuant to an agreement between his Business Unit and his collective bargaining representative. In addition, the term "Employee" shall not include any employee who is eligible to participate in any incentive compensation program maintained by his Business Unit that specifically provides that an eligible employee under such program shall not be entitled to also receive Incentive Pay Awards under this Plan. 1.14 "Employing Companies" shall mean Southern Company Services, Inc., or any affiliate or subsidiary (direct or indirect) of Southern Company, which the Board of Directors may from time to time determine to be eligible to participate under the Plan and which shall adopt the Plan, and any successor of any such affiliate or subsidiary. The Employing Companies as of the Restatement Effective Date are as follows: Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Company Services, Inc., Southern Nuclear Operating Company, Inc., Southern Company Energy Solutions, Inc. and Southern Communications Services, Inc. 1.15 "Incentive Pay Award" shall mean the amount awarded to a Participant in accordance with Article III hereof. 1.16 "Non-Adopting Company" shall mean any subsidiary or affiliate of Southern Company which is not an Employing Company. 1.17 "Participant" shall mean all Employees and Covered Employees who satisfy the criteria set forth in Article II. 1.18 "Performance Period" shall mean each 12-month period commencing on the first day of January and ending on the last day of December next following. 1.19 "Plan" shall mean the Southern Company Performance Pay Plan, as described herein or as from time to time amended. 1.20 "Plan Administrator" shall mean the Benefits Department of Southern Company Services, Inc. 1.21 "Short Term Goals Adjustment" shall mean the percentage determined by the CEO based upon the intermediate goals that have been established and set forth on a Schedule adopted by the CEO and provided to the Plan Administrator and used to adjust the calculation of the Incentive Pay Award as provided in Section 3.1. 1.22 "Southern Board" shall mean the Board of Directors of Southern Company. 1.23 "Southern Company" shall mean The Southern Company. 1.24 "Southern Company Component" shall mean the weight given to the Southern Goal as established by the CEO and as set forth on a schedule adopted by the CEO and provided to the Plan Administrator. 1.25 "Southern Goal" shall mean the goal or goals established by the CEO and as set forth on a schedule adopted by the CEO and provided to the Plan Administrator. 1.26 "Southern Goal Performance Percentage" shall mean the percentage of the Southern Goal attained during the Performance Period. 1.27 "Top Performer" shall mean an Employee whose exceptional performance qualifies him to receive an additional amount of Incentive Pay Award. It is in the sole discretion of the head of the Business Unit to determine who is to be designated a Top Performer. 1.28 "Top Performer Pool" shall mean the pool of funds established by the CEO for the payment of additional Incentive Pay to Top Performers. Where the context requires, words in the masculine gender include the feminine and neuter genders and words in the singular include the plural and words in the plural include the singular. ARTICLE II Participation 2.1 Employees. All Employees of a Business Unit shall be eligible to participate in the Plan and receive Incentive Pay Awards. (a) Employees who commence service with a Business Unit after January 1 and before December 15 of a Performance Period shall be eligible to receive Incentive Pay Awards in the same proportion as the ratio of the number of months employed during a Performance Period bears to the total number of months in a Performance Period. The following shall apply for purposes of calculating the number of months of employment with a Business Unit under this Section 2.1: (i) Employees whose effective date of employment is on or before the fourteenth (14th) day of a month shall be considered Employees as of the first day of such month; and (ii) Employees whose effective date of employment is on or after the fifteenth (15th) day of a month shall not be considered Employees until the first day of the next succeeding month. (b) Employees whose effective date of employment is on or after December 15 of a Performance Period shall not be eligible to participate until the next succeeding Performance Period. (c) Employees whose employment with a Business Unit is terminated during a Performance Period for one of the following reasons shall be eligible to receive an Incentive Pay Award for such Performance Period on a pro-rata basis: (i) retirement, (ii) total disability (as determined by the Social Security Administration), (iii) death, or (iv) termination of employment, but only in the event the Participant shall transfer to or be reemployed by a Non-Adopting Company, or any successor thereto, during such Performance Period. (v) termination of employment under a career transition plan adopted by an Employing Company. (d) The pro-rata amount of an Incentive Pay Award shall be determined for the Performance Period in which a termination described in Section 2.1(c) occurs by a fraction which is the number of months of employment with a Business Unit during the Performance Period, divided by the total number of months in the Performance Period. The following shall apply for purposes of calculating the number of months of employment with a Business Unit under this Section 2.(1)(d) for an Employee whose service is terminated for one of the reasons described in Section 2.1(c): (i) The month in which the Employee's service terminates shall not be considered if such terminating event occurs on or before the fourteenth (14th) day of the month; and (ii) The month in which the Employee's service terminates shall be considered if such terminating event occurs on or after the fifteenth (15th) day of the month. (e) An Employee who terminates participation in the Plan because the requirements of Section 1.5 of the Plan are not met (i.e. the Employee's Business Unit no longer participates in the Plan) shall be eligible to receive an Incentive Pay Award for such Performance Period on a pro-rata basis determined under Section 2.1(d) of the Plan by substituting the concept of termination of service with termination from participation in the Plan. (f) The pro-rated amount of an Incentive Pay Award determined under Section 2.1(c)-(e) above shall be paid at the same time as all other Incentive Pay Awards under the Plan. (g) An Employee whose employment with a Business Unit is terminated during a Performance Period for any reason other the reasons described in Section 2.1(c) shall not be eligible to receive an Incentive Pay Award for such Performance Period. 2.2 Collective Bargaining Agreement. Notwithstanding any other provision of the Plan, all Participants covered by a collective bargaining agreement shall become ineligible for Incentive Pay Awards under a Covered Employee Plan for and after any Performance Period in which such collective bargaining agreement expires or is terminated for any reason. 2.3 Covered Employees. All Covered Employees of a Business Unit who are covered under a Covered Employee Plan shall not be eligible to receive Incentive Pay Awards under the Plan, but shall be eligible to receive Incentive Pay Awards in accordance with the terms of such Covered Employee Plan. 2.4 Employee Transfers. If an Employee transfers from one Business Unit ("transferor Business Unit") to another Business Unit ("transferee Business Unit") during a Performance Period, the transferee Business Unit goals shall be used in calculating such Employee's Incentive Pay Award and the transferee Business Unit shall pay such Employee's Incentive Pay Award for the entire Performance Period. ARTICLE III Incentive Pay Award Opportunities 3.1 Determination of Incentive Pay Award. The Incentive Pay Award shall be determined for each Employee by first determining the Employee's Target Award Opportunity as established by the CEO and as set forth on a schedule adopted by the CEO and forwarded to the Plan Administrator), which is based upon the Employee's Grade Level Value on December 31st of the Performance Period, and then multiplying the applicable Target Award Opportunity by the Participant's Annual Salary and then by the Total Goal Performance Percentage. The Total Goal Performance Percentage shall be determined in accordance with the following formula: Determination of Total Goal Performance Percentage (Southern Company Component x Southern Goal Performance Percentage) + (Business Unit Component x Business Unit Goal Performance Percentage) = (Initial Financial Goal Performance) x (Short Term Goals Adjustment) = Total Goal Performance Percentage The Incentive Pay Award may then be adjusted downward by a percentage to be determined by the head of the Employer's Business Unit based upon individual performance. Alternatively, the Incentive Pay Award may be adjusted upward to include an additional dollar amount if the Employee is designated a Top Performer. Each head of a Business Unit shall determine in his sole and absolute discretion who is a Top Performer and the amount of the additional Incentive Pay Award. Incentive Pay Awards may be awarded to Top Performers even though no Incentive Pay Award would be paid under the formula portion of the Plan. The total amount awarded to all Top Performers shall not exceed the amount of the Top Performer Pool. No Covered Employee shall be eligible for an Incentive Pay Award (including a Top Performer adjustment) under the Plan. The Covered Employee shall only receive an Incentive Pay Award under a Covered Employee Plan under which the Covered Employee is eligible to participate. 3.2 Transition PIP Awards During Transition Performance Periods. In order to insure that an Employee receives an Incentive Pay Award that takes into account what he would have also received under the Southern Company Productivity Improvement Plan for the period January 1, 2000 through December 31, 2002, the following transition rules apply: (a) Definitions. For purposes of this Section 3.2, the following terms shall have the following meanings, unless a different meaning is plainly required by the context: (i) "Adjusted PIP Award" shall mean an amount calculated as follows: (1) multiply an Eligible Employee's Grade Value (as defined under the PIP) as of December 31, 1999 by the Eligible Employee's Award Opportunity (as determined under the PIP) as of December 31, 1999; then (2) multiply the product of (1) by seventy-five percent (75%); and then (3) multiply the product of (2) by 1.70. (ii) "Eligible Employee" shall mean a Participant who was eligible to receive an award under the PIP on December 31, 1999 and who is employed on the last day of the applicable Transition Performance Period. Eligible Employee shall also mean a Participant who was eligible to receive an award under the Executive Productivity Improvement Plan on December 31, 1999, who is not eligible to participate in the Performance Pay Plan (Shareholder Approved) on the last day of the applicable Transition Performance Period and who is employed on the last day of the applicable Transition Performance Period. (iii) "PPP Equivalent" shall mean an amount calculated as follows: (1) multiply an Eligible Employee's Annual Salary for the Transition Performance Period by the Eligible Employee's Award Opportunity (as determined under the Adjusted PIP Award); then (2) multiply the product of (1) by seventy-five percent (75%); and then (3) multiply the product of (2) by the Eligible Employee's Total Goal Performance Percentage determined in Section 3.1. (iv) "Productivity Improvement Plan" or "PIP" shall mean (1) the Southern Company Productivity Improvement Plan, amended and restated January 1, 1998, and terminated effective December 31, 1999 and, (2) for purposes of determining the Transition PIP Award for Eligible Employees who were eligible to receive an award under the Southern Company Executive Productivity Improvement Plan on December 31, 1999, the Southern Company Executive Productivity Improvement Plan, as of December 18, 1999. (v) "Transition Performance Period" shall mean the Performance Period from January 1, 2000 through December 31, 2000 ("2000 Transition Period") and the Performance Period from January 1, 2001 through December 31, 2001 ("2001 Transition Period"). (vi) "Transition PIP Award" shall mean the additional amount of incentive pay awarded under this Section 3.2 and calculated pursuant to Section 3.2(c) below. (b) The Company shall pay the Transition PIP Award to an Eligible Employee if a positive amount results from applying the calculation in accordance with Section 3.2(c). (c) The Transition PIP Award shall be determined by comparing the Adjusted PIP Award to the PPP Equivalent. If the Adjusted PIP Award is greater than the PPP Equivalent, then the Transition PIP Award shall equal the difference between the Adjusted PIP Award and the PPP Equivalent. If the Adjusted PIP Award is less than the PPP Equivalent, then no Transition PIP Award shall be paid for the applicable Transition Performance Period. (d) In the event an Eligible Employee terminates his employment with a Business Unit at any time after December 31, 1999, but before January 1, 2003, because of his retirement, total disability (as determined by the Social Security Administration) or death, then the Transition PIP Award for the Performance Period in which retirement, total disability or death occurs shall equal the Adjusted PIP Award (without subtracting the PPP Equivalent). The Transition PIP Award under this Section 3.2(d) shall be available in the next Transition Performance Period. For an Eligible Employee who terminates his employment during the 2001 Transition Period because of his retirement, total disability or death, such Eligible Employee shall receive a Transition PIP Award (calculated as provided under this subsection) for an additional period from January 1, 2002 through December 31, 2002. For purposes of this Plan, the date of disability or retirement shall be the last day of active service by the Eligible Employee and shall not mean any date subsequent to such last date of active service which is deemed to be a retirement or disability date under the terms of any pension, severance, retirement or disability plan or arrangement. (e) In the event an Eligible Employee terminates his employment during a Transition Performance Period for any reason other than because of his retirement, total disability or death, he shall not receive a Transition PIP Award for such Transition Performance Period or any subsequent Transition Performance Period, if any. (f) In the event an Eligible Employee is demoted to a Grade Level 6 or below at any time during the 2000 Transition Period, the Eligible Employee shall not receive a Transition PIP Award for the 2001 Transition Period. (g) In the event of a transfer of an Eligible Employee to a Non-Adopting Company, no Transition PIP Award will be paid. (h) In the event of a transfer of an Employee from a Non-Adopting Company to a Business Unit, a prorated Transition PIP Award shall be paid to the Employee for the Transition Performance Period in which the Employee transfers and any subsequent Transition Performance Period provided such Employee was employed with the Non-Adopting Company on December 31, 1999, is currently eligible to participate in the Plan and is employed with the Business Unit on the last day of the applicable Transition Performance Period. The Transition PIP Award shall be prorated in the same manner as provided under the provisions of Section 2.1(a) of the Plan based upon the Employee's date of hire with the Business Unit. For purposes of this provision, Southern Energy Resources, Inc. shall remain a Non-Adopting Company through December 31, 2001 even if it no longer meets the definition of Non-Adopting Company under the Plan. (i) The Plan Administrator shall be solely responsible for calculating each Participant's Transition PIP Award and distributing such Transition PIP Award at the same time and in the same manner as the Incentive Pay Awards. 3.3 Non-Covered Employee Participants. (a) The Incentive Pay Award shall be calculated by the Plan Administrator, based upon the formula set forth in Section 3.1 (and Section 3.2 if applicable in accordance with its terms) and the determinations of the head of the Business Unit as to any adjustments for individual performance and for Top Performers. Such determinations for individual performance and Top Performers shall be provided to the Plan Administrator in a timely manner. (b) The Plan Administrator shall be solely responsible for calculating each Participant's Incentive Pay Award and distributing such Incentive Pay Award. (c) The Plan Administrator shall endeavor to pay the Incentive Pay Awards for a Performance Period to the Participants not later than two and one-half (2 1/2) months following the close of the preceding Performance Period, or such shorter or longer period of time following the close of the preceding Performance Period as may be required under the Internal Revenue Code to preserve the timely accrual of the federal income tax deduction for Incentive Pay Awards paid with respect to such Performance Period. (d) The Incentive Pay Award payment shall be made in cash or its functional equivalent and the receipt of such payment may not be deferred under this Plan at the option of the Employee. In the event of an Employee's death prior to the payment of any Incentive Pay Award payable to the Employee, such amount shall be paid to the estate of the Employee. 3.4 Covered Employee Participants. (a) The Incentive Pay Awards for Covered Employee Participants shall be calculated in accordance with the terms of such Covered Employee Plan. (b) The Plan Administrator shall be solely responsible for calculating and distributing each Participant's Incentive Pay Award in accordance with the terms of the Covered Employee Plan in which the Covered Employee Participant participates. 3.5 Extraordinary Item Exception. If requested by a Business Unit, at the sole discretion of the CEO and the Committee, the Southern Goal Performance or Business Unit Goal Performance determination for a Performance Period may be calculated without regard to a particular term or occurrence ("Extraordinary Item") incurred by Southern Company or any Business Unit, provided such determination is made prior to the close of the Performance Period. If the CEO and the Committee approve an Extraordinary Item, it shall be identified in a schedule adopted by the CEO and provided to the Plan Administrator, and, in addition, such schedule shall contain an explanation as to how such Extraordinary Item shall impact the determination of the attainment of the applicable goal. 3.6 Forfeiture upon Termination for Cause. Notwithstanding anything to the contrary in this Plan, any Participant whose employment is terminated for Cause shall forfeit any and all Incentive Pay Awards and Transition PIP Awards (if any) that have not been paid to him as of his date of termination. For purposes of the preceding sentence "Cause" shall mean the termination of a Participant's employment by a Business Unit under any of the following circumstances: (a) The Participant willfully neglects or refuses to discharge his or her duties to the Business Unit as an employee or refuses to comply with any lawful or reasonable instructions given to him or her by the Business Unit without reasonable excuse; (b) The Participant is guilty of gross misconduct. For purposes of this Plan, the following acts shall constitute gross misconduct: (i) any act involving fraud or dishonesty or breach of appropriate regulations of competent authorities; (ii) the carrying out of any activity or the making of any statement which would prejudice and/or reduce the good name and standing of Southern Company or an Employing Company or would bring Southern Company or an Employing Company into contempt, ridicule or would reasonably shock or offend any community in which Southern Company or an Employing Company is located; (iii) attendance at work in a state of intoxication or otherwise being found in possession at his or her workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (iv) assault or other act of violence against any employee or other person during the course of the Participant's employment; and (v) conviction of any felony or misdemeanor involving moral turpitude. The head of the Business Unit to which the Participant has been assigned, and the Senior Vice President of Human Resources for Southern Company Services, Inc., shall determine whether a Participant has been terminated for "Cause." 3.7 Determination of Incentive Pay Awards. The factors required to determine Incentive Pay Awards shall be fixed in all events by the end of each Performance Period. 3.8 Insufficient Earnings. Notwithstanding any other provision of the Plan to the contrary, an Incentive Pay Award and a Transition PIP Award, if any, shall not be granted, awarded or paid for any Performance Period ending with the calendar year in which the current earnings of Southern Company are less than the amount necessary to fund the dividends on Southern's common stock at the rate such dividends were paid for the immediately preceding calendar year. 3.9 No Duplication. A Participant shall not receive more than one Incentive Pay Award for a Performance Period under the Plan or any similar plan. 3.10 Schedules. Any schedule to the Plan adopted by the CEO that is applicable to a Performance Period shall remain in effect for any subsequent Performance Period in the event the CEO has not adopted a schedule for such subsequent Performance Period. ARTICLE IV Change in Control The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control of Southern Company or an Employing Company and the benefits to be provided hereunder in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein. ARTICLE V Administration of Plan 5.1 Employment of Agents. The Plan Administrator shall be responsible for the daily administration of the Plan and may appoint other persons or entities to perform or assist in the performance of any of its fiduciary duties, subject to its review and approval. The Plan Administrator shall have the right to remove any such appointee from his position without cause or notice. Any person, group of persons, or entity may serve in more than one fiduciary capacity. 5.2 Record Keeping and Reporting. (a) The Plan Administrator shall maintain permanent records and accounts of Participants and shall be responsible for all receipts, disbursements, transfers and other transactions concerning the Plan. Such accounts, books, and records relating thereto shall be open to inspection and audit by the boards of directors of the Employing Companies and any persons designated thereby at all reasonable times. (b) The Plan Administrator shall undertake the preparation and filing of all documents and forms required by any governmental agency. The Plan Administrator shall keep all such books of account records, and other data as may be necessary for proper administration of the Plan. 5.3 Responsibilities in General. The Plan Administrator shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan as more particularly set forth herein. The Plan Administrator shall interpret the Plan and shall determine all questions concerning eligibility, administration, interpretation, and application of the Plan, and all such determinations shall be conclusive and binding on all Participants and interested persons. The Plan Administrator shall adopt such procedures and guidelines as it deems necessary or desirable in order to discharge its duties hereunder. 5.4 Indemnification. The Business Units shall indemnify the Plan Administrator against any and all claims, losses, damages, expenses, and liability arising from its actions or omissions, except when the same are finally adjudicated to be due to gross negligence or willful misconduct. The Business Units may purchase at their own expense sufficient liability insurance for the Plan Administrator to cover any and all claims, losses, damages, and expenses arising from any action or omission in connection with the execution of the duties as the Plan Administrator. 5.5 Service of Process. The Plan Administrator shall be the appointed agent for the service of process. ARTICLE VI Miscellaneous Provisions 6.1 No Right of Assignment or Alienation. Neither the Participant nor his personal representative shall have any rights to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payments of this Plan shall be void and have no effect. 6.2 No Trust Requirement. Unless the Board of Directors shall in its discretion determine otherwise, the Business Units shall neither reserve nor otherwise set aside funds for the payments of Incentive Pay Awards under the Plan. 6.3 Amendment and Termination of Plan. Except for the provisions of Article IV hereof, which may not be amended following a "Southern Change in Control," "Subsidiary Change in Control" or a "Southern Termination" (as such terms are defined in the Change in Control Benefit Plan Determination Policy), the Board of Directors may terminate the Plan at any time or may from time to time amend the Plan; provided, however, that no amendment shall impair any rights to payments which have been earned under the Plan prior to the termination or amendment. Any amendment or termination of the Plan shall apply, in the Board of Directors' sole discretion, with respect to all Employees participating in the Plan, irrespective of whether any such amendment or termination has been collectively bargained. 6.4 Incentive Pay Award as Compensation. (a) Incentive Pay Awards made in accordance with the Plan are in addition to any other benefits or compensation to which a Participant may be entitled or for which he may be eligible, whether funded or unfunded, by reason of his employment with the Business Unit. (b) There shall be deducted from each Incentive Pay Award to a Participant the amount of any tax required to be withheld by any governmental authority and paid over by the Business Unit to such governmental authority. 6.5 Coordination with Benefit Plans. Any Incentive Pay Awards paid to a Participant while employed by a Business Unit shall not be considered in the calculation of the Participant's benefits under any employee welfare or pension benefit plan maintained by an Business Unit, unless otherwise specifically provided therein. 6.6 Plan Not a Contract. The Plan shall not be deemed to constitute a contract between a Business Unit and any Employee or Covered Employee, nor shall anything herein contained be deemed to give any Employee or Covered Employee any right to be retained in the employ of a Business Unit or interfere with the right of the Business Unit to discharge any Employee or Covered Employee at any time and to treat him without regard to the effect which such treatment might have upon him as a Participant. 6.7 Choice of Law. This Plan shall be governed by and construed in accordance with the laws of the State of Georgia except for the application of any law which would require the use of the laws of another state. IN WITNESS WHEREOF, Southern Company Services, Inc., through its officers duly authorized, hereby amends and restates Southern Company Performance Pay Plan this _____ day of , 2001, to be effective January 1, 2001. SOUTHERN COMPANY SERVICES, INC. By: _____________________________ Its: _____________________________ Attest: By: ____________________________________________ Its: -------------------------------------------- [Form Schedule] SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 2001
SHORT TERM GOALS FOR [INSERT YEAR] - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ BIG 2000 Goals APC GPC GULF MPC SAV SNC - --- ----------- --- --- ---- --- --- --- - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ I o - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ II o - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ IV o - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------ IX o - ----------- ------------- -------------- --------------- ------------- ------------ ------------ ------------
[Form Schedule] SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 2001
INCENTIVE PAY AWARD FACTORS FOR [INSERT YEAR] - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- Target Award Opportunity Percentage of Southern Company Annual Salary Southern Company Goal Performance Business Unit Business Unit Component Component Performance Grade Level Percentage - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- President/CEO - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 15 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 14 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 13 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 12 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 11 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 10 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 9 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 8 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 7 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 6 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- 1-5 - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- - ----------------------- ------------------ ------------------ ------------------ ------------------ -------------------- Nonexempt - ----------------------- ------------------ ------------------ ------------------ ------------------ --------------------
[Form Schedule] SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 2001 BUSINESS UNIT NET INCOME FOR [INSERT YEAR] Southern Year Alabama Georgia Gulf Mississippi Savannah Nuclear SCS SOCO ---- ------- ------- ---- ----------- -------- ------- --- ---- ---- ---- ----- ----- ----- ----- ----- ----- ----- [Form Schedule] SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 2001 SOUTHERN COMPANY GOAL FOR [INSERT YEAR] Year Earnings Per Share --- --- % [Form Schedule] SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 2001 EXTRAORDINARY ITEMS FOR [INSERT YEAR] EX-10 14 x10a58.txt SOUTHERN COMPANY PERFORMANCE PAY PLAN (SHAREHOLDER APPROVED) Amended and Restated Troutman Sanders LLP Bank of America Plaza, Suite 5200 600 Peachtree Street, N.E. Atlanta, Georgia 30308 Effective January 1, 2000 SOUTHERN COMPANY PERFORMANCE PAY PLAN (SHAREHOLDER APPROVED) Purposes The purposes of the Performance Pay Plan (Shareholder Approved) are to focus the attention and efforts of certain executives on goals which have a direct and significant influence on individual, organizational and corporate performance; to improve the correlation between pay and performance for the achievement of corporate goals; and to provide the potential for levels of compensation that will enhance the ability of Southern Company and its affiliates to attract, retain, and motivate certain executive employees. Such compensation shall be paid out of the general assets of Southern Company. No benefits under the Performance Pay Plan (Shareholder Approved) shall be deferred under this Plan or held in trust for the benefit of eligible employees. The Performance Pay Plan (Shareholder Approved) is not intended to be an employee benefit plan or any other plan subject to regulation by the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). It is intended to be a bonus program as such term is defined in the regulations under ERISA at 29 C.F.R. Section 2510.3-2(c) and a qualified performance based plan under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Performance Pay Plan (Shareholder Approved) is hereby established and shall be effective January 1, 2000. ARTICLE I Definitions For purposes of the Performance Pay Plan (Shareholder Approved), the following terms shall have the following meanings, unless a different meaning is plainly required by the context: 1.1 "Annual Salary" shall mean base salary or wages paid to an Executive Employee before deductions for taxes, social security, etc., including all amounts contributed on an Executive Employee's behalf by a Business Unit to the Southern Company Flexible Benefits Plan, any amounts contributed on an Executive Employee's behalf by a Business Unit to the Southern Company Employee Savings Plan as Elective Employer Contributions (as said term is defined in Section 4.1 therein), pursuant to an Executive Employee's exercise of any deferral option made in accordance with Section 401(k) of the Internal Revenue Code, any amounts contributed on an Executive Employee's behalf to the Southern Company Deferred Compensation Plan, but excluding all awards under the Southern Company Performance Pay Plan, the Southern Company Performance Pay Plan (Shareholder Approved) and the the Southern Company Executive Productivity Improvement Plan; overtime pay; shift differential; and substitution pay. Annual Salary of an Executive Employee shall be determined as of the last day of the Performance Period, except that the Annual Salary of an Executive Employee who terminates before the last day of the Performance Period shall be determined as of his date of termination. The Annual Salary of an Executive Employee who commences service during a Performance Period and the Annual Salary of an Executive Employee who terminates his employment for one of the reasons set forth in Section 2.4 of the Plan shall be prorated based upon his date of commencement or termination of service with his Business Unit in accordance with the provisions of the Plan. 1.2 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc. 1.3 "Business Unit" shall mean an Employing Company or an organizational unit established by the Chief Executive Officer of Southern Company ("CEO") (which may consist of a portion of one Employing Company or portions of more than one Employing Company) and designated from time to time to be eligible to participate under the Plan. A Business Unit shall not consist of any portion of a Non-Adopting Company. In the event more than one Business Unit covers the same Executive Employee, the Committee shall assign the Executive Employee to a particular Business Unit for purposes of determining the amount of an Incentive Pay Award for a Performance Period. 0.4 "Change in Control Benefit Plan Determination Policy" shall mean the change in control benefit plan determination policy, as approved by the Board of Directors, as it may be amended from time to time in accordance with the provisions therein. 1.5 "Committee" shall mean the Compensation and Management Succession Committee of the Southern Board. 1.6 "Effective Date" shall mean January 1, 2000. 1.7 "Employee" shall mean an employee of a subsidiary or affiliate of Southern Company. 1.8 "Employing Company" or "Employing Companies" shall mean Southern Company Services, Inc., or any affiliate or subsidiary (direct or indirect) of Southern Company, which the Board of Directors may from time to time determine to be eligible to participate under the Plan and which shall adopt the Plan, and any successor of any such affiliate or subsidiary. 1.9 "Executive Employee" shall mean an Employee who is an executive officer of a Business Unit. 1.10 "Incentive Pay Award" or "Award" shall mean the amount awarded to a Participant in accordance with Article III hereof. 1.11 "Non-Adopting Company" shall mean any subsidiary or affiliate of Southern Company which is not a Business Unit. 1.12 "Participant" shall mean an Executive Employee who satisfies the criteria set forth in Article II. 1.13 "Performance Period" shall mean each 12-month period commencing on the first day of January and ending on the last day of December next following. 1.14 "Plan" shall mean the Southern Company Performance Pay Plan (Shareholder Approved), as described herein or as from time to time amended. 1.15 "Plan Administrator" shall mean the Compensation and Benefits Department of Southern Company Services, Inc. 1.16 "Southern Board" shall mean the Board of Directors of Southern Company. 1.17 "Southern Company" shall mean The Southern Company. Where the context requires, words in the masculine gender include the feminine and neuter genders and words in the singular include the plural and words in the plural include the singular. ARTICLE II Participants 2.1 Eligibility and Participation. All Executive Employees of the Employing Companies shall be eligible to participate in the Plan. However, actual participation in the Plan will be determined annually by the Committee subject to the termination of participation provisions set forth in Sections 2.3 through 2.7 of the Plan. Employees approved for participation will be notified of their selection as soon after approval as practicable. No Participant or Executive Employee shall at any time have a right to be selected for participation in the Plan for any Performance Period, despite having been selected for participation in a previous Performance Period. 2.2 Participation During Performance Period. The Committee shall have in its sole and absolute discretion the authority to allow participation in the Plan by any Executive Employee who becomes an Executive Employee after the first ninety (90) days of the Performance Period. The Committee shall have the discretion to adjust the Incentive Pay Award to reflect the period of participation. Such participation and adjustment of the Incentive Pay Award shall comply with the requirements of Section 162(m) of the Code. 2.3 Termination of Approval. The Committee may withdraw approval for a Participant's participation at any time. In the event of such withdrawal, the Executive Employee concerned will cease to be a Participant as of the date of such withdrawal. The Executive Employee will be notified of such withdrawal as soon as practicable following the Committee's action. A Participant who is withdrawn from participation under this Section 2.3 will not receive an Incentive Pay Award for the Performance Period, except and to the extent that the Committee decides otherwise in its sole and absolute discretion. 2.4 Termination of Employment. If a Participant's employment is terminated by reason of death, disability or retirement, such Participant or his estate shall be eligible to receive an Incentive Pay Award for the Performance Period ending in the year of such death, disability or retirement unless such death, disability or retirement shall have occurred on January 1 in which case the Participant or his estate shall only be entitled to an Incentive Pay Award for the Performance Period ending December 31 of the previous year. Subject to the provisions of Section 2.7, any Participant who terminates employment for any other reason shall receive only any unpaid Incentive Pay Award for a completed Performance Period and shall not be eligible to receive an Incentive Pay Award for the Performance Period ending in the year of such termination of employment. 2.5 Transfer to Non-Adopting Employer. Notwithstanding the provisions of Section 2.4 above and any other contrary provision of the Plan, in the case of an individual transferring from an Employing Company to a Non-Adopting Employer, such individual shall continue to participate in the Plan for the Performance Period during which the transfer occurs. However, the Committee shall have in its sole and absolute discretion the authority to appropriately adjust the Incentive Pay Award for such Performance Period provided such adjustment is in accordance with any requirements of Section 162(m) of the Code. 2.6 Corporate Spinoff. Notwithstanding the provisions of Section 2.4 above and any other contrary provisions of the Plan, in the case of an individual who is no longer employed with an Employing Company because of a corporate spinoff, such individual shall continue to participate in the Plan for the Performance Period during which the spinoff occurs. However, the Committee shall have in its sole and absolute discretion the authority to appropriately adjust the Incentive Pay Award for such Performance Period provided such adjustment is in accordance with any requirements of Section 162(m) of the Code. 2.7 Forfeiture upon Termination for Cause. Notwithstanding anything to the contrary in this Plan, any Participant whose employment is terminated for Cause shall forfeit any and all unpaid Incentive Pay Awards as of his date of termination. For purposes of the preceding sentence, "Cause" shall mean the termination of a Participant's employment by a Business Unit under any of the following circumstances: (a) The Participant willfully neglects or refuses to discharge his duties to the Business Unit as an employee or refuses to comply with any lawful or reasonable instructions given to him by the Business Unit without reasonable excuse; (b) The Participant is guilty of gross misconduct. For purposes of this Plan, the following acts shall constitute gross misconduct: (i) any act involving fraud or dishonesty or breach of appropriate regulations of competent authorities; (ii) the carrying out of any activity or the making of any statement which would prejudice and/or reduce the good name and standing of Southern Company or a Business Unit or would bring Southern Company or a Business Unit into any contempt or ridicule or would reasonably shock or offend any community in which Southern Company or a Business Unit is located; (iii) attendance at work in a state of intoxication or otherwise being found in possession at his or her workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (iv) assault or other act of violence against any employee or other person during the course of the Participant's employment; and (v) conviction of any felony or misdemeanor involving moral turpitude. The Committee shall determine in its sole and absolute discretion whether a Participant has been terminated for "Cause." ARTICLE III Incentive Pay Award Opportunities 3.1 Incentive Pay Award. (a) The Incentive Pay Award for a Performance Period shall be determined based upon a formula established by the Committee in the first ninety (90) days of the Performance Period using any combination of the following factors: (i) earnings per share or similar measure of Southern Company common stock, or another security of the Southern Company or its affiliates; (ii) net income of Southern Company; (iii) net income of a Business Unit; (iv) return on equity for Southern Company common stock; (v) total shareholder return on Southern Company common stock; (vi) return on capital; (vii) return on assets; (viii) Annual Salary; and/or (ix) any of the foregoing factors as compared to peer group companies. (b) Notwithstanding any other provision of the Plan, the Incentive Pay Award shall not exceed six million dollars ($6,000,000.00) for any one Participant during a Performance Period. (c) In accordance with the deductibility requirement under Code ss. 162(m), the regulations promulgated thereunder and any other pronouncements of the Internal Revenue Service, the Committee shall have the sole and complete discretion to adjust the Incentive Pay Award downward. 3.2 Calculation and Payment of Incentive Pay Awards. (a) The Incentive Pay Award shall be calculated by the Plan Administrator, based upon the formula established by the Committee pursuant to Section 3.1 and the determinations of the Committee as to any negative adjustments. (b) Prior to the payment of an Incentive Pay Award, the Committee shall provide in writing certification that the Participant has fulfilled any prerequisites for payment of such Incentive Pay Award as required under Section 162(m) of the Code. Once such certification is obtained, the Plan Administrator shall be solely responsible for calculating each Participant's Incentive Pay Award and distributing such Incentive Pay Award. (c) The Plan Administrator shall endeavor to pay the Incentive Pay Awards for a Performance Period to the Participants not later than two and one-half (2 1/2) months following the close of the preceding Performance Period, or such shorter or longer period of time following the close of the preceding Performance Period as may be required under the Internal Revenue Code to preserve the timely accrual of the federal income tax deduction for Incentive Pay Awards paid with respect to such Performance Period. (d) The Incentive Pay Award payment shall be made in cash or its functional equivalent and the receipt of such payment may not be deferred under this Plan at the option of the Participant. In the event of a Participant's death prior to the payment of any Incentive Pay Award payable to the Participant, such amount shall be paid to the estate of the Participant. (e) Effective May 10, 2000, if Southern Energy Resources, Inc. ("SERI") fails or refuses to make payments under the Plan, Participants employed by SERI may have the right to obtain payment by Southern Energy, Inc. ("SEI") pursuant to the terms of the "Guarantee Agreement Concerning Southern Energy Resources, Inc. Compensation and Benefit Arrangements" entered into by SERI and SEI. Such Participant's right to payment is not increased as a result of this SEI Guarantee. Participants employed by SERI have the same right to payment from SEI as they have from SERI. Any demand to enforce this SEI Guarantee should be made in writing and should reasonably and briefly specify the manner and the amount SERI has failed to pay. Such writing given by personal delivery or mail shall be effective upon actual receipt. Any writing given by telegram or telecopier shall be effective upon actual receipt if received during SEI's normal business hours, or at the beginning of the next business day after receipt, if not received during SEI's normal business hours. All arrivals by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. 3.3 Certain Exclusions. The Committee may exclude various items and occurrences from business results before determining the Incentive Pay Awards under the Plan. To the extent such exclusions affect awards to Participants covered under Section 162(m) of the Code, the exclusions shall be prescribed in resolutions that meet the requirements of Section 162(m) of the Code for deductibility. 3.4 Determination of Incentive Pay Awards. All elements required to determine Incentive Pay Awards shall be fixed in all events by the end of the Performance Period. 3.5 Insufficient Earnings. Notwithstanding the above provisions, an Award will not be granted for any Computation Period ending with the calendar year in which the current earnings of Southern Company are less than the amount necessary to fund the dividends on Southern Company's common stock at the rate such dividends were paid for the immediately preceding calendar year. 3.6 Shareholder Approval. No Incentive Pay Award shall be paid to a Participant under the Plan unless the Plan has been approved by a majority of the shareholders of Southern Company as required by Section 162(m) of the Code. 3.7. No Duplication. A Participant shall not receive more than one Incentive Pay Award for a Performance Period under the Plan or any similar plan. A Participant who receives an Incentive Pay Award under this Plan shall not receive an award under the Southern Company Performance Pay Plan or any other plan intended to replace the Southern Company Performance Pay Plan. ARTICLE IV Change in Control The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control of Southern Company or an Employing Company and the benefits to be provided hereunder in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein. ARTICLE V Administration of Plan 5.1 Responsibilities. Subject to oversight and direction from the Committee, the Plan Administrator shall be responsible for the daily administration of the Plan. The Plan Administrator shall adopt such procedures and guidelines as it deems necessary or desirable in order to discharge its duties hereunder. 5.2 Record Keeping and Reporting. (a) The Plan Administrator shall maintain permanent records and accounts of Participants and shall be responsible for all receipts, disbursements, transfers and other transactions concerning the Plan. (b) The Plan Administrator shall undertake the preparation and filing of all documents and forms required by any governmental agency. The Plan Administrator shall keep all such books of account records, and other data as may be necessary for proper administration of the Plan. 5.3 Responsibilities in General. Except for the specific powers and responsibilities reserved to the Committee, the Plan Administrator shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan as more particularly set forth herein. The Plan Administrator shall interpret the Plan and shall determine all questions concerning eligibility, administration, interpretation, and application of the Plan, and all such determinations shall be conclusive and binding on all Participants and interested persons. The Plan Administrator shall adopt such procedures and guidelines as it deems necessary or desirable in order to discharge its duties hereunder. 5.4 Indemnification. The Business Units shall indemnify the Plan Administrator against any and all claims, losses, damages, expenses, and liability arising from its actions or omissions, except when the same are finally adjudicated to be due to gross negligence or willful misconduct. The Business Units may purchase at their own expense sufficient liability insurance for the Plan Administrator to cover any and all claims, losses, damages, and expenses arising from any action or omission in connection with the execution of the duties as the Plan Administrator. 5.5 Service of Process. The Plan Administrator shall be the appointed agent for the service of process. ARTICLE VI Miscellaneous Provisions 6.1 No Right of Assignment or Alienation. Neither the Participant nor his personal representative shall have any rights to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payments of this Plan shall be void and have no effect. 6.2 No Trust Requirement. Unless the Board of Directors shall in its discretion determine otherwise, the Business Units shall neither reserve nor otherwise set aside funds for the payments of Incentive Pay Awards under the Plan. 6.3 Amendment and Termination of Plan. Except for the provisions of Article IV hereof, which may not be amended following a "Southern Change in Control," "Subsidiary Change in Control" or a "Southern Termination" (as such terms are defined in the Change in Control Benefit Plan Determination Policy), the Board of Directors may terminate the Plan at any time or may from time to time amend the Plan. Any amendment or termination of the Plan shall apply, in the Board of Directors' sole discretion, with respect to all Participants. 6.4 Incentive Pay Award as Compensation. (a) Incentive Pay Awards made in accordance with the Plan are in addition to any other benefits or compensation to which a Participant may be entitled or for which he may be eligible, whether funded or unfunded, by reason of his employment with the Business Unit. (b) There shall be deducted from each Incentive Pay Award to a Participant the amount of any tax required to be withheld by any governmental authority and paid over by the Business Unit to such governmental authority. 6.5 Coordination with Benefit Plans. Any Incentive Pay Awards paid to a Participant while employed by a Business Unit shall not be considered in the calculation of the Participant's benefits under any employee welfare or pension benefit plan maintained by an Business Unit, unless otherwise specifically provided therein. 6.6 Plan Not a Contract. The Plan shall not be deemed to constitute a contract between a Business Unit and any Executive Employee, nor shall anything herein contained be deemed to give any Executive Employee any right to be retained in the employ of a Business Unit or interfere with the right of the Business Unit to discharge any Executive Employee at any time and to treat him without regard to the effect which such treatment might have upon him as a Participant. 6.7 Choice of Law. This Plan shall be governed by and construed in accordance with the laws of the State of Georgia except for the application of any law which would require the use of the laws of another state. 6.8 Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Plan, a Change in Control transaction would otherwise be accounted for as a pooling of interests under APB No. 16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Plan that would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall automatically be void and ineffective to the extent required to permit Pooling Accounting to be used for such Change in Control transaction. IN WITNESS WHEREOF, Southern Company Services, Inc., through its officers duly authorized, hereby establishes the Southern Company Performance Pay Plan (Shareholder Approved) this _____ day of March , 2001, to be effective January 1, 2000. SOUTHERN COMPANY SERVICES, INC. By: ____________________________ _________ Robert A. Bell _________ Vice President Attest: By: ____________________________________________ Sam H. Dabbs, Jr. Assistant Secretary EX-10 15 x10a59.txt DEFERRED COMPENSATION PLAN FOR DIRECTORS OF THE SOUTHERN COMPANY Amended and Restated Effective February 19, 2001 SECTION 1 Definitions 1.1 "Beneficial Ownership" means beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. 1.2 "Board" or "Board of Directors" means the Board of Directors of the Company. 1.3 "Business Combination" means a reorganization, merger or consolidation or sale of Southern, or a sale of all or substantially all of Southern's assets. 1.4 "Cash Compensation" means the annual retainer fees and meeting fees payable to a Director in cash. 1.5 "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. 1.6 "Committee" means the Governance Committee of the Board, or such other committee as may be designated by the Board to be responsible for administering the Plan. 1.7 "Common Stock" means the common stock of Southern, including any shares into which it may be split, subdivided, or combined. 1.8 "Company" means The Southern Company or any successor thereto. 1.9 "Compensation Payment Date" means the date on which compensation, including cash retainer, meeting fees, and Stock Retainer, is payable to a Director or compensation which would otherwise be payable to a Director if an election to defer such compensation had not been made. 1.10 "Consummation" means the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or agencies. 1.11 "Deferred Cash Trust" means the Deferred Cash Compensation Trust for Directors of The Southern Company and its Subsidiaries. 1.12 "Deferred Compensation Account" means the Prime Rate Investment Account, the Phantom Stock Investment Account, the Deferred Stock Account and/or the Stock dividend investment account. 1.13 "Deferred Pension Election" means the election by a Director under Section 5.3 in connection with the deferral of receipt of the Director's Pension Benefit until termination from the Board. 1.14 "Deferred Stock Account" means the bookkeeping account established under Section 6.3 on behalf of a Director and includes shares of Common Stock credited thereto to reflect the reinvestment of dividends pursuant to Section 6.3(a)(iii). 1.15 "Deferred Stock Trust" means the Deferred Stock Trust for Directors of The Southern Company and its Subsidiaries. 1.16 "Director" means a member of the Board. 1.17 "Distribution Election" means the designation by a Director of the manner of distribution of the amounts and quantities held in the Director's Deferred Compensation Accounts upon the director's termination from the Board pursuant to Section 5.4. 1.18 "Effective Date" means January 1, 2000. 1.19 "Employee" means an employee of Southern or any of its subsidiaries that are "employing companies" as defined in the Southern Company Deferred Compensation Plan as amended and restated January 1, 2000, and as may be amended from time to time. 1.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.21 "Group" has the meaning set forth in Section 14(d) of the Exchange Act. 1.22 "Incumbent Board" means those individuals who constitute the Southern board of directors as of October 19, 1998, plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern board of directors subsequent to October 19, 1998, whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern board of directors shall be a member of the Incumbent Board. 1.23 "Market Value" means the average of the high and low prices of the Common Stock, as published in the Wall Street Journal in its report of New York Stock Exchange composite transactions, on the date such Market Value is to be determined, as specified herein (or the average of the high and low sale prices on the trading day immediately preceding such date if the Common Stock is not traded on the New York Stock Exchange on such date). 1.24 "Participant" means a Director or former Director who has an unpaid Deferred Compensation Account balance under the Plan. 1.25 "Participating Companies" means those companies that are affiliated with the Company whose boards of directors have authorized the establishment of trust(s) for the funding of their respective directors' Deferred Compensation Accounts under their respective Deferred Compensation Plans for Directors, including the Company. 1.26 "Pension Benefit" means the U.S. dollar amount of the actuarially-determined present value of benefits based on a Director's expected service at the required retirement date under The Southern Company Outside Directors Pension Plan, as calculated as of the Termination Date, plus accrued earnings on such amount calculated as if invested at the Prime Interest Rate from the Termination Date, until such amount is invested in Deferred Compensation Accounts pursuant to the provisions of Section 5.3. 1.27 "Pension Benefit Investment Date" means the date to be determined by the Committee, as of which the Director's Pension Benefit will be credited to a Deferred Compensation Account in accordance with the director's Deferred Pension Election under Section 5.3. 1.28 "Phantom Stock Investment Account" means the bookkeeping account established pursuant to Section 6.2 in which a Director may elect to defer Cash Compensation or make investments, and includes amounts credited thereto to reflect the reinvestment of dividends. 1.29 "Plan" means the Deferred Compensation Plan for Directors of The Southern Company as from time to time in effect. 1.30 "Plan Period" means the period designated in Section 4. 1.31 "Person" means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. 1.32 "Preliminary Change in Control" means the occurrence of any of the following as determined by the Southern Committee: (a) The Company has entered into a written agreement, such as, but not limited to, a letter of intent, which, if Consummated, would result in a Southern Change in Control; (b) The Company or any Person publicly announces an intention to take or to consider taking actions which, if Consummated, would result in a Southern Change in Control under circumstances where the Consummation of the announced action or intended action is legally and financially possible; (c) Any Person becomes the Beneficial Owner of fifteen percent (15%) or more of the Common Stock; or (d) The Board has declared that a Preliminary Change in Control has occurred. 1.33 "Prime Interest Rate" means the prime rate of interest as published in the Wall Street Journal. 1.34 "Prime Rate Investment Account" means the bookkeeping account established pursuant to Section 6.1 in which a Director may elect to defer Cash Compensation or make investments, the investment return on which is computed at the Prime Interest Rate. 1.35 "Southern" means The Southern Company. 1.36 "Southern Change in Control" means any of the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this subsection (a), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (i) any acquisition directly from Southern, (ii) any acquisition by Southern, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation controlled by Southern, (iv) any acquisition by a qualified pension plan or publicly held mutual fund, (v) any acquisition by an Employee or Group composed exclusively of Employees, or (vi) any Business Combination which would not otherwise constitute a Change in Control because of the application of clauses (i), (ii) and (iii) of Section 1.36(c); (b) A change in the composition of Southern's board of directors whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of Southern's board of directors; or (c) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met: (i) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (ii) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of employees or employee benefit plan (or related trust) of Southern, its subsidiaries, or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the Board were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Board, providing for such Business Combination. 1.37 "Southern Committee" means Chairman the Board, Chief Financial Officer of the Company, General Counsel of the Company, and the Chairman of the "Administrative Committee", as defined in Section 3.1 of the Southern Company Deferred Compensation Plan, as restated and amended effective January 1, 2000. 1.38 "Stock Dividend Investment Account" means the bookkeeping account(s) established pursuant to section 6.4 on behalf of a Director that is credited with shares of stock, other than Common Stock, paid as a dividend on shares of Common Stock. 1.39 "Stock Retainer" means the portion of the Board retainer fee that the Board has determined to credit to a Director's Deferred Stock Account. Such amount may be denominated in dollars and/or shares of Common Stock. 1.40 "Termination Date" means January 1, 1997, the date as of which The Southern Company Outside Directors Pension Plan was effectively terminated. 1.41 "Transferred Amount" means an amount (a) equal to the value of a Director's accounts under the applicable deferred compensation plan for directors of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, or Savannah Electric and Power Company and (b) which has been transferred to the Plan in connection with the Director's transfer from the board of directors of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, or Savannah Electric and Power Company to the Board. 1.42 "Trust Administrator" means the individual or committee that is established in the Deferred Stock Trust and the Deferred Cash Trust, to administer such trusts on behalf of the Participating Companies. 1.43 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. Where the context requires, words in the masculine gender shall include the feminine gender, words in the singular shall include the plural, and words in the plural shall include the singular. SECTION 2 Purpose The Plan provides a method of deferring payment to a Director of his compensation until a date following the termination of his membership on the Board. SECTION 3 Eligibility An individual who serves as a Director and is not otherwise actively employed by the Company or any of its subsidiaries or affiliates is eligible to participate in the Plan. SECTION 4 Plan Periods Except as pertains to a Director's initial Plan Period, all Plan Periods shall be on a calendar year basis. The initial Plan Period applicable to any person elected to the Board who was not a Director on the preceding December 31, shall begin on the first day of such Director's membership on the Board. The initial Plan Period under this amended and restated plan shall begin January 1, 2000. Except as otherwise provided herein, the terms of the Plan in effect prior to the effective date of this Plan shall continue to be applicable to deferrals made pursuant to the Plan prior to January 1, 2000. SECTION 5 Elections 5.1 Cash Compensation (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all or any portion of Cash Compensation that otherwise would be paid to the Director for the Plan Period, be deferred in amounts as designated by the Director, and credited to (i) a Prime Rate Investment Account, (ii) a Phantom Stock Investment Account, or (iii) a Deferred Stock Account. Upon the Director's termination from the Board of Directors, such deferred compensation and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer Cash Compensation is irrevocable. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer Cash Compensation payable in a future Plan Period prior to the beginning of such future Plan Period. (c) Cash Compensation deferred under this Section 5.1 shall be invested in Deferred Compensation Accounts as directed by the Director on the Compensation Payment Date. 5.2 Stock Retainer Director compensation designated as Stock Retainer shall be credited to the Director's Deferred Stock Account as of the Compensation Payment Date. Upon the Director's termination from the Board of Directors, such compensation and accumulated investment return held in the Director's Deferred Stock Account shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. 5.3 Deferred Pension Election Any Director, who had a Pension Benefit as of the Termination Date, made a single one-time election, to credit all of his Pension Benefit into a Deferred Compensation Account. The Pension Benefit was credited on the Pension Benefit Investment Date, at the election of the Director, to (i) a Prime Rate Investment Account, (ii) a Phantom Stock Investment Account, or (iii) a Deferred Stock Account. Upon the Director's termination from the Board, such Pension Benefit and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with Section 5.4(b) and the provisions of Section 7. 5.4 Distribution Election (a) Except as set forth in Sections 5.4(b) and (c), prior to the initial establishment of a Deferred Compensation Account for a Director, the Director must elect that upon termination from the Board of Directors the values and quantities held in the Directors Deferred Compensation Accounts be distributed to the Director, pursuant to the provisions of Section 7, in a single lump sum or in a series of annual installments not to exceed ten (10). The time for the commencement of distributions shall not be later than the first day of the month coinciding with or next following the second anniversary of termination of Board membership. (b) Any Director who made a Deferred Pension Election in accordance with Section 5.3 made a Distribution Election at the time the Deferred Pension Election was made, attributable to the Pension Benefit and any accumulated investment return. (c) In the event a Director terminates from the Board with Deferred Compensation Accounts established under Section 6.5, the Transferred Amounts and accumulated investment return held in the Accounts shall be distributed to the Director in accordance with the Director's distribution election in effect under the applicable deferred compensation plan for directors of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, or Savannah Electric and Power Company on the date the Director transferred to the Board, and the provisions of Section 7, unless such election is changed pursuant to Section 5.4(d). (d) Distribution Elections made under Sections 5.4 (a), (b), and (c) are irrevocable except that a Director may amend any of the Distribution Elections then in effect not prior to the 390th day or later than the 360th day prior to his termination of Board membership. 5.5 Beneficiary Designation A Director or former Director may designate a beneficiary to receive distributions from the Plan in accordance with the provisions of Section 7 upon the death of the director. The beneficiary designation may be changed by a Director or former Director at any time, and without the consent of the prior beneficiary. 5.6 Form of Election All elections pursuant to the provisions of this Section 5 of the Plan shall be made in writing to the Secretary of the Company on a form or forms available upon request of the Secretary. SECTION 6 Accounts 6.1 Prime Rate Investment Account A Prime Rate Investment Account shall be established for each Director electing deferral or investment of Cash Compensation at the Prime Interest Rate. The amount directed by the Director to such account shall be credited to it as of the Pension Benefit Investment Date or Compensation Payment Date, as applicable, and credited thereafter with interest computed using the Prime Interest Rate. Interest shall be computed from the date such compensation is credited to the account and compounded quarterly at the end of each calendar quarter. The Prime Interest Rate in effect on the first day of a calendar quarter shall be deemed the Prime Interest Rate in effect for that entire quarter. Interest shall accrue and compound on any balance until the amount credited to the account is fully distributed. 6.2 Phantom Stock Investment Account The Phantom Stock Investment Account established for each Director electing deferral of Cash Compensation for investment at the Common Stock investment rate shall be credited with the number of shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock which could have been purchased on the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, as determined by dividing the applicable compensation by the Market Value on such date. On the date of the payment of dividends on the Common Stock, the Director's Phantom Stock Investment Account shall be credited with additional shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock, as follows: (a) In the case of cash dividends, such additional shares as would have been purchased as of the Common Stock dividend record date as if the credited shares had been outstanding on such date and dividends reinvested thereon under the Southern Investment Plan; (b) In the case of dividends payable in property other than cash or Common Stock, such additional shares as could be purchased at the Market Value as of the date of payment with the fair market value of the property which would have been payable if the credited shares had been outstanding; and (c) In the case of dividends payable in Common Stock, such additional shares as would have been payable on the credited shares as if they had been outstanding. 6.3 Deferred Stock Account (a) A Director's Deferred Stock Account will be credited: (i) with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by dividing the sum of the amount of Cash Compensation subject to deferral or investment in the Deferred Stock Account and the Stock Retainer (that is denominated in dollars), by the average price paid by the Trustee of the Deferred Stock Trust for shares of Common Stock with respect to the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, as reported by the Trustee, or, if the Trustee shall not at such time purchase any shares of Common Stock, by the Market Value on such date; (ii) as of the date on which Stock Retainer (that is denominated in shares of Common Stock) is paid, with the number of shares of Common Stock payable to the Director as his Stock Retainer; and (iii) as of each date on which dividends are paid on the Common Stock, with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by multiplying the number of shares of Common Stock credited in the Director's Deferred Stock Account on the dividend record date, by the dividend rate per share of Common Stock, and dividing the product by the price per share of Common Stock attributable to the reinvestment of dividends on the shares of Common Stock held in the Deferred Stock Trust on the applicable dividend payment date or, if the Trustee of the Deferred Stock Trust has not reinvested in shares of Common Stock on the applicable dividend reinvestment date, the product shall be divided by the Market Value on the dividend payment date. (b) If Southern enters into transactions involving stock splits, stock dividends, reverse splits or any other recapitalization transactions, the number of shares of Common Stock credited to a Director's Deferred Stock Account will be adjusted (rounded to the nearest ten thousandth of a share) so that the Director's Deferred Stock Account reflects the same equity percentage interest in Southern after the recapitalization as was the case before such transaction. (c) If at least a majority of Southern's stock is sold or exchanged by its shareholders pursuant to an integrated plan for cash or property (including stock of another corporation) or if substantially all of the assets of Southern are disposed of and, as a consequence thereof, cash or property is distributed to Southern's shareholders, each Director's Deferred Stock Account will, to the extent not already so credited under this Section 6.3, be (i) credited with the amount of cash or property receivable by a Southern shareholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account and (ii) debited by that number of shares of Common Stock surrendered by such equivalent Southern shareholder. (d) Each Director who has a Deferred Stock Account also shall be entitled to provide directions to the Trust Administrator to similarly direct the Trustee of the Deferred Stock Trust to vote, on any matter presented for a vote to the shareholders of Southern, that number of shares of Common Stock held by the Deferred Stock Trust equivalent to the number of shares of Common Stock credited to the Director's Deferred Stock Account. Such Trust Administrator shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the Southern shareholders as to which their votes are solicited. 6.4 Stock Dividend Investment Account (a) A Director's Stock Dividend Investment Account will be credited as of the date on which a dividend is paid to the Company's common stockholders in stock other than Common Stock with the number of shares of the other corporation's stock receivable by a Southern stockholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account. (b) Each Director who has a Stock Dividend Investment Account also shall be entitled to provide directions to the Trust Administrator to similarly direct the Trustee of the Deferred Stock Trust to vote on any matter presented for a vote to the applicable corporation's shareholders, that number of shares of the applicable corporation's common stock held by the Deferred Stock Trust equivalent to the number of shares credited to the Director's Stock Dividend Investment Account. The Trust Administrator shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the applicable corporation's shareholders as to which their votes are solicited. 6.5 Transferred Amounts (a) As soon as administratively practicable, the Company shall establish for a Director transferring to the Board from Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, or Savannah Electric and Power Company, such Deferred Compensation Accounts as are necessary to implement Section 6.5 (b). (b) Any Transferred Amounts will be credited to the Deferred Compensation Account(s) established that are comparable to the deferred compensation accounts to which such amounts were credited under the applicable deferred compensation plan for directors of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, or Savannah Electric and Power Company, as soon as administratively practicable following the date the Transferred Amounts are transferred to the Plan. Thereafter, the Transferred Amounts shall be credited with investment returns as applicable under this Section 6 of the Plan. SECTION 7 Distributions 7.1 Upon the termination of a Director's membership on the Board the amount credited to a Director's Deferred Compensation Accounts will be paid to the Director or his beneficiary, as applicable, in the following manner: (a) the amount credited to a Director's Prime Rate Investment Account and Phantom Stock Investment Account shall be paid in cash; (b) the amount credited to a Deferred Stock Account shall, except as otherwise provided in Section 6.3 and Section 9.5, or to the extent the Company is otherwise, in the reasonable judgment of the Committee, precluded from doing so, be paid in shares of Common Stock (with any fractional share interest therein paid in cash to the extent of the then Market Value thereof); and (c) the amount credited to a Stock Dividend Investment Account shall, except as otherwise provided in section 9.5, be paid from the assets in the Deferred Stock Trust in shares of the applicable corporation, however if there is not a sufficient number of shares held in the Trust, the remainder shall be paid in cash based upon the average of the high and low price of the stock as reported in the Wall Street Journal on the business day immediately proceeding the distribution date. Such payments shall be from the general assets of the Company (including the Deferred Cash Trust and the Deferred Stock Trust) in accordance with this Section 7. Notwithstanding the foregoing, in the event the Company enters into an agreement described in Section 7.3 with respect to a Director prior to the termination of the Director, the Company shall have no obligation to make distributions to the Director under this Section 7.1 in connection with such Director's termination of membership on the Board. 7.2 Unless other arrangements are specified by the Committee on a uniform and nondiscriminatory basis, deferred amounts shall be paid in the form of (i) a lump sum payment, or (ii) in approximately equal annual installments, as elected by the Director pursuant to the provisions of Section 5.4; provided, however, that payments shall be made only in a single lump sum if payment commences due to termination for cause. Such payments shall be made (or shall commence) as soon as practicable following the termination of Board membership or, if so elected in the Distribution Election, up to twenty-four (24) months following such termination. In the event a Director elected to receive the balance of his Deferred Compensation Accounts in a lump sum, distribution shall be made on the first day of the month selected by the Director on his Distribution Election, or as soon as reasonably possible thereafter. If the Director elected to receive annual installments, the first payment shall be made on the first day of the month selected by a Director, or as soon as reasonably possible thereafter, and shall be equal to the balance in the Director's Deferred Compensation Accounts on such date divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance in the Director's Deferred Compensation Accounts on the date of payment divided by the number of remaining annual payments and shall be paid on the anniversary of the preceding date of payment. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. Upon the death of a Director, or a former Director prior to the payment of all amounts credited to the Director's Deferred Compensation Accounts, the unpaid balance shall be paid in the sole discretion of the Committee (i) in a lump sum to the designated beneficiary of such Director or former Director within thirty (30) days of the date of death (or as soon as reasonably possible thereafter) or (ii) in accordance with the Distribution Election made by such Director or former Director. In the event a beneficiary designation has not been made, or the designated beneficiary is deceased or cannot be located, payment shall be made to the estate of the Director or former Director. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. 7.3 If the Company enters into a written agreement with a subsidiary, affiliate or former affiliate of the Company under which the subsidiary, affiliate or former affiliate assumes liability for a Director's benefits accrued under the Plan in connection with, but prior to, such Director's termination of membership on the Board and election to the board of directors of such subsidiary, affiliate or former affiliate of the Company, the value of the Director's benefits which have accrued under the Plan as of the date the Director terminates from the Board shall be transferred from the Company to the subsidiary, affiliate or former affiliate of the Company, and the Company shall have no further obligation to make any distributions to the Director under Section 7.1 or any other section herein. SECTION 8 Change in Control and Other Special Provisions 8.1 Notwithstanding any other terms of the Plan to the contrary, following a Southern Change in Control, the provisions of this Section 8 shall become operative and apply to the payment of benefits under the Plan with respect to any Director who is a Participant on such date. 8.2 The Deferred Cash Trust and the Deferred Stock Trust (collectively "Trusts") have been established to hold assets of the Participating Companies under certain circumstances as a reserve for the discharge of the Company's obligations under the Plan. In the event of a Preliminary Change in Control of the Company, the Company shall be obligated to immediately contribute such amounts to the Trusts as may be necessary to fully fund all benefits payable under the Plan in accordance with the procedures set forth in Section 8.3 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(b) of the Deferred Cash Trust and Paragraph 7(c) of the Deferred Stock Trust, the Company may fund the Trusts prior to a Preliminary Change in Control of the Company in accordance with the terms of the Trusts. All assets held in the Trusts remain subject only to the claims of the Participating Companies' general creditors whose claims against the Participating Companies are not satisfied because of the Participating Companies' bankruptcy or insolvency (as those terms are defined in the Trusts). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trusts before the assets are paid to the Participant and all rights created under the Trusts, as under the Plan, are unsecured contractual claims of the Participant against the Company. 8.3 As soon as practicable following a Preliminary Change in Control of the Company, the Company shall contribute to each Trust an amount based upon the funding strategy adopted by the Trust Administrator with the assistance of an appointed actuary necessary to fulfill the Company's obligations pursuant to this Section 8. In the event of a dispute over such actuary's determination with respect to either or both Trusts, the Company and any complaining Participant(s) shall refer such dispute to an independent, third party actuarial consultant, chosen by the Company and such Participant. If the Company and the Participant cannot agree on an independent, third party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the Company and the applicable Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Company shall be responsible for all of the fees and expenses of the independent actuarial consultant. 8.4 In the event of a Southern Change in Control, notwithstanding anything to the contrary in the Plan, upon termination as a Director, that amount in the Deferred Compensation Plan Account(s) of a Participant who was a Director determined as of the date of such Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Trust Administrator, in its sole and absolute discretion. If no such election is made, the Director shall receive payment of his Accounts solely in accordance with Section 7. SECTION 9 General Provisions 9.1 In the event that the Company shall decide to establish an advance accrual reserve on its books against the future expense of payments from any Deferred Compensation Accounts, such reserve shall not under any circumstances be deemed to be an asset of this Plan but, at all times, shall remain a part of the general assets of the Company, subject to claims of the Company's creditors. 9.2 A person entitled to any amount under this Plan shall be a general unsecured creditor of the Company with respect to such amount. Furthermore, a person entitled to a payment or distribution with respect to a Deferred Compensation Account shall have a claim upon the Company only to the extent of the balance in his Deferred Compensation Accounts. The Company will pay all commissions, fees, and expenses that may be incurred in operating the Plan. 9.4 The Company will pay its prorated share of all commissions, fees, and expenses that may be incurred in operating any trust(s) established under the Plan (including the Deferred Stock Trust and the Deferred Cash Trust). 9.5 Notwithstanding any other provision of this Plan: (i) elections under this Plan may only be made by Directors while they are directors of the Company; (with the exception of the designation of beneficiaries) and (ii) distributions otherwise payable to a Director in the form of Common Stock or other corporation's stock shall be delayed and/or instead paid in cash in an amount equal to the fair market value thereof if such payment in stock would violate any federal or State securities laws (including Section 16(b) of the Securities Exchange Act of 1934, as amended) and/or rules and regulations promulgated thereunder. 9.6 Directors, their legal representatives and their beneficiaries shall have no right to anticipate, alienate, sell, assign, transfer, pledge or encumber their interests in the Plan, nor shall such interests be subject to attachment, garnishment, levy or execution by or on behalf of creditors of the Directors or of their beneficiaries. SECTION 10 Administration Subject to the express provisions of the Plan, the Committee shall have the exclusive right to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for the administration of the Plan. The decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan. The Committee may delegate to such officers, employees, or departments of the Company or Southern, such authority, duties, and responsibilities of the Committee as it, in its sole discretion, considers necessary or appropriate for the proper and efficient operation of the Plan, including, without limitation, (i) interpretation of the Plan, (ii) approval and payment of claims, and (iii) establishment of procedures for administration of the Plan. SECTION 11 Amendment, Termination and Effective Date 11.1 Amendment of the Plan Except for the provisions of Section 8, which may not be amended following a Southern Change in Control, and subject to the provisions of Section 11.3, the Plan may be wholly or partially amended or otherwise modified at any time by written action of the Board. 11.2 Termination of the Plan Subject to the provisions of Section 11.3 herein, the Plan may be terminated at any time by written action of the Board. 11.3 No Impairment of Benefits Notwithstanding the provisions of Sections 11.1 and 11.2 herein, no amendment to or termination of the Plan shall impair any rights to benefits that have accrued hereunder. 11.4 Governing Law This Plan shall be construed in accordance with and governed by the laws of the State of Georgia. IN WITNESS WHEREOF, the Plan, as amended and restated effective February 19, 2001, has been executed pursuant to resolutions of the Board of Directors of the Company, this ____ day of _______________, 2001. THE SOUTHERN COMPANY By: ________________________ Attest: By: ___________________________ EX-10 16 x10a61.txt Exhibit 10(a)61 SOUTHERN COMPANY DEFERRED COMPENSATION PLAN Troutman Sanders LLP 600 Peachtree Street, N.E. 5200 Bank of America Plaza Atlanta, Georgia 30308-2216 (404) 885-3000 Amended and Restated as of February 23, 2001 0297647 i SOUTHERN COMPANY DEFERRED COMPENSATION PLAN TABLE OF CONTENTS ARTICLE I Purpose and Adoption of Plan...................................1 ---------------------------- ARTICLE II Definitions...................................................2 ------------ ARTICLE III Administration of Plan.......................................6 ---------------------- ARTICLE IV Eligibility...................................................8 ----------- ARTICLE V Deferral Election.............................................10 ----------------- ARTICLE VI Participants' Accounts.......................................12 ---------------------- ARTICLE VII Account Distribution........................................16 -------------------- ARTICLE VIII Miscellaneous Provisions...................................20 ------------------------ SOUTHERN COMPANY DEFERRED COMPENSATION PLAN ARTICLE I Purpose and Adoption of Plan 1.1......Adoption: Southern Company Services, Inc. and the other Employing Companies established the Deferred Compensation Plan for The Southern Electric System effective October 1, 1988. The Plan has been amended from time to time including this amendment and restatement effective February 23, 2001. Except as otherwise provided herein, the terms of the Plan as in effect prior to the effective date of this Plan shall continue to be applicable to deferrals made pursuant to the Plan prior to February 23, 2001. 1.2......Purpose: This Southern Company Deferred Compensation Plan is designed to permit a select group of management or highly compensated employees to elect to defer a portion of their regular compensation during each payroll period and to defer all or a portion of certain short-term and long-term incentive payments until their death, disability, retirement, or other termination of employment with an Employing Company. The Plan shall be an unfunded deferred compensation arrangement whose benefits shall be paid solely from the general assets of the Employing Companies. ARTICLE II Definitions For purposes of the Plan, the following terms shall have the following meanings unless a different meaning is plainly required by the context: 2.1......"Account" shall mean the account or accounts established and maintained by an Employing Company to reflect the interest of a Participant in the Plan resulting from a Participant's deferral of Compensation or Incentive Pay, or transfer of Transferred Amounts, and adjustments thereto to reflect income, gains, losses, and other credits or charges. Charges to Participant's Accounts for distributions shall be posted as of the date the Committee (or its designee) notifies its paying agent to make such distribution. 2.2......"Board of Directors" shall mean the Board of Directors of the Company. 2.3......"Change in Control Benefit Plan Determination Policy" shall mean the Change in Control Benefit Plan Determination Policy, as approved by the Southern Board, as it may be amended from time to time in accordance with the provisions therein. 2.4......"Closing Price" shall mean the closing price on any trading day of a share of the Common Stock based on consolidated trading as defined by the Consolidated Tape Association and reported as part of the consolidated trading prices of New York Stock Exchange listed securities. 2.5......"Committee" shall mean the committee referred to in Section 3.1 hereof. 2.6......"Common Stock" shall mean the common stock of Southern. 2.7......"Company" shall mean Southern Company Services, Inc. 2.8......"Compensation" shall mean the monthly rate of an Employee's base wages or salary paid by any Employing Company to an Employee, including amounts contributed by an Employing Company to the Employee Savings Plan as Elective Employer Contributions, as said term is defined in Section 4.1 therein, pursuant to the Employee's exercise of his or her deferral option made in accordance with Section 401(k) of the Internal Revenue Code and amounts contributed by an Employing Company to The Southern Company Flexible Benefits Plan on behalf of the Employee pursuant to his or her salary reduction election under such plan; but disregarding overtime and any reimbursements to an Employee paid by any Employing Company including, but not limited to, reimbursements for such items as moving expenses, automobile expenses, tax preparation expenses, travel and entertainment expenses, and health and life insurance premiums. 2.9......"Deferral Election" shall mean the Participant's written election to defer a portion of his or her Compensation or Incentive Pay pursuant to Article V hereof. 2.10....."Distribution Election" shall mean the election under Article VII hereof, pursuant to which a Participant elects to receive the balance of his or her Account in either a lump sum or in annual installments following the Participant's death, disability, retirement or other termination of Employment with an Employing Company. 2.11....."Effective Date" of this amendment and restatement shall mean February 23, 2001. 2.12....."Employee" shall mean any person who is currently employed by an Employing Company. 2.13....."Employee Savings Plan" shall mean The Southern Company Employee Savings Plan, as amended from time to time. 2.14....."Employee Stock Ownership Plan" shall mean The Southern Company Employee Stock Ownership Plan, as amended from time to time. 2.15....."Employing Company" shall mean the Company, or any affiliate or subsidiary (direct or indirect) of The Southern Company, which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. 2.16....."Enrollment Date" shall mean the Effective Date, January 1 of each Plan Year, and such other dates as may be determined from time to time by the Committee. 2.17....."Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 2.18....."Incentive Pay" shall mean such long-term or short-term incentive pay as the Committee shall permit to be deferred under this Plan for any Plan Year. 2.19....."Investment Election" shall mean the Participant's written election to have his or her deferred Compensation or Incentive Pay invested pursuant to Section 6.3 or Section 6.4 hereof. 2.20....."Mirant Plan" shall mean the Mirant Corporation Deferred Compensation Plan for Directors and Select Employees. 2.21....."Non-adopting Company" shall mean any subsidiary or affiliate of The Southern Company which is not an Employing Company. 2.22....."Participant" shall mean an Employee or former employee of an Employing Company who is eligible to receive benefits under the Plan or who was so eligible and had an unpaid Account balance upon his or her death, disability, retirement or other termination of employment with an Employing Company. 2.23....."Pension Plan" shall The Southern Company Pension Plan, as amended from time to time. 2.24....."Performance Sharing Plan" shall mean The Southern Company Performance Sharing Plan, as amended from time to time. 2.25....."Plan" shall mean the Southern Company Deferred Compensation Plan, amended and restated as of February 23, 2001, as further amended from time to time. Prior to the January 1, 1996 amendment and restatement, the Plan was entitled the Deferred Compensation Plan for The Southern Electric System. 2.26....."Plan Year" shall mean the calendar year. 2.27....."Retirement Income" shall have the same meaning as set forth in the Pension Plan. 2.28....."Southern" shall mean Southern Company, its successors and assigns. 2.29....."Southern Board" shall mean the board of directors of Southern. 2.30....."Spin-off Date" shall mean the "Group Status Change Date" as defined in the Employee Matters Agreement between Mirant Corporation (formerly Southern Energy, Inc.) and The Southern Company. 2.31....."Supplemental Benefit Plan" shall mean The Southern Company Supplemental Benefit Plan and the Supplemental Executive Retirement Plan of Savannah Electric and Power Company, each as amended from time to time. 2.32....."Transferred Amount" shall mean an amount equal to the value of a Participant's accounts under the Mirant Plan which has been transferred to and credited under the Plan pursuant to Section 6.2 herein in connection with the Participant's transfer of employment from Mirant Corporation or any of its subsidiaries to an Employing Company, excluding Mirant Corporation and its subsidiaries. 2.33....."Transferred Amount Investment Date" means the date as of which a Participant's Transferred Amount will be credited and invested under the Plan in accordance with Section 6.2. 2.34....."Trust" shall mean the Southern Company Deferred Compensation Trust. 2.35....."Trustee" shall mean the entity designated as such in the Trust. 2.36....."Valuation Date" shall mean each trading day of the New York Stock Exchange, or any successor national exchange on which the Common Stock is traded and with respect to which a Closing Price may be determined. Where the context requires, the definitions of all terms set forth in the Pension Plan, the Employee Savings Plan, the Employee Stock Ownership Plan, the Performance Sharing Plan and the Supplemental Benefit Plan shall apply with equal force and effect for purposes of interpretation and administration of the Plan, unless said terms are otherwise specifically defined in the Plan. Words in the masculine gender shall include the feminine and neuter genders, words in the singular shall include the plural and words in the plural shall include the singular. ARTICLE III Administration of Plan 3.1......The general administration of the Plan shall be placed in the Committee. The Committee shall consist of the Vice President, Human Resources of Southern, the Director, System Compensation and Benefits of Southern and the Comptroller of Southern. Any member may resign or may be removed by the Board of Directors and new members may be appointed by the Board of Directors at such time or times as the Board of Directors in its discretion shall determine. The Committee shall be chaired by the Vice President, Human Resources of Southern and may select a Secretary (who may, but need not, be a member of the Committee) to keep its records or to assist it in the discharge of its duties. A majority of the members of the Committee shall constitute a quorum for the transaction of business at any meeting. Any determination or action of the Committee may be made or taken by a majority of the members present at any meeting thereof, or without a meeting by resolution or written memorandum concurred in by a majority of the members. 3.2......No member of the Committee shall receive any compensation from the Plan for his or her service. 3.3......The Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan as may be more particularly set forth herein. The Committee shall interpret the Plan and shall determine all questions arising in the administration, interpretation and application of the Plan. Any such determination by the Committee shall be conclusive and binding on all persons. The Committee may adopt such regulations as it deems desirable for the conduct of its affairs and may appoint such accountants, counsel, actuaries, specialists and other persons as it deems necessary or desirable in connection with the administration of this Plan. The Committee shall be the Plan's agent for service of process. 3.4......The Committee shall be reimbursed by the Employing Companies for all reasonable expenses incurred by it in the fulfillment of its duties, including, but not limited to, fees of accountants, counsel, actuaries, and other specialists, and other costs of administering the Plan. 3.5 (a) The Committee is responsible for the daily administration of the Plan and may appoint other persons or entities to perform any of its fiduciary functions. The Committee and any such appointee may employ advisors and other persons necessary or convenient to help the Committee carry out its duties, including its fiduciary duties. The Committee shall review the work and performance of each such appointee, and shall have the right to remove any such appointee from his or her position. Any person, group of persons or entity may serve in more than one fiduciary capacity. (b) The Committee shall maintain accurate and detailed records and accounts of Participants and of their rights under the Plan and of all receipts, disbursements, transfers and other transactions concerning the Plan. Such accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by the Board of Directors and by any persons designated thereby. (c) The Committee shall take all steps necessary to ensure that the Plan complies with the law at all times. These steps shall include such items as the preparation and filing of all documents and forms required by any governmental agency; maintaining of adequate Participants' records; recording and transmission of all notices required to be given to Participants and their beneficiaries; the receipt and dissemination, if required, of all reports and information received from an Employing Company; securing of such fidelity bonds as may be required by law; and doing such other acts necessary for the proper administration of the Plan. The Committee shall keep a record of all of its proceedings and acts, and shall keep all such books of account, records and other data as may be necessary for proper administration of the Plan. The Committee shall notify the Employing Companies upon their request of any action taken by the Committee, and when required, shall notify any other interested person or persons. ARTICLE IV Eligibility 4.1......Any Employee who is determined eligible to participate in accordance with Section 4.2 of the Plan and whose compensation equals or exceeds such minimum amount as may be established by the Committee from time to time may elect to participate in the Plan beginning on any Enrollment Date by electing to have his or her Compensation or Incentive Pay reduced and such amounts contributed to the Plan in accordance with Article V hereof, and directing the investment of such contributions in accordance with Article VI hereof. The Committee shall be authorized to establish the minimum compensation required for eligibility to participate in the Plan, to be effective as of the first day of the next succeeding Plan Year. Notwithstanding the foregoing, any Employee eligible to participate in any similar deferred compensation plan maintained by an Employing Company or maintained by a Non-adopting Company shall be ineligible to defer Compensation or Incentive Pay under this Plan, unless the Committee in its sole discretion shall determine otherwise. 4.2......Effective December 19, 2000, the Committee shall determine which Employees are eligible to participate in the Plan. Additionally, the Committee shall be authorized to modify the minimum compensation amount described in Section 4.1 of the Plan and to rescind the eligibility of any Participant if necessary or advisable to insure that the Plan is maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees, as such terms are defined by the Employee Retirement Income Security Act of 1974, as amended. 4.3......The Committee shall have the authority to permit, if it deems appropriate, separate Deferral Elections under Article V hereof, Investment Elections under Article VI hereof, and Distribution Elections under Article VII hereof for Compensation and Incentive Pay, respectively. 4.4......Notwithstanding the foregoing provisions of this Article IV, an Employee who has Transferred Amounts transferred to and credited under the Plan pursuant to Section 6.2 herein shall be a Participant in the Plan. However, an Employee who becomes a Participant under this Section 4.4 who is not determined eligible under Section 4.2 shall be a non-active Participant and shall be ineligible to actively defer Compensation or Incentive Pay under this Plan unless such Employee is later determined to be eligible under Section 4.2 or the Committee in its sole discretion determines otherwise. ARTICLE V Deferral Election 5.1......A Participant may elect to defer payment of a portion of his or her Compensation otherwise payable to him by his or her Employing Company during each payroll period of the next succeeding Plan Year by any whole percentage not to exceed fifty percent (50%) of his or her Compensation, or such greater or lesser amount as shall be determined by the Committee from time to time. A Participant may also elect to defer payment of up to one hundred percent (100%), by whole percentages, of any Incentive Pay otherwise payable to him or her by his or her Employing Company. 5.2......The Deferral Election shall be made in writing on a form prescribed by the Committee and shall state as follows: (a) That the Participant wishes to make an election to defer the receipt of a portion of his or her Compensation or all or a portion of his or her Incentive Pay; (b) The whole percentage of his or her Compensation or Incentive Pay which the Participant elects to defer; and (c) The Distribution Election under Article VII hereof. 5.3......The initial Deferral Election of a new Participant shall be made in writing by the Participant and delivered to the Participant's Employing Company by the date established by the Committee and shall be effective on the next occurring Enrollment Date. Any modification or revocation of the most recent Deferral Election shall be made by written notice of the Participant and delivered to the Participant's Employing Company by the date established by the Committee and shall be effective on the first day of the Plan Year immediately following the date of the Deferral Election. A Deferral Election with respect to the deferral of future Compensation or Incentive Pay shall be an annual election for each Plan Year unless otherwise modified or revoked as provided herein. The termination of a Participant's participation in the Plan shall not affect the Participant's Compensation or Incentive Pay previously deferred under the Plan, which shall be invested and distributed in accordance with the Participant's elections and the terms and conditions of the Plan. 5.4......Notwithstanding the provisions of Section 5.3 of the Plan, the Committee, in its sole discretion upon written application by a Participant, may authorize the suspension of a Participant's Deferral Election in the event of an unforeseen emergency or hardship of the Participant. A Deferral Election suspension will be on account of hardship if it is necessary in light of immediate and heavy financial needs of the Participant which cannot reasonably be met from the Participant's other financial resources. For this purpose, any amounts held in the Participant's accounts in the Employee Savings Plan and the Employee Stock Ownership Plan shall not be deemed to be reasonably available. Any Deferral Election suspension authorized by the Committee shall become effective as of the first payroll period beginning thirty (30) days after receipt by the Participant's Employing Company of the Participant's suspension application, or as soon as practicable after the receipt of such application. Such Deferral Election suspension shall be effective for the remainder of the Plan Year of application and shall be deemed an annual election by the Participant for each succeeding Plan Year unless otherwise modified by the Participant under the provisions of Section 5.3 hereof. ARTICLE VI Participants' Accounts 6.1......Upon the Committee's receipt of a Participant's valid Deferral Election under Article V hereof, beginning as of the Enrollment Date, the designated portion of Compensation and Incentive Pay shall be credited to the Participant's Account as of the date of each such deferral in accordance with the provisions of this Article VI. 6.2......Transferred Amounts shall be credited to a Participant's Account as soon as administratively practicable following the Participant's transfer of employment. Any Transferred Amounts credited to a Participant's Account which were invested at the prime interest rate under the Mirant Plan shall be invested pursuant to Section 6.3 herein. Any Transferred Amounts credited to a Participant's Account which were invested in Mirant Corporation phantom stock under the Mirant Plan shall be invested in a Mirant Stock Option investment pursuant to the terms of Section 6.4(d) herein, and prior to the opening of the window period described in Section 6.4(d), such Transferred Amounts may be transferred out of the Mirant Stock Option investment during other window periods established by the Committee pursuant to Section 6.5 herein. Upon a Participant's termination of employment, the Transferred Amounts and accumulated investment return held in the Participant's Account shall be distributed to the Participant in accordance with the Participant's Distribution Election and the provisions of Article VII. 6.3......On the last business day of each month, the Account of each Participant either electing to invest his or her deferred Compensation or Incentive Pay for a Plan Year in accordance with this Section 6.3 or transferring a Transferred Amount to this Plan in accordance with Section 6.2 for investment pursuant to this Section 6.3, shall be credited by the Employing Company with an amount, in lieu of interest, equal to the monthly equivalent of the per annum prime rate of interest as published by the Wall Street Journal as the base rate on corporate loans posted as of the last business day of each month by at least seventy five (75%) percent of the United States' largest banks, compounded monthly on any Account balance until such balance is fully distributed. 6.4......The Account of each Participant either electing to invest his or her deferred Compensation or Incentive Pay for a Plan Year in accordance with this Section 6.4 for investment pursuant to this Section 6.4 shall be credited on the date of deferral with the deemed number of shares (including fractional shares) of Common Stock which could have been purchased on such date with the dollar amount of such deferral, based upon the Common Stock's Closing Price on the Valuation Date immediately preceding the date of deferral. As of the date on which occurs the payment of dividends on the Common Stock, there shall be credited with respect to the deemed number of shares of Common Stock in the Participant's Account on such date such additional deemed shares (including fractional shares) of Common Stock as follows: (a) In the case of cash dividends, such additional deemed shares as could be purchased at the Closing Price on the Valuation Date immediately preceding the dividend payment date with the dividends which would have been payable on the deemed number of shares previously credited to the Participant's Account; (b) In the case of dividends payable in property other than cash or Common Stock, such additional deemed shares as could be purchased at the Closing Price on the Valuation Date immediately preceding the dividend payment date with the fair market value of the property which would have been payable on the deemed number of shares previously credited to the Participant's Account; or (c) In the case of dividends payable in Common Stock, such additional deemed shares as would have been payable on the deemed number of shares previously credited to the Participant's Account; or (d) In the case of a deemed distribution of Mirant Corporation ("Mirant") common stock as a result of a spin-off of Mirant from the Southern Company or the transfer of Transferred Amounts which were invested in Mirant phantom stock under the Mirant Plan pursuant to Section 6.2 herein (collectively, "Mirant Shares"), the Mirant Shares shall be retained in a Mirant Stock Option investment for a limited period established by the Committee rather than immediately converted to Common Stock. The Participant will be given the opportunity to transfer the Mirant Shares into another investment option during a specific window period for such Mirant Shares established by the Committee pursuant to Section 6.5. Once the window period described in the preceding sentence closes, the Committee shall transfer the Mirant Shares into Common Stock at a time and in a manner designated by the Committee. 6.5......The Investment Election by a Participant with respect to his or her Account shall be made in writing on a form prescribed by the Committee. Investment Elections shall be delivered to the Participant's Employing Company prior to the first (1st) day of the month immediately prior to his or her Enrollment Date or the next succeeding Plan Year, as appropriate, and shall be effective on such Enrollment Date or the first day of such succeeding Plan Year. Investment Elections shall be irrevocable and shall continue from Plan Year to Plan Year unless the Participant changes the Investment Election regarding future deferred Compensation or Incentive Pay by submitting a written request to his or her Employing Company on a form prescribed by the Committee or unless the Participant transfers all or a portion of his Account to another investment option as provided below. Any such change shall become effective as of the first day of the Plan Year next following the Plan Year in which such request is submitted to the Employing Company. No transfer of amounts between investment options shall be permitted under the Plan except during a window period which may be designated by the Committee. The window period will normally occur once a year. However, the Committee may designate additional window periods during which transfers are allowed if it determines special circumstances warrant such a window. The length and timing of each window period, the procedures for transfer and the valuation of transferred Accounts or portions of Accounts shall be determined by the Committee. 6.6......As of the last day of each Plan Year, the Committee shall issue a report to each Participant holding an Account, setting forth the dollar amount of deferrals and Transferred Amounts invested under Section 6.3 hereof as of the last day of the Plan Year and, with respect to deferrals and Transferred Amounts invested under Section 6.4 hereof, the aggregate Closing Price of the number of shares of Common Stock credited to each Participant's Account as of the Valuation Date on or immediately preceding the last day of the Plan Year. ARTICLE VII Account Distribution 7.1 (a) When a Participant retires or terminates his or her employment with an Employing Company, he or she shall be entitled to receive in cash an amount equal to the dollar amount of any deferrals, Transferred Amounts, and any amounts in lieu of interest thereon credited to his or her Account under Section 6.3 hereof, and the dollar value of the aggregate Closing Price of the number of deemed shares of Common Stock (and fractions thereof) credited to his or her Account in accordance Section 6.4 hereof, determined as of the date following such termination or retirement that the Company notifies its paying agent to make the distribution or the immediately preceding Valuation Date, and any replacement benefits provided under Sections 6.3, 6.4 and 6.5 hereof prior to January 1, 1996, such amounts to be paid in accordance with the Participant's most recent Distribution Election. No portion of a Participant's Account shall be distributed in Common Stock. (b) The transfer by a Participant between subsidiaries or affiliates of Southern shall not be deemed to be a termination of employment with an Employing Company for purposes of the Plan. (c) The Accounts of all Participants who are employees of Mirant Corporation or one of its subsidiaries under the Plan on the Spin-off Date shall be transferred to the Mirant Plan on a date selected by the Committee, and the Southern Company and its affiliates and subsidiaries shall have no further obligation to make any distribution to such Participants under Section 7.1. 7.2......In the event that a Participant's most recent Distribution Election is to receive a lump sum distribution of his or her Account, the dollar amount determined under Section 7.1 hereof shall be paid to the Participant not later than sixty (60) days following the date on which the Participant's termination of employment occurs, or as soon as reasonably practicable thereafter. 7.3......In the event that a Participant's most recent Distribution Election is to receive the distribution of his or her Account in annual installments, the first payment shall be made not later than sixty (60) days following the date on which the Participant's termination of employment occurs, or as soon as reasonably practicable thereafter, and shall be in an amount equal to the dollar balance in the Participant's Account determined under Section 7.1 hereof, divided by the number of annual installments elected. Subsequent annual installments shall be in an amount equal to the dollar value of the Participant's Account determined under Section 7.1 hereof divided by the number of the remaining annual payments, and shall be paid as soon as practicable following each anniversary of the initial payment date until the balance of the Participant's Account is paid in full. 7.4......The Participants' initial Distribution Elections may not be revoked and shall govern the distribution of the Participants' Accounts. Notwithstanding the foregoing, and except as otherwise provided herein, the Committee may, in its sole discretion, upon application by a Participant, accept an amended Distribution Election from a Participant provided the election is made not later than the 366th day prior to a distribution of such Participant's Account in accordance with the terms of the Plan; provided further, however, that any Participant who is required to file reports pursuant to Section 16(a) of the Securities and Exchange Act of 1934, as amended, with respect to equity securities of Southern shall not be permitted to amend his or her Distribution Election during any time period for which such Participant is required to file any such reports with respect to the portion of his or her Account invested in accordance with the provisions of Section 6.3 of the Plan, unless the Committee in its sole discretion shall determine otherwise. 7.5......Upon the death of a Participant prior to the complete distribution his or her Account, the unpaid Account balance shall be paid in the sole discretion of the Committee (a) in a lump sum to the Participant's designated beneficiary within sixty (60) days following the date on which the Committee is provided evidence of the Participant's death (or as soon as reasonably practicable thereafter) or (b) in accordance with the Distribution Election made by such Participant. In the event a beneficiary designation is not on file or the designated beneficiary is deceased or cannot be located, payment will be made to the Participant's estate. 7.6......Beneficiary designations may be changed by the Participants at any time without the consent of any prior beneficiary. 7.7......Upon the total disability of a Participant, as determined by the Social Security Administration, prior to the complete distribution of his or her Account, the unpaid balance of his or her Account shall be paid in the sole discretion of the Committee (a) in a lump sum to the Participant or his or her legal representative within sixty (60) days following the date on which the Committee receives notification of the determination of disability by the Social Security Administration (or as soon as reasonable practicable thereafter) or (b) in accordance with the Participant's Deferral Election. 7.8......Upon application made by a Participant, his or her designated beneficiary, or an authorized legal representative, the Committee may in its sole discretion determine to accelerate payments or, in the event of death or total disability (as determined by Social Security Administration), may extend or otherwise make payments in a manner different from the manner in which such payment would otherwise be made under the Participant's Deferral Election in the absence of such determination. 7.9......In the event a Participant who is employed on or after January 1, 1999 with an "Employing Company" (as defined in the Change in Control Benefit Plan Determination Policy) disputes the calculation of his Account or payment of amounts due under the terms of this Plan, Participant has recourse against the Company, the Employing Company by which Participant is employed, if different, the Plan, and the Trust for the payment of benefits to the extent the Trust so provides. 7.10.....Effective May 10, 2000, if Mirant Services, LLC (formerly Southern Energy Resources, Inc.) ("Services") fails or refuses to make payments under the Plan, Participants employed by Services may have the right to obtain payment by Mirant Corporation (formerly Southern Energy, Inc.) ("Mirant") pursuant to the terms of the "Guarantee Agreement Concerning Southern Energy Resources, Inc. Compensation and Benefit Arrangements" entered into by Services and Mirant. A Participant's right to payment is not increased as a result of this Mirant Guarantee. Participants have the same right to payment from Mirant as they have from Services. Any demand to enforce this Mirant Guarantee should be made in writing and should reasonably and briefly specify the manner and the amount Services has failed to pay. Such writing given by personal delivery or mail shall be effective upon actual receipt. Any writing given by telegram or telecopier shall be effective upon actual receipt if received during Mirant's normal business hours, or at the beginning of the next business day after receipt, if not received during Mirant's normal business hours. All arrivals by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. 7.11 The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control or preliminary change in control of Southern or an Employing Company, the benefits to be provided hereunder and the funding of the Trust in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein. ARTICLE VIII Miscellaneous Provisions 8.1......Neither the Participant, his or her beneficiary, nor his or her legal representative shall have any rights to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the rights thereto are expressly declared to be non-assignable and nontransferable. Any attempt to assign or transfer the right to payments of this Plan shall be void and have no effect. 8.2......Except as expressly limited under the terms of the Trust, an Employing Company maintaining an Account for the benefit of a Participant shall neither reserve nor specifically set aside funds for the payment of its obligations under the Plan. In any event, such obligations shall be paid or deemed to be paid solely from the general assets of the Employing Companies. Participants shall only have the status of a general, unsecured creditor of the Employing Company(ies). Notwithstanding that a Participant shall be entitled to receive the balance of his or her Account under the Plan, the assets from which such amount may be paid shall at all times be subject to the claims of the creditors of the Participants' Employing Companies. 8.3......Except for the provisions of Section 7.11 hereof, which may not be amended following a "Southern Change in Control" or "Subsidiary Change in Control" (as defined in the Change in Control Benefit Plan Determination Policy), the Plan may be amended, modified, or terminated by the Board of Directors in its sole discretion at any time and from time to time; provided, however, that no such amendment, modification, or termination shall impair any rights to any amounts which have been earned or deferred under the Plan prior to such amendment, modification, or termination. Payment in full in cash of the amount credited to a Participant's Account as of the date of any amendment, modification of termination of the Plan shall not be deemed to be an impairment of the Participant's rights under the Plan. The Plan may also be amended or modified by the Committee if such amendment or modification does not involve a substantial increase in cost to any Employing Company. 8.4......It is expressly understood and agreed that the payments made in accordance with the Plan are in addition to any other benefits or compensation to which a Participant may be entitled or for which he or she may be eligible, whether funded or unfunded, by reason of his or her employment with any Employing Company. 8.5......There shall be deducted from each payment under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by an Employing Company to such governmental authority for the account of the person entitled to such distribution. 8.6......Any Compensation or Incentive Pay deferred by a Participant while employed by an Employing Company and any Transferred Amounts shall not be considered "compensation," as the term is defined in the Employee Savings Plan, the Employee Stock Ownership Plan, or the Pension Plan. Distributions from a Participant's Account shall not be considered wages, salaries or compensation under any other employee benefit plan. 8.7......No provision of this Plan shall be construed to affect in any manner the existing rights of an Employing Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship of the Participant and his or her Employing Company. 8.8......This Plan, and all rights under it, shall be governed by and construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, the amended and restated Plan has been executed by duly authorized officers of Southern Company Services, Inc. pursuant to resolutions of the Committee, this ___ day of __________, 2001. ......... SOUTHERN COMPANY SERVICES, INC. By:__________________________________________________ Its:_________________________________________________ Attest: By: ______________________________ Its: ______________________________ EX-10 17 x10a63.txt OUTSIDE DIRECTORS STOCK PLAN FOR SUBSIDIARIES OF THE SOUTHERN COMPANY AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000 OUTSIDE DIRECTORS STOCK PLAN FOR SUBSIDIARIES OF THE SOUTHERN COMPANY ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption. The board of directors of The Southern Company hereby adopts the Outside Directors Stock Plan for Subsidiaries of The Southern Company as amended and restated effective January 1, 2000 (the "Plan"). The Plan was initially established effective January 1, 1995, and amended effective January 1, 1995. The Plan was approved by the shareholders of the Company at the annual meeting thereof held on May 24, 1995, and the Company's issuance of the Stock pursuant to the Plan was approved by the Securities and Exchange Commission (the "Commission") under the Public Utility Holding Company Act of 1935. 1.2 Purpose. The Plan is designed to more closely align the interests of Directors of the System Companies (defined herein) with the interests of the shareholders of the Company through ownership of the Company's common stock, par value $5.00 per share (the "Stock"). ARTICLE II - DEFINITIONS 2.1 "Affiliated Employer" shall mean any corporation, which is a member of the controlled group of corporations of which The Southern Company is the common parent corporation. 2.2 "Board of Directors" shall means the Board of Directors of each System Company. 2.3 "Commission" shall mean the Securities and Exchange Commission. 2.4 "Company" shall mean The Southern Company. 2.5 "Director" shall mean any person (a) who serves on the Board of Directors of one or more System Companies on or after January 1, 1995; and (b) who is not an active employee of The Southern Company or an Affiliated Employer. 2.6 "Effective Date" shall mean January 1, 2000. 2.7 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 2.8 "Market Value" shall mean the following: (a) With respect to Stock that is issued by the Company, the average of the high and low prices of the Stock, as published in the Wall Street Journal in its report of New York Stock Exchange composite transactions, on the date one day prior to the date of distribution as set forth in Section 4.3(a) of the Plan (or the average of the high and low sale prices on the trading day immediately preceding such determination date if the stock is not traded on the date one day prior to the date of distribution). (b) With respect to Stock that is purchased on the open market, the actual purchase price paid for such Stock on the date of purchase. 2.9 "Participant" shall mean each Director on the Board of Directors of a System Company who meets the requirements of Section 3.1 of the Plan. 2.10 "Plan" shall mean the Amended and Restated Outside Directors Stock Plan for Subsidiaries of The Southern Company, as amended from time to time. 2.11 "Plan Administrator" shall mean the Governance Committee of the Board of Directors of the Company. 2.12 "Plan Year" shall mean the calendar year. 2.13 "Retainer Fee" shall mean the annual rate of the fees, payable to a Director for service on the Board of Directors of a System Company, but excluding reimbursements for expenses and any fees or compensation for: (a) attendance at the meetings of the Board of Directors or any committee, (b) service on a committee, and (c) service at the request of the Board of Directors or a committee. Such amount may be denominated in dollars and/or a specific number of shares of Stock. 2.14 "Stock" shall mean the Company's common stock, par value $5.00 per share. 2.15 "System Company" shall mean any affiliate or subsidiary of the Company which the Board of Directors of the Company may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. The System Companies that have adopted the Plan are listed in Schedule A, attached hereto, as such Schedule may be amended from time to time. The masculine pronoun shall be construed to include the feminine pronoun and the singular shall include the plural, where the context so requires. ARTICLE III - ELIGIBILITY Each Director who serves on a Board of Directors of a System Company shall become a Participant in the Plan on the first date such Director serves on the Board of Directors of a System Company. ARTICLE IV - FORM AND TIME OF BENEFIT DISTRIBUTIONS 4.1 Stock Grant. Each participant shall receive a portion of his Retainer Fee in Stock, with the remainder of such Retainer Fee to be payable, as elected by the Director in accordance with Section 4.2 below, in cash or in Stock. The portion of the Retainer Fee required to be paid in Stock pursuant to this Section 4.1 shall be stated in Schedule B, attached hereto, as such Schedule shall be amended from time to time by the Governance Committee of the Board of Directors of the Company. 4.2 Election to Determine Percentage of Amount of Compensation to be Paid in Stock. Each Participant shall have an annual opportunity to elect to have the remaining portion of his Retainer Fee paid in cash or Stock of the Company, or a combination thereof. Such election shall be made at the time specified by the Plan Administrator on a form provided to the Participant by the Plan Administrator or by the Corporate Secretary of the Director's System Company. Nothing contained in this Section 4.2 shall be interpreted in such a manner as would disqualify the Plan from treatment as a "formula plan" under Rule 16-b3, as promulgated by the Commission under the Exchange Act, as that rule may be amended from time to time. 4.3 Amount and Date of Payment for Stock Compensation. (a) For any Plan Year in which a Director is a Participant for the full Plan Year, any Stock compensation due a Participant pursuant to Sections 4.1 and 4.2 above shall be payable on a quarterly basis, with the first such quarterly distribution being made on April 1 and succeeding quarterly distributions being made on July 1, October 1, and January 1, except for Directors of Alabama Power Company for whom Stock distributions will first be made on January 1 with succeeding quarterly distributions made on April 1, July 1, and October 1. The amount of Stock to be distributed to a Participant per quarter shall be equal to the number of shares of Stock as set forth on Schedule "B" plus the amount calculated by first dividing the Participant's elected dollar amount of Stock compensation by four (4) and then dividing such quarterly quotient by the Market Value of the Stock. 4.4 Death Benefits. No benefits shall be payable under the Plan to any beneficiary of a Participant following a Participant's death. 4.5 Deferral of Stock Grant. If permitted by resolution of the Board of Directors of a System Company, a Director may elect to defer receipt of 100% of the Stock Grant set forth in Section 4.1, under the terms of the respective System Company's Deferred Compensation Plan for Directors. ARTICLE V - ADMINISTRATION OF PLAN 5.1 Administrator. The general administration of the Plan shall be the responsibility of the Governance Committee of the Board of Directors of The Southern Company, as Plan Administrator. 5.2 Powers. The Plan Administrator shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan more particularly set forth herein. It shall interpret the Plan and shall have the discretion to determine all questions arising in the administration, interpretation and application of the Plan, including any ambiguities contained herein or any questions of fact. Any such determination by it shall be conclusive and binding on all persons. It may adopt such regulations, as it deems desirable for the conduct of its affairs. It may appoint such accountants, counsel, actuaries, specialists and other persons as it deems necessary or desirable in connection with the administration of this Plan, and shall be the agent for the service of process. 5.3 Duties of the Plan Administrator. (a) The Plan Administrator is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Plan Administrator and any such appointee may employ advisors and other persons necessary or convenient to help it carry out its duties, including its fiduciary duties. The Plan Administrator shall have the right to remove any such appointee from his position. Any person, group of persons or entity may serve in more than one fiduciary capacity. (b) The Plan Administrator shall maintain accurate and detailed records and accounts of Participants and of their rights under the Plan and of all receipts, disbursements, transfers and other transactions concerning the Plan. Such accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by persons designated by the Board of Directors of each System Company. (c) The Plan Administrator shall take all steps necessary to ensure that the Plan complies with the law at all times. These steps shall include such items as the preparation and filing of all documents and forms required by any governmental agency; maintaining of adequate Participants' records; recording and transmission of all notices required to be given to Participants; the receipt and dissemination, if required, of all reports and information received from a System Company; securing of such fidelity bonds as may be required by law; and doing such other acts necessary for the proper administration of the Plan. The Plan Administrator shall keep a record of all of its proceedings and acts and shall keep all such books of account, records and other data as may be necessary for proper administration of the Plan. 5.4 Indemnification. The System Companies shall indemnify the Plan Administrator against any and all claims, losses, damages, expenses and liability arising from any action or failure to act, except when the same is finally judicially determined to be due to gross negligence or willful misconduct. The System Companies may purchase at their own expense sufficient liability insurance for the Plan Administrator to cover any and all claims, losses, damages and expenses arising from any action or failure to act in connection with the execution of the duties as Plan Administrator. ARTICLE VI - MISCELLANEOUS 6.1 Assignment. Neither the Participant nor his legal representative shall have any rights to sell, assign, transfer or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the right thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payment under the Plan shall be null and void and of no effect. 6.2. Amendment and Termination. The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time by the Board of Directors of the Company or by Governance Committee with the approval of the Board of Directors of the Company, upon execution of a duly authorized written document. Schedules A and B of the Plan may be wholly or partially amended or otherwise modified at any time by the Governance Committee, provided such amended schedules shall be filed with the Plan records. Provided, however, that without the approval of the shareholders of the Company entitled to vote thereon, no amendment to the Plan, including Schedules A or B, may be made which would, absent such shareholder approval, disqualify the Plan for coverage under Rule 16b-3, as promulgated by the Commission under the Exchange Act, as that rule may be amended from time to time. Notwithstanding the foregoing, no such amendment or termination shall impair any rights to payments to which a Participant may be entitled prior to the effective date of such amendment or termination. 6.3 No Guarantee of Continued or Future Service on a Board of Directors. Participation hereunder shall not be construed as creating a right in any Director to continued service or future service on the Board of Directors of any System Company. Participation hereunder does not constitute an employment contract between any Director and any System Company. 6.4 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent such laws are not otherwise superseded by the laws of the United States. IN WITNESS WHEREOF, the Plan, as amended and restated effective January 1, 2000, has been executed pursuant to resolutions of the Board of Directors of The Southern Company, this ____ day of _______________, 2000. THE SOUTHERN COMPANY By: ________________________________ Attest: By: ___________________________ OUTSIDE DIRECTORS STOCK PLAN FOR SUBSIDIARIES OF THE SOUTHERN COMPANY SCHEDULE A The System Companies as of January 1, 1995 are: Alabama Power Company Georgia Power Company Gulf Power Company Mississippi Power Company Savannah Electric and Power Company OUTSIDE DIRECTORS STOCK PLAN FOR SUBSIDIARIES OF THE SOUTHERN COMPANY SCHEDULE B As of January 1, 2000 The Participant's Retainer Fee required to be distributed in common stock of The Southern Company shall be determined in accordance with the following schedule: Company Required Stock Distribution Per Quarter Alabama Power Company 80 shares of Stock Georgia Power Company 80 shares of Stock Gulf Power Company 50 shares of Stock Mississippi Power Company 50 shares of Stock Savannah Electric and Power Company 50 shares of Stock EX-10 18 x10a64.txt SOUTHERN COMPANY PERFORMANCE DIVIDEND PLAN Amended and Restated TROUTMAN SANDERS LLP Bank of America Plaza 600 Peachtree Street, N.E., Suite 5200 Atlanta, Georgia 30308 (404) 885-3000 Effective December 11, 2000 SOUTHERN COMPANY PERFORMANCE DIVIDEND PLAN Purposes The purposes of the Southern Company Performance Dividend Plan are to provide a financial incentive which will focus the efforts of certain key employees on areas which will have a direct and significant influence on corporate performance and to provide the potential for levels of compensation which will enhance the Employing Companies' abilities to attract, retain and motivate such key employees. In order to achieve these objectives, the Plan will be based upon corporate performance as measured by total shareholder return or such other performance measure which the Committee may determine under the terms of the Plan. This Plan is intended to meet the requirements of Code Section 162(m) related to the deductibility of Awards paid to Participants subject thereto. ARTICLE I Definitions For purposes of the Plan, the following terms shall have the following meanings unless a different meaning is plainly required by the context: 1.1 "Annual Dividend" shall mean the aggregate, annual dividend declared by Southern Company on Common Stock for the Plan Year in which an Award is made. 1.2 "Award" shall mean the awards granted pursuant to Article IV hereof. 1.3 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc. 1.4 "Change in Control Benefit Plan Determination Policy" shall mean the change in control benefit plan determination policy, as approved by the Board of Directors, as it may be amended from time to time in accordance with the provisions therein. 1.5 "Committee" shall mean the Compensation Committee of the Board of Directors of Southern Company. 1.6 "Common Stock" shall mean the common stock of Southern Company. 1.7 "Computation Period" shall mean a four-year period commencing the first day of January of each year, provided, however, that the Computation Period for the first three years beginning in the year of the effective date of the Plan shall be one year, two years and three years, respectively, beginning January 1, 1997. 1.8 "Employing Company" shall mean Southern Company Services, Inc., or any other affiliate or subsidiary (direct or indirect) of Southern Company, which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. 1.9 "Key Employee" shall mean any person who is or was employed by an Employing Company who has been granted Stock Options. 1.10 Fair Market Value" shall mean the average of the high and low prices at which a share of Common Stock shall have been traded on the respective measurement date, such as the first and last days of a Computation Period or Restriction Period, or on the next preceding trading day if such date was not a trading date, as reported on the New York Stock Exchange Composite Transactions Listing, or as otherwise determined by the Committee. In no event shall the Fair Market Value equal less than the par value of the Common Stock. 1.11 "Participant" shall mean a Key Employee who satisfies the criteria set forth in Article III. 1.12 "Payment Date" shall mean the date the check evidencing an Award is endorsed by an authorized person of an Employing Company. 1.13 "Peer Group Common Stock" shall mean the common stock of the Peer Group Companies. 1.14 "Peer Group Companies" shall mean those companies considered part of the peer group of Southern Company for a Computation Period as determined and designated by the Committee and as set forth on a Schedule adopted by the Committee and provided to the Plan Administrator. The Committee shall establish the Peer Group Companies within the first ninety (90) days of a Computation Period. The Committee shall have the discretion to change the Peer Group Companies at any time during a Computation Period. The Committee shall also have the discretion to determine whether or not such change shall apply to Participants subject to the limitations of Section 162(m) of the Code. 1.15 "Performance Based" shall mean compensation which qualifies as "performance based" within the meaning of Code Section 162(m)(4)(c) and the regulations thereunder. 1.16 "Permanent Disability" shall mean such permanent disability as defined in The Southern Company Pension Plan. 1.17 "Phantom Stock" shall mean phantom shares of Common Stock as defined by The Southern Company Deferred Compensation Plan. 1.18 "Plan" shall mean the Southern Company Performance Dividend Plan. 1.19 "Plan Year" shall mean the calendar year. 1.20 "Restricted Stock Units" shall mean the number of shares of Common Stock deemed to have been awarded to a Participant at the end of a Computation Period for the purpose of providing the Participant with the opportunity to receive an Award which incorporates the appreciation on the Common Stock during the Restriction Period. The Award shall not be invested in actual Common Stock of the Company. 1.21 "Restriction Period" shall mean the period during which the Restricted Stock Units are subject to employment restrictions as provided in Section 4.3. 1.22 "Retirement" shall mean the termination of employment with an Employing Company under the terms of The Southern Company Pension Plan or such other retirement or early retirement plan or arrangement which the Committee shall adopt and make available to a Participant. 1.23 "Southern Company" shall mean The Southern Company. 1.24 "Stock Option" shall mean those options to acquire Common Stock awarded to Participants pursuant to the Southern Company Performance Stock Plan, including, but not limited to, any nonqualified stock option which has been transferred to a Transferee. "Stock Option" shall also mean that portion of options to acquire Common Stock awarded to Participants pursuant to the Southern Company Executive Stock Plan attributable to additional shares of Common Stock granted to the Participant in the event of a spin-off of Southern Energy, Inc., from Southern Company. Notwithstanding the preceding sentence, "Stock Option" shall not mean that portion of options to acquire Common Stock awarded to the Participant under the Southern Company Executive Stock Plan attributable to grants of Common Stock awarded prior to 1997. 1.25 "Termination for Cause" or "Cause" shall mean the termination of a Participant's employment by an Employing Company under any of the following circumstances: (a) The Participant willfully neglects or refuses to discharge his or her duties to the Employing Company as an employee or refuses to comply with any lawful or reasonable instructions given to him or her by the Employing Company without reasonable excuse; (b) The Participant is guilty of gross misconduct. For purposes of this Plan, the following acts shall constitute gross misconduct: (i) any act involving fraud or dishonesty or breach of appropriate regulations of competent authorities; (ii) the carrying out of any activity or the making of any statement which would prejudice and/or reduce the good name and standing of Southern Company or an Employing Company or would bring Southern Company or an Employing Company into contempt, ridicule or would reasonably shock or offend any community in which Southern Company or an Employing Company is located; (iii) attendance at work in a state of intoxication or otherwise being found in possession at his or her workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (iv) assault or other act of violence against any employee or other person during the course of the Participant's employment; and (v) conviction of any felony or misdemeanor involving moral turpitude. 1.26 "Total Shareholder Return" or "TSR" shall mean the total amount an investor would receive by investing $100 per quarter in Common Stock or in Peer Group Common Stock, as the case may be, as determined by measuring the total dividends which would have been paid on such Common Stock or Peer Group Common Stock by reinvesting such dividends on a quarterly basis in additional shares of Common Stock or Peer Group Common Stock as the case may be and the total gain or loss on such Common Stock or Peer Group Common Stock as if such stock had been sold at the closing price on the last day of the respective Computation Period. 1.27 "Transferee" shall mean the person, trust, partnership or limited liability company to whom or to which Stock Options have been transferred pursuant to Section 8.6 of the Southern Company Performance Stock Plan. Where the context requires, words in the masculine gender shall include the feminine and neuter genders, words in the singular shall include the plural, and words in the plural shall include the singular. ARTICLE II Plan Administration. 2.1 Committee. The Plan shall be administered by the Committee. The Committee is authorized to establish such rules and to appoint such agents as it deems appropriate for the proper administration of the Plan, and to make such determinations and to take such steps in connection with the Plan or the benefits provided hereunder as it deems necessary or advisable. 2.2 Plan Interpretation. The Committee shall have the exclusive authority to interpret the Plan. The decision of the Committee with respect to any question arising as to the grant of an Award to a Participant in the Plan, the amount, term, form, and time of payment of Awards under the Plan, or any other matter concerning the Plan shall be final, conclusive, and binding on both Southern Company and the Participants. ARTICLE III Participants 3.1 Participation in the Plan shall be limited to Key Employees of the Employing Companies, or in the case of death, their estates or beneficiaries, holding Stock Options as of the last day of any Computation Period. Key Employees who do not hold Stock Options as of the last day of any Computation Period solely because such Stock Options have been transferred to a Transferee shall also participate in the Plan, provided the Transferee holds such Stock Options as of the last day of any Computation Period. 3.2 Any Participant who terminates his or her employment with an Employing Company and who is not immediately re-employed with an affiliate of an Employing Company prior to the Payment Date of any Award due under this Plan for reasons other than death, Permanent Disability, or Retirement shall forfeit any Award due under this Plan. If a Participant terminates his or her employment by reason of death or Permanent Disability, such Participant or his or her estate or representative shall continue to be eligible to receive Awards with respect to any Stock Options which remain outstanding in accordance with their terms. If a Participant terminates his or her employment by reason of Retirement, such Participant shall continue to be eligible to receive Awards with respect to any Stock Options which remain outstanding in accordance with their terms for the Computation Period ending during the year of his or her Retirement and the next two (2) succeeding Computation Periods. 3.3 Notwithstanding any other provision of this Plan, no Participant whose employment is terminated by an Employing Company for Cause shall be eligible to receive an Award under this Plan. 3.4 Notwithstanding any other provision of this Plan, the maximum Award for any Plan Year payable to any Participant with respect to Stock Options awarded during such Plan Year shall be six million dollars ($6,000,000). 3.5 In the case of an individual who becomes a Participant subsequent to January 1, 2000, such Participant shall participate in the Computation Period that ends during the year that he is hired and in each Computation Period thereafter. A new four-year measuring period shall begin each year in order to recognize the need to link objectives over longer periods of time, to recognize changes in the operating environment, and to encourage Participants to make long-term decisions. ARTICLE IV Performance Dividend Award 4.1 Each Participant shall receive an Award on the last day of each Computation Period which shall be based upon the number of vested and unvested, outstanding Stock Options held by the Participant or the Transferee on the last day of such Computation Period multiplied by the Annual Dividend multiplied by the Payout Percentage determined in accordance with the following schedule: Percentile of Southern TSR Payout Percentage Versus Peer Group TSR 90th and above 100% 70th 75% 50th 50% 30th 25% Below 30th 0% The Payout Percentage for performance levels falling between the percentiles listed above shall be interpolated on a straight line basis for any given Plan Year. The Committee may also increase the Payout Percentage by up to a factor of two (2) with respect to such Participants and under such circumstances as the Committee in its discretion shall deem appropriate. The Committee may in its sole discretion change the Payout Percentage during a Computation Period if it deems such change appropriate. The Committee may also in its sole discretion determine whether such change to the Payout Percentage applies to Participants subject to the limitations of Section 162(m) of the Code. 4.2 The Payout Percentage set forth herein shall be based on Southern Company's Total Shareholder Return during a Computation Period as compared to the Total Shareholder Return ranking of the Peer Group Companies for such Computation Period. The Total Shareholder Return of the Peer Group Companies shall be determined annually by an independent certified public accountant and shall be properly adjusted and annualized by such accountant so that the Peer Group Companies' Total Shareholder Return may be accurately compared to that of Southern Company. 4.3 If the Committee has increased the Payout Percentage by up to a factor of two (2) for an Award to a Participant under Section 4.1 of the Plan, the amount of such Award in excess of one hundred percent (100%) of the Annual Dividend shall be converted into Restricted Stock Units using the Fair Market Value of the Common Stock on the last day of the Computation Period. The Restricted Stock Units shall not be paid to the Participant at the end of the Computation Period and shall, instead, be subject to a Restriction Period determined by the Committee. Unless determined otherwise by the Committee, in the event the employment of a Participant is terminated by reason of Death, Permanent Disability, or Retirement during the Restriction Period, the Participant (or his estate or representative) shall receive an immediate cash payment equal to the number of Restricted Stock Units held by the Participant multiplied times the Fair Market Value of the Common Stock on the date of death, Permanent Disability or Retirement, whichever applicable. In the event that a Participant's employment terminates for any reason other than Death, Permanent Disability or Retirement during the Restriction Period, all Restricted Stock Units shall be immediately forfeited by the Participant to the Company unless determined otherwise by the Committee. At the end of the Restriction Period, the Restricted Stock Units shall be converted into cash using the Fair Market Value of the Common Stock on the last day of the Restriction Period and shall be paid in accordance with Section 4.5. If the Committee so determines, the Participant shall also be awarded an amount equal to the Annual Dividend (payable during the Restriction Period) multiplied times the number of Restricted Stock Units held by the Participant. Such additional amount shall be subject to the same restrictions, forfeiture provisions and payout provisions as the Restricted Stock Units as determined by the Committee. 4.4 Notwithstanding the above provisions, an Award shall not be granted for any Computation Period ending with the Plan Year in which the current earnings of Southern Company are less than the amount necessary to fund dividends on its Common Stock at the rate such dividends were paid for the immediately preceding Plan Year. 4.5 Awards shall be paid in cash on or before the 15th day of the third month following the last day of the Computation Period or Restriction Period, whichever applicable, or, with respect to those Participants who are otherwise eligible to participate in the Southern Company Deferred Compensation Plan, may be deferred by exercising an option to do so no later than 12 months before any amount would otherwise be distributed pursuant to this Section 4.5. Notwithstanding the above 12 month limitation, a new Participant in the Plan shall be eligible to elect to defer the receipt of any Award during the first deferral election period established by the Company that follows the date he first becomes eligible to participate in the Plan. If an election is made to defer the receipt of the amount of any Award, such amount shall be deemed to be invested in Phantom Stock. Dividend equivalents earned on such Phantom Stock shall be automatically invested in additional shares of Phantom Stock. ARTICLE V Change in Control The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control of Southern Company or an Employing Company and the benefits to be provided hereunder in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein. ARTICLE VI Miscellaneous Provisions 6.1 Neither the Participant, his or her beneficiary, nor his or her personal representative shall have any rights to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payments under this Plan shall be void and have no effect. 6.2 An Employing Company shall neither reserve nor otherwise set aside funds for the payments of any Awards under this Plan. 6.3 Except for the provisions of Article V, which may not be amended, modified or terminated following a "Southern Change in Control," a "Subsidiary Change in Control" or a "Southern Termination" (as such terms are defined in the Change in Control Benefit Plan Determination Policy), the Plan may be amended, modified, or terminated by the Board of Directors in its sole discretion at any time and from time to time; provided, however, that no such amendment, modification, or termination shall impair any rights to payments which have accrued under the Plan prior to such amendment, modification, or termination. 6.4 It is expressly understood and agreed that Awards made in accordance with the Plan are in addition to any other benefits or compensation to which a Participant may be entitled or for which he or she may be eligible, whether funded or unfunded, by reason of his or her employment with an Employing Company. 6.5 There shall be deducted from the payment of each Award under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by an Employing Company to such governmental authority for the account of the person entitled to such distribution. 6.6 Any Awards paid to a Participant while employed by an Employing Company shall not be considered in the calculation of the Participant's benefits under any other employee welfare or pension benefit plan maintained by an Employing Company, unless otherwise specifically provided therein. 6.7 This Plan, and all rights under it, shall be governed by and construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officers, hereby adopts the Southern Company Performance Dividend Plan this ____ day of _____________, ____, to be effective December 11, 2000. SOUTHERN COMPANY SERVICES, INC. By: ---------------------------------- Its: --------------------------------- Attest: By: -------------------------------------------------- Its: ------------------------------------------------- EX-10 19 x10a66.txt FIFTH AMENDMENT TO THE SOUTHERN COMPANY PENSION PLAN WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan, as amended and restated (the "Plan"), effective January 1, 1997; and WHEREAS, the Company desires to amend the Plan to clarify offset provisions applicable to the benefits provided to former Scott Paper Company employees; and WHEREAS, the Company desires to amend the Plan to clarify offset provisions applicable to the benefits provided to certain employees formerly employed by Commonwealth Energy System; and WHEREAS, the Company desires to amend the Plan to clarify the benefit and offset provisions applicable to certain employees formerly employed by Commonwealth Edison of Indiana; and WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan to amend the Plan at any time. NOW, THEREFORE, the Company hereby amends the Plan as follows to be effective as provided herein: 1. Effective January 1, 1995, Section 16.1(a) of the Plan shall be amended by deleting such subsection (a) in its entirety and substituting the following in lieu thereof: (a) Former Scott Paper Company Employees. Effective January 1, 1995, notwithstanding any other provision of the Plan to the contrary, with respect to a former, non-collective bargaining unit employee of Scott Paper Company who was employed by Southern Electric International, Inc. as of December 17, 1994 as set forth on Schedule 2.1 of the Employee Transition Agreement entered into by and among Mobile Energy Services Company, Inc., Southern Electric International, Inc. and Scott Paper Company (hereinafter referred to in this Section 16.1(a) as the "Scott Scheduled Employee"): (1) Such Scott Scheduled Employee shall be eligible to participate in the Plan effective January 1, 1995. (2) Such Scott Scheduled Employee, if and when he attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any other reason subject to the requirements of Section 8.1 or 8.2, shall be entitled to receive Retirement Income based on both his Accredited Service with an Employing Company and the service accrued under the Scott Paper Company Pension Plan for Salaried Employees (the "Scott Salaried Plan") which shall be treated as if Accredited Service under this Plan. To calculate such Scott Scheduled Employee's Retirement Income, the Scott Scheduled Employee's Accrued Retirement Income, as determined in accordance with Section 5.1, shall first be reduced by the applicable reductions, if any, set forth in Article V, Section 8.1 and Section 8.2, as appropriate. Thereafter, such Scott Salaried Employee's Accrued Retirement Income shall be reduced by such Employee's accrued benefit in the Scott Salaried Plan, as set forth in Schedule A attached hereto (the "Scheduled Benefit"). Prior to the subtraction of the Scheduled Benefit from the Scott Scheduled Employee's Accrued Retirement Income, the Scheduled Benefit will be reduced to reflect the age at which the Employee's Retirement Income is scheduled to commence (the "Southern Commencement Date") in accordance with the applicable reduction factors set forth in Schedule A. (3) For purposes of calculating the Social Security Offset and the level income option set forth in the last paragraph of Section 5.5, the actual salary history of a Scott Scheduled Employee with Scott Paper Company shall be included. If the actual salary history is not available from Scott Paper Company, such history shall be estimated in accordance with Section 5.4. (4) For vesting purposes, such Scott Scheduled Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.41 and, in addition, shall be entitled to vesting service equal to the sum of the years of vesting service accrued under each defined benefit pension plan maintained by Scott Paper Company in which such Scott Scheduled Employee participated. 2. Effective January 1, 1998, Section 16.1(b) of the Plan, as amended by the First Amendment and Second Amendment to the Plan, is further amended by deleting such subsection (b) in its entirety and substituting the following in lieu thereof: (b) Former Commonwealth Edison of Indiana Employees. Effective January 1, 1998, notwithstanding any other provision of the Plan to the contrary, any former employee of Commonwealth Edison of Indiana ("ComEd") who was employed by Southern Energy Resources, Inc. on or before December 31, 1997 and is set forth on a schedule of employees acknowledged by the Retirement Board (hereafter "January 1 ComEd Employees") shall be eligible to participate in the Plan effective January 1, 1998. In addition, any former employee of ComEd who becomes employed by Southern Energy Resources, Inc. on or after January 1, 1998 but prior to April 1, 1998 (hereafter "Date of Employment") and is set forth on the schedule of employees acknowledged by the Retirement Board (hereafter "Pre-April 1 ComEd Employees") shall become a participant as of the first day of the month coincident with or next following such employee's Date of Employment. The following provisions of this subparagraph (b) shall also apply with respect to all January 1 ComEd Employees and Pre-April 1 ComEd Employees (hereafter jointly referred to as "ComEd Scheduled Employees"): (1) Such ComEd Scheduled Employee, if and when he attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any reason subject to the requirements of Section 8.1 or 8.2, shall be entitled to receive the greater of A or B below: (A) Retirement Income based on both his Accredited Service with an Employing Company and the service accrued under the Commonwealth Edison Company of Indiana Service Annuity System Plan (the "ComEd Plan") which shall be treated as if Accredited Service under this Plan. To calculate such ComEd Scheduled Employee's Retirement Income under this subsection (A), the ComEd Scheduled Employee's Accrued Retirement Income, as determined in accordance with Section 5.1, subject to the provisions of Article XV of the Plan, shall first be reduced by the Employee's accrued benefit in the ComEd Plan, determined as if he retired from ComEd at his normal retirement age, as that term is defined in the ComEd Plan on December 31, 1997 and as set forth on Schedule B attached hereto (the "ComEd Reduction Amount"). For each full year of Accredited Service with an Employing Company earned by a ComEd Scheduled Employee, up to a maximum of 10 years, the ComEd Reduction Amount shall be reduced by 5% with the maximum reduction equal to 50% of the original ComEd Reduction Amount. Thereafter, such Employee's Retirement Income shall be subject to applicable reductions, if any, in accordance with Article V (subject to the provisions in Article XV), Section 8.1 and Section 8.2, as appropriate. (B) Retirement Income based on his Accredited Service with an Employing Company and disregarding any service accrued under the ComEd Plan, subject to applicable reductions, if any, in accordance with Article V (subject to the provisions in Article XV), Section 8.1 and Section 8.2, as appropriate. (2) For purposes of calculating the level income option set forth in the last paragraph of Section 5.5, the actual salary history of a ComEd Scheduled Employee with ComEd shall be included. If the actual salary history is not available from ComEd, such history shall be estimated in accordance with Section 5.4. (3) For vesting purposes, such ComEd Scheduled Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.41 and, in addition, shall be entitled to vesting service equal to the years of service accrued under the ComEd Plan. 3. Effective January 1, 1999, Section 16.1(c) of the Plan, as added by the Third Amendment to the Plan and amended by the Fourth Amendment to the Plan, shall be amended by deleting such subsection (c) in its entirety and substituting the following in lieu thereof: (c) Former Commonwealth Energy System Employees. (1) Effective January 1, 1999, notwithstanding any other provision of the Plan to the contrary, any former employees of Commonwealth Energy System ("CES") who were employed by Southern Energy Resources, Inc. and are set forth on Schedule C attached hereto (hereinafter "CES Employees") shall be included in the Plan as of the first day of the month coincident with or next following the later of the CES Employee's employment date or the date on which he first completes an Eligibility Year of Service as provided in Paragraph (5) below. (2) CES Employees who (A) were actively employed by CES on January 1, 1997 and (B) attain their fortieth (40th) birthday on or before January 1, 2002 shall not be subject to provisions of Article XV of the Plan. (3) If and when a CES Employee attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any reason subject to the requirements of Section 8.1 or 8.2, he shall be entitled to receive Retirement Income based on both his Accredited Service with an Employing Company and the Credited Service as defined under The Pension Plan for Employees of Commonwealth Energy System and Subsidiary Companies (the "CES Plan") which shall be treated as Accredited Service under this Plan. However, after applicable reductions for early commencement as provided in Article V, Section 8.1 and Section 8.2, as appropriate, but prior to adjustments for forms of payment, a CES Employee's Accrued Retirement Income will be reduced by the benefit attributable to Credited Service accrued by a CES Employee under the CES Plan as set forth in Schedule C attached hereto (the "Scheduled Benefit"). Prior to the Scheduled Benefit being subtracted from a CES Employee's Retirement Income, it will be reduced to reflect the age at which the CES Employee's Retirement Income is scheduled to commence (the "Southern Commencement Date"). Such early retirement reductions shall be determined (A) for a CES Employee who is at least age 55 but not yet 65 on his Southern Commencement Date, by applying the factors set forth in the definition of Actuarial Equivalent contained in Section 8 of Schedule D attached hereto for each calendar month by which the Southern Commencement Date precedes his sixty-fifth (65th) birthday; and (B) for a CES Employee who is under age 55 on his Southern Commencement Date, by first applying the reduction factors in (A) for ages 55 to 65 and then applying an additional reduction equal to one-third of one-percent (.333%) for each calendar month by which the Southern Commencement Date precedes his fifty-fifth (55th) birthday. Notwithstanding the above, the Scheduled Benefit of CES Employees who are specifically designated on Schedule C to have 75 points shall not be subject to the early retirement reductions described in (A) above but shall be subject to those reductions described in (B) above (relating to those CES Employees with a Commencement Date that precedes their fifty-fifth (55th) birthday), if applicable. (4) For purposes of calculating Retirement Income, such CES Employee's actual salary history with CES shall be included. With respect to determining the Social Security Offset and the level income option set forth in the last paragraph of Section 5.5, if the actual salary history is not available from CES, such history shall be estimated in accordance with Section 5.4. (5) For vesting and participation purposes, such CES Employee shall be entitled to receive Vesting and Eligibility Years of Service as provided under the Plan and, in addition, shall be entitled to vesting and eligibility service equal to the years of service as defined and accrued under the CES Plan. (6) Notwithstanding any provision in this Plan to the contrary, a CES Employee's Retirement Income will not be less than the greater of (A) his Retirement Allowance or (B) his vested benefit, as described in Schedule D attached hereto which summarizes the benefit provisions provided by the CES Plan on December 31, 1998, as of the earlier of his retirement, termination of employment, or December 31, 2001. Such determination will be made prior to any adjustment for forms of payments. (7) For purposes of this 16.1(c), Earnings shall mean the following: (A) With respect to Paragraph (3) above, for periods on and after January 1, 1999, Earnings is defined in Paragraph 1.13 and for periods before January 1, 1999, Earnings shall have the same meaning as the term "Compensation" as provided under the CES Plan during the applicable period. (B) With respect to determining the minimum benefit provided in Paragraph (6) above, Earnings shall have the same meaning as Compensation as provided under the CES Plan prior to January 1, 1999 and from the period January 1, 1999 to December 31, 2001 shall mean the authorized basic rate of compensation at Southern Energy Resources, Inc. ("SERI") as in effect on January 1 each year, converted to an annual basis, exclusive of all compensation in the form of pay for overtime, commissions, bonuses and the like; but inclusive of amounts deferred under a salary reduction agreement for that year. Notwithstanding anything contained herein to the contrary, a CES Employee's Compensation for any Plan Year as determined under the preceding sentence shall not exceed $150,000.00 (or such higher limit as determined by the Secretary of the Treasury under Section 401(a)(17) of the Code). IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officer, has adopted this Fifth Amendment to The Southern Company Pension Plan pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this ____ day of , 2000, to be effective as stated herein. SOUTHERN COMPANY SERVICES, INC. By: -------------------------------------------------- Title: ----------------------------------------------- ATTEST By: ________________________ Its: ________________________ SIXTH AMENDMENT TO THE SOUTHERN COMPANY PENSION PLAN WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan, as amended and restated (the "Plan"), effective January 1, 1997; WHEREAS, Southern Energy, Inc. ("SEI"), an Employing Company under the Plan, will through a subsidiary become the employer of certain individuals currently employed by Southern Company Energy Marketing, L.P. ("SCEM") following a reorganization of SCEM; WHEREAS, The Southern Company ("Southern") anticipates that in 2001 it will distribute pro rata to the Southern shareholders all of the stock of SEI held by Southern pursuant to a tax-free spin-off under Section 355 of the Internal Revenue Code; WHEREAS, in connection with such transaction, Southern and SEI have entered into an Employee Matters Agreement ("Agreement") to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, benefit plans, and programs, and certain employment matters; WHEREAS, the Company desires to amend the Plan to exclude the former SCEM employees from participation in the Plan by virtue of their employment with SEI; WHEREAS, the Company desires to amend the Plan to address the spin-off of SEI from Southern, including making such changes as are pursuant to the Agreement; WHEREAS, the Company desires to amend the Plan to authorize participation by employees represented by the International Brotherhood of Electrical Workers Local 1208 and Office and Professional Employees International Union Local 455, pursuant to negotiated collective bargaining agreements; WHEREAS, the Company desires to amend the Plan to clarify the Accredited Service awarded under the Prior Plans; WHEREAS, the Company desires to amend the Plan to make certain technical changes and to reflect recent changes in the law; and WHEREAS, the Company is authorized, pursuant to Section 13.1 of the Plan, to amend the Plan at any time. NOW, THEREFORE, the Company hereby amends the Plan as follows, effective as of January 1, 1997, unless indicated otherwise below: 1. The first paragraph of Section 1.36, "Social Security Offset," shall be amended, effective January 1, 1998, to read as follows: 1.36 "Social Security Offset" shall mean an amount equal to one-half (1/2) of the amount, if any, of the Federal primary Social Security benefit (primary old age insurance benefit) to which it is estimated that an Employee will become entitled in accordance with the Social Security Act in force as provided in subparagraphs (a) through (e) below which shall exceed $168 per month on and after January 1, 1989, $250 per month on and after January 1, 1991, for Employees who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan as amended, $325 per month on and after January 1, 1996, and for Employees who are covered under a collective bargaining agreement with IBEW Local 1208, $350 per month on and after January 1, 1998, multiplied by a fraction not greater than one, the numerator of which shall be the Employee's total Accredited Service, and the denominator of which shall be such total Accredited Service plus the Accredited Service the Employee could have accumulated if he had continued his employment from the date he terminates service with any Affiliated Employer until his Normal Retirement Date. For purposes of determining the estimated Federal primary Social Security benefit used in the Social Security Offset, an Employee shall be deemed to be entitled to receive Federal primary Social Security benefits after retirement or death, if earlier, regardless of the fact that he may have disqualified himself to receive payment thereof. In addition to the foregoing, the calculation of the Social Security benefit shall be based on the salary history of the Employee as provided in Section 5.4 and shall be determined pursuant to the following, as applicable: 2. Article II, "Eligibility," shall be amended by adding the following new Section 2.8 to the end: 2.8 Exclusion of Certain Employees of Southern Energy Resources, Inc. Notwithstanding any other provision of this Article II, the following Employees who would otherwise be eligible to participate in the Plan by virtue of their employment by Southern Energy Resources, Inc. ("SERI") shall not be eligible to participate in the Plan: (a) individuals employed by Southern Company Energy Marketing, L.P. ("SCEM") on December 22, 2000; (b) Employees hired by SERI on or after December 23, 2000, who are employed in the Americas Group and whose job function is listed on Attachment A attached hereto. 3. Section 2.8, "Exclusion of Certain Employees of Southern Energy Resources, Inc.," shall be amended to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 2.8 Exclusion of Certain Employees of Southern Energy, Inc. Notwithstanding any other provision of this Article II, Employees who are eligible to participate in the Plan by virtue of their employment by Southern Energy, Inc. or any subsidiary or affiliate thereof shall not be eligible to participate in the Plan. 4. Section 4.1, "Accredited Service pursuant to Prior Plan," shall be deleted in its entirety and replaced with the following: 4.1 Accredited Service pursuant to Prior Plan. (a) Each Employee who participated in the Prior Plans shall be credited with such Accredited Service, if any, earned under such Prior Plans as of December 31, 1996. (b) In addition to any Accredited Service credited under Section 4.1(a), an Employee shall be entitled to Accredited Service determined under the Prior Plans, without regard to the age requirement for eligibility to participate in the Prior Plans, in excess of the Accredited Service determined under the Prior Plans (including the age requirement for eligibility to participate in the Prior Plans). Such Accredited Service shall be considered Accredited Service after December 31, 1985 for purposes of calculating an Employee's Retirement Income under Articles V, XV or XVII. 5. Section 4.4, "Accrual of Retirement Income during period of total disability," shall be amended by adding the following new subsection (e) (and redesignating the current subsection (e) as subsection (f)): (e) (i) If an Employee's Disability Leave terminates on or after his Normal Retirement Date and he fails to return to the employment of an Employing Company within sixty (60) days after the termination of such leave, his service shall be deemed to have terminated upon the termination of his Disability Leave and such termination of service shall be deemed to constitute his retirement under Section 3.3. (ii) An Employee whose Disability Leave continues beyond his Normal Retirement Date based on entitlement to long-term disability benefits under a long-term disability plan of an Employing Company shall have payment of his Retirement Income suspended pursuant to Code Section 411(a)(3)(B) until he is no longer eligible under a long-term disability plan of an Employing Company. Such Employee shall then receive Retirement Income determined as of the date such eligibility ends. However, if the Employee's Disability Leave continues after the date the Employee ceases to be eligible for the long-term disability plan of an Employing Company based on entitlement to Social Security Disability benefits, his Retirement Income for the period after his Normal Retirement Date shall be determined under Subsection (iii). (iii) An Employee whose Disability Leave continues for any period after his Normal Retirement Date based solely on his entitlement to Social Security Disability benefits shall receive Retirement Income as of his Deferred Retirement Date. However, if his Deferred Retirement Date occurs in a Plan Year subsequent to the Plan Year in which occurs his Normal Retirement Date, his Retirement Income shall not be less than his Retirement Income adjusted for commencement after his Normal Retirement Date. For the Plan Year following the Plan Year in which occurs the Employee's Normal Retirement Date, his adjusted Retirement Income shall be equal to the greater of his Retirement Income determined as of such date or the Actuarial Equivalent of his Retirement Income computed as of his Normal Retirement Date. For the next Plan Year, his adjusted Retirement Income shall be equal to the greater of his Retirement Income determined as of such Plan Year or the Actuarial Equivalent of his adjusted Retirement Income computed as of the end of the prior Plan Year. This process shall be repeated each Plan Year until the termination of his Disability Leave. 6. Section 5.7, "Payment of Retirement Income," shall be amended, effective January 1, 2000, by adding the following to the end of the second paragraph: However, if an Employee fails to make an election pursuant to this Section 5.7 within the thirty (30) day period immediately preceding his Retirement Date, his Retirement Income shall be determined as of his Retirement Date and payment thereof shall commence as soon as administratively feasible following his election to retire, provided his election occurs not more than ninety (90) days after his Retirement Date. If the election is made more than ninety (90) days following an Employee's Retirement Date, his benefits shall commence as soon as administratively feasible and his Retirement Income shall be determined as of the first day of the month following submission of his election. 7. Subsection (3) of Section 5.9(b), "Required minimum distributions," shall be deleted in its entirety and replaced with the following: (3) With respect to an Employee who retires after attaining age 70-1/2 and who has not previously commenced receipt of his Retirement Income pursuant to this Section 5.9(b) while an Employee of an Affiliated Employer, the amount of his Retirement Income shall be computed as of the end of the Plan Year the Employee attains age 70-1/2 and shall be recomputed as of the close of each Plan Year thereafter and preceding his Deferred Retirement Date. With respect to each Plan Year following the Plan Year the Employee attains age 70-1/2, his Retirement Income shall equal the greater of his Retirement Income determined as of such Plan Year or the Actuarial Equivalent of his Retirement Income computed as of the end of the Plan Year he attains age 70-1/2. For the next Plan Year, his adjusted Retirement Income shall be equal to the greater of his Retirement Income determined as of such Plan Year or the Actuarial Equivalent of his adjusted Retirement Income computed as of the end of the prior Plan Year. This process shall be repeated each Plan Year until his Deferred Retirement Date. 8. Section 5.9(b), "Required minimum distributions," shall be amended by adding a new subsection (4) as follows: (4) If a former Employee who is receiving Retirement Income shall be reemployed by any Affiliated Employer as an Employee and his Retirement Income is suspended in accordance with Section 5.10(b), the Retirement Income payable upon his subsequent retirement shall be adjusted in accordance with Section 5.9(b)(3) if his subsequent retirement occurs after he attains age 70-1/2, but shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment in accordance with Section 5.10(b). 9. Section 5.10, "Suspension of Retirement Income for reemployment," shall be renamed "Suspension of Retirement Income," and shall be amended to read as follows: 5.10 Suspension of Retirement Income. (a) The Retirement Income of an Employee who remains in active service after his Normal Retirement Date shall be suspended for each calendar month after his Normal Retirement Date during which he completes forty (40) or more Hours of Service, pursuant to ERISA Section 203(a)(3)(B) ("ERISA Section 203(a)(3)(B) Service"). (b) If a former Employee who is receiving Retirement Income shall be reemployed by any Affiliated Employer as an Employee and shall not elect to waive his right to participate under the Plan or the pension plan of the Affiliated Employer, whichever applies, his Retirement Income shall be suspended for each calendar month after his reemployment during which he is employed in ERISA Section 203(a)(3)(B) Service. The Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment. (c) No payment shall be suspended by the Plan pursuant to this Section 5.10 unless the Plan notifies the Employee by personal delivery or first class mail during the first calendar month in which the Plan withholds payments that his Retirement Income is suspended. (d) If the payment of Retirement Income has been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the Employee ceases to be employed in ERISA Section 203(a)(3)(B) service. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of ERISA Section 203(a)(3)(B) service and the resumption of payments. 10. Effective for plan years beginning on or after January 1, 2000, Section 6.4, "Limitation on benefits from multiple plans," Section 6.5, "Special rules for plans subject to overall limitations under Code Section 415(e)," and Section 6.6, "Combination of plans," shall be deleted in their entirety and replaced with the following (and Section 6.7 shall be renumbered as Section 6.5): 6.4 Limitations on benefits from multiple plans. (a) For purposes of the limitations described in Section 6.1 of the Plan and Section 415 of the Code, all defined benefit plans (whether or not terminated) maintained by an Affiliated Employer shall be treated as one defined benefit plan. (b) Notwithstanding any provisions contained herein to the contrary, in the event that an Employee participates in another defined benefit plan required to be aggregated with this Plan under Code Section 415(g) and the combined benefits with respect to an Employee exceed the limitations contained in Code Section 415(b), corrective adjustments shall first be made under this Plan. 11. Subsection (c) of Section 8.5, "Calculation of present value for cash-out of benefits and for determining amount of benefits," shall be deleted in its entirety and replaced with the following, effective as of January 1, 2001: (c) For purposes of this Section 8.5, "Applicable Interest Rate" shall be calculated by using the annual rate of interest on 30-year Treasury securities for the month of August in the Plan Year which precedes the Plan Year in which such present value is determined and by using the prevailing commissioners' standard table used to determine reserves for group annuity contracts in effect on the date as of which the present value is being determined. Notwithstanding the foregoing, for the Plan Year beginning January 1, 2001, the Applicable Interest Rate shall be calculated using the annual rate of interest on 30-year Treasury securities for the month of August, or for the month of November, in the Plan Year which precedes such Plan Year, whichever month produces the greater amount. 12. Effective on and after the date this amendment is adopted, Article XVII of the Plan shall be amended in its entirety to read as set forth below: Article XVII 17.1 Definition of Terms Used in this Article XVII and the SEPCO Schedule. (a) "SEPCO" shall mean Savannah Electric and Power Company. (b) "SEPCO Plan" shall mean the Employees' Retirement Plan of Savannah Electric and Power Company, as amended and restated January 1, 1997. (c) "SEPCO Schedule" shall mean the Schedule attached to the Plan and made a part thereof containing the provisions of the SEPCO Plan as merged into the Plan effective January 1, 1998 which shall apply to SEPCO Employees and Covered SEPCO Employees. (d) "SEPCO Employee" shall mean an Employee as defined in the SEPCO Plan having an Hour of Service under the SEPCO Plan on or after January 1, 1997. This shall include persons represented by a collective bargaining agent where such agent and SEPCO have mutually agreed to participate in the Plan. This shall not include employees who are hired or rehired at SEPCO after December 31, 1997 or rescind a waiver of participation under Section 3.8 of the SEPCO Plan or SEPCO Schedule on or after January 1, 1998 that was in effect on December 31, 1997. Notwithstanding anything to the contrary above, Covered SEPCO Employees shall be considered SEPCO Employees unless otherwise provided in this Article XVII or otherwise required by law. (e) "Covered SEPCO Employee" shall mean an Employee or former Employee who is or was represented by the International Brotherhood of Electrical Workers ("IBEW") Local 1208 or the Office and Professional Employees International Union ("OPEIU") Local 455, who has an Hour of Service under the SEPCO Plan or SEPCO Schedule on or after January 1, 1997. An Employee who is represented by IBEW Local 1208 and is hired or re-hired on or after January 1, 1999 or who is represented by OPEIU Local 455 and is hired or re-hired on or after January 1, 2000 shall not be considered a Covered SEPCO Employee. Rather, such Employee shall be treated only as an Employee under the Plan. 17.2 [RESERVED] 17.3 SEPCO Employees Eligibility in the New Pension Program (a) The following SEPCO Employees shall be subject to this Section 17.3 of the Plan: (1) SEPCO Employees, including Covered SEPCO Employees, who are actively employed by SEPCO on January 1, 1997 but who will not attain their fortieth (40th) birthday on or before January 1, 2002, or (2) SEPCO Employees, including Covered SEPCO Employees, who are hired or re-hired by SEPCO after January 1, 1997, or (3) SEPCO Employees who are not members of an eligible class of SEPCO Employees on or after January 1, 1997 and have not previously participated in the SEPCO Plan. (b) The monthly Retirement Income payable as a single life annuity to a SEPCO Employee described in Section 17.3(a) (or his Provisional Payee) who retires from the service of SEPCO or another Employing Company at his Normal Retirement Date or Deferred Retirement Date (before adjustment for a Provisional Payee designation, if any) after January 1, 1997, subject to the limitations in Article VI, shall be the greater of (1) and (2) below: (1) 1.0% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service, without application of the limitation described in Section 4.2(e), to his Normal Retirement Date or Deferred Retirement Date; or (2) $25 multiplied by his years (and fraction of a year) of Accredited Service, without application of the limitation described in Section 4.2(e), to his Normal Retirement Date or Deferred Retirement Date. (c) Notwithstanding paragraph (b) above, if the Allowance of a SEPCO Employee determined under the SEPCO Schedule as of the earlier of his retirement or termination of employment with SEPCO or December 31, 2001 would be greater, such SEPCO Employee shall be entitled when eligible to receive payments of such greater Allowance upon his retirement or termination of employment with SEPCO or another Employing Company. (d) Notwithstanding paragraphs (b) and (c) above, Retirement Income or Allowance, as the case may be, determined with respect to a SEPCO Employee under this Article XVII who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income or Allowance which would have been payable with respect to such SEPCO Employee commencing on his earlier Retirement Date had (1) the SEPCO Employee retired on his earlier Retirement Date which would have resulted in the greatest Retirement Income or Allowance and (2) such Retirement Income or Allowance commencing on such earlier Retirement Date been payable in the same form as his Retirement Income or Allowance commencing on his Normal Retirement Date or Deferred Retirement Date. (e) With respect to SEPCO Employees described in this Section 17.3 who retire before their Normal Retirement Date, the monthly amount of Retirement Income provided in paragraph (b) above shall be reduced in accordance with Section 5.5. (f) With respect to Covered SEPCO Employees described in this Section 17.3 (or their Provisional Payees), the monthly amount of Retirement Income provided in paragraphs (b) through (e) above shall become payable as of the later of (i) the first of the month following the Covered SEPCO Employee's retirement, or (ii) January 1, 1998. (g) Covered SEPCO Employees who retired or terminated employment prior to (i) July 1, 1999 for Covered SEPCO Employees represented by IBEW and (ii) February 9, 2000 for Covered SEPCO Employees represented by OPEIU, and who commenced payment of an Allowance under the SEPCO Schedule shall receive a lump sum payment which is the actuarial equivalent of the difference, if any, between the Retirement Income payable pursuant to paragraphs (b) through (e) above and the Allowance they have previously received determined from their date of retirement to the earlier of their date of death or the date payment under this paragraph (g) is made. Such lump sum payments shall be made as soon as administratively feasible following adoption of these provisions. The monthly payments pursuant to paragraphs (b) through (e), if greater than the Covered SEPCO Employee's Allowance, shall be made thereafter. (h) The Provisional Payees of Covered SEPCO Employees described in Section 17.3 who died prior to (i) July 1, 1999 for Covered SEPCO Employees represented by IBEW and (ii) February 9, 2000 for Covered SEPCO Employees represented by OPEIU, after having commenced payment of an Allowance under the SEPCO Schedule, shall receive a lump sum payment that is the actuarial equivalent of the difference, if any, between the survivor benefits under the Plan and the survivor benefits under the SEPCO Schedule that the Provisional Payees have previously received determined from the date of the Covered SEPCO Employee's death through the earlier of (i) the Provisional Payee's date of death, or (ii) the date payment is made under this paragraph (h) to the Provisional Payee. Thereafter, monthly payments shall be made to the Provisional Payee in accordance with Section 17.5(h) of this Article XVII. (i) For purposes of subsections (g) and (h) of this Section 17.3, actuarial equivalent shall mean the value of such lump sum payment determined as of the date of distribution of the lump sum applying the Applicable Interest Rate as defined in Section 8.5(c) of the Plan and using the prevailing commissioners' standard table used to determined reserves for group annuity contracts in effect on the date as of which the present value is being determined. 17.4 SEPCO Employees Not Described in 17.2 or 17.3. SEPCO Employees not described in Section 17.2 or 17.3 above shall be eligible for a benefit under the Plan as described in this Section 17.4, notwithstanding any other provision of the Plan or SEPCO Schedule to the contrary. (a) A SEPCO Employee shall be eligible to participate in the Plan and receive Retirement Income thereunder as determined under the Plan's terms and this Article XVII. Notwithstanding the preceding sentence, if such SEPCO Employee's Allowance determined as of the earlier of his retirement or termination of employment with SEPCO or December 31, 2001 would be greater, such SEPCO Employee shall be entitled when eligible to commence payments of such greater Allowance upon his retirement or termination of employment with SEPCO or another Employing Company. (b) Notwithstanding paragraph (a) above, only with respect to SEPCO Employees who have attained age fifty (50) and have ten (10) or more years of Credited Service on or before January 1, 1997 or who have attained age 55 on or before January 1, 1997, such SEPCO Employees shall be entitled to receive the greater of their Allowance or Retirement Income upon retirement. (c) Covered SEPCO Employees who are described in this Section 17.4 (or their Provisional Payees) shall receive the monthly benefit described in paragraph (a) for months beginning on the later of (i) the first of the month following their retirement, or (ii) January 1, 1998. (d) A Covered SEPCO Employee who retires or terminates employment prior to (i) July 1, 1999 for Covered SEPCO Employees represented by IBEW and (ii) February 9, 2000 for Covered SEPCO Employees represented by OPEIU, and who commences payment of an Allowance under the SEPCO Schedule before such date shall receive a lump sum payment which is the actuarial equivalent of the difference, if any, between the benefits payable pursuant to paragraph (a) above and the Allowance they have previously received determined from their date of retirement to the earlier of their date of death or the date a lump sum payment is made pursuant to this paragraph (d). Such lump sum payments shall be made as soon as administratively feasible following adoption of these provisions. The monthly payments pursuant to paragraph (a) shall be made thereafter. (e) The Provisional Payee of a Covered SEPCO Employee described in this Section 17.4 who died prior to (i) July 1, 1999 for Covered SEPCO Employees represented by IBEW, and (ii) February 9, 2000 for Covered SEPCO Employees represented by OPEIU, after having commenced payment of an Allowance under the SEPCO Schedule shall receive a lump sum payment that is the actuarial equivalent of the difference, if any, between the survivor benefits under the Plan and the survivor benefits under the SEPCO Schedule that the Provisional Payee has previously received determined from the date of the Covered SEPCO Employee's death through the earlier of (i) the Provisional Payee's date of death, or (ii) the date payment is made to the Provisional Payee under this paragraph (e). Thereafter, monthly payments shall be made in accordance with Section 17.5(h) of this Article XVII. (f) For purposes of subsections (d) and (e) of this Section 17.4, actuarial equivalent shall mean the value of such lump sum payment determined as of the date of distribution of the lump sum applying the Applicable Interest Rate as defined in Section 8.5(c) of the Plan and using the prevailing commissioners' standard table used to determined reserves for group annuity contracts in effect on the date as of which the present value is being determined. 17.5 Special Transition Rules. Notwithstanding any other provisions in the Plan to the contrary, SEPCO Employees who participate in the Plan shall be subject to the following transition rules. (a) In determining the greater benefit as required under Sections 17.3 and 17.4, the form of payment and any early retirement reductions with respect to the payment of Retirement Income as set forth in Articles V and VII of the Plan and of an Allowance as set forth in Articles 5 and 7 of the SEPCO Schedule shall be considered. For purposes of making the preceding determination, (1) the applicable Allowance shall first be converted to a monthly payment, and (2) the Retirement Annuities described in Article 2 of the SEPCO Schedule shall be taken into account consistent with Section 5.01 of the SEPCO Schedule. (b) With respect to eligibility to participate in the Plan, all SEPCO Employees employed by SEPCO on December 31, 1997 who are not already eligible to participate in the Plan shall be immediately eligible to participate in the Plan. (c) SEPCO Employees who were eligible to participate in the SEPCO Plan on December 31, 1997 shall have their Vesting Years of Service determined as if their anniversary date of hire is January 1. All SEPCO Employees who participate in the Plan shall be credited with Vesting Years of Service based upon the terms of the Plan for periods of service on and after January 1, 1998, and based upon the Continuous Service such SEPCO Employees accrued under the SEPCO Plan prior to January 1, 1998. (d) (1) For SEPCO Employees (other than Covered SEPCO Employees): (A) For periods of service on and after January 1, 1998, Accredited Service for SEPCO Employees shall be determined in accordance with the Plan. (B) For periods of service on and after January 1, 1998, with respect to any Allowance a SEPCO Employee may be entitled to under the SEPCO Schedule, such Allowance shall be determined using Accredited Service in place of Credited Service. (C) For periods of service prior to January 1, 1998, the Credited Service of a SEPCO Employee shall be used to determine such SEPCO Employee's Allowance and Retirement Income accrued prior to January 1, 1998. (D) When calculating a SEPCO Employee's Retirement Income prior to June 1, 2000, the maximum amount of Accredited Service and Credited Service that will be considered is forty-three (43) years. (2) For Covered SEPCO Employees: (A) For periods of service on and after January 1, 2001, Accredited Service for Covered SEPCO Employees shall be determined in accordance with the Plan. (B) For periods of service on and after January 1, 2001, with respect to any Allowance a Covered SEPCO Employee may be entitled to under the SEPCO Schedule, such Allowance shall be determined using Accredited Service in place of Credited Service. (C) For periods of service prior to January 1, 2001, the Credited Service of a Covered SEPCO Employee shall be used to determine such Covered SEPCO Employee's Allowance and Retirement Income accrued prior to January 1, 2001. Such Credited Service shall count as Accredited Service to determine eligibility for retirement at age fifty pursuant to paragraph (g) below. (D) When calculating a Covered SEPCO Employee's Retirement Income under Section 17.4 prior to June 1, 2000, the maximum amount of Accredited Service and Credited Service that will be considered is forty-three (43) years. (e) For purposes of calculating Retirement Income for a SEPCO Employee, Compensation determined under the SEPCO Plan, excluding unused accrued vacation, shall be used in place of Earnings for periods of service prior to January 1, 1998. (f) The Normal Retirement Date of a SEPCO Employee shall always be determined in accordance with the SEPCO Plan prior to January 1, 1998 and the SEPCO Schedule on and after January 1, 1998. (g) (1) A SEPCO Employee may retire if he has either attained age fifty-five (55) or attained age fifty (50) and has at least ten (10) years of Accredited Service as determined under this Article XVII. A SEPCO Employee who retires because he has attained age fifty (50) and has ten (10) years of Accredited Service may not commence receipt of his Retirement Income or Allowance until on or after January 1, 1998. (2) A SEPCO Employee who retires under paragraph (1) above having at least ten (10) years of Accredited Service shall be entitled to the greater of his (A) Retirement Income determined under Section 5.5 (excluding the third paragraph thereof) and this Article XVII or (B) Allowance determined under this Article XVII and in addition applying a reduction of one-third of one percent ([OBJECT OMITTED]%) for each calendar month by which the commencement date precedes the first day of the month following any such Employee's attainment of his fifty-fifth (55th) birthday. However, effective for SEPCO Employees who retire on or after June 1, 2000, the term three-tenths of one percent (0.3%) shall replace one-third of one percent ([OBJECT OMITTED]%) in the preceding sentence. (3) A SEPCO Employee who retires or terminates under paragraph (1) above after attaining age 55 having less than ten (10) years of Accredited Service shall be entitled to the greater of his (A) Retirement Income determined under Section 8.2 (without regard to the ten (10) years of Accredited Service requirement) and this Article XVII or (B) Allowance determined under this Article XVII. (h) On and after January 1, 1998, the Provisional Payees of SEPCO Employees who are not Covered SEPCO Employees shall only be entitled to benefits as provided in Article VII of the Plan. On or after January 1, 1998 but on or before December 31, 2000, Provisional Payees of Covered SEPCO Employees shall be entitled to benefits equal to the greater of (i) the benefits provided for in Article VII of the Plan, or (ii) the benefits provided for in Article 7 of the SEPCO Schedule. Provisional Payees of Covered SEPCO Employees who retire, terminate employment or die on or after January 1, 2001 shall only be entitled to benefits as provided in Article VII of the Plan. (i) With respect to the accrual of Retirement Income or an Allowance during a period of total disability, SEPCO Employees incurring a disability on and after January 1, 1998 shall only be subject to the provisions of Section 4.4 of the Plan. Notwithstanding the above, a Covered SEPCO Employee who incurs a disability on or after January 1, 1998 but on or before December 31, 2000 shall accrue Retirement Income or an Allowance equal to the greater of : (i) his Retirement Income determined under Section 4.4 of the Plan, or (ii) his Allowance determined under the SEPCO Schedule. Covered SEPCO Employees who become disabled on or after January 1, 2001 shall only be entitled to benefits as provided in Section 4.4 of the Plan. (j) (1) The options for payment described in Sections 7.1(c) and (d) and Sections 7.6(c) and (d) may be elected by SEPCO Employees who are not Covered SEPCO Employees and who retire or terminate on or after January 1, 1998 and by Covered SEPCO Employees who retire or terminate on or after (i) July 1, 1999 for Covered SEPCO Employees represented by IBEW, and (ii) February 9, 2000 for Covered SEPCO Employees represented by OPEIU. (2) Notwithstanding Section 17.3, SEPCO Employees who terminate or retire in 1997 and Covered SEPCO Employees who terminate or retire prior to January 1, 2001 and commence receipt of an Allowance shall not be eligible to change the form of benefit elected under the SEPCO Plan even if such SEPCO Employees are entitled to receive Retirement Income under this Article XVII. (3) Notwithstanding Section 7.07(a)(Option ii) of the SEPCO Schedule, SEPCO Employees who are not Covered SEPCO Employees shall not be eligible to elect a 75% joint and survivor annuity. Covered SEPCO Employees, however, shall be allowed to elect a 75% joint and survivor annuity pursuant to Section 7.07(a)(Option ii) before January 1, 2001. (k) SEPCO Employees may elect in accordance with the SEPCO Schedule to have their benefit, whether paid as Retirement Income or an Allowance, adjusted to take into account their old-age insurance benefit under Title II of the Social Security Act. In the event that a SEPCO Employee's Retirement Income is greater than his Allowance under Section 17.3 or 17.4, the old age insurance benefit used to compute such Retirement Income shall be used to determine the amount payable under Section 5.04 of the SEPCO Schedule. (l) Notwithstanding anything in this Article XVII to the contrary, the Accrued Benefit of any SEPCO Employee shall not be less than the Accrued Benefit such SEPCO Employee derived under the SEPCO Plan as of the earlier of retirement, termination or December 31, 1997. 17.6 Transfers of SEPCO Employees. (a) With respect to a transfer of employment from an Employing Company other than SEPCO to SEPCO, (1) occurring prior to January 1, 1998, the person will be treated as a SEPCO Employee under this Article XVII or (2) occurring on or after January 1, 1998, the person will be treated as an Employee under the terms of the Plan. Notwithstanding the foregoing, a person transferring to SEPCO as a Covered SEPCO Employee on or after January 1, 1998 will be treated as a SEPCO Employee. Only persons transferring to SEPCO as a Covered SEPCO Employee on or after January 1, 2001 will be treated as an Employee. (b) With respect to a transfer of employment from SEPCO to an Employing Company, (1) occurring prior to January 1, 1997, the person will be treated like an Employee under Sections 4.6(a), (c) and (d) of the Plan provided that any Retirement Income or Allowance payable to the Employee shall be determined in accordance with Section 17.5(a), (g), (j) and (k) or (2) occurring on or after January 1, 1997, the person will be treated as a SEPCO Employee or Covered SEPCO Employee, whichever is applicable, under this Article XVII. 17.7 Application of Plan to SEPCO. To the extent not inconsistent with the provisions of this Article XVII, all the provisions of the Plan are applicable to SEPCO Employees and Covered SEPCO Employees. 13. Section 1.14 of the SEPCO Schedule, the definition of "Employee," shall be deleted in its entirety and replaced with the following new definition: 1.14 "Employee" shall mean any person regularly employed by the Company who receives regular stated salary, or wages paid directly by the Company as (a) a regular full-time employee, (b) a regular part-time employee, (c) a cooperative education employee or (d) a temporary employee paid directly or indirectly by the Company. Notwithstanding the preceding sentence, on and after January 1, 1998 but before January 1, 2001, "Employee" shall be limited to Covered SEPCO Employees as defined in Article XVII of the Plan. Thereafter, no person employed by the Company shall be an "Employee" under this SEPCO Schedule. For purposes of this Section 1.14, temporary employee means a full-time or part-time employee who provides services to the Company for a stated period of time after which period such employee will be terminated from employment. The term Employee shall also include Leased Employees within the meaning of Code ss. 414(n) (2). Notwithstanding the foregoing, if such Leased Employees constitute less than twenty percent (20%) of the Employer's non-highly compensated workforce within the meaning of Code ss. 414(n)(5)(C)(ii), the term Employee shall not include those Leased Employees covered under the SEPCO Schedule described in Code ss. 414(n)(5). The term Employee for participation purposes shall not include any individual who is classified by the Company as an independent contractor or temporary employee (unless with respect to a temporary employee who is grandfathered under this SEPCO Schedule) regardless of whether such classification is in error. 14. Southern Energy, Inc. shall be removed as an Employing Company in Appendix A of the Plan, effective as of the "Group Status Change Date," as defined in the Agreement. 15. Except as amended herein by this Sixth Amendment, the Plan shall remain in full force and effect as amended and restated by the Company prior to the adoption of this Sixth Amendment. IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly authorized officer, has adopted this Sixth Amendment to The Southern Company Pension Plan this ____ day of _________________, 2000, to be effective as stated herein. SOUTHERN COMPANY SERVICES, INC. By: _____________________________________ Title:___________________________________ ATTEST: By: _________________________________________________________ Title:________________________________________________________ EX-10 20 x10a67.txt SOUTHERN COMPANY PERFORMANCE STOCK PLAN AMENDED AND RESTATED TROUTMAN SANDERS LLP Bank of America Plaza 600 Peachtree Street, N.E., Suite 5200 Atlanta, Georgia 30308 (404) 885-3000 Effective January 1, 2000 SOUTHERN COMPANY PERFORMANCE STOCK PLAN AMENDED AND RESTATED Purposes This Southern Company Performance Stock Plan originally established effective January 1, 1998 is hereby amended and restated effective January 1, 2000. The Plan is intended to maximize the long-term success of Southern Company, ensure a balanced emphasis on both current and long-term performance, enhance Participants' identification with shareholders' interests, and facilitate the attraction and retention of key individuals with outstanding ability. ARTICLE I Definitions. Whenever used in the Plan, the following terms shall have the meaning set forth below: 1.1 "Award" shall mean, individually and collectively, any Option, Stock Appreciation Right or Restricted Stock granted under the Plan. 1.2 "Award Document" shall mean the written document evidencing the grant of an Award and setting forth the terms and conditions thereof. 1.3 "Base Value" shall mean the Fair Market Value of a Stock Appreciation Right on the date of its grant. 1.4 "Board" or "Board of Directors" shall mean the Board of Directors of Southern Company. 1.5 "Change in Control Benefit Plan Determination Policy" shall mean the change in control benefit plan determination policy, as approved by the Board, as it may be amended from time to time in accordance with the provisions therein. 1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.7 "Committee" shall mean the Compensation Committee of the Board of Directors composed solely of not less than three (3) Nonemployee Directors and, to the extent necessary for any Award intended to qualify as Performance Based to so qualify, each member of the Committee shall be an Outside Director. 1.8 "Common Stock" shall mean the common stock of Southern Company. 1.9 "Covered Employee" shall mean a Participant who is, as of the last day of Southern Company's fiscal year in which the Participant shall be required to recognize taxable income with respect to an Award, a "covered employee" within the meaning of Code section 162(m)(3) and the regulations thereunder. 1.10 "Director" shall mean any person who is a member of the Board of Directors or of the board of directors of an Employing Company. 1.11 "Disability" shall mean total and permanent disability as determined by the Social Security Administration. 1.12 "Effective Date" shall mean January 1, 2000. 1.13 "Employee" shall mean any person who is employed by an Employing Company. 1.14 "Employing Company" shall mean any affiliate or subsidiary (direct or indirect) of Southern Company, which the Board of Directors may from time to time determine to bring under the Plan and which may adopt the Plan, and any successor of any of them. 1.15 "Fair Market Value" shall mean the average of the high and low prices at which a share of Common Stock shall have been traded on the respective measurement date, such as the date of grant or the exercise of an Award, or on the next preceding trading day if such date was not a trading date, as reported on the New York Stock Exchange-Composite Transactions Listing, or as otherwise determined by the Committee. In no event shall the Fair Market Value equal less than the par value of the Common Stock. 1.16 "Incentive Stock Option" shall mean a stock option satisfying the requirements of Section 422 of the Code granted pursuant to Section 4.1(b) and designated by the Committee as an Incentive Stock Option. 1.17 "Nonemployee Director" shall mean a Director of Southern Company who is a "nonemployee director" within the meaning of Rule 16b-3 promulgated under the Exchange Act. 1.18 "Nonqualified Stock Option" shall mean an Option, other than an Incentive Stock Option, granted pursuant to Section 4.1(c). 1.19 "Option" shall mean, individually and collectively, an Incentive Stock Option or a Nonqualified Stock Option to purchase Common Stock. 1.20 "Optionee" shall mean a person to whom an Option has been granted under the Plan. 1.21 "Option Price" shall mean the price per share of Common Stock set by the grant of an Option, but in no event less than the Fair Market Value of the Common Stock on the date of grant. 1.22 "Outside Director" shall mean a Director of Southern Company who is an "outside director" within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder. 1.23 "Participant" shall mean any Director or Employee who satisfies the criteria set forth in Article III. 1.24 "Performance-Based" shall mean compensation which qualifies as "performance-based" within the meaning of Code section 162(m)(4)(c) and the regulations thereunder. 1.25 "Plan" shall mean this Southern Company Performance Stock Plan, as amended and restated and as may be further amended from time to time. 1.26 "Restricted Stock" shall mean an Award granted pursuant to Section 4.1(e). 1.27 "Retirement" shall mean the termination of service or employment by a Participant on or after age 65 or as otherwise determined by the Committee in its sole discretion. 1.28 "Separation Date" shall mean, as determined by the Committee, the date on which a Participant's service or employment with Southern Company or an Employing Company terminates for reasons other than his transfer of service or employment to Southern Company or another Employing Company. Whether any leave of absence shall constitute a termination of service or employment for the purposes of the Plan shall be determined in each case by the Committee in its sole discretion. 1.29 "Southern Company" shall mean The Southern Company. 1.30 "Stock Appreciation Right" or "SAR" shall mean a right to any appreciation in value of shares of Common Stock granted pursuant to Section 4.1(d). Where the context requires, words in the masculine gender shall include the feminine and neuter genders, words in the singular shall include the plural, and words in the plural shall include the singular. ARTICLE II 2.1 Plan Administration. The Plan shall be administered by the Committee. The Committee is authorized to establish such rules, to appoint such agents and to delegate such authority as it deems appropriate for the proper administration of the Plan, including, but not limited to, the delegation of authority to such person or persons to exercise the discretion provided in Section 5.1 hereof to determine whether a Participant may exercise an Award subsequent to termination of employment, and to make such determinations and to take such steps in connection with the Plan or the benefits provided hereunder as it deems necessary or advisable. 2.2 Plan Interpretation. The Committee shall have the exclusive authority to interpret the Plan. The decision of the Committee with respect to any question arising as to the grant of an Award to a Participant in the Plan, the amount, term, form, and time of payment of Awards under the Plan, or any other matter concerning the Plan shall be final, conclusive, and binding on both Southern Company and the Participants. ARTICLE III 3.1 Eligibility. The Participants in the Plan shall be limited to Directors and to those Employees, as determined by the Committee, who have a significant impact on the long-term performance and success of Southern Company. Subject to the terms of the Plan, the Committee shall identify individuals eligible to become Participants in the Plan, select from time to time the Participants to whom Awards shall be granted and shall determine the number of Awards to be granted. ARTICLE IV 4.1 Awards. (a) General. Beginning January 1, 1998 and thereafter, the Committee shall determine the forms and amounts of Awards for Participants. All Awards shall be subject to the terms and conditions of the Plan and to such other terms and conditions consistent with the Plan as the Committee deems appropriate. Awards under the Plan need not be uniform and Awards under two (2) or more paragraphs may be combined in one Award Document. Any combination of Awards may be granted at one time and on more than one occasion to the same Participant. More than one Award may be granted to a Participant in the same calendar year. Such Awards may take the following forms, in the Committee's sole discretion: (b) Incentive Stock Options. These shall be stock options within the meaning of Section 422 of the Code to purchase Common Stock. In addition to other restrictions contained in the Plan, an Incentive Stock Option (1) shall not be exercised more than ten (10) years after the date it is granted, (2) shall not have an Option Price less than the Fair Market Value of Common Stock on the date the Incentive Stock Option is granted, (3) shall otherwise comply with Section 422 of the Code, (4) shall be granted only to Employees and (5) shall be designated as an "Incentive Stock Option" by the Committee. The aggregate Fair Market Value of Common Stock, determined at the time of each grant, for which any Optionee may vest in Incentive Stock Options under this Plan for any calendar year shall not exceed $100,000. (c) Nonqualified Stock Options. These shall be stock options to purchase Common Stock which are not designated by the Committee as "Incentive Stock Options." At the time of the grant, the Committee shall determine the Option exercise period, the Option Price, and such other conditions or restrictions on the exercise of the Nonqualified Stock Option as the Committee deems appropriate. In addition to other restrictions contained in the Plan, a Nonqualified Stock Option (1) shall not be exercised more than ten (10) years after the date it is granted, and (2) shall not have an Option Price less than 100% of the Fair Market Value of Common Stock on the date the Nonqualified Stock Option is granted. (d) Stock Appreciation Rights. These shall be rights that on exercise entitle the holder to receive the excess of (1) the Fair Market Value of Common Stock on the date of exercise over (2) its Base Value multiplied by (3) the number of SARs exercised. Such rights shall be satisfied in cash, stock, or a combination thereof, as determined by the Committee. Stock Appreciation Rights granted under the Plan may be granted in the sole discretion of the Committee in conjunction with an Incentive Stock Option or Nonqualified Stock Option under the Plan. The Committee may impose such conditions or restrictions on the exercise of SARs as it deems appropriate and may terminate, amend, or suspend such SARs at any time. SARs granted under this Plan shall not be exercised more than ten (10) years after the date of grant. (e) Restricted Stock. Restricted Stock shall be shares of Common Stock held by Southern Company for the benefit of a Participant without payment of consideration, except as otherwise may be determined by the Committee in its discretion, with restrictions or conditions upon the Participant's right to retain, transfer or sell such shares. The following provisions shall be applicable to Restricted Stock Awards: (1) Stock Power. Each certificate for Restricted Stock shall be registered in the name of the Participant and shall be deposited by him with Southern Company, together with a stock power endorsed in blank. (2) Restriction Period. At the time of making a Restricted Stock Award, the Committee shall establish the "Restriction Period" applicable thereto. Such Restriction Period may be up to ten (10) years as determined by the Committee. The Committee may provide for the annual lapse of restrictions with respect to a specified percentage of the Restricted Stock, provided the Participant satisfies all eligibility requirements at such time. (3) Dividends. The Participant shall be entitled to receive dividends during the Restriction Period and shall have the right to vote such Common Stock and all other shareholder's rights except the following: (i) the Participant shall not be entitled to delivery of the stock certificate during the Restriction Period, (ii) Southern Company shall retain custody of the Common Stock during the Restriction Period, and (iii) a breach of a restriction or a breach of the terms and conditions established by the Committee with respect to the Restricted Stock shall cause a forfeiture of the Restricted Stock. 4.2 Award Document. (a) General. After the Committee determines the form and amount of a Participant's Award, it shall cause Southern Company to prepare an Award Document to be delivered to the Participant setting forth the form and amount of the Award and any conditions and restrictions on the Award imposed by the Plan and the Committee. (b) Vesting of Award Outstanding as of October 18, 1999. Only with respect to Awards outstanding as of October 18, 1999, notwithstanding the terms of any Award Document, vesting of such Awards shall occur prior to a termination of employment on the anniversary of each grant date as follows: first - 34%; second - 33%; and third - 33%. 4.3 Exercise and Payment. The exercise of an Option shall be made only by a written notice delivered in person or by mail to the Secretary of Southern Company at Southern Company's principal executive office, specifying the number of shares of Common Stock to be purchased and accompanied by payment therefor and otherwise in accordance with the Award Document pursuant to which the Option was granted. The purchase price for any shares of Common Stock purchased pursuant to the exercise of an Option shall be paid, as determined by the Committee in its discretion and set forth in the Award Document at the time of grant, in either of the following forms (or any combination thereof): (i) cash or (ii) the transfer of shares of Common Stock with a Fair Market Value equal to the aggregate exercise price of the Option to Southern Company upon such terms and conditions as determined by the Committee. In addition, Options may be exercised through a registered broker-dealer pursuant to such cashless exercise procedures (other than the withholding of shares of Common Stock that would otherwise be acquired upon the exercise of such Option) which are, from time to time, deemed acceptable by the Committee, and the Committee may authorize that the purchase price payable upon exercise of an Option may be paid by having shares of Common Stock withheld that otherwise would be acquired upon such exercise. Any shares of Common Stock transferred to Southern Company (or withheld upon exercise) as payment of the purchase price under an Option shall be valued at their Fair Market Value on the day preceding the date of exercise of such Option. The Optionee shall deliver the Award Document evidencing the Option to the Secretary of Southern Company who shall endorse thereon a notation of such exercise and return such Award Document to the Optionee. No fractional shares of Common Stock (or cash in lieu thereof) shall be issued upon exercise of an Option and the number of shares of Common Stock that may be purchased upon exercise shall be rounded to the nearest number of whole shares of Common Stock. 4.4 Limitations on Exercise. Awards do not provide the Participant with any rights or interests until they vest. Unless otherwise provided in the Award Document, and subject to any other relevant Sections of the Plan, an Award shall vest twenty-five (25%) percent per year on each of the first four (4) anniversary dates of the Grant Date, provided the Participant has continued in the employment of the Company through such anniversary or anniversaries. ARTICLE V 5.1 Termination of Service or Employment. A Participant whose service as a Director or whose employment terminates for reasons other than Retirement, Disability, or death shall, in the discretion of the Committee, has no right to receive any benefit or payment for existing Awards under the Plan. Any outstanding Award shall terminate on the Participant's Separation Date; provided, however, that the Committee or its designee, in its or his sole discretion, may permit the exercise of any outstanding Award after the Participant's Separation Date, at such time and in such manner as the Committee or such designee may determine, but in no event in the case of Incentive Stock Options shall such exercise be beyond the earlier of (a) three (3) months from the Participant's Separation Date or (b) the expiration date of the Award, to the extent exercisable on such Participant's Separation Date. 5.2 Death of a Participant. Unless otherwise provided in the Award Document, in the event of the death of a Participant prior to the exercise of all Incentive Stock Options, Nonqualified Stock Options, and Stock Appreciation Rights granted to such Participant, the administrator of the deceased Participant's estate, the executor under his will, or the person or persons to whom the Options or SARs shall have been validly transferred by such executor or administrator pursuant to the will or laws of intestate succession shall have the right, within thirty-six (36) months from the date of such Participant's death, but not beyond the expiration date of the Options or SARs, to exercise such Options or SARs to the extent exercisable on such Participant's Separation Date. 5.3 Retirement. (a) Incentive Stock Options. In the event of the termination of a Participant's employment as result of his Retirement prior to the exercise of all Incentive Stock Options granted to the Participant, such Participant shall have the right, within three (3) months of his Separation Date, but not beyond the expiration date of such Options, to exercise such Incentive Stock Options to the extent exercisable on his Separation Date. (b) Nonqualified Stock Options and SARs. Unless otherwise provided in the Award Document, in the event of the termination of a Participant's employment as a result of his Retirement prior to the exercise of all Nonqualified Stock Options or Stock Appreciation Rights granted to the Participant, such Participant shall have the right with respect to all Nonqualified Stock Options or SARs outstanding as of October 18, 1999 and thereafter granted, within sixty (60) months of his Separation Date, but not beyond the expiration date of such Nonqualified Stock Options or SARs, to exercise such Nonqualified Stock Options or SARs to the extent exercisable on his Separation Date. 5.4 Disability. (a) Incentive Stock Options. In the event of the termination of a Participant's employment due to Disability prior to the exercise of all Incentive Stock Options granted to the Participant, such Participant or his legal representative shall have the right, within twelve (12) months of his Separation Date, but not beyond the expiration date of such Incentive Stock Options, to exercise such Incentive Stock Options to the extent exercisable on his Separation Date. (b) Nonqualified Stock Options and SARs. Unless otherwise provided in the Award Document, in the event of the termination of a Participant's employment due to Disability prior to the exercise of all Nonqualified Stock Options or Stock Appreciation Rights granted to the Participant, such Participant or his legal representative shall have the right, within thirty-six (36) months of his Separation Date, but not beyond the expiration date of such Nonqualified Stock Options or SARs, to exercise such Nonqualified Stock Options or SARs to the extent exercisable on his Separation Date. 5.5 Change in Control. The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control of Southern Company or an Employing Company and the benefits to be provided hereunder in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein. ARTICLE VI 6.1 Limitation of Shares of Common Stock Available under the Plan. (a) Share Limit. The total number of shares of Common Stock available to be granted by the Committee as Awards to the Participants under the Plan shall not exceed 40,000,000 shares. Upon a change in capitalization, the maximum number of shares of Common Stock referred to in the preceding sentence shall be adjusted in number and kind pursuant to Section 7.1 hereof. (b) Share Reduction. The total number of shares available under Section 6.1(a) shall be reduced from time to time in the manner specified: (1) Incentive Stock Options and Nonqualified Stock Options. The grant of an Incentive Stock Option and Nonqualified Stock Option shall reduce the available shares by the number of shares subject to such Option. (2) Stock Appreciation Rights. The grant of Stock Appreciation Rights shall reduce the available shares by the number of SARs granted; provided, however, if SARs are granted in conjunction with an Option and the exercise of such Option would cancel the SARs and vice versa, then the grant of the SARs will only reduce the amount available by the excess, if any, of the number of SARs granted over the number of shares subject to the related Option. (3) Restricted Stock. The grant of Restricted Stock shall reduce the available shares by the number of shares of Restricted Stock granted. (c) Share Increase. The total number of shares available under Section 6.1(a) shall be increased from time to time in the manner specified: (1) Incentive Stock Options and Nonqualified Stock Options. The lapse or cancellation of an Incentive Stock Option or Nonqualified Stock Option shall increase the available shares by the number of shares released from such Option; provided, however, in the event the cancellation of an Option is due to the exercise of SARs related to such Option, the cancellation of such Option shall only increase the amount available by the excess, if any, of the number of shares released from such Option over the number of SARs exercised. (2) Stock Appreciation Rights. The lapse or cancellation of Stock Appreciation Rights shall increase the available shares by the number of SARs which lapse or are canceled; provided, however, in the event the cancellation of such SARs is due to the exercise of an Option related to such SARs, the cancellation of such SARs shall only increase the available shares by the excess, if any, of the number of SARs canceled over the number of shares delivered on the exercise of such Option. (3) Restricted Shares. The reversion of Restricted Stock to Southern Company due to the breach or occurrence of a restriction or failure to satisfy a condition on such shares shall increase the available shares by the number of shares of Restricted Stock reverted. 6.2 Maximum Shares to Participant. The maximum number of shares of Common Stock which may be the subject of Awards to a Participant during any calendar year during the term of the Plan shall be 1,000,000. ARTICLE VII 7.1 Adjustment Upon Changes in Capitalization. In the event of any change in corporate capitalization, such as a stock split, stock dividend or reclassification, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of Southern Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of Southern Company, the Committee shall as appropriate adjust the total number of shares of Common Stock available for Awards under the Plan or allocable to any individual Participant, the number of shares of Common Stock subject to outstanding Options, the exercise price for such Options, the number of outstanding SARs, the Base Value of such SARs, the number of shares of outstanding Restricted Stock and the Award limit set forth in subsection 6.2. 7.2 Merger, Consolidation or Tender Offer. In the event of a merger or consolidation of Southern Company or a tender offer for shares of Common Stock, or in anticipation of such merger, consolidation, or tender offer, the Committee may make such adjustments with respect to Awards under the Plan and take such other action as it deems necessary or appropriate to reflect such merger, consolidation, or tender offer, including without limitation the substitution of new Awards, the termination or adjustment of outstanding Awards, the acceleration of Awards, or the removal of limitations or restrictions on outstanding Awards. ARTICLE VIII 8.1 Withholding Taxes. Southern Company or the Employing Company of the Participant, as the case may be, shall deduct from all payments and distributions in cash under the Plan any taxes required to be withheld for federal, state, or local governments. In the event distributions are made in shares of Common Stock, Southern Company shall retain the value of sufficient shares to equal the amount of the tax required to be withheld in respect of such distributions. 8.2 Service or Employment. The establishment of the Plan and Awards hereunder shall not be construed as conferring on any Participant any right to continued service or employment, and the service or employment of any Participant may be terminated without regard to the effect which such action might have upon him or her as a Participant. 8.3 Non-Alienation of Benefits. Except as otherwise provided in Section 8.5 or 8.6 hereof, or as may otherwise be provided in the Participant's Award Document with respect to Awards other than Incentive Stock Options, and other than as specifically provided with regard to the death of a Participant, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, excluding the use of Options under this Plan as collateral in exercising such Options. Any attempt to do so shall be null and void. No such benefits shall, prior to receipt thereof by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagement, or torts of the Participant. 8.4 Non-Alienation of Election or Exercise Rights. Except as otherwise provided in Section 8.5 or 8.6 hereof, or as may otherwise be provided in the Participant's Award Document with respect to Awards other than Incentive Stock Options, no election as to benefits or exercise of Options, Stock Appreciation Rights, or other rights may be made during a Participant's lifetime by anyone other than the Participant. 8.5 Transfer of Awards (Other Than ISOs) to Revocable Trust. Awards other than Incentive Stock Options may be transferred by a Participant to a revocable trust under circumstances where the grantor Participant is the trustee or co-trustee of such revocable trust and the trust beneficiaries are limited to the grantor Participant and, in the event of the Participant's death, the grantor's spouse, lineal descendants and lineal ancestors. Powers of the non-Participant co-trustee must be limited to the exercise of the Awards held by the trust in the event of the Participant's death or incapacity. Written notice of the Participant's intent to transfer Awards under this Section 8.5 must be delivered to the Vice President of Human Resources of Southern Company Services, Inc. prior to such transfer. 8.6 Transfer of Nonqualified Stock Options by Certain Participants. Nonqualified Stock Options may be transferred by a Participant who Southern Company determines must file reports on the beneficial ownership of securities under Section 17(a) of the Public Utility Holding Company Act of 1935, as amended, or who is specifically approved by the Committee, to, or for the benefit of, the Participant's Immediate Family (including, without limitation, to a trust for the benefit of the Participant's Immediate Family or to a partnership or limited liability company whose only partners or members are the Participant and/or the Participant's Immediate Family), subject to such limits as the Committee may establish. The transferee shall remain subject to all the terms and conditions applicable to the Nonqualified Stock Option prior to such transfer. The term "Immediate Family" shall mean the Participant's spouse, children, and grandchildren (and, for these purposes, shall also include the Participant). Written notice of the Participant's intent to transfer Options under this Section 8.6 must be delivered to the Vice President of Human Resources of Southern Company Services, Inc. prior to such transfer. 8.7 Amendment, Modification, and Termination of the Plan. Except for the provisions of Section 5.5 hereof, which cannot be amended, modified or terminated following a "Subsidiary Change in Control" or a "Southern Termination" (as defined in the Change in Control Benefit Plan Determination Policy), the Board of Directors, at any time, may terminate and in any respect amend or modify the Plan; provided, however, that, except as provided in Section 7.1, no such action by the Board of Directors, without approval of Southern Company's shareholders, may increase the total number of shares of Common Stock available under the Plan; and further provided that, except as provided in Section 7.2, no amendment, modification, or termination of the Plan shall in any manner adversely affect the rights of any Participant under the Plan without the consent of such Participant. 8.8 Indemnification. Each person who is or shall have been a member of the Committee or of the Board of Directors shall be indemnified and held harmless by Southern Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action or failure to act under the Plan and against and from any and all amounts paid by him in satisfaction of judgment in any such action, suit, or proceeding against him. Such person shall give Southern Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under Southern Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that Southern Company may have to indemnify them or hold them harmless. 8.9 Reliance on Reports. Each member of the Committee and each member of the Board of Directors shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of Southern Company and any Employing Company and upon any other information furnished in connection with the Plan by any person or persons other than himself. In no event shall any person who is or shall have been a member of the Committee or the Board of Directors be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith. 8.10 Governing Law. To the extent that federal law shall not be held to have preempted local law, this Plan shall be governed by the laws of the State of Delaware. If any provision of the Plan shall be held invalid or unenforceable, the remaining provisions hereof shall continue in full force and effect. 8.11 Term. The Plan shall remain in effect for ten (10) years from the Effective Date or until terminated by the Board of Directors, whichever occurs first. 8.12 Additional Terms. With respect to any Award, the Committee may, in its discretion: (i) modify or restrict any of the terms and conditions of any Awards (provided, however, that no such modification of an Award may in any way adversely affect a Participant's Award, without the written consent of a Participant); (ii) modify or restrict Award exercise procedures and any other Plan procedures; (iii) establish local country plans as subplans to this Plan, each of which may be attached as an Appendix hereto; and (iv) take any action, before or after an Award is made, which it deems advisable to obtain or comply with any necessary local government regulatory exemptions or approvals; provided that the Committee may not take any action hereunder which would violate any securities law or any governing statute. 8.13 Refusal of Award. Any Participant may refuse the grant of an Award by notifying the Committee of his or her refusal in writing in a form and pursuant to procedures to be determined by the Committee. 8.14 No Additional Rights. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, or confer upon any Participant any right to continue in the employ of the Company. No employee shall have the right to be selected to receive an Award under this Plan or having been so selected, to be selected to receive a future Award. Neither the Award nor any benefits arising under this Plan shall constitute part of a Participant's employment contract with the Company (or any affiliate or subsidiary of the Company), and accordingly, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to liability on the part of the Company (or any affiliate or subsidiary of the Company) for severance payments. 8.15 Requirements of Law. The granting of Awards and the issuance of shares of Common Stock under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. IN WITNESS WHEREOF, Southern Company has caused the Southern Company Performance Stock Plan, as amended and restated, to be executed by its duly authorized officers pursuant to resolutions of the Board of Directors as of the ______day of ___________2000, to be effective January 1, 2000. SOUTHERN COMPANY By: ----------------------------------- Its: ---------------------------------- Attest: By: -------------------------------------------------- Its: ------------------------------------------------- EX-10 21 x10a68.txt THE SOUTHERN COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Troutman Sanders LLP 600 Peachtree Street, N.E. Suite 5200 Bank of America Plaza Atlanta, Georgia 30308-2216 (404) 885-3000 Amended and Restated Effective July 10, 2000 THE SOUTHERN COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption: Southern Company Services, Inc. hereby adopts The Southern Company Supplemental Executive Retirement Plan as amended and restated effective July 10, 2000 (the "Plan"). The Plan was initially established effective January 1, 1997, and was subsequently amended from time to time thereafter. The Plan shall be an unfunded deferred compensation arrangement whose benefits shall be paid solely from the general assets of the Company. 1.2 Purpose: The Plan is designed to provide deferred compensation benefits primarily for a select group of management or highly compensated employees which are not otherwise payable under The Southern Company Pension Plan as a result of the exclusion of incentive pay from the definition of earnings set forth under such plan. ARTICLE II - DEFINITIONS 2.1 "Administrative Committee" shall mean the committee referred to in Section 3.1 hereof. 2.2 "Affiliated Employer" shall mean any corporation which is a member of the controlled group of corporations of which Southern Company is the common parent corporation which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. The Affiliated Employers are set forth in Appendix A to the Plan, as amended from time to time. 2.3 "Beneficiary" shall mean any person, estate, trust or organization entitled to receive any payment under the Plan upon the death of a Participant. 2.4 "Board of Directors" shall mean the Board of Directors of the Company. 2.5 "Change in Control Benefit Plan Determination Policy" shall mean the Change in Control Benefit Plan Determination Policy, as approved by the Southern Board, as it may be amended from time to time in accordance with the provisions therein. 2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.7 "Company" shall mean Southern Company Services, Inc. 2.8 "Effective Date" of this amendment and restatement shall mean July 10, 2000. 2.9 "Employee" shall mean any person who is employed by an Affiliated Employer excluding any persons represented by a collective bargaining agent. 2.10 "Incentive Pay" shall mean all awards earned while an Employee under any incentive pay plans sponsored by an Affiliated Employer as shall be determined by the Board of Directors from time to time and set forth in Appendix B attached hereto, provided such incentive award was earned on or after January 1, 1994. If a person was formerly represented by a collective bargaining agent with respect to any corporation which is a member of the controlled group of corporations of which Southern Company is the common parent and such person subsequently becomes an Employee, incentive awards described in the preceding sentence shall include awards earned on and after January 1, 1994 while represented by such collective bargaining agent. 2.11 "Participant" shall mean an Employee or former Employee of an Affiliated Employer who is eligible and participates in the Plan pursuant to Sections 4.1 and 4.2. 2.12 "Pension Plan" shall mean The Southern Company Pension Plan, as amended from time to time. 2.13 "Plan" shall mean The Southern Company Supplemental Executive Retirement Plan, as amended from time to time. 2.14 "Plan Year" shall mean the calendar year. 2.15 "SERP Benefit" shall mean the benefit described in Section 5.1. 2.16 "Southern Board" shall mean the board of directors of Southern Company. 2.17 "Supplemental Pension Benefit" shall mean the pension benefit, if any, that is payable to a Participant under a group and/or individual supplemental benefit plan of an Affiliated Employer (as such term is defined therein). 2.18 "Trust" shall mean the Southern Company Deferred Compensation Trust. Where the context requires, the definitions of all terms set forth in the Pension Plan shall apply with equal force and effect for purposes of interpretation and administration of the Plan, unless said terms are otherwise specifically defined in the Plan. The masculine pronoun shall be construed to include the feminine pronoun and the singular shall include the plural, where the context so requires. ARTICLE III - ADMINISTRATION OF PLAN 3.1 Administrator. The general administration of the Plan shall be placed in the Administrative Committee. The Administrative Committee shall consist of the Vice President, Human Resources of The Southern Company, the Director, System Compensation and Benefits of The Southern Company and the Comptroller of The Southern Company or any other position or positions that succeed to the duties of the foregoing positions. Any member may resign or may be removed by the Board of Directors and new members may be appointed by the Board of Directors at such time or times as the Board of Directors in its discretion shall determine. The Administrative Committee shall be chaired by the Vice President, Human Resources of The Southern Company and may select a Secretary (who may, but need not, be a member of the Administrative Committee) to keep its records or to assist it in the discharge of its duties. A majority of the members of the Administrative Committee shall constitute a quorum for the transaction of business at any meeting. Any determination or action of the Administrative Committee may be made or taken by a majority of the members present at any meeting thereof, or without a meeting by resolution or written memorandum concurred in by a majority of the members. 3.2 Powers. The Administrative Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan more particularly set forth herein. The Administrative Committee shall have the discretionary authority to interpret the Plan and shall determine all questions arising in the administration, interpretation and application of the Plan. Any such determination by it shall be conclusive and binding on all persons. It may adopt such regulations as it deems desirable for the conduct of its affairs. It may appoint such accountants, counsel, actuaries, specialists and other persons as it deems necessary or desirable in connection with the administration of this Plan, and shall be the agent for the service of process. 3.3 Duties of the Administrative Committee. (a) The Administrative Committee is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Administrative Committee and any such appointee may employ advisors and other persons necessary or convenient to help it carry out its duties, including its fiduciary duties. The Administrative Committee shall have the right to remove any such appointee from his position. Any person, group of persons or entity may serve in more than one fiduciary capacity. (b) The Administrative Committee shall maintain accurate and detailed records and accounts of Participants and of their rights under the Plan and of all receipts, disbursements, transfers and other transactions concerning the Plan. Such accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by persons designated by the Administrative Committee. (c) The Administrative Committee shall take all steps necessary to ensure that the Plan complies with the law at all times. These steps shall include such items as the preparation and filing of all documents and forms required by any governmental agency; maintaining adequate Participants' records; recording and transmission of all notices required to be given to Participants and their Beneficiaries; the receipt and dissemination, if required, of all reports and information received from an Affiliated Employer; securing of such fidelity bonds as may be required by law; and doing such other acts necessary for the proper administration of the Plan. The Administrative Committee shall keep a record of all of its proceedings and acts, and shall keep all such books of account, records and other data as may be necessary for proper administration of the Plan. 3.4 Indemnification. The Company shall indemnify the Administrative Committee against any and all claims, losses, damages, expenses and liability arising from an action or failure to act, except when the same is finally judicially determined to be due to gross negligence or willful misconduct. The Company may purchase at its own expense sufficient liability insurance for the Administrative Committee to cover any and all claims, losses, damages and expenses arising from any action or failure to act in connection with the execution of the duties as Administrative Committee. No member of the Administrative Committee shall receive any compensation from the Plan for his service as such. ARTICLE IV - ELIGIBILITY 4.1 Eligibility Requirements. All Employees who are determined to be eligible to participate in the Plan in accordance with Section 4.2 whose benefits under the Pension Plan are limited by the exclusion of Incentive Pay from the definition of Earnings thereunder (or their spouses, as the case may be) shall be eligible to receive benefits under the Plan provided such Employees are (a) participating in the Plan at the time they terminate from an Affiliated Employer and are retirement eligible or (b) die while in active service while with an Affiliated Employer provided each such Employee's spouse is eligible to receive a survivor benefit under Article VII of the Pension Plan at each eligible Employee's death. Notwithstanding the foregoing sentence, any former Employee who is rehired by an Affiliated Employer on or after January 1, 1997, shall also be required to complete one (1) year of continuous paid service with an Affiliated Employer before being eligible to participate in the Plan. 4.2 Determination of Eligibility. The Administrative Committee shall determine which Employees are eligible to participate. Upon becoming a Participant, an Employee shall be deemed to have assented to the Plan and to any amendments hereafter adopted. The Administrative Committee shall be authorized to rescind the eligibility of any Participant if necessary to ensure that the Plan is maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees under the Employee Retirement Income Security Act of 1974, as amended. ARTICLE V - BENEFITS 5.1 SERP Benefit. (a) Subject to Article XV of the Pension Plan, a Participant shall be entitled to a monthly SERP Benefit equal to: (1) 1.70% (1.0% if subject to Article XV of the Pension Plan) of the Participant's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date, death or other termination of service, including a Social Security Offset, as adjusted, if necessary, under the terms of the Pension Plan for commencement prior to the Participant's Normal Retirement Date; less (2) such Participant's Retirement Income that is payable under the Pension Plan; less (3) such Participant's Supplemental Pension Benefit. (b) For purposes of Section 5.1(a)(1), the Participant's Average Monthly Earnings shall be calculated based on the Participant's Earnings that are considered under the Pension Plan in calculating his Retirement Income, but without regard to the limitation of Section 401(a)(17) of the Code, and including the following additional amounts: (1) any portion of such Participant's base pay that he may have elected to defer under The Southern Company Deferred Compensation Plan, but excluding Incentive Pay he deferred under such plan; and (2) any Incentive Pay which was earned as of the applicable Plan Year in excess of 25% of the Participant's corresponding base pay for the applicable Plan Year determined under this Section 5.1(b). In addition, to determine the Plan Years which produce the highest monthly average to calculate Average Monthly Earnings under the Plan, a Participant's Earnings should include those additional amounts provided for in Section 5.1(b). (c) For purposes of Section 5.1(a)(1), the Participant's years of Accredited Service shall include any deemed Accredited Service provided under the terms of any agreement concerning supplemental pension payments between the Participant and an Affiliated Employer. (d) To the extent that a Participant's Retirement Income under the Pension Plan is recalculated as a result of an amendment to the Pension Plan in order to increase the amount of his Retirement Income, the Participant's SERP Benefit shall also be recalculated in order to properly reflect such increase in determining payments of the Participant's SERP Benefit made on or after the effective date of such increase. 5.2 Distribution of Benefits. (a) The SERP Benefit, as determined in accordance with Section 5.1, shall be payable in monthly increments on the first day of the month concurrently with the Participant's Retirement Income under the Pension Plan. The form in which the SERP Benefit is paid will be the same as elected by the Participant under the Pension Plan except that the amount of the monthly benefit will be modified at the appropriate time based on the commencement of payments as follows. Payments shall be adjusted to include three components: (1) The amount necessary to pay the tax due under the Federal Insurance Contributions Act with respect to the accrued SERP Benefit determined upon retirement (or such other appropriate "resolution date" as defined under Treasury Regulation Section 31.3121(v)-2) calculated in accordance with Section 5.1; (2) The amount estimated to pay the federal and state income tax withholding liability due on the amount paid under paragraph (1) above; and (3) An adjusted monthly benefit determined on an actuarially equivalent basis in accordance with the terms of the Pension Plan which takes into account the amounts paid under paragraph (1) and (2) above and taking into account the form of benefit elected by the Participant under the Pension Plan. Upon adjustment, the remaining monthly payments shall equal the amount described in paragraph (3) above. The Beneficiary of a Participant's Pension Benefit shall be the same as the Provisional Payee, if any, of the Participant's Retirement Income under the Pension Plan. 5.3 Allocation of SERP Benefit Liability. In the event that a Participant eligible to receive a SERP Benefit has been employed at more than one Affiliated Employer, the SERP Benefit liability shall be apportioned so that each such Affiliated Employer is obligated in accordance with Section 5.4 to cover the percentage of the total SERP Benefit as determined below. Each Affiliated Employer's share of the SERP Benefit liability shall be calculated by multiplying the SERP Benefit by a fraction where the numerator of such fraction is the pay, as defined by the Administrative Committee, received by the Participant at the respective Affiliated Employer multiplied by the Accredited Service earned by the Participant at the respective Affiliated Employer and where the denominator of such fraction is the sum of all numerators calculated for each respective Affiliated Employer for which the Participant has been employed. In the event that a Participant receives additional Accredited Service in accordance with Section 5.1(c), for purposes of determining liability under this Section 5.3, such Accredited Service shall be allocated to each Affiliated Employer which has contracted with the Participant in accordance with such contract and this allocation will be utilized to adjust the appropriate components of the fraction in the preceding sentence in determining each Affiliated Employer's share of the SERP Benefit liability. 5.4 Funding of Benefits. Except as expressly limited under the terms of the Trust, the Company shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan. In any event, such obligations shall be paid or deemed to be paid solely from the general assets of the Company. Participants shall only have the status of a general, unsecured creditor of the Company. When a Participant becomes entitled to payment of a SERP Benefit, the Company may, in its sole discretion, elect to purchase an annuity from a reputable third party annuity provider to secure payment of all or any portion of the Participant's SERP Benefit, pursuant to a uniform annuitization program adopted by the Administrative Committee. 5.5 Withholding. There shall be deducted from the payment of any SERP Benefit due under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of the Participant or Beneficiary entitled to such payment. 5.6 Recourse Against Deferred Compensation Trust. In the event a Participant who is employed on or after January 1, 1999 with an "Employing Company" (as defined in the Change in Control Benefit Plan Determination Policy) disputes the calculation of his SERP Benefit, the Participant has recourse against the Company, the Employing Company by which the Participant is employed, if different, the Plan, and the Trust for payment of benefits to the extent the Trust so provides. 5.7 SEI Guarantee. Effective May 10, 2000, if Southern Energy Resources, Inc. ("SERI") fails or refuses to make payments under the Plan, Participants employed by SERI may have the right to obtain payment by Southern Energy, Inc. ("SEI") pursuant to the terms of the "Guarantee Agreement Concerning Southern Energy Resources, Inc. Compensation and Benefit Arrangements" entered into by SERI and SEI. A Participant's right to payment is not increased as a result of this SEI Guarantee. Participants have the same right to payment from SEI as they have from SERI. Any demand to enforce this SEI Guarantee should be made in writing and should reasonably and briefly specify the manner and the amount SERI has failed to pay. Such writing given by personal delivery or mail shall be effective upon actual receipt. Any writing given by telegram or telecopier shall be effective upon actual receipt if received during SEI's normal business hours, or at the beginning of the next business day after receipt, if not received during SEI's normal business hours. All arrivals by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. 5.8 Change in Control. The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control or preliminary change in control of Southern Company or an Employing Company, the benefits to be provided hereunder and the funding of the Trust in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein. ARTICLE VI - MISCELLANEOUS 6.1 Assignment. Neither the Participant, his Beneficiary nor his legal representative shall have any rights to sell, assign, transfer or otherwise convey the right to receive the payment of any SERP Benefit due hereunder, which payment and the right thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payment under the Plan shall be null and void and of no effect. 6.2 Amendment and Termination. Except for the provisions of Section 5.8 hereof, which may not be amended following a "Southern Change in Control" or "Subsidiary Change in Control" (as defined in the Change in Control Benefit Plan Determination Policy), the Plan may be amended or terminated at any time by the Board of Directors, provided that no amendment or termination shall cause a forfeiture or reduction in any benefits accrued as of the date of such amendment or termination. 6.3 No Guarantee of Employment. Participation hereunder shall not be construed as creating any contract of employment between an Affiliated Employer and a Participant, nor shall it limit the right of an Affiliated Employer to suspend, terminate, alter or modify, whether or not for cause, the employment relationship between the Affiliated Employer and a Participant. 6.4 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent such laws are not otherwise superseded by the laws of the United States. IN WITNESS WHEREOF, the amended and restated Plan has been executed by duly authorized officers of Southern Company Services, Inc. pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this _______ day of ____________________ , 2000. SOUTHERN COMPANY SERVICES, INC. By:__________________________________________________ By:______________________________ Its:_________________________________________________ Attest: By: ______________________________ Its: ______________________________ APPENDIX A THE SOUTHERN COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AFFILIATED EMPLOYERS AS OF JANUARY 1, 2000 Alabama Power Company Georgia Power Company Gulf Power Company Mississippi Power Company Savannah Electric and Power Company Southern Communications Services, Inc. Southern Company Energy Solutions, Inc. Southern Company Services, Inc. Southern Energy Resources, Inc. Southern Nuclear Operating Company, Inc. APPENDIX B THE SOUTHERN COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN INCENTIVE PAY PLANS Effective as of January 1, 1999, all awards under the following incentive pay plans shall be counted for purposes of Section 2.10 of the Plan: The Southern Company Performance Pay Plan The Southern Company Productivity Improvement Plan The Southern Company Executive Productivity Improvement Plan Georgia Power Company Customer Choice Group Incentive Compensation Plan Georgia Power Company Customer Partnership Teams Incentive Plan Georgia Power Company Residential Customer Partnership Team Incentive Plan Merchandise Sales Business Unit Incentive Plan (APC/Gulf) Southern Company Energy Solutions Officer and Staff Incentive Compensation Plan Southern Company Energy Solutions PowerCall Security Incentive Compensation Plan (Installation & Service Technicians) Southern Company National Accounts Incentive Compensation Plan Southern LINC Annual Incentive Plan Southern LINC Regional Sales Managers Incentive Plan EX-10 22 x10a70.txt EIGHTH AMENDMENT TO THE SOUTHERN COMPANY PERFORMANCE SHARING PLAN WHEREAS, Southern Company Services, Inc. heretofore adopted The Southern Company Performance Sharing Plan ("Plan"), effective as of January 1, 1997; WHEREAS, Southern Energy Resources, Inc. ("SERI"), an Employing Company under the Plan, will become the employer of certain individuals currently employed by Southern Company Energy Marketing, L.P. ("SCEM") following a reorganization of SCEM; WHEREAS, the Southern Company ("Southern") anticipates that in 2001 it will distribute pro rata to the Southern shareholders all of the stock of Southern Energy, Inc. ("SEI") held by Southern pursuant to a tax-free spin-off under Section 355 of the Internal Revenue Code; WHEREAS, in connection with such transaction, Southern and SEI have entered into an Employee Matters Agreement ("Agreement") to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, benefit plans and programs, and certain employment matters; WHEREAS, the Performance Sharing Plan Committee ("Committee") desires to amend the Plan to exclude the former employees of SCEM from participating in the Plan by virtue of their employment with SERI; WHEREAS, the Committee desires to amend the Plan to address the spin-off of SEI from Southern, including making such changes as are necessary pursuant to the Agreement; WHEREAS, the Committee desires to amend the Plan to make certain other technical changes and to reflect recent changes in the law; and WHEREAS, the Committee is authorized pursuant to Section 12.1 of the Plan to amend the Plan at any time, provided that the amendment does not involve a substantial increase in cost to any Employing Company or is necessary or desirable to comply with the laws and regulations applicable to the Plan. NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be effective as of the dates indicated: 1. Sections 2.13 and 2.14 of the Plan shall be eliminated in their entirety, effective as of January 1, 2001. Each subsequent Section in Article II shall remain as currently numbered until such time as the Plan is amended and restated. 2. Section 2.19 of the Plan shall be amended to read as follows, effective as of December 22, 2000: 2.19 "Eligible Employee" shall mean an Employee who is employed by an Employing Company and who is classified by the Employing Company as a regular full-time, regular part-time or cooperative education employee who: (a) was actively employed on December 31, 1996 but who will not attain his fortieth (40th) birthday on or before January 1, 2002 or who was not a member of an eligible class of employees under a pension plan of an Employing Company on December 31, 1996 and has not previously participated in any such pension plan; (b) was actively employed on December 31, 1996 and properly elects to participate in this Plan pursuant to the procedures established under the Plan for making such election; or (c) was employed or reemployed on or after January 1, 1997 or who rescinded a waiver of participation in The Southern Company Pension Plan pursuant to Section 2.7 thereof on or after January 1, 1997 that was in effect on December 31, 1996. "Eligible Employee" shall not include: (t) any individual, who would otherwise be eligible to participate in the Plan by virtue of his employment by SERI, but who (i) is an employee of SCEM on December 22, 2000, (ii) was hired by SERI on or after December 23, 2000, and who was a former employee of SCEM, or (iii) was hired by SERI on or after December 23, 2000, who is employed in the Americas Group and whose job function is indicated on Exhibit A attached hereto; (u) an Employee who is described in Section 3.8 of the Plan; (v) an Employee who has been previously employed by an Employing Company, transferred to Southern Company Energy Marketing, L.P., subsequently transfers back to an Employing Company, and is not described in paragraph (a) of Section 15.1 of The Southern Company Pension Plan; (w) an Employee who is treated as such solely by reason of the "leased employee" rules of Code Section 414(n) such that, pursuant to an agreement between an Employing Company and any other person, such individual has performed services for the Employing Company (or the Employing Company and related persons as described in Code Section 414(n)(6)) on a substantially full-time basis for a period of at least one year and such services were performed under the primary direction or control of the Employing Company; (x) any Employee who is represented by a collective bargaining agent unless the representatives of his bargaining unit and the Employing Company mutually agree to participation in the Plan subject to its terms by members of his bargaining unit; (y) any individual or Employee who is classified by the Employing Company as a temporary employee or as an independent contractor, regardless of prior inclusion under the Plan or whether such classification is determined to be in error; or (z) any individual or Employee who has voluntarily waived participation in the Plan for any reason, including any individual or Employee who has waived benefits upon employment by the Employing Company. 3. Paragraph (t) of Section 2.19 of the Plan shall be amended to read as follows, effective as of the Group Status Change Date as defined in the Agreement: (t) an individual who is employed by SERI; 4. Two new definition Sections shall be added to the Plan to read as follows, effective as of December 22, 2000: 2.54 "SCEM" shall mean Southern Company Energy Marketing, L.P. 2.55 "SERI" shall mean Southern Energy Resources, Inc. 5. A new definition Section shall be added to the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 2.56 "SEI" shall mean Southern Energy, Inc., any subsidiary of Southern Energy, Inc., or any successor thereto. 6. Section 5.1 of the Plan shall be amended to read as follows, effective as of January 1, 2000: 5.1 Section 415 Limitations. Notwithstanding any provision of the Plan to the contrary, the total Annual Additions allocated to the Account (and the accounts under all defined contribution plans maintained by an Affiliated Employer) of any Participant for any Limitation Year in accordance with Code Section 415 and the regulations thereunder, which are incorporated herein by this reference, shall not exceed the lesser of the following amounts: (a) twenty-five percent (25%) of the Participant's compensation (as defined in Code Section 415(c)(3) and any rulings and regulations thereunder) in the Limitation Year; or (b) $30,000 (as adjusted pursuant to Code Section 415(d)(1)(C)). 7. Section 5.3 of the Plan shall be amended to read as follows, effective as of January 1, 2000: 5.3 Combination of Plans. If an Employee participates in more than one defined contribution plan maintained by an Affiliated Employer and his Annual Additions exceed the limitations of Section 5.1, corrective adjustments shall be made first under The Southern Company Employee Savings Plan and then, to the extent necessary, under this Plan and then, to the extent necessary, under the Southern Company Employee Stock Ownership Plan. 8. The phrase ", as provided in regulations prescribed by the Secretary of the Treasury" shall be added to the end of the last sentence in the second paragraph of Section 12.1 of the Plan, effective as of September 5, 2000. 9. Section 13.5 of the Plan shall be deleted in its entirety, effective as of January 1, 2000. 10. A new Section 15.4 shall be added to the Plan to read as follows, effective as of the Group Status Change Date as defined in the Agreement: 15.4 Transfer of Plan Assets. Notwithstanding any provision of the Plan to the contrary, upon the distribution by the Southern Company to its shareholders of the SEI Stock held by the Southern Company pursuant to a tax-free spin-off under Code Section 355 or such similar transaction, the Accounts of certain active Participants who shall be identified in accordance with the Employee Matters Agreement entered into between the Southern Company and SEI ("Agreement") shall be transferred to a retirement plan established by SEI which is intended to constitute a qualified retirement plan under Code Section 401(a). The Committee shall determine the time of such transfers and shall establish such rules and procedures as its deems necessary or appropriate to effect the transfers, except that all actions with respect to the transfers shall be taken in a manner consistent with the Agreement. 11. Southern Energy Resources, Inc. shall be removed as an Employing Company in Appendix A of the Plan, effective as of the Group Status Change Date as defined in the Agreement. 12. Except as amended herein by this Eighth Amendment, the Plan shall remain in full force and effect as amended and restated by the Company prior to the adoption of this Eighth Amendment. IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly authorized members of the Performance Sharing Plan Committee, has adopted this Eighth Amendment to The Southern Company Performance Sharing Plan this ____ day of ___________________, 2000. PERFORMANCE SHARING PLAN COMMITTEE: EX-10 23 x10a71.txt THE SOUTHERN COMPANY SUPPLEMENTAL BENEFIT PLAN Troutman Sanders LLP 600 Peachtree Street, N.E. Suite 5200 Bank of America Plaza Atlanta, Georgia 30308-2216 (404) 885-3000 Amended and Restated Effective as of July 10, 2000 THE SOUTHERN COMPANY SUPPLEMENTAL BENEFIT PLAN Page ARTICLE I PURPOSE AND ADOPTION OF PLAN............................1 1.1 Adoption................................................1 1.2 Purpose.................................................2 ARTICLE II DEFINITIONS.............................................3 2.1 Account.................................................3 2.2 Administrative Committee................................3 2.3 Beneficiary.............................................3 2.4 Board of Directors......................................3 2.5 Change in Control Benefit Plan Determination Policy..................................................3 2.6 Code....................................................3 2.7 Common Stock............................................3 2.8 Company.................................................3 2.9 Deferred Compensation Plan..............................3 2.10 Effective Date..........................................3 2.11 Employee................................................3 2.12 Employing Company.......................................4 2.13 ESOP....................................................4 2.14 Non-Pension Benefit.....................................4 2.15 Participant.............................................4 2.16 Pension Benefit.........................................4 2.17 Pension Plan............................................4 2.18 Performance Sharing Plan................................4 2.19 Phantom Common Stock....................................4 2.20 Plan....................................................4 2.21 Plan Year...............................................4 2.22 Purchase Price..........................................5 2.23 Sales Price.............................................5 2.24 Savings Plan............................................5 2.25 Southern Board..........................................5 2.26 Southern Company........................................5 2.27 Trust...................................................5 2.28 Valuation Date..........................................5 ARTICLE III ADMINISTRATION OF PLAN..................................6 3.1 Administrator...........................................6 3.2 Powers..................................................6 3.3 Duties of the Administrative Committee..................7 3.4 Indemnification.........................................8 ARTICLE IV ELIGIBILITY.............................................9 4.1 Eligibility Requirements................................9 4.2 Determination of Eligibility............................9 4.3 Eligibility of Employees of Savannah Electric and Power Company.......................................9 ARTICLE V BENEFITS...............................................11 5.1 Pension Benefit........................................11 5.2 Non-Pension Benefit....................................11 5.3 Distribution of Benefits...............................14 5.4 Allocation of Pension Benefit Liability................17 5.5 Funding of Benefits....................................17 5.6 Withholding............................................18 5.7 Recourse Against Deferred Compensation Trust...........18 5.8 SEI Guarantee..........................................18 5.9 Change in Control......................................19 ARTICLE VI MISCELLANEOUS..........................................19 6.1 Assignment.............................................19 6.2 Amendment and Termination..............................19 6.3 No Guarantee of Employment.............................20 6.4 Construction...........................................20 THE SOUTHERN COMPANY SUPPLEMENTAL BENEFIT PLAN ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption: The Southern Company Supplemental Benefit Plan, effective as of July 10, 2000 and hereinafter set forth (the "Plan"), is a modification and continuation of the Supplemental Benefit Plan for Southern Company Services, Inc. and Southern Electric International, Inc., which originally became effective January 1, 1983, was amended and restated effective January 1, 1998, and was subsequently amended by the First Amendment dated April 15, 1999. Effective January 1, 1998, the following other plans were merged into the Plan: o Supplemental Benefit Plan for Alabama Power Company o Supplemental Benefit Plan for Georgia Power Company o Supplemental Benefit Plan for Gulf Power Company o Supplemental Benefit Plan for Mississippi Power Company o Supplemental Benefit Plan for Southern Company Services, Inc. and Southern Electric International, Inc., as adopted by Southern Communications Services, Inc. o Supplemental Benefit Plan for Southern Company Services, Inc. and Southern Electric International, Inc., as adopted by Southern Development and Investment Group, Inc. o Supplemental Benefit Plan for Southern Nuclear Operating Company, Inc. Employees participating in the merged plans and employed by an Employing Company on January 1, 1998 became immediately covered under the Plan; provided, however, that the terms of the prior plans govern an Employee's circumstances with regard to actions taken or occurring before January 1, 1998. The benefits of former Employees are payable in accordance with the provisions of the prior plans. 1.2 Purpose: The Plan is designed to provide certain retirement and other deferred compensation benefits primarily for a select group of management or highly compensated employees which are not otherwise payable or cannot otherwise be provided by the Employing Companies (1) under The Southern Company Pension Plan, The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan and The Southern Company Performance Sharing Plan, as a result of the limitations set forth under Sections 401(a)(17), 401(k), 401(m), 402(g), or 415 of the Internal Revenue Code of 1986, as amended from time to time; and (2) to compensate for lost benefits resulting from participation in The Southern Company Deferred Compensation Plan, as amended from time to time. The Plan shall be an unfunded deferred compensation arrangement whose benefits shall be paid solely from the general assets of the Employing Companies. ARTICLE II - DEFINITIONS 2.1 "Account" shall mean the total amount credited to the account of a Participant to reflect the interest of a Participant in the Plan resulting from a Participant's Non-Pension Benefit calculated in accordance with Section 5.2. 2.2 "Administrative Committee" shall mean the committee referred to in Section 3.1 hereof. 2.3 "Beneficiary" shall mean any person, estate, trust, or organization entitled to receive any payment under the Plan upon the death of a Participant. 2.4 "Board of Directors" shall mean the Board of Directors of the Company. 2.5 "Change in Control Benefit Plan Determination Policy" shall mean the Change in Control Benefit Plan Determination Policy, as approved by the Southern Board, as it may be amended from time to time in accordance with the provisions therein. 2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.7 "Common Stock" shall mean common stock of Southern Company. 2.8 "Company" shall mean Southern Company Services, Inc. 2.9 "Deferred Compensation Plan" shall mean The Southern Company Deferred Compensation Plan, as amended from time to time. 2.10 "Effective Date" of this amendment and restatement shall mean July 10, 2000. 2.11 "Employee" shall mean any person who is currently employed by an Employing Company. 2.12 "Employing Company" shall mean the Company and any affiliate or subsidiary of Southern Company which the Board of Directors may from time to time determine to bring under the Plan and any successor to them. The Employing Companies are set forth in Appendix A to the Plan, as amended from time to time. 2.13 "ESOP" shall mean The Southern Company Employee Stock Ownership Plan, as amended from time to time. 2.14 "Non-Pension Benefit" shall mean the benefit described in Section 5.2. 2.15 "Participant" shall mean an Employee or former Employee of an Employing Company who is eligible and participates in the Plan pursuant to Sections 4.1 and 4.2. 2.16 "Pension Benefit" shall mean the benefit described in Section 5.1. 2.17 "Pension Plan" shall mean The Southern Company Pension Plan, as amended from time to time. 2.18 "Performance Sharing Plan" shall mean The Southern Company Performance Sharing Plan, as amended from time to time. 2.19 "Phantom Common Stock" shall mean the Common Stock in which a Participant is deemed to invest his Non-Pension Benefit as if such Common Stock had been purchased upon contribution to the Savings Plan, the ESOP and/or the Performance Sharing Plan, as the case may be. 2.20 "Plan" shall mean The Southern Company Supplemental Benefit Plan, as amended from time to time. 2.21 "Plan Year" shall mean the calendar year. 2.22 "Purchase Price" shall mean for purposes of deemed purchases of Phantom Common Stock the following: (a) with respect to the Savings Plan and the Performance Sharing Plan, the weighted average purchase price of a share of the Common Stock under the Savings Plan as of the applicable Valuation Date; (b) with respect to any investment of dividends attributable to Phantom Common Stock, the dividend reinvestment price of a share of the Common Stock under the Savings Plan as of the applicable Valuation Date; and (c) with respect to the ESOP, the price at which a share of Common Stock is purchased with regard to a contribution made for each applicable Plan Year. 2.23 "Sales Price" shall mean the weighted average sales price of a share of Common Stock under the Savings Plan as of each applicable Valuation Date. 2.24 "Savings Plan" shall mean The Southern Company Employee Savings Plan, as amended from time to time. 2.25 "Southern Board" shall mean the board of directors of Southern Company. 2.26 "Southern Company" shall mean Southern Company, its successors and assigns. 2.27 "Trust" shall mean the Southern Company Deferred Compensation Trust. 2.28 "Valuation Date" shall mean each business day of the New York Stock Exchange. Where the context requires, the definitions of all terms set forth in the Pension Plan, the ESOP, the Performance Sharing Plan, the Savings Plan and the Deferred Compensation Plan shall apply with equal force and effect for purposes of interpretation and administration of the Plan, unless said terms are otherwise specifically defined in the Plan. The masculine pronoun shall be construed to include the feminine pronoun and the singular shall include the plural, where the context so requires. ARTICLE III - ADMINISTRATION OF PLAN 3.1 Administrator. The general administration of the Plan shall be placed in the Administrative Committee. The Administrative Committee shall consist of the Vice President, Human Resources of The Southern Company, the Director, System Compensation and Benefits of The Southern Company and the Comptroller of The Southern Company or any other position or positions that succeed to the duties of the foregoing positions. Any member may resign or may be removed by the Board of Directors and new members may be appointed by the Board of Directors at such time or times as the Board of Directors in its discretion shall determine. The Administrative Committee shall be chaired by the Vice President, Human Resources of The Southern Company and may select a Secretary (who may, but need not, be a member of the Administrative Committee) to keep its records or to assist it in the discharge of its duties. A majority of the members of the Administrative Committee shall constitute a quorum for the transaction of business at any meeting. Any determination or action of the Administrative Committee may be made or taken by a majority of the members present at any meeting thereof, or without a meeting by resolution or written memorandum concurred in by a majority of the members. 3.2 Powers. The Administrative Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan more particularly set forth herein. It shall have the discretion to interpret the Plan and shall determine all questions arising in the administration, interpretation and application of the Plan. Any such determination by it shall be conclusive and binding on all persons. It may adopt such regulations as it deems desirable for the conduct of its affairs. It may appoint such accountants, counsel, actuaries, specialists and other persons as it deems necessary or desirable in connection with the administration of this Plan, and shall be the agent for the service of process. 3.3 Duties of the Administrative Committee. (a) The Administrative Committee is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Administrative Committee and any such appointee may employ advisors and other persons necessary or convenient to help it carry out its duties, including its fiduciary duties. The Administrative Committee shall have the right to remove any such appointee from his position. Any person, group of persons or entity may serve in more than one fiduciary capacity. (b) The Administrative Committee shall maintain accurate and detailed records and accounts of Participants and of their rights under the Plan and of all receipts, disbursements, transfers and other transactions concerning the Plan. Such accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by persons designated by the Administrative Committee. (c) The Administrative Committee shall take all steps necessary to ensure that the Plan complies with the law at all times. These steps shall include such items as the preparation and filing of all documents and forms required by any governmental agency; maintaining of adequate Participants' records; recording and transmission of all notices required to be given to Participants and their Beneficiaries; the receipt and dissemination, if required, of all reports and information received from an Employing Company; securing of such fidelity bonds as may be required by law; and doing such other acts necessary for the proper administration of the Plan. The Administrative Committee shall keep a record of all of its proceedings and acts, and shall keep all such books of account, records and other data as may be necessary for proper administration of the Plan. 3.4 Indemnification. The Employing Companies shall indemnify the Administrative Committee against any and all claims, losses, damages, expenses and liability arising from an action or failure to act, except when the same is finally judicially determined to be due to gross negligence or willful misconduct. The Employing Companies may purchase at their own expense sufficient liability insurance for the Administrative Committee to cover any and all claims, losses, damages and expenses arising from any action or failure to act in connection with the execution of the duties as Administrative Committee. No member of the Administrative Committee who is also an Employee of the Employing Companies shall receive any compensation from the Plan for his services in administering the Plan. ARTICLE IV - ELIGIBILITY 4.1 Eligibility Requirements. Subject to Section 4.3, all Employees who are determined eligible to participate in accordance with Section 4.2: (a) whose benefits under the Pension Plan are limited by the limitations set forth in Sections 401(a)(17) or 415 of the Code, (b) for whom contributions by their Employing Company to the Savings Plan are limited by the limitations set forth in Sections 401(a)(17), 401(k), 401(m), 402(g) or 415 of the Code, (c) for whom contributions by their Employing Company to the ESOP are limited by the limitations set forth in Sections 401(a)(17) or 415 of the Code, (d) for whom contributions by their Employing Company to the Performance Sharing Plan are limited by the limitations set forth in Sections 401(a)(17) or 415 of the Code, or (e) who make deferrals under the Deferred Compensation Plan, shall be eligible to receive benefits under the Plan. 4.2 Determination of Eligibility. The Administrative Committee shall determine which Employees are eligible to participate. Upon becoming a Participant, an Employee shall be deemed to have assented to the Plan and to any amendments hereafter adopted. The Administrative Committee shall be authorized to rescind the eligibility of any Participant if necessary to ensure that the Plan is maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees under the Employee Retirement Income Security Act of 1974, as amended. 4.3 Eligibility of Employees of Savannah Electric and Power Company. (a) Employees of Savannah Electric and Power Company meeting the requirements of Sections 4.1 and 4.2 on or after January 1, 1997 shall be eligible to participate in the Plan provided that such employees are not participating in the Supplemental Executive Retirement Plan of Savannah Electric and Power Company. Such Employees' benefits shall include any accruals for the Plan Year ending December 31, 1997 as determined in accordance with Sections 5.1 and 5.2. (b) Notwithstanding paragraph (a) above, Employees of Savannah Electric and Power Company who have participated in The Southern Company Deferred Compensation Plan on and after January 1, 1996, shall be eligible to participate in the Plan but only to the extent that the Plan compensates employees for lost benefits resulting from participation in The Southern Company Deferred Compensation Plan. Such Employees' benefits shall include any accruals permitted under the preceding sentence for Plan Years ending December 31, 1996 and December 31, 1997 determined in accordance with Sections 5.1 and 5.2. ARTICLE V - BENEFITS 5.1 Pension Benefit. (a) Each Participant shall be entitled to a Pension Benefit equal to that portion of his Retirement Income under the Pension Plan which is not payable under the Pension Plan as a result of the limitations imposed by Sections 401(a)(17) or 415(b) of the Code. (b) For purposes of this Section 5.1, the Pension Benefit of a Participant shall be calculated based on the Participant's Earnings that are considered under the Pension Plan in calculating his Retirement Income, without regard to the limitation of Section 401(a)(17) of the Code, including any portion of his compensation he may have elected to defer under the Deferred Compensation Plan, but excluding incentive pay he deferred under such Deferred Compensation Plan. (c) To the extent that a Participant's Retirement Income under the Pension Plan is recalculated as a result of an amendment to the Pension Plan in order to increase the amount of his Retirement Income, the Participant's Pension Benefit shall also be recalculated in order to properly reflect such increase in determining payments of the Participant's Pension Benefit made on or after the effective date of such increase. 5.2 Non-Pension Benefit. (a) A Participant shall be entitled to a Non-Pension Benefit which is determined under this Section 5.2. An Account shall be established for the Participant as of his initial Plan Year of participation in the Plan. Each Plan Year, such Account shall be credited with an amount equal to the amount that his Employing Company is prohibited from contributing (1) to the Savings Plan on behalf of the Participant as a result of the limitations imposed by Sections 401(a)(17), 401(k), 401(m), 402(g), or 415(c) of the Code, (2) to the ESOP on behalf of the Participant as a result of the limitations imposed by Sections 401(a)(17) or 415(c) of the Code and (3) to the Performance Sharing Plan (including for the 1997 Plan Year) on behalf of the Participant as a result of the limitations imposed by Sections 401(a)(17) or 415(c) of the Code. (b) For purposes of this Section 5.2, the Non-Pension Benefit of a Participant shall be calculated based on the Participant's compensation that would have been considered in calculating allocations to his accounts under the Savings Plan, ESOP and Performance Sharing Plan, without regard to the limitations of Section 401(a)(17) or Section 402(g) of the Code, including any portion of his compensation he may have elected to defer under the Deferred Compensation Plan, but with respect to the Savings Plan only excluding incentive pay he deferred under the Deferred Compensation Plan. (c) The Non-Pension Benefit of the Participant shall be deemed to be invested in Phantom Common Stock. On each such date of investment, a Participant's Account shall be credited with the number of shares (including fractional shares) of Phantom Common Stock which could have been purchased on such date, based upon the Common Stock's Purchase Price. As of the date upon which occurs the payment of dividends on the Common Stock, there shall be credited with respect to shares of Phantom Common Stock in the Participant's Account on such date, such additional shares (including fractional shares) of Phantom Common Stock as follows: (1) In the case of cash dividends, such additional shares as could be purchased at the Purchase Price with the dividends which would have been payable if the credited shares had been outstanding; (2) In the case of dividends payable in property other than cash or Common Stock, such additional shares as could be purchased at the Purchase Price with the fair market value of the property which would have been payable if the credited shares had been outstanding; or (3) In the case of dividends payable in Common Stock, such additional shares as would have been payable on the credited shares if they had been outstanding. (d) As soon as practicable following the first day of his eligibility to have benefits credited to his Account, a Participant shall designate in writing on a form to be prescribed by the Administrative Committee the method of payment of his Account, which shall be the payment of a single lump sum or a series of annual installments not to exceed twenty (20). The method of distribution initially designated by a Participant shall not be revoked and shall govern the distribution of a Participant's Account. Notwithstanding the foregoing, in the sole discretion of the Administrative Committee, upon application by the Participant, the method of distribution designated by such Participant may be modified not prior to 395 days nor later than 365 days prior to a Participant's date of separation from service in order to change the form of distribution of his Account in accordance with the terms of the Plan; provided, however, that any Participant who is required to file reports pursuant to Section 16(a) of the Securities and Exchange Act of 1934, as amended, with respect to equity securities of The Southern Company shall not be permitted to amend his distribution election during any time period for which such Participant is required to file any such reports with respect to his Non-Pension Benefit unless such amendment is specifically approved by the Administrative Committee in its sole discretion. Each Participant, his Beneficiary, and legal representative shall be bound as to any action taken pursuant to the method of distribution elected by a Participant and the terms of the Plan. 5.3 Distribution of Benefits. (a) The Pension Benefit, as determined in accordance with Section 5.1, shall be payable in monthly increments on the first day of the month concurrently with the Participant's Retirement Income under the Pension Plan. The form in which the Pension Benefit is paid will be the same as elected by the Participant under the Pension Plan except that the amount of the monthly benefit will be modified at the appropriate time based on the commencement of payments as follows. Payments shall be adjusted to include three components: (1) The amount necessary to pay the tax due under the Federal Insurance Contributions Act with respect to the accrued Pension Benefit determined upon retirement (or such other appropriate "resolution date" as defined under Treasury Regulation Section 31.3121(v)-2) calculated in accordance with Section 5.1; (2) The amount estimated to pay the federal and state income tax withholding liability due on the amount paid under paragraph (1) above; and (3) An adjusted monthly benefit determined on an actuarially equivalent basis in accordance with the terms of the Pension Plan which takes into account the amounts paid under paragraph (1) and (2) above and taking into account the form of benefit elected by the Participant under the Pension Plan. Upon adjustment, the remaining monthly payments shall equal the amount described in paragraph (3) above. The Beneficiary of a Participant's Pension Benefit shall be the same as the Provisional Payee, if any, of the Participant's Retirement Income under the Pension Plan. (b) When a Participant terminates his employment with an Employing Company, said Participant shall be entitled to receive the market value of any shares of Phantom Common Stock (and fractions thereof) reflected in his Account in a single lump sum distribution or annual installments not to exceed twenty (20). Such distribution shall be made not later than sixty (60) days following the date on which his termination of employment occurs, or as soon as reasonably practicable thereafter. The transfer by a Participant between companies within The Southern Company shall not be deemed to be a termination of employment with an Employing Company. With regard to any distribution made under this Article, the market value of any shares of Phantom Common Stock credited to a Participant's Account shall be based on the Sales Price. No portion of a Participant's Account shall be distributed in Common Stock. (c) In the event a Participant elects to receive the distribution of his Account in annual installments, the first payment shall be made not later than sixty (60) days following the date on which his termination of employment occurs, or as soon as reasonably practicable thereafter. Installments shall equal the balance in the Participant's Account taking into account the tax due under the Federal Insurance Contributions Act divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance in the Participant's Account as of the Valuation Date, divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. (d) Upon the death of a Participant, or a former Participant prior to the payment of the market value of any shares of Phantom Common Stock (and fractions thereof) credited to said Participant's Account based on the Sales Price, the unpaid balance shall be paid in the sole discretion of the Administrative Committee (1) in a lump sum to the designated Beneficiary of a Participant or former Participant within sixty (60) days following the date on which the Administrative Committee is provided evidence of the Participant's death (or as soon as reasonably practicable thereafter) or (2) in accordance with the distribution method chosen by such Participant or former Participant. The Beneficiary designation may be changed by the Participant or former Participant at any time without the consent of the prior Beneficiary. In the event a Beneficiary designation is not on file or the designated Beneficiary is deceased or cannot be located, payment will be made to the person or persons in the first of the following classes of successive preference, if then living: (1)......the Participant's spouse on the date of his death; (2)......the Participant's children, equally; (3)......the Participant's parents, equally; (4)......the Participant's brothers and sisters, equally; or (5)......the Participant's executors or administrators. Payment to such one or more persons shall completely discharge the Plan with respect to the amount so paid. (e) Upon the total disability of a Participant or former Participant, as determined by the Social Security Administration, prior to the payment of the market value of any shares of Phantom Common Stock (and fractions thereof) credited to such Participant's Account based on the Sales Price, the unpaid balance of his Account shall be paid in the sole discretion of the Administrative Committee (1) in a lump sum to the Participant or former Participant, or his legal representative within sixty (60) days following the date on which the Administrative Committee receives notification of the determination of a disability by the Social Security Administration (or as soon as reasonably practicable thereafter) or (2) in accordance with the distribution method elected by such Participant or former Participant. (f) The Administrative Committee, in its sole discretion upon application made by the Participant, a designated Beneficiary, or their legal representative, may determine to accelerate payments or, in the event of death or total disability (as determined by Social Security Administration), to extend or otherwise make payments in a manner different from the manner in which such payment would be made under the method of distribution elected by the Participant in the absence of such determination. 5.4 Allocation of Pension Benefit Liability. In the event that a Participant eligible to receive a Pension Benefit has been employed at more than one Employing Company, the Pension Benefit liability shall be apportioned so that each such Employing Company is obligated in accordance with Section 5.5 to cover the percentage of the total Pension Benefit as determined below. Each Employing Company's share of the Pension Benefit liability shall be calculated by multiplying the Pension Benefit by a fraction where the numerator of such fraction is the pay, as defined by the Administrative Committee, received by the Participant at the respective Employing Company multiplied by the Accredited Service earned by the Participant at the respective Employing Company and where the denominator of such fraction is the sum of all numerators calculated for each respective Employing Company for which the Participant has been employed. 5.5 Funding of Benefits. Except as expressly limited under the terms of the Trust, neither the Company nor any Employing Company hereunder shall reserve or otherwise set aside funds for the payment of its obligations under the Plan. In any event, such obligations shall be paid or deemed to be paid solely from the general assets of the Employing Companies. Participants shall only have the status of general, unsecured creditors of the Company and their respective Employing Companies. Notwithstanding that a Participant shall be entitled to receive the balance of his Account under the Plan, the assets from which such amount shall be paid shall at all times remain subject to the claims of the creditors of the Participant's Employing Company. When a Participant becomes entitled to payment of a Pension Benefit, the Company may, in its sole discretion, elect to purchase an annuity from a reputable third party annuity provider to secure payment of all or any portion of the Participant's Pension Benefit, pursuant to a uniform annuitization program adopted by the Administrative Committee. 5.6 Withholding. There shall be deducted from payments and, if necessary, from the Non-Pension Account under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by an Employing Company to such governmental authority for the account of the Participant or Beneficiary. 5.7 Recourse Against Deferred Compensation Trust. In the event a Participant who is employed on or after January 1, 1999 with an "Employing Company" (as such term is defined in the Change in Control Benefit Plan Determination Policy) disputes the calculation of his Pension Benefit or Non-Pension Benefit, or payment of amounts due under the terms of the Plan, the Participant has recourse against the Company, the Employing Company by which the Participant is employed, if different, the Plan, and the Trust for payment of benefits to the extent the Trust so provides. 5.8 SEI Guarantee. Effective May 10, 2000, if Southern Energy Resources, Inc. ("SERI") fails or refuses to make payments under the Plan, Participants employed by SERI may have the right to obtain payment by Southern Energy, Inc. ("SEI") pursuant to the terms of the "Guarantee Agreement Concerning Southern Energy Resources, Inc. Compensation and Benefit Arrangements" entered into by SERI and SEI. A Participant's right to payment is not increased as a result of this SEI Guarantee. Participants have the same right to payment from SEI as they have from SERI. Any demand to enforce this SEI Guarantee should be made in writing and should reasonably and briefly specify the manner and the amount SERI has failed to pay. Such writing given by personal delivery or mail shall be effective upon actual receipt. Any writing given by telegram or telecopier shall be effective upon actual receipt if received during SEI's normal business hours, or at the beginning of the next business day after receipt, if not received during SEI's normal business hours. All arrivals by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. 5.9 Change in Control. The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control or preliminary change in control of Southern Company or an Employing Company, the benefits to be provided hereunder and the funding of the Trust in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein. ARTICLE VI - MISCELLANEOUS 6.1 Assignment. Neither the Participant, his Beneficiary, nor his legal representative shall have any rights to sell, assign, transfer or otherwise convey the right to receive the payment of any Pension Benefit or Non-Pension Benefit due hereunder, which payment and the right thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payment under the Plan shall be null and void and of no effect. 6.2 Amendment and Termination. Except for the provisions of Section 5.9 hereof, which may not be amended following a "Southern Change in Control" or "Subsidiary Change in Control", as defined in the Change in Control Benefit Plan Determination Policy, the Plan may be amended or terminated at any time by the Board of Directors, provided that no amendment or termination shall cause a forfeiture or reduction in any benefits accrued as of the date of such amendment or termination. The Plan may also be amended by the Administrative Committee (a) if such amendment does not involve a substantial increase in cost to any Employing Company, or (b) as may be necessary, proper, or desirable in order to comply with laws or regulations enacted or promulgated by any federal or state governmental authority. 6.3 No Guarantee of Employment. Participation hereunder shall not be construed as creating any contract of employment between any Employing Company and a Participant, nor shall it limit the right of an Employing Company to suspend, terminate, alter, or modify, whether or not for cause, the employment relationship between such Employing Company and a Participant. 6.4 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent such laws are not otherwise superseded by the laws of the United States. IN WITNESS WHEREOF, the amended and restated Plan has been executed by a duly authorize officer of Southern Company Services, Inc., pursuant to resolutions of the Board of Directors of the Company, this day of , 2000. SOUTHERN COMPANY SERVICES, INC. By:__________________________________________________ Its:_________________________________________________ Attest: By: ______________________________ Its: ______________________________ APPENDIX A THE SOUTHERN COMPANY SUPPLEMENTAL BENEFIT PLAN EMPLOYING COMPANIES AS OF JANUARY 1, 2000 Alabama Power Company Georgia Power Company Gulf Power Company Mississippi Power Company Savannah Electric and Power Company Southern Communications Services, Inc. Southern Company Energy Solutions, Inc. Southern Company Services, Inc. Southern Energy Resources, Inc. Southern Nuclear Operating Company, Inc. EX-10 24 x10a72.txt SOUTHERN COMPANY CHANGE IN CONTROL SEVERANCE PLAN Troutman Sanders LLP Bank of America Plaza, Suite 5200 600 Peachtree Street, N.E. Atlanta, Georgia 30308 Effective July 10, 2000 SOUTHERN COMPANY CHANGE IN CONTROL SEVERANCE PLAN ARTICLE 1 - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption of Plan. Southern Company Services, Inc. hereby adopts this Southern Company Change in Control Severance Plan, effective as of the date of execution hereof. This Plan was originally effective December 7, 1998; it was amended by a First Amendment also effective December 7, 1998. This amended and restated Plan is effective July 10, 2000. The Plan shall be an unfunded severance pay plan that is a welfare plan as such term is defined by the Employee Retirement Income Security Act of 1974, the benefits of which shall be paid solely from the general assets of the respective Employing Companies. 1.2 Purpose. The Plan is primarily designed to provide benefits to certain employees of the Employing Companies, whose employment is terminated subsequent to a change in control of Southern or their respective Employing Company. ARTICLE 2 - DEFINITIONS 2.1 "Administrative Committee" shall mean the Board of Directors, plus, in the event of any act necessary to be taken in connection with the Plan relative to a particular Participant, the Chief Executive Officer of the Participant's Employing Company, if such Chief Executive Officer is not already a member of the Board of Directors. 2.2 "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. 2.3 "Board of Directors" shall mean the board of directors of the Company. 2.4 "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. 2.5 "Change in Control" shall mean, (a) with respect to Southern, the occurrence of any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Section 2.5(a)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by an employee of Southern or its subsidiary or affiliate or Group composed exclusively of such employees; or (F) any Business Combination which would not otherwise constitute a Change in Control because of the application of clauses (A), (B) and (C) of Section 2.5(a)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; or (iii) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of Employees or employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (b) with respect to an Employing Company, the occurrence of any of the following: (i) Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of an Employing Company; provided, however, that for purposes of this Section 2.5(b)(i), any acquisition by an employee of Southern or its subsidiary or affiliate, or Group composed entirely of such employees, any qualified pension plan, any publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (ii) Consummation of a reorganization, merger or consolidation of an Employing Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation surviving or resulting from such Employing Company Business Combination; or (iii) Consummation of the sale or other disposition of all or substantially all of the assets of an Employing Company to an entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of an Employing Company, For purposes of this Section 2.5 only, SERI shall not be considered an Employing Company. 2.6 "COBRA Coverage" shall mean any continuation coverage to which a Participant or his dependents may be entitled pursuant to Code Section 4980B. 2.7 "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.8 "Company" shall mean Southern Company Services, Inc., its successors and assigns. 2.9 "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. 2.10 "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. 2.11 "DIC Plan" shall mean the Southern Energy Resources, Inc. Deferred Incentive Compensation Plan or any successor thereto which is considered an "equitable arrangement" thereof, as such plans may be amended from time to time. 2.12 "Effective Date" shall mean the date of execution hereof. 2.13 "Employee" shall mean each regular full-time or regular part-time employee of an Employing Company of Grade 9 or below (or, if the Grade system is not used, below $130,000 of annual base salary rate for the twelve month period immediately preceding the Change in Control) not covered by a collective bargaining agreement between the Employing Company and a union or other employee representative. With respect to a Change in Control of SEI, SERI Participants shall be deemed to be employed by SEI for purposes of being covered under this Plan. 2.14 "Employee Outplacement Program" shall mean the program established by the Employing Company from time to time for the purpose of assisting Participants covered by the Plan in finding employment outside of the Employing Company which provides for the following services: (a) self assessment, career decision and goal setting; (b) job market research and job sources; (c) networking and interviewing skills; (d) planning and implementation strategy; (e) resume writing, job hunting methods and salary negotiation; and (f) office support and job search resources. 2.15 "Employing Company" shall mean the Company, or any other Southern Subsidiary, which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. 2.16 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 2.17 "Good Reason" shall mean, without an Employee's express written consent, after written notice to his Employing Company, and after a thirty (30) day opportunity for the Employee's Employing Company to cure, the continuing occurrence of any of the following events: (a) Reduced Salary. A reduction of five percent (5%) or more by the Employing Company in either of the following: (i) the Employee's annual base salary rate for the twelve month period immediately preceding the Change in Control ("Base Salary") (except for a less than ten percent (10%), across-the-board Base Salary reduction similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company) or (ii) the sum of the Employee's Base Salary plus target bonus under his Employing Company's short term bonus plan (e.g., either the PPP Plan or the Southern Energy, Inc. Short Term Plan, as the case may be), as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board reduction of Base Salary plus target bonus under such short term plans similarly affecting at least ninety-five (95%) of all Employees of the Employing Company); (b) Relocation. A change in an Employee's work location to a location more than fifty (50) miles from the facility where the Employee was located at the time of the Change in Control, unless such new work location is within fifty (50) miles from the Employee's principal place of residence at the time of the Change in Control. The acceptance, if any, by an Employee of employment by an Employing Company at a work location which is outside the fifty mile radius set forth in this Section 2.17(b) shall not be a waiver of the Employee's right to refuse subsequent transfer by an Employing Company to a location which is more than fifty (50) miles from the Employee's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; (c) Compensation Plans. The failure by an Employing Company to continue in effect any "compensation plan or agreement" in which an Employee participates or the elimination of the Employee's participation in any such plan (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company); For purposes of this Section 2.17(c), the term "compensation plan or agreement" shall mean any written arrangement executed by an authorized officer of the Employing Company which provides for periodic, non-discretionary compensatory payments to Employees in the nature of bonuses. (d) Benefits and Perquisites. The taking of any action by the Employing Company that would directly or indirectly materially reduce the benefits enjoyed by an Employee under the Employing Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which the Employee was participating immediately prior to the Change in Control, or the failure by the Employing Company to provide an Employee with the number of paid vacation days to which the Employee is entitled on the basis of years of service with the Employing Company in accordance with the Employing Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company). 2.18 "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. 2.19 "Group Health Plan" shall mean the group health plan covering the Participant, as such plan may be amended from time to time. 2.20 "Group Life Insurance Plan" shall mean the group life insurance program covering the Participant, as such plan may be amended from time to time. 2.21 "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998, plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to the Effective Date whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. 2.22 "Month of Service" shall mean any calendar month during which a Participant has worked at least one (1) hour or was on approved leave of absence while in the employ of an Employing Company or any other Southern Subsidiary. 2.23 "Participant" shall mean an Employee who meets the eligibility requirements of Section 3.1 of this Plan. 2.24 "Pension Plan" shall mean The Southern Company Pension Plan or any successor thereto, as such plans may be amended from time to time. 2.25 "Performance Dividend Plan" or "PDP Plan" shall mean the Southern Company Performance Dividend Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.25 thereof, as such plans may be amended from time to time. 2.26 "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.31 thereof, as such plans may be amended from time to time. 2.27 "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.33 thereof, as such plans may be amended from time to time. 2.28 "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Exchange Act. 2.29 "Plan" shall mean the Southern Company Change in Control Severance Plan. 2.30 "Short Term Plan" shall mean the Southern Energy Resources, Inc. Short Term Plan, as amended from time to time. 2.31 "SEI" shall mean Southern Energy, Inc., its successors and assigns. 2.32 "SERI" shall mean Southern Energy Resources, Inc., its successors and assigns. 2.33 "SERI Participant" shall mean a Participant who is employed by SERI. 2.34 "Southern" shall mean The Southern Company, its successors and assigns. 2.35 "Southern Board" shall mean the board of directors of Southern. 2.36 "Southern Subsidiary" shall mean any corporation or other entity which Southern Controls. 2.37 "Straight Time Pay" shall mean a Participant's highest base salary during the calendar year in which his Termination Date occurs, plus the average of the most recent three years' commission pay (if employed less than three years, the average of the period of employment). Base salary shall include "add ons" such as monthly shift differential, monthly premium pay, etc., but shall not include overtime pay. For Participants who were part-time Employees "Straight Time Pay" shall mean the actual average salary, plus the average of the most recent three years' commission pay (if employed less than three years, the average of the period of employment), paid during the calendar year in which the Participant's Termination Date occurs. 2.38 "Support Employee" shall mean an Employee of the Company (which shall continue to be such Employee's Employing Company for purposes of this Plan) who: (a) Is involuntarily terminated without Cause within one year of the Change in Control of an Employing Company (other than the Company) and either (i) spent at least 40% of his working time performing services for such Employing Company at the time of the Change in Control and for the six months prior thereto, or (ii) is determined by the Administrative Committee to be involuntarily terminated without Cause as a result of such Change in Control; or (b) Voluntarily terminates with Good Reason within one year of the Change in Control of an Employing Company (other than the Company) and spent at least 40% of his working time performing services for such Employing Company at the time of the Change in Control and for the six months prior thereto. 2.39 "Termination for Cause" or "Cause" shall mean an Employee's termination of employment with his Employing Company upon the occurrence of any of the following: (a) The willful and continued failure by the Employee to substantially perform his duties with his Employing Company (other than any such failure resulting from the Employee's Total Disability or from the Employee's retirement or any such actual or anticipated failure resulting from termination by the Employee for Good Reason) after a written demand for substantial performance is delivered to him by the Employee's responsible corporate officer, which demand specifically identifies the manner in which such corporate officer believes the Employee has not substantially performed his duties; or (b) The willful engaging by the Employee in conduct that is demonstrably and materially injurious to his Employing Company, monetarily or otherwise, including but not limited to any of the following: (i) any willful act involving fraud or dishonesty in the course of an Employee's employment by his Employing Company; (ii) the willful carrying out of any activity or the making of any statement by an Employee which would materially prejudice or impair the good name and standing of his Employing Company, Southern or any other Southern Subsidiary or would bring his Employing Company, Southern or any other Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which his Employing Company, Southern or such other Southern Subsidiary is located; (iii) attendance by an Employee at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (iv) violation of his Employing Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Employing Company's safety officer; (v) assault or other act of violence by an Employee against any person during the course of employment; or (vi) an Employee's indictment for any felony or any misdemeanor involving moral turpitude. No act or failure to act by an Employee shall be deemed "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that his action or omission was in the best interest of his Employing Company. Notwithstanding the foregoing, an Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of the majority of the Administrative Committee at a meeting called and held for such purpose (after reasonable notice to the Employee and an opportunity for him, together with counsel, to be heard before the Administrative Committee), finding that, in the good faith opinion of the Administrative Committee, the Employee was guilty of conduct set forth in Section 2.39(a) or (b) hereof and specifying the particulars thereof in detail. 2.40 "Termination Date" shall mean the date on which a Participant is separated from his Employing Company's regular payroll; provided, however, that solely for purposes of Section 3.2(c) hereof, the Termination Date of Participants who are deemed to be retired pursuant to the provisions of Section 3.3 hereof, shall be the effective date of their retirement pursuant to the terms of the Pension Plan. 2.41 "Total Disability" shall mean total disability under the terms of the Pension Plan. 2.42 "Value Creation Plan" shall mean the Southern Energy Resources, Inc. Value Creation Plan or any replacement thereto which is considered an "equitable arrangement" under Section 1.30 thereof, as such plans may be amended from time to time. 2.43 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. 2.44 "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. 2.45 "Year of Service" shall mean an Employee's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If an Employee has a break in his service with his Employing Company, he will receive credit under this Plan for the service prior to the break in service only if the break in service was less than five years and his service prior to the break exceeds the length of the break in service. ARTICLE 3 - SEVERANCE BENEFITS 3.1 Eligibility. (a) Employees. Except as otherwise provided herein, any Employee whose employment is involuntarily terminated by his Employing Company at any time during the two year period following a Change in Control of Southern or his Employing Company for reasons other than Cause or who shall voluntarily terminate his employment with his Employing Company for Good Reason at any time during the two year period following a Change in Control of Southern or his Employing Company shall be entitled to participate in this Plan and receive the benefits described in Section 3.2 hereof, subject to the terms and conditions described in this Article 3. (b) Support Employees. A Support Employee shall be entitled to participate in this Plan and receive the benefits described in Section 3.2 hereof, subject to the terms and conditions described in this Article 3. (c) Limits on Eligibility. Notwithstanding anything to the contrary herein, an Employee or Support Employee shall not be eligible to receive benefits under this Plan if the Employee or Support Employee: (i) is not actively at work on his Termination Date, unless such Employee or Support Employee is capable of returning to work within twelve (12) weeks of the beginning of any leave of absence from work; (ii) voluntarily terminates his employment with his Employing Company for other than Good Reason; (iii) is terminated by his Employing Company for Cause; (iv) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that acquires all or substantially all of the assets of Southern, a Southern Subsidiary or his Employing Company; (v) refuses an offer of continued employment with his Employing Company, Southern or a Southern Subsidiary, or any employer that acquires all or substantially all of the assets of Southern, a Southern Subsidiary or his Employing Company, under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment and such employer agrees to adopt this Plan as it applies to such Participant; or (vi) elects to receive the benefits of any other voluntary or involuntary severance, separation or outplacement program, plan or agreement maintained by his Employing Company in lieu of benefits under this Plan; provided however, that the receipt of benefits under any retention plan or agreement shall not be deemed to be the receipt of benefits under any severance, separation or outplacement program for purposes of this Plan. 3.2 Benefits. Upon the Employing Company's receipt of an effective Waiver and Release, Participants shall be entitled to receive the following benefits: (a) Employee Outplacement Services. Each Participant shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from the Participant's Termination Date. (b) Severance Benefit. Each Participant shall be paid a cash amount equal to the sum of the following amounts: (i) eight (8) weeks' Straight Time Pay, (ii) one (1) week's Straight Time Pay for each of the Participant's first five (5) Years of Service; (iii) two (2) weeks' Straight Time Pay for each of the Participant's sixth (6th) through tenth (10th) Years of Service; (iv) three (3) weeks' Straight Time Pay for each of the Participant's eleventh (11th) through fifteenth (15th) Years of Service; (v) five (5) weeks' Straight Time Pay for each of the Participant's sixteenth (16th) through twentieth (20th) Years of Service; and (vi) six (6) weeks' Straight Time Pay for each of the Participant's Years of Service in excess of twenty (20) Years of Service. (c) Welfare Benefit. (i) Except as provided in Section 3.3 hereof, each Participant shall be eligible to participate in the Employing Company's Group Health Plan for a period of six (6) months for each of the Participant's Years of Service, not to exceed a period of five (5) years, beginning on the first day of the first month following the Participant's Termination Date unless otherwise specifically provided under such plan, upon the Participant's payment of both the Employing Company's and the Participant's premium under such plan. A Participant who receives this extended medical coverage shall also be entitled to elect coverage under the Group Health Plan for his dependents who are participating in the Group Health Plan on the Participant's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of the Participant's extended medical coverage under this Section 3.2(c) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (ii) The extended medical coverage afforded to a Participant pursuant to this Section 3.2(c) as well as the premiums to be paid by the Participant in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by the Participant in connection with this extended coverage shall be due on the first day of each month; provided, however, that if a Participant fails to pay his premium within thirty (30) days of its due date, such Participant's extended coverage shall be terminated. (iii) Any Group Health Plan coverage provided under this Section 3.2(c) shall be a part of and not in addition to any COBRA Coverage which a Participant or his dependent may elect. In the event that a Participant or his dependent becomes eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Employing Company's Group Health Plan available to the Participant or his dependent by virtue of the provisions of this Article 3 shall terminate, except as may otherwise be required by law, and shall not be renewed. It shall be the duty of a Participant to inform the Employing Company of his eligibility to participate in any such health plan. (iv) Except as otherwise provided in Section 3.3 hereof, regardless of whether a Participant elects the extended coverage described in Section 3.2(c) hereof, the Employing Company shall pay to each Participant a cash amount equal to the Employing Company's and the Participant's cost of premiums for coverage under the Group Health Plan and Group Life Insurance Plan, if the Participant was participating in such plans on his Termination Date, for a period equal to the total number of weeks of pay the Participant receives as a severance benefit under Section 3.2(b) hereof. (d) Stock Option Vesting. The provisions of this Section 3.2(d) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Stock Plan, the defined terms of which are incorporated in this Section 3.2(d) by reference. (i) Any of the Participant's Options and Stock Appreciation Rights outstanding as of the Termination Date which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Participant holding a Stock Appreciation Right who is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to the Participant under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (ii) The restrictions and deferral limitations applicable to any of the Participant's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (iii) The restrictions and deferral limitations and other conditions applicable to any other Awards held by the Participant under the Performance Stock Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (e) Performance Pay Plan. The provisions of this Section 3.2(e) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Pay Plan, the defined terms of which are incorporated in this Section 3.2(e) by reference. Provided the Participant is not entitled to benefits under Article IV of the PPP Plan, if the PPP Plan is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Award under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (f) Performance Dividend Plan. The provisions of this Section 3.2(f) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Dividend Plan, the defined terms of which are incorporated in this Section 3.2(f) by reference. Provided the Participant is not entitled to benefits under Article V of the Performance Dividend Plan, if the Performance Dividend Plan is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash for each Award held as of such date based on a Payout Percentage of 50% under Section 4.1 of the Performance Dividend Plan for the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (g) Value Creation Plan. The provisions of this Section 3.2(g) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Value Creation Plan, the defined terms of which are incorporated in this Section 3.2(g) by reference. Any of the Participant's Appreciation Rights or Indexed Rights outstanding as of the Termination Date which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. Notwithstanding anything in the Value Creation Plan to the contrary, Share Value with respect to any Appreciation Rights or Indexed Rights held by the Participant following his Termination Date shall be no less than the Share Value as of the date of the Change in Control of Southern or his Employing Company, as the case may be. (h) Short Term Plan. The provisions of this Section 3.2(h) shall apply to any Participant who, as of the date of the Change in Control was a Participant in the Short Term Plan, the defined terms of which are incorporated in this Section 3.2(h) by reference. Provided the Participant is not entitled to benefits under Article V of the Short Term Plan, if the Short Term Plan is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash in an amount equal to his Award under the Short Term Plan for the Performance Period in which the Termination Date shall have occurred, at Total Target for the Participant's Job Category and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (i) Other Short Term Incentive Plans. The provisions of this Section 3.2(i) shall apply to any Participant who, as of the date of the Change in Control is a participant in any other "short term incentive compensation plan" not otherwise previously referred to in this Section 3.2. Provided the Participant is not otherwise entitled to a plan payout under any change in control provisions of such plans, if the "short term incentive compensation plan" is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash in an amount equal to his award under his respective Employing Company's "short term incentive compensation plan" for the annual performance period in which the Termination Date shall have occurred, at the Participant's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until the Termination Date. For purposes of this Section 3.2(i), the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by an Employing Company which provides for annual, recurring compensatory bonuses to participants based upon articulated performance criteria, and which have been identified by the Board of Directors and listed on Exhibit B hereto which may be amended from time to time to reflect plan additions, terminations and amendments. (j) DIC Plan. The provisions of this Section 3.2(j) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the DIC Plan, the defined terms of which are incorporated into this Section 3.2(j) by reference. Provided a Participant is not entitled to benefits under Article V of the DIC Plan, if the DIC Plan is in place through Participant's Termination Date and to the extent that Participant is entitled to participate therein, any of the Participant's Awards as of the Termination Date which are not then vested shall become fully vested and Participant shall be entitled to receive cash in the amount equal to Participant's Account as of his Termination Date. Notwithstanding anything in the DIC Plan to the contrary, the investment return on the Awards determined in accordance with Section 3.1 of the DIC Plan for any Plan Year following a Change in Control of Southern or its Employing Company shall be no less than the investment return determined in accordance with Section 3.1 of the DIC Plan as of the date of such Change in Control with respect to those Accounts which are outstanding as of the date of such Change in Control. 3.3 Coordination with Retiree Medical and Life Insurance Coverage. Notwithstanding anything to the contrary above, any Participant who is otherwise eligible to retire pursuant to the terms of the Pension Plan, shall be deemed to have retired for purposes of all employee benefit plans sponsored by the Employing Company of which the Participant is a participant. A Participant who is deemed to have retired in accordance with the preceding sentence shall not be eligible to receive the benefits described in Section 3.2(c) hereof if, upon his Termination Date, such Participant becomes eligible to receive the retiree medical and life insurance coverage provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan. 3.4 Maximum Benefit. Notwithstanding anything to the contrary above, with respect to each Participant, the maximum benefit payable under this Article 3 shall be an amount equal to two (2) times such Participant's "annual compensation" as defined in Department of Labor Regulation Section 2510.3-2(b), which, for purposes of this Plan shall be no less than Straight Time Pay plus thirty percent (30%). When necessary, the Administrative Committee shall reduce the severance benefits described in Section 3.2(b) and 3.2(c)(iv) hereof to comply with this Section 3.4. 3.5 Payment of Benefits. The total amount payable under this Article 3 shall be paid to a Participant in one (1) lump sum payment within two (2) payroll periods of the later of the following to occur: (a) the Participant's Termination Date, or (b) the tender to the Employing Company by the Participant of an effective Waiver and Release (in the form of Exhibit A attached hereto) and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Employing Company. 3.6 Benefits in the Event of Death. In the event of the Participant's death prior to the payment of all benefits due under this Article 3, the Participant's estate shall be entitled to receive as due any amounts not yet paid under this Article 3 upon the tender by the executor or administrator of the estate of an effective Waiver and Release. 3.7 Legal Fees. In the event of a dispute between a Participant and his Employing Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in the Participant's favor, his Employing Company shall reimburse the Participant's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifteen thousand dollars ($15,000). 3.8 No Mitigation. A Participant who receives benefits under Section 3.2 of this Plan shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Subsection 3.1(d) hereof, the amounts due a Participant hereunder shall not be reduced or suspended if such Participant accepts such subsequent employment. 3.9 Non-qualified Retirement and Deferred Compensation Plans. Subsequent to a Change in Control, any claims by a Participant for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the procedures and provisions set forth in Article 5 hereof and if any material issue in such dispute is finally resolved in the Participant's favor, the Company shall reimburse the Participant's legal fees in the manner provided in Section 3.7 hereof. 3.10 Guarantee of SEI. Effective May 10, 2000, if SERI fails or refuses to make payments under the Plan, SERI Participants may have the right to obtain payment by SEI pursuant to the terms of the "Guarantee Agreement Concerning Southern Energy Resources, Inc. Compensation and Benefit Arrangements" entered into by SEI and SERI. A SERI Participant's right to payment is not increased as a result of this Guarantee. SERI Participants have the same right to payment from SEI as they have from SERI. Any demand to enforce this Guarantee should be made in writing and should reasonably and briefly specify the manner and the amount SERI has failed to pay. Such writing given by personal delivery or mail shall be effective upon actual receipt. Any writing given by telegram or telecopier shall be effective upon actual receipt if received during SEI's normal business hours, or at the beginning of the next business day after receipt, if not received during SEI's normal business hours. All arrivals by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. ARTICLE 4 - ADMINISTRATION 4.1 Administrative Committee. The Administrative Committee shall be responsible for the general administration of the Plan and shall be a "named fiduciary" under Section 402 of the Employee Retirement Income Security Act of 1974, as amended. 4.2 Duties of the Administrative Committee. (a) The Administrative Committee shall be responsible for the daily administration of the Plan and may appoint other persons or entities to perform or assist in the performance of any of its fiduciary duties, subject to its review and approval. The Administrative Committee shall have the right to remove any such appointee from his position without cause upon notice. Any person, group of persons, or entity may serve in more than one fiduciary capacity. (b) The Administrative Committee shall maintain permanent records and accounts of Participants and of their rights under the Plan and of all receipts, disbursements, transfers, and other transactions concerning the Plan. Such accounts, books, and records relating thereto shall be open at all reasonable times to inspection and audit by the Company and any persons designated thereby. (c) The Administrative Committee shall take all steps necessary to ensure that the Plan complies with the law at all times, including the preparation and filing of all documents and forms required by any governmental agency; maintenance of adequate Participant records; recording and transmission of all notices required to be given to Participants and their beneficiaries; receipt and dissemination, if required, of all reports and information received from the Employing Companies; securing of such fidelity bonds as may be required by law; and doing such other acts necessary for the proper administration of the Plan. The Administrative Committee shall keep a record of all of its proceedings and acts, and shall keep all such books of accounts, records, and other data as may be necessary for proper administration of the Plan. The Administrative Committee shall notify the Employing Companies upon their request of any action taken by it, and when required, shall notify any other interested person or persons. 4.3 Powers. The Administrative Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan as more particularly set forth herein. The Administrative Committee shall have the discretionary authority to interpret the Plan (including any ambiguities herein) and to determine all questions arising in the administration, interpretation, and application of the Plan. The Administrative Committee shall adopt such procedures and regulations necessary or desirable for the discharge of its duties hereunder and may appoint such accountants, counsel, actuaries, specialists, and other agents as it deems necessary or desirable in connection with the administration of this Plan. The Administrative Committee shall be the legal appointed agent for the service of process. 4.4 Compensation of the Administrative Committee. The Administrative Committee shall not receive any compensation from the Plan for its services. 4.5 Payment of Expenses. The Administrative Committee shall be reimbursed by the Employing Companies for its reasonable expenses incurred in the discharge of its duties. Such expenses shall include any expenses incident to its duties, including, but not limited to, fees of accountants, counsel, actuaries, and other specialists, and other costs of administering the Plan. 4.6 Indemnification. Each Employing Company shall indemnify the Administrative Committee against any and all claims, losses, damages, expenses, and liability arising from its actions or omissions, except when the same is finally adjudicated to be the result of gross negligence or willful misconduct. The Employing Companies may purchase at their own expense sufficient liability insurance for the Administrative Committee to cover any and all claims, losses, damages, and expenses arising from any action or omission in connection with the execution of the duties as the Administrative Committee. ARTICLE 5 - ARBITRATION 5.1 General. Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Plan, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Article 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to a Participant's employment by an Employing Company or the termination thereof. 5.2 Demand for Arbitration. Arbitration shall be initiated by serving a written notice of demand for arbitration to the Participant, in the case of an Employing Company, or to the Administrative Committee, in the case of a Participant. 5.3 Law and Venue. The arbitrators shall apply the laws of the State of Georgia, except to the extent pre-empted by federal law, excluding any law which would require the use of the law of another state. The arbitration shall be held in Atlanta, Georgia. 5.4 Appointment of Arbitrators. Arbitrators shall be appointed within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by the Participant, one arbitrator shall be appointed by the Employing Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. 5.5 Costs. The arbitration filing fee shall be paid by the Participant. All other costs of arbitration shall be borne equally by the Participant and his Employing Company, provided, however, that such Employing Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in the Participant's favor and the Participant is reimbursed legal fees under Section 3.7 hereof. 5.6 Interim and Injunctive Relief. Nothing in this Article 5 is intended to preclude, upon application of either party, any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to either party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Article 5 and nothing herein is intended to prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Article 5. ARTICLE 6 - MISCELLANEOUS 6.1 Funding of Benefits. Unless the Board of Directors in its discretion determines otherwise, the benefits payable to a Participant under the Plan shall not be funded in any manner and shall be paid by the Employing Companies out of their general assets, which assets are subject to the claims of the Employing Companies' creditors. 6.2 Withholding. There shall be deducted from the payment of any benefit due under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Employing Companies to such governmental authority for the account of the Participant entitled to such payment. 6.3 Assignment. No Participant or beneficiary shall have any rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. 6.4 Amendment and Termination. The Plan may be amended or terminated at any time by the Board of Directors, provided, however, the Plan may not be amended in any material of respect or terminated within the two (2) year period following a Change in Control nor shall any amendment or termination impair the rights of any Participant which have accrued hereunder prior to any such amendment or termination. 6.5 Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Plan, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Plan which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Plan, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, this Southern Company Change in Control Severance Plan has been executed by the Company through its duly authorized officers, this ____ day of ___________, 2000, to be effective as provided herein. SOUTHERN COMPANY SERVICES, INC. By: --------------------------------------- Exhibit A SOUTHERN COMPANY CHANGE IN CONTROL SEVERANCE PLAN Waiver and Release I understand that I am entitled to receive the severance benefits described in Article 3 of the Southern Company Change in Control Severance Plan (the "Plan") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I have elected to receive under the Plan are in excess of those I would have received from ____________________ (the "Company") if I had not elected to participate in the Plan and sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. I understand and agree that I am obligated to keep confidential and not disclose the terms of this Waiver, including, but not limited to, the benefits under this Plan, except to my attorneys, financial advisors, or except where such disclosure is required by law. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to any vested or accrued benefits that I have under any workers' compensation laws or any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company except for programs specifically designed for participants in the Plan. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to forty-five (45) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this _____ day of ________________, in the year ___. Employee's signature Employee's printed name Acknowledged and Accepted by the Administrative Committee of the Southern Company Change in Control Severance Plan. By: ----------------------------------- Date: ----------------------------------- Attachment to Exhibit A TO: All Eligible Employees under the Southern Company Change in Control Severance Plan FROM: _____________________ RE: ADEA Information Notice DATE: _____________________ A severance plan known as the Southern Company Change in Control Severance Plan ("Plan") has been approved and established by The Southern Company, its affiliates and its direct and indirect subsidiaries (collectively the "Company"). You are eligible to participate in the Plan subject to the terms of the Plan. In accordance with the Age Discrimination in Employment Act ("ADEA"), the Company is providing you the following information pertaining to eligibility and participation in the Plan. o The purpose of the Plan is to provide benefits to certain employees of The Southern Company and certain subsidiaries of The Southern Company ("Employing Companies") whose employment is terminated subsequent to a change in control of The Southern Company or their respective Employing Company. A full description of the benefits under the Plan as well as any restrictions or limitations that may be applicable can be found in the Summary Plan Description you have been given. o Each active regular employee of an Employing Company of Grade 9 or below (or, if the Grade System is not used, below $130,000 of annual base salary rate for the 12 month period immediately preceding the change in control) not covered by a collective bargaining agreement is generally eligible to participate in the Plan if during the two year period following a change in control: (i) his employment is involuntarily terminated for reasons other than cause, or (ii) he voluntarily terminates his employment for good reason. o All eligible employees may elect to receive severance benefits under the Plan by signing an Election Form and Waiver Agreement no later than 45 calendar days from the date it is received. The Agreement will remain revocable by you for a seven day period after you sign it. o Attached is a list sorted by job title and age of each employee eligible to participate in the Plan as well as a list of the ages of all employees in the same job classification who are not eligible to participate in the Plan. In furtherance of you making an informed decision, the Company urges you to seek a financial advisor, legal counsel and a qualified tax advisor to assist you in fully understanding your rights and benefits under the plan and the Election Form and Waiver Agreement that you will be required to sign to receive severance benefits under the Plan. If you have any questions or need additional information, please call me at _______________. Sincerely, - ---------------------- [Name] - ---------------------- [Title] ADEA INFORMATION NOTICE - ------------------------------------------------------------ --------------------------------------------------------- Job Title, Classification Age of or Category of Eligible Employees Eligible Employees - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- [List job classification, title or category of all [List corresponding age of each eligible employee] eligible employees] - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- Job Title, Classification Age of or Category of Ineligible Employees Ineligible Employees - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- [List job classification, title or category of all [List corresponding age of each ineligible employee] ineligible employees] - ------------------------------------------------------------ ---------------------------------------------------------
Exhibit B SOUTHERN COMPANY CHANGE IN CONTROL SEVERANCE PLAN Short Term Incentive Compensation Plans EX-10 25 x10a73.txt SOUTHERN COMPANY EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN Troutman Sanders LLP Bank of America Plaza, Suite 5200 600 Peachtree Street, N.E. Atlanta, Georgia 30308 Effective July 10, 2000 SOUTHERN COMPANY EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN ARTICLE 1 - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption of Plan. Southern Company Services, Inc. hereby adopts this Southern Company Executive Change in Control Severance Plan. This Plan was originally effective December 7, 1998; it was amended by a First Amendment also effective December 7, 1998. This amended and restated Plan is effective July 10, 2000. The Plan shall be an unfunded "top hat" plan designed to provide certain severance benefits to a select group of management or highly compensated employees, to be paid solely from the general assets of the respective Employing Companies. 1.2 Purpose. The Plan is primarily designed to provide benefits to certain key employees of the Employing Companies, whose employment is terminated subsequent to a change in control of Southern or their respective Employing Company. ARTICLE 2 - DEFINITIONS 2.1 "Administrative Committee" shall mean the Board of Directors, plus, in the event of any act necessary to be taken in connection with the Plan relative to a particular Participant, the Chief Executive Officer of the Participant's Employing Company, if such Chief Executive Officer is not already a member of the Board of Directors. 2.2 "Annual Compensation" shall mean a Participant's highest annual base salary rate for the twelve month period immediately preceding the date of the Change in Control plus target bonus. 2.3 "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. 2.4 "Board of Directors" shall mean the board of directors of the Company. 2.5 "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. 2.6 "Change in Control" shall mean, (a) with respect to Southern, the occurrence of any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Section 2.6(a)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by an employee of Southern or its subsidiary or affiliate, or Group composed exclusively of such employees; or (F) any Business Combination which would not otherwise constitute a Change in Control because of the application of clauses (A), (B) and (C) of Section 2.6(a)(iii). (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; or (iii) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of Employees or employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (b) with respect to an Employing Company, the occurrence of any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of an Employing Company; provided, however, that for purposes of this Section 2.6(b)(i), any acquisition by an employee of Southern or its subsidiary or affiliate, or Group composed entirely of such employees, any qualified pension plan, any publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (ii) The Consummation of a reorganization, merger or consolidation of an Employing Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation surviving or resulting from such Employing Company Business Combination; or (iii) The Consummation of the sale or other disposition of all or substantially all of the assets of an Employing Company to an entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of an Employing Company. For purposes of this Section 2.6 only, SERI shall not be considered an Employing Company. 2.7 "COBRA Coverage" shall mean any continuation coverage to which a Participant or his dependents may be entitled pursuant to Code Section 4980B. 2.8 "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.9 "Company" shall mean Southern Company Services, Inc., its successors and assigns. 2.10 "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. 2.11 "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. 2.12 "DIC Plan" shall mean the Southern Energy Resources, Inc. Deferred Incentive Compensation Plan or any successor thereto which is considered an "equitable arrangement" thereof, as such plans may be amended from time to time. 2.13 "Effective Date" shall mean the date of execution hereof. 2.14 "Employee" shall mean each regular full-time or regular part-time employee of an Employing Company of Grades 10 to 13 (or, if the Grade system is not used, $130,000 or more of annual base salary rate for the twelve month period immediately preceding the Change in Control who has not otherwise entered into a Change in Control agreement with his Employing Company and elects to receive benefits under such agreement) not covered by a collective bargaining agreement between the Employing Company and a union or other employee representative. With respect to a Change in Control of SEI, SERI Participants shall be deemed to be employed by SEI for purposes of being covered under this Plan. 2.15 "Employee Outplacement Program" shall mean the program established by the Employing Company from time to time for the purpose of assisting Participants covered by the Plan in finding employment outside of the Employing Company which provides for the following services: (a) self assessment, career decision and goal setting; (b) job market research and job sources; (c) networking and interviewing skills; (d) planning and implementation strategy; (e) resume writing, job hunting methods and salary negotiation; and (f) office support and job search resources. 2.16 "Employing Company" shall mean the Company, or any other Southern Subsidiary, which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. 2.17 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 2.18 "Good Reason" shall mean, without an Employee's express written consent, after written notice to his Employing Company, and after a thirty (30) day opportunity for the Employee's Employing Company to cure, the continuing occurrence of any of the following events: (a) Inconsistent Duties. A meaningful and detrimental alteration in the Employee's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (b) Reduced Salary. A reduction of five percent (5%) or more by the Employing Company in either of the following: (i) the Employee's annual base salary rate for the twelve month period immediately preceding the date of the Change in Control ("Base Salary") (except for a less than ten percent (10%), across-the-board Base Salary reduction similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company); or (ii) the sum of the Employee's Base Salary plus target bonus under his Employing Company's short term bonus plan (e.g., either the PPP Plan or the Southern Energy, Inc. Short Term Plan, as the case may be), as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board reduction of Base Salary plus target bonus under such short term plan similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company); (c) Compensation Plans. The failure by the Employing Company to continue in effect any "compensation plan or agreement" in which an Employee participates as of the date of the Change in Control or the elimination of the Employee's participation in any such plan, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company); For purposes of this Section 2.18(c), the "compensation plan or agreement" shall mean any written arrangement executed by an authorized officer of the Employing Company which provides for periodic, non-discretionary compensatory payments to employees in the nature of bonuses. (d) Relocation. A change in an Employee's work location to a location more than fifty (50) miles from the facility where the Employee was located at the time of the Change in Control, unless such new work location is within fifty (50) miles from the Employee's principal place of residence at the time of the Change in Control. The acceptance, if any, by an Employee of employment by an Employing Company at a work location which is outside the fifty mile radius set forth in this Section 2.18(d) shall not be a waiver of the Employee's right to refuse subsequent transfer by an Employing Company to a location which is more than fifty (50) miles from the Employee's principal place of residence at the time of the Change in Control, and such subsequent, unconsented transfer shall be "Good Reason" under this Agreement; or (e) Benefits and Perquisites. The taking of any action by the Employing Company that would directly or indirectly materially reduce the benefits enjoyed by an Employee under the Employing Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which the Employee was participating immediately prior to the Change in Control, or the failure by the Employing Company to provide an Employee with the number of paid vacation days to which the Employee is entitled on the basis of years of service with the Employing Company in accordance with the Employing Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company). 2.19 "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. 2.20 "Group Health Plan" shall mean the group health plan covering the Participant, as such plan may be amended from time to time. 2.21 "Group Life Insurance Plan" shall mean the group life insurance program covering the Participant, as such plan may be amended from time to time. 2.22 "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to the Effective Date whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. 2.23 "Month of Service" shall mean any calendar month during which a Participant has worked at least one (1) hour or was on approved leave of absence while in the employ of an Employing Company or any other Southern Subsidiary. 2.24 "Participant" shall mean an Employee who meets the eligibility requirements of Section 3.1 of this Plan. 2.25 "Pension Plan" shall mean The Southern Company Pension Plan or any successor thereto, as such plans may be amended from time to time. 2.26 "Performance Dividend Plan" or "PDP Plan" shall mean the Southern Company Performance Dividend Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.25 thereof, as such plans may be amended from time to time. 2.27 "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.31 thereof, as such plans may be amended from time to time. 2.28 "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.33 thereof, as such plans may be amended from time to time. 2.29 "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Exchange Act. 2.30 "Plan" shall mean the Southern Company Executive Change in Control Severance Plan. 2.31 "SEI" shall mean Southern Energy, Inc., its successors and assigns. 2.32 "SERI" shall mean Southern Energy Resources, Inc., its successors and assigns. 2.33 "SERI Participant" shall mean a Participant who is employed by SERI. 2.34 "Short Term Plan" shall mean the Southern Energy Resources, Inc. Short Term Plan, as amended from time to time. 2.35 "Southern" shall mean The Southern Company, its successors and assigns. 2.36 "Southern Board" shall mean the board of directors of Southern. 2.37 "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. 2.38 "Support Employee" shall mean an Employee of the Company (which shall continue to be such Employee's Employing Company for purposes of this Plan) who: (a) Is involuntarily terminated without Cause within one year of the Change in Control of an Employing Company (other than the Company) and either (i) spent at least 40% of his working time performing services for such Employing Company at the time of the Change in Control and for the six months prior thereto, or (ii) is determined by the Administrative Committee to be involuntarily terminated without Cause as a result of such Change in Control; or (b) Voluntarily terminates with Good Reason within one year of the Change in Control of an Employing Company (other than the Company) and spent at least 40% of his working time performing services for such Employing Company at the time of the Change in Control and for the six months prior thereto. For purposes of this Section 2.38(b) only, Good Reason shall not include the provisions of Section 2.18(a), entitled "Inconsistent Duties." 2.39 "Termination for Cause" or "Cause" shall mean an Employee's termination of employment with his Employing Company upon the occurrence of any of the following: (a) The willful and continued failure by the Employee to substantially perform his duties with his Employing Company (other than any such failure resulting from the Employee's Total Disability or from the Employee's retirement or any such actual or anticipated failure resulting from termination by the Employee for Good Reason) after a written demand for substantial performance is delivered to him by the Administrative Committee, which demand specifically identifies the manner in which the Administrative Committee believes that he has not substantially performed his duties; or (b) The willful engaging by the Employee in conduct that is demonstrably and materially injurious to his Employing Company, monetarily or otherwise, including but not limited to any of the following: (i) any willful act involving fraud or dishonesty in the course of an Employee's employment by his Employing Company; (ii) the willful carrying out of any activity or the making of any statement by an Employee which would materially prejudice or impair the good name and standing of his Employing Company, Southern or any other Southern Subsidiary or would bring his Employing Company, Southern or any other Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which his Employing Company, Southern or such other Southern Subsidiary is located; (iii) attendance by an Employee at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (iv) violation of his Employing Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Employing Company's safety officer; (v) assault or other act of violence by an Employee against any person during the course of employment; or (vi) an Employee's indictment for any felony or any misdemeanor involving moral turpitude. No act or failure to act by an Employee shall be deemed "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that his action or omission was in the best interest of his Employing Company. Notwithstanding the foregoing, an Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of the majority of the Administrative Committee at a meeting called and held for such purpose (after reasonable notice to the Employee and an opportunity for him, together with counsel, to be heard before the Administrative Committee), finding that, in the good faith opinion of the Administrative Committee, the Employee was guilty of conduct set forth in Section 2.39(a) or (b) hereof and specifying the particulars thereof in detail. 2.40 "Termination Date" shall mean the date on which a Participant is separated from his Employing Company's regular payroll; provided, however, that solely for purposes of Section 3.2(c) hereof, the Termination Date of Participants who are deemed to be retired pursuant to the provisions of Section 3.3 hereof, shall be the effective date of their retirement pursuant to the terms of the Pension Plan. 2.41 "Total Disability" shall mean total disability within the meaning of the Pension Plan. 2.42 "Value Creation Plan" shall mean the Southern Energy Resources, Inc. Value Creation Plan or any replacement thereto which is considered an "equitable arrangement" under Section 1.30 thereof, as such plans may be amended from time to time. 2.43 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. 2.44 "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. 2.45 "Year of Service" shall mean an Employee's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If an Employee has a break in his service with his Employing Company, he will receive credit under this Plan for the service prior to the break in service only if the break in service was less than five years and his service prior to the break exceeds the length of the break in service. ARTICLE 3 - SEVERANCE BENEFITS 3.1 Eligibility. (a) Employees. Except as otherwise provided herein, any Employee whose employment is involuntarily terminated by his Employing Company at any time during the two year period following a Change in Control of Southern or his Employing Company for reasons other than Cause or who shall voluntarily terminate his employment with his Employing Company for Good Reason at any time during the two year period following a Change in Control of Southern or his Employing Company, shall be entitled to participate in this Plan and receive the benefits described in Section 3.2 hereof, subject to the terms and conditions described in this Article 3. (b) Support Employees. A Support Employee shall be entitled to participate in this Plan and receive the benefits described in Section 3.2 hereof, subject to the terms and conditions described in this Article 3. (c) Limits on Eligibility. Notwithstanding anything to the contrary herein, an Employee or Support Employee shall not be eligible to receive benefits under this Plan if the Employee or Support Employee: (i) is not actively at work on his Termination Date, unless such Employee or Support Employee is capable of returning to work within twelve (12) weeks of the beginning of any leave of absence from work; (ii) voluntarily terminates his employment with his Employing Company for other than Good Reason; (iii) is terminated by his Employing Company for Cause; (iv) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that acquires all or substantially all of the assets of Southern, a Southern Subsidiary or his Employing Company; (v) refuses an offer of continued employment with his Employing Company, Southern or a Southern Subsidiary, or any employer that acquires all or substantially all of the assets of Southern, a Southern Subsidiary or his Employing Company, under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment and such employer agrees to adopt this Plan as it applies to such Participant; or (vi) elects to receive the benefits of any other voluntary or involuntary severance, separation or outplacement program, plan or agreement maintained by his Employing Company in lieu of benefits under this Plan; provided however, that the receipt of benefits under any retention plan or agreement shall not be deemed to be the receipt of benefits under any severance, separation or outplacement program for purposes of this Plan. 3.2 Benefits. Upon the Employing Company's receipt of an effective Waiver and Release, Participants shall be entitled to receive the following benefits: (a) Employee Outplacement Services. Each Participant shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from the Participant's Termination Date. (b) Severance Benefit. Participants shall be paid in cash an amount equal to two times the Participant's Annual Compensation, but not in excess of the Capped Amount. For purposes of this Section 3.2(b), the Capped Amount shall be the amount otherwise payable under this Section 3.2(b), reduced in such amount and to such extent that no amount of the payment under this Section 3.2(b), plus all other "parachute payments" under Code Section 280G, would constitute an "excess parachute payment" under Code Section 280G, but only to the extent that if the payment under this Section 3.2(b) were increased by one additional dollar ($1.00), a portion of the payment under this Section 3.2(b) would be an "excess parachute payment" under Code Section 280G. The calculation of the Capped Amount and any other determinations relating to the applicability of Code Section 280G (and the rules and regulations promulgated thereunder) to the payments contemplated by this Plan shall be made by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such determinations shall be binding upon the Participants, Southern and the Employing Company. (c) Welfare Benefit. (i) Except as provided in Section 3.3 hereof, each Participant shall be eligible to participate in the Employing Company's Group Health Plan for a period of six (6) months for each of the Participant's Years of Service, not to exceed a period of five (5) years, beginning on the first day of the first month following the Participant's Termination Date unless otherwise specifically provided under such plan, upon the Participant's payment of both the Employing Company's and the Participant's premium under such plan. A Participant who receives this extended medical coverage shall also be entitled to elect coverage under the Group Health Plan for his dependents who are participating in the Group Health Plan on the Participant's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of the Participant's extended medical coverage under this Section 3.2(c) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (ii) The extended medical coverage afforded to a Participant pursuant to this Section 3.2(c) as well as the premiums to be paid by the Participant in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by the Participant in connection with this extended coverage shall be due on the first day of each month; provided, however, that if a Participant fails to pay his premium within thirty (30) days of its due date, such Participant's extended coverage shall be terminated. (iii) Any Group Health Plan coverage provided under this Section 3.2(c) shall be a part of and not in addition to any COBRA Coverage which a Participant or his dependent may elect. In the event that a Participant or his dependent becomes eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Employing Company's Group Health Plan available to the Participant or his dependent by virtue of the provisions of this Article 3 shall terminate, except as may otherwise be required by law, and shall not be renewed. It shall be the duty of a Participant to inform the Employing Company of his eligibility to participate in any such health plan. (iv) Except as otherwise provided in Section 3.3 hereof, regardless of whether a Participant elects the extended coverage described in Section 3.2(a) hereof, the Employing Company shall pay to each Participant a cash amount equal to the Employing Company's and the Participant's cost of premiums for two (2) years of coverage under the Group Health Plan and Group Life Insurance Plan, as such Plans were in effect as of the date of the Change in Control. (d) Stock Option Vesting. The provisions of this Section 3.2(d) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Stock Plan, the defined terms of which are incorporated in this Section 3.2(d) by reference. (i) Any of the Participant's Options and Stock Appreciation Rights outstanding as of the Termination Date which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Participant holding a Stock Appreciation Right who is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to the Participant under Section 16(b) of the Exchange Act, provided further that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (ii) The restrictions and deferral limitations applicable to any of the Participant's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (iii) The restrictions and deferral limitations and other conditions applicable to any other Awards held by the Participant under the Performance Stock Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (e) Performance Pay Plan. The provisions of this Section 3.2(e) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Pay Plan, the defined terms of which are incorporated in this Section 3.2(e) by reference. Provided the Participant is not entitled to benefits under Article IV of the PPP Plan, if the PPP Plan is in place as of the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Award under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (f) Performance Dividend Plan. The provisions of this Section 3.2(f) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Dividend Plan, the defined terms of which are incorporated in this Section 3.2(f) by reference. Provided the Participant is not entitled to benefits under Article V of the Performance Dividend Plan, if the Performance Dividend Plan is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash for each Award held as of such date based on a Payout Percentage of 50% under Section 4.1 of the Performance Dividend Plan for the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (g) Value Creation Plan. The provisions of this Section 3.2(g) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Value Creation Plan, the defined terms of which are incorporated in this Section 3.2(g) by reference. Any of the Participant's Appreciation Rights or Indexed Rights outstanding as of the Termination Date which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. Notwithstanding anything in the Value Creation Plan to the contrary, Share Value with respect to any Appreciation Rights or Indexed Rights held by the Participant following his Termination Date shall be no less than the Share Value as of the date of the Change in Control of Southern or his Employing Company, as the case may be. (h) Short Term Plan. The provisions of this Section 3.2(h) shall apply to any Participant who, as of the date of the Change in Control was a Participant in the Short Term Plan, the defined terms of which are incorporated in this Section 3.2(h) by reference. Provided the Participant is not entitled to benefits under Article V of the Short Term Plan, if the Short Term Plan is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash in an amount equal to his Award under the Short Term Plan for the Performance Period in which the Termination Date shall have occurred, at Total Target for the Participant's Job Category and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (i) Other Short Term Incentive Plans. The provisions of this Section 3.2(i) shall apply to any Participant who, as of the date of the Change in Control is a participant in any other "short term incentive compensation plan" not otherwise previously referred to in this Section 3.2. Provided the Participant is not otherwise entitled to a plan payout under any change in control provisions of such plans, if the "short term incentive compensation plan" is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash in an amount equal to his award under his respective Employing Company's "short term incentive compensation plan" for the annual performance period in which the Termination Date shall have occurred, at the Participant's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until the Termination Date. For purposes of this Section 3.2(i), the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by an Employing Company which provides for annual, recurring compensatory bonuses to participants based upon articulated performance criteria, and which have been identified by the Board of Directors and listed on Exhibit B hereto, which may be amended from time to time to reflect plan additions, terminations and amendments. (j) DIC Plan. The provisions of this Section 3.2(j) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the DIC Plan, the defined terms of which are incorporated into this Section 3.2(j) by reference. Provided a Participant is not entitled to benefits under Article V of the DIC Plan, if the DIC Plan is in place through Participant's Termination Date and to the extent that Participant is entitled to participate therein, any of the Participant's Awards as of the Termination Date which are not then vested shall become fully vested and Participant shall be entitled to receive cash in the amount equal to Participant's Account as of his Termination Date. Notwithstanding anything in the DIC Plan to the contrary, the investment return on the Awards determined in accordance with Section 3.1 of the DIC Plan for any Plan Year following a Change in Control of Southern or its Employing Company shall be no less than the investment return determined in accordance with Section 3.1 of the DIC Plan as of the date of such Change in Control with respect to those Accounts which are outstanding as of the date of such Change in Control. 3.3 Coordination with Retiree Medical and Life Insurance Coverage. Notwithstanding anything to the contrary above, any Participant who is otherwise eligible to retire pursuant to the terms of the Pension Plan shall be deemed to have retired for purposes of all employee benefit plans sponsored by the Employing Company of which the Participant is a participant. A Participant who is deemed to have retired in accordance with the preceding sentence shall not be eligible to receive the benefits described in Section 3.2(c) hereof if, upon his Termination Date, such Participant becomes eligible to receive the retiree medical and life insurance coverage provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan. 3.4 Payment of Benefits. The amounts due a Participant under Sections 3.2(b) and (c) hereof shall be payable in one (1) lump sum payment as soon as administratively practicable within thirty (30) days of the later of the following to occur: (a) the Participant's Termination Date, or (b) the tender to the Employing Company by the Participant of an effective Waiver and Release in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Employing Company. 3.5 Benefits in the Event of Death. In the event of the Participant's death prior to the payment of all benefits due under this Article 3, the Participant's estate shall be entitled to receive as due any amounts not yet paid under this Article 3 upon the tender by the executor or administrator of the estate of an effective Waiver and Release. 3.6 Legal Fees. In the event of a dispute between a Participant and his Employing Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in the Participant's favor, his Employing Company shall reimburse the Participant's legal fees incurred with respect to all issues in such dispute in an amount not to exceed thirty thousand dollars ($30,000). 3.7 No Mitigation. A Participant who receives benefits under Section 3.2 of this Plan shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Subsection 3.1(d) hereof, the amounts due a Participant hereunder shall not be reduced or suspended if such Participant accepts such subsequent employment. 3.8 Non-qualified Retirement and Deferred Compensation Plans. Subsequent to a Change in Control, any claims by a Participant for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the procedures and provisions set forth in Article 5 hereof and if any material issue in such dispute is finally resolved in the Participant's favor, the Company shall reimburse the Participant's legal fees in the manner provided in Section 3.6 hereof. 3.9 Guarantee of SEI. Effective May 10, 2000, if SERI fails or refuses to make payments under the Plan, SERI Participants may have the right to obtain payment by SEI pursuant to the terms of the "Guarantee Agreement Concerning Southern Energy Resources, Inc. Compensation and Benefit Arrangements" entered into by SEI and SERI. A SERI Participant's right to payment is not increased as a result of this Guarantee. SERI Participants have the same right to payment from SEI as they have from SERI. Any demand to enforce this Guarantee should be made in writing and should reasonably and briefly specify the manner and the amount SERI has failed to pay. Such writing given by personal delivery or mail shall be effective upon actual receipt. Any writing given by telegram or telecopier shall be effective upon actual receipt if received during SEI's normal business hours, or at the beginning of the next business day after receipt, if not received during SEI's normal business hours. All arrivals by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. ARTICLE 4 - ADMINISTRATION 4.1 Administrative Committee. The Administrative Committee shall be responsible for the general administration of the Plan and may appoint other persons or entities to perform or assist in the performance of any of its duties, subject to its review and approval. The Administrative Committee shall have the right to remove any such appointee from his position without cause upon notice. ARTICLE 5 - ARBITRATION 5.1 General. Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Plan, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Article 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to a Participant's employment by an Employing Company or the termination thereof. 5.2 Demand for Arbitration. Arbitration shall be initiated by serving a written notice of demand for arbitration to the Participant, in the case of an Employing Company, or to the Administrative Committee, in the case of a Participant. 5.3 Law and Venue. The arbitrators shall apply the laws of the State of Georgia, except to the extent pre-empted by federal law, excluding any law which would require the use of the law of another state. The arbitration shall be held in Atlanta, Georgia. 5.4 Appointment of Arbitrators. Arbitrators shall be appointed within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by the Participant, one arbitrator shall be appointed by the Employing Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. 5.5 Costs. The arbitration filing fee shall be paid by the Participant. All other costs of arbitration shall be borne equally by the Participant and his Employing Company, provided, however, that such Employing Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in the Participant's favor and the Participant is reimbursed legal fees under Section 3.6 hereof. 5.6 Interim and Injunctive Relief. Nothing in this Article 5 is intended to preclude, upon application of either party, any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to either party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Article 5 and nothing herein is intended to prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Article 5. ARTICLE 6 - MISCELLANEOUS 6.1 Funding of Benefits. Unless the Board of Directors shall in its discretion determine otherwise, the benefits payable to a Participant under the Plan shall not be funded in any manner and shall be paid by the Employing Companies out of their general assets, which assets are subject to the claims of the Employing Companies' creditors. 6.2 Withholding. There shall be deducted from the payment of any benefit due under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Employing Companies to such governmental authority for the account of the Participant entitled to such payment. 6.3 Assignment. No Participant or beneficiary shall have any rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. 6.4 Amendment and Termination. The Plan may be amended or terminated at any time by the Board of Directors, provided, however, the Plan may not be amended in any material respect or terminated within the two (2) year period following a Change in Control nor shall any amendment or termination impair the rights of any Participant which have accrued hereunder prior to any such amendment or termination. 6.5 Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Plan, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Plan which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Plan, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, this Southern Company Executive Change in Control Severance Plan has been executed by the Company through its duly authorized officers, this ____ day of ___________, 2000, to be effective as provided herein. SOUTHERN COMPANY SERVICES, INC. By: ____________________________________ Exhibit A SOUTHERN COMPANY EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN Waiver and Release I understand that I am entitled to receive the Severance Benefits described in Article 3 of the Southern Company Executive Change in Control Severance Plan (the "Plan") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I have elected to receive under the Plan are in excess of those I would have received from ________________________ (the "Company") if I had not elected to participate in the Plan and sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. I understand and agree that I am obligated to keep confidential and not disclose the terms of this Waiver, including, but not limited to, the benefits under this Plan, except to my attorneys, financial advisors, or except where such disclosure is required by law. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to any vested or accrued benefits that I have under any workers' compensation laws or any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company except for programs specifically designed for participants in the Plan. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to forty-five (45) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this _________ day of_________ , in the year ______. Employee's signature Employee's printed name Acknowledged and Accepted by the Administrative Committee of the Southern Company Executive Change in Control Severance Plan. By: ----------------------------------- Date: ----------------------------------- Attachment to Exhibit A TO: All Eligible Employees under the Southern Company Executive Change in Control Severance Plan FROM: _____________________ RE: ADEA Information Notice DATE: _____________________ A severance plan known as the Southern Company Executive Change in Control Severance Plan ("Plan") has been approved and established by The Southern Company, its affiliates and its direct and indirect subsidiaries (collectively the "Company"). You are eligible to participate in the Plan subject to the terms of the Plan. In accordance with the Age Discrimination in Employment Act ("ADEA"), the Company is providing you the following information pertaining to eligibility and participation in the Plan. o The purpose of the Plan is to provide benefits to certain key employees of The Southern Company and certain subsidiaries of The Southern Company ("Employing Companies") whose employment is terminated subsequent to a change in control of The Southern Company or their respective Employing Company. o Each active regular employee of an Employing Company of Grade 10 to 13 (or, if the Grade System is not used, $130,000 or more of annual base salary rate for the 12 month period immediately preceding the change in control) not covered by a collective bargaining agreement is generally eligible to participate in the Plan if, during the two year period following a change in control: (i) his employment is involuntarily terminated for reasons other than cause, or (ii) he voluntarily terminates employment for good reason. o All eligible employees may receive severance benefits under the Plan by signing a Waiver and Release no later than 45 calendar days from the date it is received. The Waiver and Release will remain revocable by you for a seven day period after you sign it. o Attached is a list sorted by job title and age of each employee eligible to participate in the Plan as well as a list of the ages of all employees in the same job classification who are not eligible to participate in the Plan. In furtherance of you making an informed decision, the Company urges you to seek a financial advisor, legal counsel and a qualified tax advisor to assist you in fully understanding your rights and benefits under the plan and the Waiver and Release that you will be required to sign to receive severance benefits under the Plan. If you have any questions or need additional information, please call me at _______________. Sincerely, - ---------------------- [Name] - ---------------------- [Title] ADEA INFORMATION NOTICE - ------------------------------------------------------------ --------------------------------------------------------- Job Title, Classification Age of or Category of Eligible Employees Eligible Employees - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- [List job classification, title or category of all [List corresponding age of each eligible employee] eligible employees] - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- Job Title, Classification Age of or Category of Ineligible Employees Ineligible Employees - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- - ------------------------------------------------------------ --------------------------------------------------------- [List job classification, title or category of all [List corresponding age of each ineligible employee] ineligible employees] - ------------------------------------------------------------ ---------------------------------------------------------
Exhibit B SOUTHERN COMPANY EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN Short Term Incentive Compensation Plans EX-10 26 x10a79.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Gulf Power Company (the "Company") and Mr. Travis J. Bowden ("Mr. Bowden") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on February 26, 1999. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Bowden is the President and Chief Executive Officer of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective February 26, 1999 (the "Original Agreement") to provide to Mr. Bowden certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Bowden's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Bowden or any Group of which Mr. Bowden is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Bowden, any Group of which Mr. Bowden is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Bowden, any Group composed exclusively of employees of the Company, any Group of which Mr. Bowden is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Bowden or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Gulf Power Company , its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Bowden's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Bowden's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Bowden's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Bowden's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Bowden participates or is a party as of the date of the Change in Control or the elimination of Mr. Bowden's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Bowden's work location to a location more than fifty (50) miles from the office where Mr. Bowden is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Bowden's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Bowden of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Bowden's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Bowden's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Bowden under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Bowden was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Bowden with the number of paid vacation days to which Mr. Bowden is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Bowden, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Bowden, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Bowden has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Bowden's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Bowden substantially to perform his duties with the Company (other than any such failure resulting from Mr. Bowden's Total Disability or from Mr. Bowden's retirement or any such actual or anticipated failure resulting from termination by Mr. Bowden for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Bowden in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Bowden's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Bowden shall be deemed "willful" unless done, or omitted to be done, by Mr. Bowden not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Bowden shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Bowden and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Bowden was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Bowden's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Bowden's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Bowden's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Bowden has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Bowden's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Bowden voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Bowden shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Bowden shall not be eligible to receive benefits under this Agreement if Mr. Bowden: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Bowden meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Bowden an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Bowden under Code Section 280G exceeds three (3) times Mr. Bowden's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Bowden's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Bowden, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Bowden meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Bowden shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Bowden's Years of Service, not to exceed five (5) years. If Mr. Bowden elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Bowden's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Bowden's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Bowden pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Bowden in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Bowden in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Bowden or his dependents may elect. In the event that Mr. Bowden or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Bowden or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Bowden shall be entitled to receive cash in an amount equal to the Company's and Mr. Bowden's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Bowden meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Bowden's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Bowden is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Bowden under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Bowden's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Bowden under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Bowden is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Bowden's Termination Date and to the extent Mr. Bowden is entitled to participate therein, Mr. Bowden shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Bowden is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Bowden's Termination Date and to the extent Mr. Bowden is entitled to participate therein, Mr. Bowden shall be entitled to receive cash for each Award held by Mr. Bowden on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Bowden is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Bowden is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Bowden is entitled to participate therein, Mr. Bowden shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Bowden's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Bowden's Termination Date, or (ii) upon Mr. Bowden's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Bowden's death prior to the payment of all amounts due under this Agreement, Mr. Bowden's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Bowden and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Bowden's favor, the Company shall reimburse Mr. Bowden's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Bowden shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Bowden's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Bowden for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Bowden's favor, the Company shall reimburse Mr. Bowden's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Bowden's employment by the Company is terminated during the two year period following a Change in Control and Mr. Bowden accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Bowden is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Bowden hereunder shall not be reduced or suspended if Mr. Bowden accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Bowden's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Bowden, in the case of the Company, or to the Southern Board, in the case of Mr. Bowden. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Bowden, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Bowden. All other costs of arbitration shall be borne equally by Mr. Bowden and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Bowden's favor and Mr. Bowden is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Bowden under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Bowden. (c) Assignment. Mr. Bowden shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ GULF POWER COMPANY By: ____________________________________ MR. BOWDEN ----------------------------- Travis J. Bowden Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. Travis J. Bowden upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, Travis J. Bowden, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Gulf Power Company (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. Travis J. Bowden Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 27 x10a80.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. A. W. Dahlberg ("Mr. Dahlberg") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on December 7, 1998. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Dahlberg is the Chairman of the Board and Chief Executive Officer of Southern; WHEREAS, Mr. Dahlberg is the Chairman of the Executive Committee of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective December 7, 1998 (the "Original Agreement") to provide to Mr. Dahlberg certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to the provisions of such Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) change references from the "Productivity Improvement Plan" to the "Executive Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Dahlberg's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (d) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(d)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Dahlberg or any Group of which Mr. Dahlberg is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(d)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Dahlberg, any Group of which Mr. Dahlberg is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(d)(iv), any acquisition by Mr. Dahlberg, any Group composed exclusively of employees of the Company, any Group of which Mr. Dahlberg is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (e) "COBRA Coverage" shall mean any continuation coverage to which Mr. Dahlberg or his dependents may be entitled pursuant to Code Section 4980B. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended. (g) "Company" shall mean Southern Company Services, Inc., its successors and assigns. (h) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (i) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (j) "Effective Date" shall mean the date of execution of this Agreement. (k) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (m) "Executive Productivity Improvement Plan" or "Executive PIP Plan" shall mean the Southern Company Executive Productivity Improvement Plan or replacement thereto, as such plans may be amended from time to time. (n) "Good Reason" shall mean, without Mr. Dahlberg's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Dahlberg's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Dahlberg's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Dahlberg's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Dahlberg participates or is a party as of the date of the Change in Control or the elimination of Mr. Dahlberg's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Dahlberg's work location to a location more than fifty (50) miles from the office where Mr. Dahlberg is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Dahlberg's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Dahlberg of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Dahlberg's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Dahlberg's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Dahlberg under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Dahlberg was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Dahlberg with the number of paid vacation days to which Mr. Dahlberg is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Dahlberg as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Dahlberg as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Dahlberg has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Dahlberg's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Dahlberg substantially to perform his duties with the Company (other than any such failure resulting from Mr. Dahlberg's Total Disability or from Mr. Dahlberg's retirement or any such actual or anticipated failure resulting from termination by Mr. Dahlberg for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Dahlberg in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Dahlberg's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Dahlberg shall be deemed "willful" unless done, or omitted to be done, by Mr. Dahlberg not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Dahlberg shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Dahlberg and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Dahlberg was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Dahlberg's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(b) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Dahlberg's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Dahlberg's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Dahlberg has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Dahlberg's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Dahlberg voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Dahlberg shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Dahlberg shall not be eligible to receive benefits under this Agreement if Mr. Dahlberg: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Dahlberg meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Dahlberg an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Dahlberg under Code Section 280G exceeds three (3) times Mr. Dahlberg's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Dahlberg's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Dahlberg, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Dahlberg meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Dahlberg shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Dahlberg's Years of Service, not to exceed five (5) years. If Mr. Dahlberg elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Dahlberg's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Dahlberg's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Dahlberg pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Dahlberg in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Dahlberg in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Dahlberg or his dependents may elect. In the event that Mr. Dahlberg or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Dahlberg or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Dahlberg shall be entitled to receive cash in an amount equal to the Company's and Mr. Dahlberg's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Dahlberg meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Dahlberg's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Dahlberg is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Dahlberg under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Dahlberg's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Dahlberg under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Dahlberg is not entitled to benefits under Article V of the PPP Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Dahlberg's Termination Date and to the extent Mr. Dahlberg is entitled to participate therein, Mr. Dahlberg shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Executive PIP Plan. Provided Mr. Dahlberg is not entitled to benefits under Article IV of the Executive PIP Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Executive PIP Plan is in place through Mr. Dahlberg's Termination Date and to the extent Mr. Dahlberg is entitled to participate therein, Mr. Dahlberg shall be entitled to receive cash in an amount equal to his Award Opportunity for the Computation Periods in which the Termination Date shall have occurred at a target Value of Performance Unit of $1.00, prorated for each Performance Period by the number of months which have passed since the beginning of each of the Computation Periods until the Termination Date. (iv) Performance Dividend Plan. Provided Mr. Dahlberg is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iv) by reference), if the Performance Dividend Plan is in place through Mr. Dahlberg's Termination Date and to the extent Mr. Dahlberg is entitled to participate therein, Mr. Dahlberg shall be entitled to receive cash for each Award held by Mr. Dahlberg on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (v) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(v) shall apply if and to the extent that Mr. Dahlberg is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Dahlberg is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Dahlberg is entitled to participate therein, Mr. Dahlberg shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Dahlberg's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(v) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Dahlberg's Termination Date, or (ii) upon Mr. Dahlberg's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Dahlberg's death prior to the payment of all amounts due under this Agreement, Mr. Dahlberg's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Dahlberg and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Dahlberg's favor, the Company shall reimburse Mr. Dahlberg's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Dahlberg shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Dahlberg's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Dahlberg for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Dalhberg's favor, the Company shall reimburse Mr. Dahlberg's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Dahlberg's employment by the Company is terminated during the two year period following a Change in Control and Mr. Dahlberg accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Dahlberg is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Dahlberg hereunder shall not be reduced or suspended if Mr. Dahlberg accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Dahlberg's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Dahlberg, in the case of the Company, or to the Southern Board, in the case of Mr. Dahlberg. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Dahlberg, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Dahlberg. All other costs of arbitration shall be borne equally by Mr. Dahlberg and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Dahlberg's favor and Mr. Dahlberg is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Dahlberg under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Dahlberg. (c) Assignment. Mr. Dahlberg shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, -----. THE SOUTHERN COMPANY By: ____________________________________ SOUTHERN COMPANY SERVICES, INC. By: ____________________________________ MR. DAHLBERG ----------------------------- A.W. Dahlberg Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. A.W. Dahlberg upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, A.W. Dahlberg, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. A.W. Dahlberg Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 28 x10a81.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Mississippi Power Company (the "Company") and Mr. Dwight H. Evans ("Mr. Evans") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on February 24, 1999. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Evans is the President and Chief Executive Officer of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective February 24, 1999 (the "Original Agreement") to provide to Mr. Evans certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Evans's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Evans or any Group of which Mr. Evans is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Evans, any Group of which Mr. Evans is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Evans, any Group composed exclusively of employees of the Company, any Group of which Mr. Evans is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Evans or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Mississippi Power Company, its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Evans's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Evans's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Evans's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Evans's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Evans participates or is a party as of the date of the Change in Control or the elimination of Mr. Evans's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Evans's work location to a location more than fifty (50) miles from the office where Mr. Evans is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Evans's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Evans of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Evans's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Evans's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Evans under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Evans was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Evans with the number of paid vacation days to which Mr. Evans is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Evans, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Evans, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Evans has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Evans's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Evans substantially to perform his duties with the Company (other than any such failure resulting from Mr. Evans's Total Disability or from Mr. Evans's retirement or any such actual or anticipated failure resulting from termination by Mr. Evans for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Evans in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Evans's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Evans shall be deemed "willful" unless done, or omitted to be done, by Mr. Evans not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Evans shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Evans and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Evans was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Evans's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Evans's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Evans's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Evans has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Evans's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Evans voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Evans shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Evans shall not be eligible to receive benefits under this Agreement if Mr. Evans: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Evans meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Evans an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Evans under Code Section 280G exceeds three (3) times Mr. Evans's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Evans's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Evans, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Evans meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Evans shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Evans's Years of Service, not to exceed five (5) years. If Mr. Evans elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Evans's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Evans's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Evans pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Evans in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Evans in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Evans or his dependents may elect. In the event that Mr. Evans or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Evans or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Evans shall be entitled to receive cash in an amount equal to the Company's and Mr. Evans's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Evans meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Evans's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Evans is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Evans under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Evans's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Evans under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Evans is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Evans's Termination Date and to the extent Mr. Evans is entitled to participate therein, Mr. Evans shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Evans is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Evans's Termination Date and to the extent Mr. Evans is entitled to participate therein, Mr. Evans shall be entitled to receive cash for each Award held by Mr. Evans on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Evans is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Evans is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Evans is entitled to participate therein, Mr. Evans shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Evans's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Evans's Termination Date, or (ii) upon Mr. Evans's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Evans's death prior to the payment of all amounts due under this Agreement, Mr. Evans's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Evans and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Evans's favor, the Company shall reimburse Mr. Evans's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Evans shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Evans's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Evans for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Evans's favor, the Company shall reimburse Mr. Evans's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Evans's employment by the Company is terminated during the two year period following a Change in Control and Mr. Evans accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Evans is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Evans hereunder shall not be reduced or suspended if Mr. Evans accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Evans's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Evans, in the case of the Company, or to the Southern Board, in the case of Mr. Evans. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Evans, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Evans. All other costs of arbitration shall be borne equally by Mr. Evans and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Evans's favor and Mr. Evans is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Evans under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Evans. (c) Assignment. Mr. Evans shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ MISSISSIPPI POWER COMPANY By: ____________________________________ MR. EVANS ----------------------------- Dwight H. Evans Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. Dwight H. Evans upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, Dwight H. Evans, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Mississippi Power Company (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. Dwight H. Evans Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 29 x10a83.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. Henry Allen Franklin ("Mr. Franklin") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, effective and executed on July 8, 1999. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Franklin is the President and Chief Operating Officer of Southern; WHEREAS, the Parties entered into a Change in Control Agreement effective July 8, 1999 (the "July 8, 1999 Agreement") to provide to Mr. Franklin certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the July 8, 1999 Agreement, the Parties may amend the July 8, 1999 Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to the provisions of such Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) change references from the "Productivity Improvement Plan" to the "Executive Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Franklin's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (d) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(d)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Franklin or any Group of which Mr. Franklin is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(d)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Franklin, any Group of which Mr. Franklin is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(d)(iv), any acquisition by Mr. Franklin, any Group composed exclusively of employees of the Company, any Group of which Mr. Franklin is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (e) "COBRA Coverage" shall mean any continuation coverage to which Mr. Franklin or his dependents may be entitled pursuant to Code Section 4980B. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended. (g) "Company" shall mean Southern Company Services, Inc., its successors and assigns. (h) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (i) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (j) "Effective Date" shall mean the date of execution of this Agreement. (k) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (m) "Executive Productivity Improvement Plan" or "Executive PIP Plan" shall mean the Southern Company Executive Productivity Improvement Plan or replacement thereto, as such plans may be amended from time to time. (n) "Good Reason" shall mean, without Mr. Franklin's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Franklin's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Franklin's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Franklin's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Franklin participates or is a party as of the date of the Change in Control or the elimination of Mr. Franklin's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Franklin's work location to a location more than fifty (50) miles from the office where Mr. Franklin is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Franklin's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Franklin of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Franklin's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Franklin's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Franklin under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Franklin was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Franklin with the number of paid vacation days to which Mr. Franklin is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Franklin as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Franklin as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Franklin has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Franklin's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Franklin substantially to perform his duties with the Company (other than any such failure resulting from Mr. Franklin's Total Disability or from Mr. Franklin's retirement or any such actual or anticipated failure resulting from termination by Mr. Franklin for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Franklin in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Franklin's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Franklin shall be deemed "willful" unless done, or omitted to be done, by Mr. Franklin not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Franklin shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Franklin and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Franklin was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Franklin's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(b) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Franklin's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Franklin's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Franklin has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Franklin's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Franklin voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Franklin shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Franklin shall not be eligible to receive benefits under this Agreement if Mr. Franklin: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Franklin meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Franklin an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Franklin under Code Section 280G exceeds three (3) times Mr. Franklin's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Franklin's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Franklin, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Franklin meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Franklin shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Franklin's Years of Service, not to exceed five (5) years. If Mr. Franklin elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Franklin's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Franklin's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Franklin pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Franklin in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Franklin in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Franklin or his dependents may elect. In the event that Mr. Franklin or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Franklin or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Franklin shall be entitled to receive cash in an amount equal to the Company's and Mr. Franklin's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Franklin meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Franklin's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Franklin is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Franklin under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Franklin's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Franklin under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Franklin is not entitled to benefits under Article V of the PPP Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Franklin's Termination Date and to the extent Mr. Franklin is entitled to participate therein, Mr. Franklin shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Executive PIP Plan. Provided Mr. Franklin is not entitled to benefits under Article IV of the Executive PIP Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Executive PIP Plan is in place through Mr. Franklin's Termination Date and to the extent Mr. Franklin is entitled to participate therein, Mr. Franklin shall be entitled to receive cash in an amount equal to his Award Opportunity for the Computation Periods in which the Termination Date shall have occurred at a target Value of Performance Unit of $1.00, prorated for each Performance Period by the number of months which have passed since the beginning of each of the Computation Periods until the Termination Date. (iv) Performance Dividend Plan. Provided Mr. Franklin is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iv) by reference), if the Performance Dividend Plan is in place through Mr. Franklin's Termination Date and to the extent Mr. Franklin is entitled to participate therein, Mr. Franklin shall be entitled to receive cash for each Award held by Mr. Franklin on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (v) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(v) shall apply if and to the extent that Mr. Franklin is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Franklin is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Franklin is entitled to participate therein, Mr. Franklin shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Franklin's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(v) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Franklin's Termination Date, or (ii) upon Mr. Franklin's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Franklin's death prior to the payment of all amounts due under this Agreement, Mr. Franklin's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Franklin and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Franklin's favor, the Company shall reimburse Mr. Franklin's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Franklin shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Franklin's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Franklin for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Dalhberg's favor, the Company shall reimburse Mr. Franklin's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Franklin's employment by the Company is terminated during the two year period following a Change in Control and Mr. Franklin accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Franklin is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Franklin hereunder shall not be reduced or suspended if Mr. Franklin accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Franklin's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Franklin, in the case of the Company, or to the Southern Board, in the case of Mr. Franklin. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Franklin, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Franklin. All other costs of arbitration shall be borne equally by Mr. Franklin and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Franklin's favor and Mr. Franklin is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Franklin under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Franklin. (c) Assignment. Mr. Franklin shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, -----. THE SOUTHERN COMPANY By: ____________________________________ SOUTHERN COMPANY SERVICES, INC. By: ____________________________________ MR. FRANKLIN ----------------------------- Henry Allen Franklin Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. Henry Allen Franklin upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, Henry Allen Franklin, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. Henry Allen Franklin Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 30 x10a84.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Nuclear Operating Company, Inc. (the "Company") and Mr. William G. Hairston, III ("Mr. Hairston") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on December 8, 1998. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Hairston is the President and Chief Executive Officer of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective December 8, 1998 (the "Original Agreement") to provide to Mr. Hairston certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Hairston's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Hairston or any Group of which Mr. Hairston is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Hairston, any Group of which Mr. Hairston is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Hairston, any Group composed exclusively of employees of the Company, any Group of which Mr. Hairston is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Hairston or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Southern Nuclear Operating Company, Inc., its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Hairston's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Hairston's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Hairston's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Hairston's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Hairston participates or is a party as of the date of the Change in Control or the elimination of Mr. Hairston's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Hairston's work location to a location more than fifty (50) miles from the office where Mr. Hairston is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Hairston's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Hairston of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Hairston's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Hairston's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Hairston under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Hairston was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Hairston with the number of paid vacation days to which Mr. Hairston is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Hairston, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Hairston, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Hairston has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Hairston's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Hairston substantially to perform his duties with the Company (other than any such failure resulting from Mr. Hairston's Total Disability or from Mr. Hairston's retirement or any such actual or anticipated failure resulting from termination by Mr. Hairston for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Hairston in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Hairston's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Hairston shall be deemed "willful" unless done, or omitted to be done, by Mr. Hairston not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Hairston shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Hairston and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Hairston was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Hairston's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Hairston's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Hairston's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Hairston has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Hairston's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Hairston voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Hairston shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Hairston shall not be eligible to receive benefits under this Agreement if Mr. Hairston: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Hairston meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Hairston an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Hairston under Code Section 280G exceeds three (3) times Mr. Hairston's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Hairston's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Hairston, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Hairston meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Hairston shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Hairston's Years of Service, not to exceed five (5) years. If Mr. Hairston elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Hairston's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Hairston's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Hairston pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Hairston in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Hairston in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Hairston or his dependents may elect. In the event that Mr. Hairston or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Hairston or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Hairston shall be entitled to receive cash in an amount equal to the Company's and Mr. Hairston's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Hairston meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Hairston's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Hairston is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Hairston under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Hairston's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Hairston under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Hairston is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Hairston's Termination Date and to the extent Mr. Hairston is entitled to participate therein, Mr. Hairston shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Hairston is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Hairston's Termination Date and to the extent Mr. Hairston is entitled to participate therein, Mr. Hairston shall be entitled to receive cash for each Award held by Mr. Hairston on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Hairston is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Hairston is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Hairston is entitled to participate therein, Mr. Hairston shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Hairston's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Hairston's Termination Date, or (ii) upon Mr. Hairston's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Hairston's death prior to the payment of all amounts due under this Agreement, Mr. Hairston's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Hairston and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Hairston's favor, the Company shall reimburse Mr. Hairston's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Hairston shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Hairston's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Hairston for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Hairston's favor, the Company shall reimburse Mr. Hairston's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Hairston's employment by the Company is terminated during the two year period following a Change in Control and Mr. Hairston accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Hairston is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Hairston hereunder shall not be reduced or suspended if Mr. Hairston accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Hairston's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Hairston, in the case of the Company, or to the Southern Board, in the case of Mr. Hairston. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Hairston, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Hairston. All other costs of arbitration shall be borne equally by Mr. Hairston and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Hairston's favor and Mr. Hairston is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Hairston under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Hairston. (c) Assignment. Mr. Hairston shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ SOUTHERN NUCLEAR OPERATING COMPANY, INC. By: ____________________________________ MR. HAIRSTON ----------------------------- William G. Hairston, III Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. William G. Hairston, III upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, William G. Hairston, III understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Nuclear Operating Company, Inc. (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. William G. Hairston, III Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 31 x10a85.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Alabama Power Company (the "Company") and Mr. Elmer B. Harris ("Mr. Harris") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on January 22, 1999. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Harris is the Chief Executive Officer and President of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective January 22, 1999 (the "Original Agreement") to provide to Mr. Harris certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Harris's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Harris or any Group of which Mr. Harris is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Harris, any Group of which Mr. Harris is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Harris, any Group composed exclusively of employees of the Company, any Group of which Mr. Harris is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Harris or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Alabama Power Company, its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Harris's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Harris's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Harris's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Harris's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Harris participates or is a party as of the date of the Change in Control or the elimination of Mr. Harris's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Harris's work location to a location more than fifty (50) miles from the office where Mr. Harris is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Harris's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Harris of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Harris's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Harris's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Harris under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Harris was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Harris with the number of paid vacation days to which Mr. Harris is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Harris, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Harris, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Harris has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Harris's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Harris substantially to perform his duties with the Company (other than any such failure resulting from Mr. Harris's Total Disability or from Mr. Harris's retirement or any such actual or anticipated failure resulting from termination by Mr. Harris for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Harris in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Harris's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Harris shall be deemed "willful" unless done, or omitted to be done, by Mr. Harris not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Harris shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Harris and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Harris was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Harris's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Harris's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Harris's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Harris has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Harris's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Harris voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Harris shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Harris shall not be eligible to receive benefits under this Agreement if Mr. Harris: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Harris meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Harris an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Harris under Code Section 280G exceeds three (3) times Mr. Harris's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Harris's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Harris, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Harris meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Harris shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Harris's Years of Service, not to exceed five (5) years. If Mr. Harris elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Harris's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Harris's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Harris pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Harris in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Harris in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Harris or his dependents may elect. In the event that Mr. Harris or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Harris or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Harris shall be entitled to receive cash in an amount equal to the Company's and Mr. Harris's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Harris meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Harris's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Harris is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Harris under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Harris's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Harris under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Harris is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Harris's Termination Date and to the extent Mr. Harris is entitled to participate therein, Mr. Harris shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Harris is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Harris's Termination Date and to the extent Mr. Harris is entitled to participate therein, Mr. Harris shall be entitled to receive cash for each Award held by Mr. Harris on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Harris is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Harris is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Harris is entitled to participate therein, Mr. Harris shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Harris's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Harris's Termination Date, or (ii) upon Mr. Harris's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Harris's death prior to the payment of all amounts due under this Agreement, Mr. Harris's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Harris and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Harris's favor, the Company shall reimburse Mr. Harris's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Harris shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Harris's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Harris for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Harris's favor, the Company shall reimburse Mr. Harris's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Harris's employment by the Company is terminated during the two year period following a Change in Control and Mr. Harris accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Harris is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Harris hereunder shall not be reduced or suspended if Mr. Harris accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Harris's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Harris, in the case of the Company, or to the Southern Board, in the case of Mr. Harris. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Harris, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Harris. All other costs of arbitration shall be borne equally by Mr. Harris and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Harris's favor and Mr. Harris is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Harris under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Harris. (c) Assignment. Mr. Harris shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ ALABAMA POWER COMPANY By: ____________________________________ MR. HARRIS ----------------------------- Elmer B. Harris Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. Elmer B. Harris upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, Elmer B. Harris, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Alabama Power Company (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. Elmer B. Harris Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 32 x10a86.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Savannah Electric & Power Company (the "Company") and Mr. G. Edison Holland, Jr. ("Mr. Holland") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on February 23, 1999. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Holland is the President and Chief Executive Officer of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective February 23, 1999 (the "Original Agreement") to provide to Mr. Holland certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Holland's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Holland or any Group of which Mr. Holland is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Holland, any Group of which Mr. Holland is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Holland, any Group composed exclusively of employees of the Company, any Group of which Mr. Holland is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Holland or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Savannah Electric & Power Company, its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Holland's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Holland's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Holland's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Holland's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Holland participates or is a party as of the date of the Change in Control or the elimination of Mr. Holland's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Holland's work location to a location more than fifty (50) miles from the office where Mr. Holland is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Holland's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Holland of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Holland's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Holland's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Holland under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Holland was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Holland with the number of paid vacation days to which Mr. Holland is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Holland, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Holland, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Holland has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Holland's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Holland substantially to perform his duties with the Company (other than any such failure resulting from Mr. Holland's Total Disability or from Mr. Holland's retirement or any such actual or anticipated failure resulting from termination by Mr. Holland for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Holland in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Holland's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Holland shall be deemed "willful" unless done, or omitted to be done, by Mr. Holland not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Holland shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Holland and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Holland was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Holland's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Holland's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Holland's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Holland has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Holland's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Holland voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Holland shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Holland shall not be eligible to receive benefits under this Agreement if Mr. Holland: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Holland meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Holland an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Holland under Code Section 280G exceeds three (3) times Mr. Holland's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Holland's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Holland, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Holland meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Holland shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Holland's Years of Service, not to exceed five (5) years. If Mr. Holland elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Holland's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Holland's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Holland pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Holland in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Holland in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Holland or his dependents may elect. In the event that Mr. Holland or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Holland or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Holland shall be entitled to receive cash in an amount equal to the Company's and Mr. Holland's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Holland meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Holland's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Holland is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Holland under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Holland's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Holland under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Holland is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Holland's Termination Date and to the extent Mr. Holland is entitled to participate therein, Mr. Holland shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Holland is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Holland's Termination Date and to the extent Mr. Holland is entitled to participate therein, Mr. Holland shall be entitled to receive cash for each Award held by Mr. Holland on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Holland is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Holland is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Holland is entitled to participate therein, Mr. Holland shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Holland's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Holland's Termination Date, or (ii) upon Mr. Holland's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Holland's death prior to the payment of all amounts due under this Agreement, Mr. Holland's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Holland and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Holland's favor, the Company shall reimburse Mr. Holland's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Holland shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Holland's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Holland for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Holland's favor, the Company shall reimburse Mr. Holland's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Holland's employment by the Company is terminated during the two year period following a Change in Control and Mr. Holland accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Holland is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Holland hereunder shall not be reduced or suspended if Mr. Holland accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Holland's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Holland, in the case of the Company, or to the Southern Board, in the case of Mr. Holland. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Holland, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Holland. All other costs of arbitration shall be borne equally by Mr. Holland and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Holland's favor and Mr. Holland is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Holland under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Holland. (c) Assignment. Mr. Holland shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ SAVANNAH ELECTRIC & POWER COMPANY By: ____________________________________ MR. HOLLAND ----------------------------- G. Edison Holland, Jr. Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. G. Edison Holland, Jr. upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, G. Edison Holland, Jr., understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Savannah Electric & Power Company (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. G. Edison Holland, Jr. Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 33 x10a87.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Alabama Power Company (the "Company") and Mr. C. Alan Martin ("Mr. Martin") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by Southern, Southern Company Services, Inc. and Mr. Martin, originally effective and executed on December 7, 1998. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Southern, Southern Company Services, Inc. and Mr. Martin entered into a Change in Control Agreement effective December 7, 1998 (the "Original Agreement") to provide to Mr. Martin certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or Southern Company Services, Inc.; WHEREAS, subsequent to the Original Agreement, Mr. Martin transferred to the Company and is its Executive Vice President; WHEREAS, the Company wishes to provide to Mr. Martin certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company to the same extent as prior to his transfer to the Company; WHEREAS, Southern, the Company and Mr. Martin wish to enter this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) reflect his current employment by the Company and to supersede the Original Agreement, (ii) change certain references from normal market bonus to target bonus, (iii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iv) delete references to the "Productivity Improvement Plan," (v) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (vi) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Martin's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Martin or any Group of which Mr. Martin is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Martin, any Group of which Mr. Martin is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Martin, any Group composed exclusively of employees of the Company, any Group of which Mr. Martin is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Martin or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Alabama Power Company, its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Martin's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Martin's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Martin's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Martin's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Martin participates or is a party as of the date of the Change in Control or the elimination of Mr. Martin's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Martin's work location to a location more than fifty (50) miles from the office where Mr. Martin is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Martin's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Martin of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Martin's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Martin's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Martin under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Martin was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Martin with the number of paid vacation days to which Mr. Martin is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Martin, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Martin, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Martin has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Martin's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Martin substantially to perform his duties with the Company (other than any such failure resulting from Mr. Martin's Total Disability or from Mr. Martin's retirement or any such actual or anticipated failure resulting from termination by Mr. Martin for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Martin in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Martin's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Martin shall be deemed "willful" unless done, or omitted to be done, by Mr. Martin not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Martin shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Martin and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Martin was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Martin's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Martin's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Martin's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Martin has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Martin's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Martin voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Martin shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Martin shall not be eligible to receive benefits under this Agreement if Mr. Martin: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Martin meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Martin an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Martin under Code Section 280G exceeds three (3) times Mr. Martin's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Martin's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Martin, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Martin meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Martin shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Martin's Years of Service, not to exceed five (5) years. If Mr. Martin elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Martin's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Martin's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Martin pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Martin in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Martin in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Martin or his dependents may elect. In the event that Mr. Martin or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Martin or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Martin shall be entitled to receive cash in an amount equal to the Company's and Mr. Martin's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Martin meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Martin's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Martin is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Martin under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Martin's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Martin under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Martin is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Martin's Termination Date and to the extent Mr. Martin is entitled to participate therein, Mr. Martin shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Martin is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Martin's Termination Date and to the extent Mr. Martin is entitled to participate therein, Mr. Martin shall be entitled to receive cash for each Award held by Mr. Martin on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Martin is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Martin is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Martin is entitled to participate therein, Mr. Martin shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Martin's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Martin's Termination Date, or (ii) upon Mr. Martin's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Martin's death prior to the payment of all amounts due under this Agreement, Mr. Martin's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Martin and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Martin's favor, the Company shall reimburse Mr. Martin's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Martin shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Martin's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Martin for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Martin's favor, the Company shall reimburse Mr. Martin's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Martin's employment by the Company is terminated during the two year period following a Change in Control and Mr. Martin accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Martin is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Martin hereunder shall not be reduced or suspended if Mr. Martin accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Martin's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Martin, in the case of the Company, or to the Southern Board, in the case of Mr. Martin. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Martin, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Martin. All other costs of arbitration shall be borne equally by Mr. Martin and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Martin's favor and Mr. Martin is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Martin under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Martin. (c) Assignment. Mr. Martin shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ ALABAMA POWER COMPANY By: ____________________________________ MR. MARTIN ----------------------------- C. Alan Martin Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. C. Alan Martin upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, C. Alan Martin, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Alabama Power Company (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. C. Alan Martin Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 34 x10a88.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. Charles Douglas McCrary ("Mr. McCrary") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on December 7, 1998. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. McCrary is the Executive Vice President of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective December 7, 1998 (the "Original Agreement") to provide to Mr. McCrary certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. McCrary's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. McCrary or any Group of which Mr. McCrary is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. McCrary, any Group of which Mr. McCrary is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. McCrary, any Group composed exclusively of employees of the Company, any Group of which Mr. McCrary is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. McCrary or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Southern Company Services, Inc., its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. McCrary's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. McCrary's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. McCrary's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. McCrary's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. McCrary participates or is a party as of the date of the Change in Control or the elimination of Mr. McCrary's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. McCrary's work location to a location more than fifty (50) miles from the office where Mr. McCrary is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. McCrary's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. McCrary of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. McCrary's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. McCrary's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. McCrary under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. McCrary was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. McCrary with the number of paid vacation days to which Mr. McCrary is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. McCrary, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. McCrary, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. McCrary has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. McCrary's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. McCrary substantially to perform his duties with the Company (other than any such failure resulting from Mr. McCrary's Total Disability or from Mr. McCrary's retirement or any such actual or anticipated failure resulting from termination by Mr. McCrary for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. McCrary in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. McCrary's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. McCrary shall be deemed "willful" unless done, or omitted to be done, by Mr. McCrary not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. McCrary shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. McCrary and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. McCrary was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. McCrary's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. McCrary's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. McCrary's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. McCrary has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. McCrary's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. McCrary voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. McCrary shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. McCrary shall not be eligible to receive benefits under this Agreement if Mr. McCrary: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. McCrary meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. McCrary an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. McCrary under Code Section 280G exceeds three (3) times Mr. McCrary's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. McCrary's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. McCrary, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. McCrary meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. McCrary shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. McCrary's Years of Service, not to exceed five (5) years. If Mr. McCrary elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. McCrary's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. McCrary's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. McCrary pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. McCrary in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. McCrary in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. McCrary or his dependents may elect. In the event that Mr. McCrary or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. McCrary or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. McCrary shall be entitled to receive cash in an amount equal to the Company's and Mr. McCrary's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. McCrary meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. McCrary's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. McCrary is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. McCrary under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. McCrary's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. McCrary under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. McCrary is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. McCrary's Termination Date and to the extent Mr. McCrary is entitled to participate therein, Mr. McCrary shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. McCrary is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. McCrary's Termination Date and to the extent Mr. McCrary is entitled to participate therein, Mr. McCrary shall be entitled to receive cash for each Award held by Mr. McCrary on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. McCrary is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. McCrary is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. McCrary is entitled to participate therein, Mr. McCrary shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. McCrary's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. McCrary's Termination Date, or (ii) upon Mr. McCrary's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. McCrary's death prior to the payment of all amounts due under this Agreement, Mr. McCrary's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. McCrary and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. McCrary's favor, the Company shall reimburse Mr. McCrary's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. McCrary shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. McCrary's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. McCrary for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. McCrary's favor, the Company shall reimburse Mr. McCrary's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. McCrary's employment by the Company is terminated during the two year period following a Change in Control and Mr. McCrary accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. McCrary is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. McCrary hereunder shall not be reduced or suspended if Mr. McCrary accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. McCrary's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. McCrary, in the case of the Company, or to the Southern Board, in the case of Mr. McCrary. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. McCrary, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. McCrary. All other costs of arbitration shall be borne equally by Mr. McCrary and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. McCrary's favor and Mr. McCrary is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. McCrary under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. McCrary. (c) Assignment. Mr. McCrary shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ SOUTHERN COMPANY SERVICES, INC. By: ____________________________________ MR. MCCRARY ----------------------------- Charles Douglas McCrary Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. Charles Douglas McCrary upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, Charles Douglas McCrary, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. Charles Douglas McCrary Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 35 x10a89.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Georgia Power Company (the "Company") and Mr. David M. Ratcliffe ("Mr. Ratcliffe") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on February 17, 1999. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Ratcliffe is the President and Chief Executive Officer of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective February 17, 1999 (the "Original Agreement") to provide to Mr. Ratcliffe certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Ratcliffe's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Ratcliffe or any Group of which Mr. Ratcliffe is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Ratcliffe, any Group of which Mr. Ratcliffe is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Ratcliffe, any Group composed exclusively of employees of the Company, any Group of which Mr. Ratcliffe is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Ratcliffe or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Georgia Power Company, its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Ratcliffe's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Ratcliffe's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Ratcliffe's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Ratcliffe's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Ratcliffe participates or is a party as of the date of the Change in Control or the elimination of Mr. Ratcliffe's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Ratcliffe's work location to a location more than fifty (50) miles from the office where Mr. Ratcliffe is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Ratcliffe's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Ratcliffe of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Ratcliffe's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Ratcliffe's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Ratcliffe under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Ratcliffe was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Ratcliffe with the number of paid vacation days to which Mr. Ratcliffe is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Ratcliffe, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Ratcliffe, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Ratcliffe has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Ratcliffe's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Ratcliffe substantially to perform his duties with the Company (other than any such failure resulting from Mr. Ratcliffe's Total Disability or from Mr. Ratcliffe's retirement or any such actual or anticipated failure resulting from termination by Mr. Ratcliffe for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Ratcliffe in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Ratcliffe's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Ratcliffe shall be deemed "willful" unless done, or omitted to be done, by Mr. Ratcliffe not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Ratcliffe shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Ratcliffe and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Ratcliffe was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Ratcliffe's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Ratcliffe's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Ratcliffe's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Ratcliffe has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Ratcliffe's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Ratcliffe voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Ratcliffe shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Ratcliffe shall not be eligible to receive benefits under this Agreement if Mr. Ratcliffe: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Ratcliffe meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Ratcliffe an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Ratcliffe under Code Section 280G exceeds three (3) times Mr. Ratcliffe's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Ratcliffe's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Ratcliffe, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Ratcliffe meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Ratcliffe shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Ratcliffe's Years of Service, not to exceed five (5) years. If Mr. Ratcliffe elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Ratcliffe's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Ratcliffe's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Ratcliffe pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Ratcliffe in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Ratcliffe in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Ratcliffe or his dependents may elect. In the event that Mr. Ratcliffe or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Ratcliffe or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Ratcliffe shall be entitled to receive cash in an amount equal to the Company's and Mr. Ratcliffe's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Ratcliffe meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Ratcliffe's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Ratcliffe is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Ratcliffe under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Ratcliffe's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Ratcliffe under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Ratcliffe is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Ratcliffe's Termination Date and to the extent Mr. Ratcliffe is entitled to participate therein, Mr. Ratcliffe shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Ratcliffe is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Ratcliffe's Termination Date and to the extent Mr. Ratcliffe is entitled to participate therein, Mr. Ratcliffe shall be entitled to receive cash for each Award held by Mr. Ratcliffe on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Ratcliffe is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Ratcliffe is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Ratcliffe is entitled to participate therein, Mr. Ratcliffe shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Ratcliffe's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Ratcliffe's Termination Date, or (ii) upon Mr. Ratcliffe's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Ratcliffe's death prior to the payment of all amounts due under this Agreement, Mr. Ratcliffe's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Ratcliffe and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Ratcliffe's favor, the Company shall reimburse Mr. Ratcliffe's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Ratcliffe shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Ratcliffe's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Ratcliffe for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Ratcliffe's favor, the Company shall reimburse Mr. Ratcliffe's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Ratcliffe's employment by the Company is terminated during the two year period following a Change in Control and Mr. Ratcliffe accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Ratcliffe is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Ratcliffe hereunder shall not be reduced or suspended if Mr. Ratcliffe accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Ratcliffe's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Ratcliffe, in the case of the Company, or to the Southern Board, in the case of Mr. Ratcliffe. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Ratcliffe, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Ratcliffe. All other costs of arbitration shall be borne equally by Mr. Ratcliffe and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Ratcliffe's favor and Mr. Ratcliffe is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Ratcliffe under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Ratcliffe. (c) Assignment. Mr. Ratcliffe shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ GEORGIA POWER COMPANY By: ____________________________________ MR. RATCLIFFE ----------------------------- David M. Ratcliffe Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. David M. Ratcliffe upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, David M. Ratcliffe, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Georgia Power Company (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. David M. Ratcliffe Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 36 x10a90.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. Stephen A. Wakefield ("Mr. Wakefield") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on December 7, 1998. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Wakefield is the Senior Vice President and General Counsel of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective December 7, 1998 (the "Original Agreement") to provide to Mr. Wakefield certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Wakefield's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Wakefield or any Group of which Mr. Wakefield is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Wakefield, any Group of which Mr. Wakefield is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Wakefield, any Group composed exclusively of employees of the Company, any Group of which Mr. Wakefield is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Wakefield or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Southern Company Services, Inc., its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Wakefield's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Wakefield's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Wakefield's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Wakefield's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Wakefield participates or is a party as of the date of the Change in Control or the elimination of Mr. Wakefield's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Wakefield's work location to a location more than fifty (50) miles from the office where Mr. Wakefield is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Wakefield's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Wakefield of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Wakefield's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Wakefield's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Wakefield under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Wakefield was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Wakefield with the number of paid vacation days to which Mr. Wakefield is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Wakefield, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Wakefield, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Wakefield has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Wakefield's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Wakefield substantially to perform his duties with the Company (other than any such failure resulting from Mr. Wakefield's Total Disability or from Mr. Wakefield's retirement or any such actual or anticipated failure resulting from termination by Mr. Wakefield for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Wakefield in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Wakefield's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Wakefield shall be deemed "willful" unless done, or omitted to be done, by Mr. Wakefield not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Wakefield shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Wakefield and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Wakefield was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Wakefield's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Wakefield's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Wakefield's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Wakefield has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Wakefield's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Wakefield voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Wakefield shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Wakefield shall not be eligible to receive benefits under this Agreement if Mr. Wakefield: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Wakefield meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Wakefield an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Wakefield under Code Section 280G exceeds three (3) times Mr. Wakefield's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Wakefield's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Wakefield, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Wakefield meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Wakefield shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Wakefield's Years of Service, not to exceed five (5) years. If Mr. Wakefield elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Wakefield's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Wakefield's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Wakefield pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Wakefield in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Wakefield in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Wakefield or his dependents may elect. In the event that Mr. Wakefield or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Wakefield or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Wakefield shall be entitled to receive cash in an amount equal to the Company's and Mr. Wakefield's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Wakefield meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Wakefield's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Wakefield is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Wakefield under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Wakefield's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Wakefield under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Wakefield is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Wakefield's Termination Date and to the extent Mr. Wakefield is entitled to participate therein, Mr. Wakefield shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Wakefield is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Wakefield's Termination Date and to the extent Mr. Wakefield is entitled to participate therein, Mr. Wakefield shall be entitled to receive cash for each Award held by Mr. Wakefield on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Wakefield is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Wakefield is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Wakefield is entitled to participate therein, Mr. Wakefield shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Wakefield's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Wakefield's Termination Date, or (ii) upon Mr. Wakefield's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Wakefield's death prior to the payment of all amounts due under this Agreement, Mr. Wakefield's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Wakefield and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Wakefield's favor, the Company shall reimburse Mr. Wakefield's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Wakefield shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Wakefield's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Wakefield for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Wakefield's favor, the Company shall reimburse Mr. Wakefield's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Wakefield's employment by the Company is terminated during the two year period following a Change in Control and Mr. Wakefield accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Wakefield is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Wakefield hereunder shall not be reduced or suspended if Mr. Wakefield accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Wakefield's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Wakefield, in the case of the Company, or to the Southern Board, in the case of Mr. Wakefield. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Wakefield, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Wakefield. All other costs of arbitration shall be borne equally by Mr. Wakefield and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Wakefield's favor and Mr. Wakefield is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Wakefield under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Wakefield. (c) Assignment. Mr. Wakefield shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ SOUTHERN COMPANY SERVICES, INC. By: ____________________________________ MR. WAKEFIELD ----------------------------- Stephen A. Wakefield Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. Stephen A. Wakefield upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, Stephen A. Wakefield, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. Stephen A. Wakefield Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 37 x10a91.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. W. Lawrence Westbrook ("Mr. Westbrook") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on December 7, 1998. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Westbrook is the Executive Vice President and Chief Financial Officer of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective December 7, 1998 (the "Original Agreement") to provide to Mr. Westbrook certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Westbrook's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Westbrook or any Group of which Mr. Westbrook is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Westbrook, any Group of which Mr. Westbrook is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Westbrook, any Group composed exclusively of employees of the Company, any Group of which Mr. Westbrook is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Westbrook or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Southern Company Services, Inc., its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Westbrook's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Westbrook's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Westbrook's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Westbrook's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Westbrook participates or is a party as of the date of the Change in Control or the elimination of Mr. Westbrook's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Westbrook's work location to a location more than fifty (50) miles from the office where Mr. Westbrook is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Westbrook's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Westbrook of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Westbrook's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Westbrook's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Westbrook under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Westbrook was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Westbrook with the number of paid vacation days to which Mr. Westbrook is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Westbrook, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Westbrook, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Westbrook has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Westbrook's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Westbrook substantially to perform his duties with the Company (other than any such failure resulting from Mr. Westbrook's Total Disability or from Mr. Westbrook's retirement or any such actual or anticipated failure resulting from termination by Mr. Westbrook for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Westbrook in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Westbrook's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Westbrook shall be deemed "willful" unless done, or omitted to be done, by Mr. Westbrook not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Westbrook shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Westbrook and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Westbrook was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Westbrook's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Westbrook's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Westbrook's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Westbrook has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Westbrook's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Westbrook voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Westbrook shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Westbrook shall not be eligible to receive benefits under this Agreement if Mr. Westbrook: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Westbrook meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Westbrook an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Westbrook under Code Section 280G exceeds three (3) times Mr. Westbrook's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Westbrook's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Westbrook, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Westbrook meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Westbrook shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Westbrook's Years of Service, not to exceed five (5) years. If Mr. Westbrook elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Westbrook's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Westbrook's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Westbrook pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Westbrook in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Westbrook in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Westbrook or his dependents may elect. In the event that Mr. Westbrook or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Westbrook or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Westbrook shall be entitled to receive cash in an amount equal to the Company's and Mr. Westbrook's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Westbrook meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Westbrook's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Westbrook is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Westbrook under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Westbrook's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Westbrook under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Westbrook is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Westbrook's Termination Date and to the extent Mr. Westbrook is entitled to participate therein, Mr. Westbrook shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Westbrook is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Westbrook's Termination Date and to the extent Mr. Westbrook is entitled to participate therein, Mr. Westbrook shall be entitled to receive cash for each Award held by Mr. Westbrook on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Westbrook is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Westbrook is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Westbrook is entitled to participate therein, Mr. Westbrook shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Westbrook's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Westbrook's Termination Date, or (ii) upon Mr. Westbrook's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Westbrook's death prior to the payment of all amounts due under this Agreement, Mr. Westbrook's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Westbrook and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Westbrook's favor, the Company shall reimburse Mr. Westbrook's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Westbrook shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Westbrook's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Westbrook for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Westbrook's favor, the Company shall reimburse Mr. Westbrook's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Westbrook's employment by the Company is terminated during the two year period following a Change in Control and Mr. Westbrook accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Westbrook is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Westbrook hereunder shall not be reduced or suspended if Mr. Westbrook accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Westbrook's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Westbrook, in the case of the Company, or to the Southern Board, in the case of Mr. Westbrook. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Westbrook, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Westbrook. All other costs of arbitration shall be borne equally by Mr. Westbrook and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Westbrook's favor and Mr. Westbrook is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Westbrook under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Westbrook. (c) Assignment. Mr. Westbrook shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ SOUTHERN COMPANY SERVICES, INC. By: ____________________________________ MR. WESTBROOK ----------------------------- W. Lawrence Westbrook Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. W. Lawrence Westbrook upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, W. Lawrence Westbrook, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. W. Lawrence Westbrook Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 38 x10a92.txt AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. Gale E. Klappa ("Mr. Klappa") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties effective October 6, 1999. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Klappa is Executive Vice President of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective October 6, 1999 (the "October 6, 1999 Agreement") to provide to Mr. Klappa certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; WHEREAS, pursuant to Section 6(d) of the October 6, 1999 Agreement, the Parties may amend the October 6, 1999 Agreement by written agreement; WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Klappa's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Klappa or any Group of which Mr. Klappa is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Klappa, any Group of which Mr. Klappa is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Klappa, any Group composed exclusively of employees of the Company, any Group of which Mr. Klappa is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Klappa or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Southern Company Services, Inc., its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "DIC Plan" shall mean the Southern Energy Resources, Inc. Deferred Incentive Compensation Plan or replacement thereto, as such plans may be amended from time to time. (l) "Effective Date" shall mean the date of execution of this Agreement. (m) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (o) "Good Reason" shall mean, without Mr. Klappa's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Klappa's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Klappa's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Klappa's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Klappa participates or is a party as of the date of the Change in Control or the elimination of Mr. Klappa's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(o), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Klappa's work location to a location more than fifty (50) miles from the office where Mr. Klappa is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Klappa's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Klappa of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(o)(iv) shall not be a waiver of Mr. Klappa's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Klappa's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Klappa under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Klappa was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Klappa with the number of paid vacation days to which Mr. Klappa is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(o), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (p) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (q) "Group Health Plan" shall mean the group health plan covering Mr. Klappa, as such plan may be amended from time to time. (r) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Klappa, as such plan may be amended from time to time. (s) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (t) "Month of Service" shall mean any calendar month during which Mr. Klappa has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (u) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (v) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (x) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (y) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (z) "Southern" shall mean The Southern Company, its successors and assigns. (aa) "Southern Board" shall mean the board of directors of Southern. (bb) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (cc) "Termination for Cause" or "Cause" shall mean the termination of Mr. Klappa's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Klappa substantially to perform his duties with the Company (other than any such failure resulting from Mr. Klappa's Total Disability or from Mr. Klappa's retirement or any such actual or anticipated failure resulting from termination by Mr. Klappa for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Klappa in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Klappa's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Klappa shall be deemed "willful" unless done, or omitted to be done, by Mr. Klappa not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Klappa shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Klappa and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Klappa was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(cc) and specifying the particulars thereof in detail. (dd) "Termination Date" shall mean the date on which Mr. Klappa's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (ee) "Total Disability" shall mean Mr. Klappa's total disability within the meaning of the Pension Plan. (ff) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (gg) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (hh) "Year of Service" shall mean Mr. Klappa's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Klappa has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Klappa's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Klappa voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Klappa shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Klappa shall not be eligible to receive benefits under this Agreement if Mr. Klappa: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Klappa meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Klappa an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Klappa under Code Section 280G exceeds three (3) times Mr. Klappa's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Klappa's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Klappa, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Klappa meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Klappa shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Klappa's Years of Service, not to exceed five (5) years. If Mr. Klappa elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Klappa's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Klappa's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Klappa pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Klappa in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Klappa in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Klappa or his dependents may elect. In the event that Mr. Klappa or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Klappa or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Klappa shall be entitled to receive cash in an amount equal to the Company's and Mr. Klappa's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Klappa meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Klappa's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Klappa is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Klappa under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Klappa's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Klappa under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Klappa is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Klappa's Termination Date and to the extent Mr. Klappa is entitled to participate therein, Mr. Klappa shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Klappa is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Klappa's Termination Date and to the extent Mr. Klappa is entitled to participate therein, Mr. Klappa shall be entitled to receive cash for each Award held by Mr. Klappa on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Klappa is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Klappa is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Klappa is entitled to participate therein, Mr. Klappa shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Klappa's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (v) DIC Plan. Provided Mr. Klappa is not entitled to benefits under Article V of the DIC Plan (the defined terms of which are incorporated into this Paragraph 2(d)(v) by reference), if the DIC Plan is in place through Mr. Klappa's Termination Date and to the extent that Mr. Klappa is entitled to participate therein, any of Mr. Klappa's Awards as of the Termination Date which are not then vested shall become fully vested and Mr. Klappa shall be entitled to receive cash in the amount equal to Mr. Klappa's Account as of his Termination Date. Notwithstanding anything in the DIC Plan to the contrary, the investment return on the Awards determined in accordance with Section 3.1 of the DIC Plan for any Plan Year following a Change in Control shall be no less than the investment return on the Awards determined in accordance with Section 3.1 of the DIC Plan as of the date of such Change in Control with respect to those Accounts which are outstanding as of the date of such Change in Control. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Klappa's Termination Date, or (ii) upon Mr. Klappa's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Klappa's death prior to the payment of all amounts due under this Agreement, Mr. Klappa's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Klappa and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Klappa's favor, the Company shall reimburse Mr. Klappa's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Klappa shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Klappa's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Klappa for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Klappa's favor, the Company shall reimburse Mr. Klappa's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Klappa's employment by the Company is terminated during the two year period following a Change in Control and Mr. Klappa accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Klappa is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Klappa hereunder shall not be reduced or suspended if Mr. Klappa accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Klappa's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Klappa, in the case of the Company, or to the Southern Board, in the case of Mr. Klappa. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Klappa, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Klappa. All other costs of arbitration shall be borne equally by Mr. Klappa and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Klappa's favor and Mr. Klappa is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Klappa under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Klappa. (c) Assignment. Mr. Klappa shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ SOUTHERN COMPANY SERVICES, INC. By: ____________________________________ MR. KLAPPA ----------------------------- Gale E. Klappa Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. Gale E. Klappa upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, Gale E. Klappa, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. Gale E. Klappa Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 39 x10a94.txt DEFERRED COMPENSATION AGREEMENT THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered into by and between THE SOUTHERN COMPANY, with its corporate offices located at 270 Peachtree Street, 14th Floor, Atlanta, Georgia 30303 (the "Company"), and WILLIAM L. WESTBROOK, residing at 10 Bohler Mews, Atlanta, Georgia 30327 ("Employee"). W I T N E S S E T H WHEREAS, Employee has been employed by the Company for approximately thirty-seven (37) years; WHEREAS, Employee is a highly compensated employee of the Company and is a member of its management; WHEREAS, in order to be eligible for benefits under this Agreement, the parties have agreed that Employee shall retire from employment with the Company on the earlier of the last day of a month mutually agreed upon by Employee and the Company, the last day of the month following the date the Company makes a pro-rata distribution to the holders of its common stock of all of the shares of Southern Energy, Inc. stock owned by the Company or June 30, 2001, but in no event shall Employee retire from employment with the Company prior to March 1, 2001; WHEREAS, the parties desire to delineate their respective rights, duties, and obligations attendant to such retirement, and desire to reach an accord and satisfaction of all claims arising from Employee's employment and his retirement, with appropriate releases; and WHEREAS, the Company desires to provide Employee with deferred compensation and other severance benefits for service he has provided or will provide for the Company prior to retirement; WHEREAS, it is the Company's intent that Employee otherwise receive all benefits and compensation which Employee has accrued as of his early retirement date, and this Agreement and the Release attached hereto is not intended in any way to affect Employee's right to such benefits and compensation; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: 1. Retirement from Employment. Upon Employee's execution of this Agreement, voluntary early retirement from employment on the earlier of the last day of a month mutually agreed upon by Employee and the Company, the last day of the month following the date the Company makes a pro-rata distribution to the holders of its common stock of all of the shares of Southern Energy, Inc. stock owned by the Company ("Spin-off") or June 30, 2001, but in no event prior to March 1, 2001 (the Employee's "Early Retirement Date"), and effectiveness of the Release attached hereto as Exhibit 1 (such effectiveness being no earlier than the Employee's Early Retirement Date), the Company shall pay to Employee the amounts described in Paragraph 2 hereof and shall apply the treatment set forth in Paragraph 3 to Employee's Nonqualified Stock Options under The Southern Company Performance Stock Plan. Employee agrees to provide the Company with at least 30 days prior written notification of his Early Retirement Date. Employee covenants and agrees that the consideration set forth in Paragraphs 2 and 3 is in full satisfaction of all sums owed to Employee, if any, by the Company, and constitutes good and complete consideration for his Release attached hereto as Exhibit 1, those nondisclosure, non-compete and ownership obligations under Paragraph 5 hereof and all other obligations and covenants of Employee contained herein. Employee agrees that this Agreement provides him certain benefits to which he would not otherwise be entitled. 2. Severance Payments to Employee. Subject to Paragraph 1, the Company shall pay the following amounts to employee: (a) On the effective date of the Release (such effective date being no earlier than the Employee's Early Retirement Date), the Company shall pay to Employee a lump sum amount equal to Five Hundred Fifty Thousand Two Hundred and No/100 Dollars ($550,200.00), plus a lump sum amount equal to any unused financial planning allowance as of his Early Retirement Date that is still payable in the year of his retirement hereunder (such financial planning allowance shall equal Seven Thousand and No/100 Dollars ($7,000.00) as of the commencement of the calendar year in which Employee retires, and such amount shall be reduced prior to Employee's retirement in accordance with its use). (b) Subject to Paragraph 1, in the event of a Spin-off, Company shall pay to Employee an amount ("Additional Spin-off Amount") determined in accordance with the following table: If Spin-off occurs: Additional Spin-off Amount is: ------------------- ------------------------------ On or before December 31, 2001 $223,000.00 After December 31, 2001, but $185,833.34 before January 1, 2003 After December 31, 2002, but $148,666.67 before January 1, 2004 After December 31, 2003, but $111,500.00 before January 1, 2005 After December 31, 2004, but $74,333.34 before January 1, 2006 After December 31, 2005, but $37,166.67 before January 1, 2007 After December 31, 2006 $0 The Additional Spin-Off Amount payable to Employee in accordance with this subparagraph 2(b), if any, shall be paid to Employee on the first day of the first month coincident with or next following the later of (i) the date of the Spin-Off, (ii) Employee's Early Retirement Date, and (iii) the effective date of the Release (such effective date being no earlier than Employee's Early Retirement Date). (c) Subject to the terms and conditions of this Agreement, including Paragraph 1 hereof, beginning on the effective date of the Release (such effective date being no earlier than Employee's Early Retirement Date), and thereafter on the first day of the month, the Company shall commence payment to Employee of a monthly installment ("Employee Replacement Benefit"), determined in accordance with the following table and adjusted as provided below: Employee's Early Retirement Date is: Employee Replacement Benefit is: March 31, 2001 $9,927.00 April 30, 2001 $9,727.00 May 31, 2001 $9,471.00 June 30, 2001 $9,268.00 Based upon the foregoing table and assuming for all purposes a single life annuity payout under the three plans listed below, the Employee Replacement Benefit, together with (i) the Retirement Income that Employee receives under The Southern Company Pension Plan ("Pension Plan"); (ii) the SERP Benefit the Employee receives under The Southern Company Supplemental Executive Retirement Plan ("SERP"); and (iii) the Pension Benefit that Employee receives under The Southern Company Supplemental Benefit Plan ("Supplemental Benefit Plan"), shall result in a total annual payment to Employee of Four Hundred Two Thousand Nine Hundred Forty-Five Dollars And No Cents ($402,945.00) ("Annual Floor"). The Employee Replacement Benefit and Annual Floor payable to Employee described above shall be adjusted to reflect the Employee's provisional payee option selected under The Southern Company Pension Plan ("Pension Plan") and shall be increased from time to time to reflect future increases, if any, in Retirement Income of retirees following the Employee's retirement. In accordance with Paragraph 16 hereof, Employee shall be responsible for all state and federal income taxes and his share of FICA taxes owed on the amounts payable in accordance with subparagraphs (a), (b) and (c) of this Paragraph 2, and Company shall make appropriate withholding of these amounts. 3. Employee's Stock Options Under The Southern Company Performance Stock Plan. Employee's Nonqualified Stock Options ("Stock Options") covering a total of 107,115 shares of common stock of the Company under The Southern Company Performance Stock Plan ("Performance Stock Plan") shall continue in accordance with their terms; provided, however, that, subject to Paragraph 1, for all purposes of the Company's Performance Stock Plan, Employee's retirement on his Early Retirement Date in accordance with this Agreement shall be deemed to constitute Retirement (as defined in the Company's Performance Stock Plan) with the result thereof to include that as of Employee's Early Retirement Date, (i) all of Employee's existing Stock Options, and all of his rights therein, will become fully vested and non-forfeitable; (ii) any restrictions or reductions applicable to option holders under the Company's Performance Stock Plan in case of early retirement shall be inapplicable; and (iii) the sixty-month exercise period under the Performance Stock Plan with respect to such Stock Options (which is subject to the expiration of such Stock Options) shall commence as of Employee's Early Retirement Date. The Company agrees that the Employee's existing Stock Options will be adjusted for the Spin-off in the same manner as other participants under the Performance Stock Plan. 4. Publicity; No Disparaging Statement. Except as otherwise provided in Paragraph 9 hereof, Employee and the Company covenant and agree that they shall not engage in any communications which shall disparage one another or interfere with their existing or prospective business relationships. 5. Non-Disclosure, Non-Solicitation and Non-Competition Provisions. (a) Preamble. As a material inducement to the Company to enter into this Agreement, and its recognition of the valuable experience, knowledge and proprietary information Employee gained from his employment with the Company, Employee agrees he will abide by and adhere to the following Non-Disclosure, Non-Solicitation and Non-Competition Provisions. (b) Definitions. For purposes of this Paragraph 5, the following terms shall have the following meanings: (i) "Confidential Information" shall mean the proprietary and confidential data or information, other than "Trade Secrets" (as defined below), (A) that either (i) belongs to the Company or (ii) pertains to the Company and that, if it does not belong to the Company, is either subject to a confidentiality agreement or belongs to or is held by a third party that the Company reasonably expects will maintain the proprietary or confidential nature of the data or information, including, but not limited to, attorneys and accountants engaged by the Company, and (B) that is of value to the Company and is not generally known to the public but is generally known only to the Company and those of its employees, independent contractors or agents to whom such information must be confided for business purposes, regarding the products, services, contractual arrangements, customers, suppliers, and partners of the Company gained by Employee as a result of his employment with the Company. Confidential Information shall also include other items that the Company may from time to time mark or otherwise identify as confidential, provided that Employee has knowledge of such marking or identification. As used in this subsection, "Company" shall include any of the Company's affiliates. (ii) "Entity" shall mean any business, individual, partnership, joint venture, agency, governmental subdivision, association, firm, corporation or other entity. (iii) "Territory" shall include the geographic area in which Southern Company and any of its affiliates, exclusive of Southern Energy, Inc., provides electrical service to retail customers as of the date of this Agreement. (iv) "Trade Secrets" shall mean information of the Company or any of its affiliates which (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; it being agreed that such information includes, without limitation, non-public information related to the rate making process of the Company, or its affiliates, technical and non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans or a list of actual or potential customers or suppliers or any other information which is defined as a "trade secret" under applicable law. (v) "Work Product" shall mean all tangible work product, property, data, documentation, concepts or plans, inventions, improvements, techniques and processes relating to the Company or any of its affiliates that were conceived, discovered, created or developed by Employee pursuant to his employment with the Company. (c) Nondisclosure: Ownership of Proprietary Property. (i) In recognition of the need of the Company to protect its legitimate business interests, Employee hereby covenants and agrees that: (A) with regard to each item constituting all or any portion of a Trade Secret at all times such information remains a "trade secret" under applicable law and (B) with regard to any Confidential Information, for a period of three (3) years following the Early Retirement Date (hereafter the "Nondisclosure Period"), Employee shall regard and treat Trade Secrets and all Confidential Information as strictly confidential and wholly-owned by the Company and shall not, for any reason, in any fashion, either directly or indirectly, use, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, reproduce, copy, misappropriate or otherwise communicate any such item or information to any third party or Entity for any purpose other than in accordance with this Agreement, as required by applicable law, or to defend against litigation brought by the Company alleging a breach by Employee of the non-disclosure provisions of Paragraph 5 of this Agreement. Employee shall exercise all reasonable best efforts to ensure the continued confidentiality of all Trade Secrets and Confidential Information of the Company known by, disclosed to or made available to Employee in connection with his employment relationship with the Company or any other past or present relationship with the Company. Employee shall immediately notify the Company of any unauthorized disclosure or use of any Trade Secrets or Confidential Information of which Employee becomes aware. Employee shall assist the Company, to the extent necessary and reasonable, in the procurement of any protection of the Company's rights to or in any of the Trade Secrets or Confidential Information. (ii) All Work Product shall be owned exclusively by the Company. To the greatest extent possible, any Work Product shall be deemed to be "work made for hire" (as defined in the Copyright Act, 17 U.S.C.A.ss. 101 et seq., as amended), and Employee hereby unconditionally and irrevocably transfers and assigns to the Company all right, title and interest Employee currently has or may have by operation of law or otherwise in or to any Work Product, including, without limitation, all patents, copyrights, trademarks, trade secrets, service marks and other intellectual property rights. Employee agrees to execute and deliver to the Company any transfers, assignments, documents or other instruments which the Company may deem necessary or appropriate, from time to time, to vest complete title and ownership of any and all Work Product, and all associated intellectual property and other rights therein, exclusively in the Company. (iii) Employee represents and agrees that he will keep the terms and amount of this Agreement completely confidential, and except to his personal agents or legal counsel to the extent required by law or as necessary to either defend against litigation brought by the Company alleging a breach by Employee of the non-disclosure provisions of Paragraph 5 of this Agreement or arbitrate a claim or dispute pursuant to Paragraph 19 of this Agreement, he will not hereafter disclose this information concerning this Agreement to anyone, including, but not limited to, any past, present, or prospective employee or applicant for employment with the Company. Employee may only disclose to future, potential employers of Employee that he participates in a deferred compensation arrangement with the Company which imposes certain restrictions on him related to such future, potential employment. (d) No Employment. Employee agrees that he shall not hereafter seek any re-employment with the Company, its parent, its affiliates or its subsidiaries. (e) Non-Solicitation of Employees. Employee agrees, during the three (3) years following the Employee's separation from employment, that he will not, either directly or indirectly, alone or in conjunction with any other person or entity, actively recruit, engage in passive hiring efforts, solicit, attempt to solicit, or induce any person who, during such three year period, or within one year prior to Employee's separation from employment, was an exempt employee of the Company or any of its subsidiaries, or was an officer of the Company or any of its affiliates to leave or cease such employment for any reason whatsoever or hire or engage the services of such person in any business substantially similar or competitive with that in which The Southern Company and its affiliates were engaged during the employment. (f) Non-Competition. Employee agrees that, for a period of two (2) years from the date of separation of employment with the Company, he will not: (i) be employed by an entity which is engaged in the generation, transmission, distribution or sale, whether at retail or wholesale, of electricity within the Territory, or (ii) consult for or advise any entity with respect to the acquisition or development of power generation assets located or to be located within the Territory, or (iii) unless requested by the Company or required by law to do so, testify or otherwise appear with respect to or regarding a matter affecting Southern Company, its subsidiaries or Southern Energy, Inc., before any (A) regulatory agency, government commission or regulatory body within the Territory, (B) the Federal Energy Regulatory Commission or (C) the Securities and Exchange Commission. Notwithstanding these limitations, and by way of clarification, Employer agrees that Employee may at any time engage in a consulting relationship with any entity, whether or not within the Territory, to provide advice as to financial matters, such as capital budgeting, capital processes, debt or equity offerings, project finance, commercial paper transactions, rating agency matters, risk management, insurance, and other similar finance related matters, provided that such consultation does not violate the restrictions set forth in (ii) and (iii) of this subsection (f). Further, Employee may at any time consult for, advise or serve on the board of directors of a technology development company that is involved in electric power technology, such as fuel cell or micro-turbine technology, provided that such company is not involved in the generation, transmission, distribution or sale of electricity in the Territory in excess of ten (10) megawatts. Employee and Company expressly covenant and agree that the scope, territorial, time and other restrictions contained in this Agreement constitute the most reasonable and equitable restrictions possible to protect the business interest of the Company given: (1) the business of the Company; (2) the competitive nature of the Company's industry; and (3) that Employee's skills are such that he could easily find alternative, commensurate employment or consulting work in his field which would not violate any of the provisions of this Agreement. 6. Return of Materials. Upon the Employee's retirement or earlier termination, or at any point after that time upon the specific request of the Company, Employee shall return to the Company all written or descriptive materials or any other property of any kind belonging to the Company, its Affiliates, or its agents, including, without limitation, any Intellectual Property, Confidential Information and Trade Secrets, in Employee's possession. 7. Cooperation. The parties agree that as a result of Employee's duties and activities during his employment, Employee's reasonable availability may be necessary for the Company to meaningfully respond to or address actual or threatened litigation, or government inquiries or investigations, or required filings with state, federal or foreign agencies (hereinafter "Company Matters"). Upon request of the Company, and at any point following termination of employment, Employee will make himself available to the Company for reasonable periods consistent with his future employment, if any, by other Entities and will cooperate with its agents and attorneys as reasonably required by such Company matters. The Company will reimburse Employee for any reasonable out-of-pocket expenses associated with providing such cooperation. 8. Termination with Cause. In the event of Employee's termination of employment for Cause at any time prior to Employee's Early Retirement Date, the Employee shall forfeit all of the benefits provided in Paragraphs 2 and 3, and the Company and Employee shall have no further obligations with respect to this Agreement or the Release attached as Exhibit 1 other than, as to Employee, the return of information under Paragraph 6. As used in this Agreement, the term "Cause" shall mean Employee's gross negligence or willful misconduct in the performance of his duties and services required in the course of employment by the Company; or a material breach of the fiduciary obligations owed by an officer and an employee to Southern, provided that the Company has given written notice to Employee of such gross negligence, willful misconduct or material breach and Employee has failed to cure such gross negligence, willful misconduct or material breach within fifteen (15) days after Employee receives such notice. No act or failure by Employee shall be deemed "willful" unless done, or omitted to be done, by Employee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. 9. Confidentiality and Legal Process. The Parties hereto each represent and agree that they will keep the terms, amount and fact of this Agreement confidential and that they will not hereafter disclose any information concerning this Agreement to any one other than their respective agents or legal counsel. Employee specifically acknowledges and agrees that he will not hereafter disclose any information concerning this Agreement to any past, present, or prospective employee or applicant for employment with Company. Notwithstanding the foregoing, nothing in this Agreement shall preclude Employee from disclosing to any prospective employer or client, in connection with its decision to hire Employee, solely that he entered into an arrangement with the Company which imposes certain restrictions on him related to such future potential employment or retention. Nothing in this Agreement is intended to prohibit either party from performing any duty or obligation that shall arise as a matter of law. Specifically, Employee shall continue to be under a duty to truthfully respond to any legal and valid subpoena or other legal process. This Agreement is not intended in any way to proscribe either party's right and ability to provide information to any federal, state or local government in the lawful exercise of such governments' governmental functions. 10. Successors And Assigns; Applicable Law. This Agreement shall be binding upon and inure to the benefit of Employee and his heirs, administrators, representatives, executors, successors and assigns, and shall be binding upon and inure to the benefit of Southern, the Company and their officers, directors, employees, agents, shareholders, parent corporation and affiliates, and their respective predecessors, successors, assigns, heirs, executors and administrators and each of them, and to their heirs, administrators, representatives, executors, successors and assigns. This Agreement shall be construed and interpreted in accordance with the laws of the State of Georgia, United States of America (without giving effect to principles of conflicts of laws). 11. Complete Agreement. This Agreement shall constitute the full and complete Agreement between the parties concerning its subject matter and fully supersedes any and all other prior Agreements or understandings between the parties concerning the subject matter hereof. This Agreement shall not be modified or amended except by a written instrument signed by both Employee and an authorized representative of the Company. 12. Severability. The unenforceability or invalidity of any particular provision of this Agreement shall not affect its other provisions, and to the extent necessary to give such other provisions effect, they shall be deemed severable. 13. Waiver Of Breach; Specific Performance. The waiver of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other breach. Each of the parties to this Agreement will be entitled to enforce its or his rights under this Agreement, specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its or his favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its or his sole discretion apply to any court of law or equity of competent jurisdiction for specific performance or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Notwithstanding anything contained in this Agreement to the contrary, the Company acknowledges and agrees that following Employee's retirement pursuant to this Agreement, it shall pay all of its obligations under this Agreement when due without set off or reduction as a result of any defense or claim that the Company may have at any time against the Employee. Notwithstanding the preceding sentence, Employee acknowledges that Company shall have the right to pursue Employee for recovery of such payments for Employee's violation of the terms of this Agreement, and in the event of a final judgment against Employee, Company shall recover pursuant to such judgment and, if the judgment so provides, cease any additional payments hereunder. 14. Unsecured General Creditor. The Company shall neither reserve nor specifically set aside funds for the payment of its obligations under this Agreement, and such obligations shall be paid solely from the general assets of the Company. Notwithstanding that Employee may be entitled to receive the value of his benefit under the terms and conditions of this Agreement, the assets from which such amount may be paid shall at all times be subject to the claims of the Company's creditors. 15. No Effect On Other Arrangements. It is expressly understood and agreed that the payments made in accordance with this Agreement are in addition to any other benefits or compensation to which Employee may be entitled or for which he may be eligible, whether funded or unfunded, by reason of his employment with the Company, including but not limited to, (i) those rights and benefits to which Employee is entitled under the Change of Control Agreement between The Southern Company, Southern Company Services, Inc. and Employee, provided Employee remains employed by the Company and such Change in Control Agreement by its terms is in effect; (ii) all benefits accrued by Employee as of his Early Retirement Date, including, but not limited to, those provided under the terms of The Southern Company Performance Pay Plan; and (iii) any rights to indemnification in respect of his services as an employee, officer and/or director of the Company or any of its subsidiaries or affiliates as provided by law or the Certificate of Incorporation and/or By-laws (or like constitutive documents) of the Company or any of its subsidiaries or affiliates. 16. Tax Withholding. There shall be deducted from each payment under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Employee. 17. Compensation. Any compensation contributed on behalf of Employee under this Agreement shall not be considered "compensation," as the term is defined in The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, The Southern Company Performance Sharing Plan or The Southern Company Pension Plan. Payments under this Agreement shall not be considered wages, salaries or compensation under any other employee benefit plan. 18. No Guarantee of Employment. No provision of this Agreement shall be construed to affect in any manner the existing rights of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship of Employee and the Company. 19. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for benefits hereunder and the arbitrators' award shall be final and binding. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Employee, in the case of the Company, or to the Southern Corporate Secretary, in the case of Employee. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Employee, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be borne equally by Employee and the Company. All other costs of arbitration shall be borne equally by Employee and the Company, provided, however, that in the event any material issue in the dispute being arbitrated hereunder is finally resolved in Employee's favor, the Company shall reimburse Employee for all such fees and costs paid by Employee and Employee's legal fees incurred with respect to such dispute in an amount not to exceed $50,000. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 19 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 19 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 19. 20. Non-Qualified Benefit Security - Annuitization. (a) Company acknowledges and agrees that Employee shall be eligible for a partial annuitization of his non-qualified pension benefit between his Early Retirement Date and the later of the third anniversary of his Early Retirement Date or the date on which he attains age 65, in accordance with Company policy, including but not limited to the following: (i) Annuitizable benefit equals the excess, if any, of the Employee's total non-qualified pension plan benefits over 40% of the Employee's total qualified and non-qualified pension plan benefits; (ii) Pension plan benefits include only those benefits payable by: a. Any Southern, or affiliated company sponsored, tax qualified pension plan; and b. The following pension plans which are not tax qualified: Southern Company Supplemental Benefit Plan, Southern Company Supplemental Executive Retirement Plan, Southern Energy, Inc. Supplemental Executive Retirement Plan, and Savannah Electric Power Company Supplemental Executive Retirement Plan. (b) Consistent with Company policy, with respect to any partial annuitization of non-qualified pension benefits, the Company will "tax equalize" the annuity benefit and provide Employee with a "tax equalization gross up" due to the significant differences between the taxation of monthly non-qualified pension benefits and monthly annuity benefits. (c) The parties acknowledge and agree that the annuitization policy described in this Paragraph 20 does not apply to any obligations of the Company described in the preceding Paragraphs of this Agreement. 21. Notices. All notices, demands, elections, requests and other communications hereunder shall be in writing and shall be deemed to have been given to a party hereto, if personally delivered, on the date of such delivery, or five days after having been mailed, postage prepaid, by certified or registered mail, return receipt requested, to the party at its or his address as set forth at the beginning hereof (in the case of the Company, marked to the attention of the Secretary, or, in the case of Paragraph 19, to the attention of the Company's Board of Directors) or to such other address as the party may designate by notice given in conformity with the foregoing. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, this ___ day of ________________, 2001. "COMPANY" THE SOUTHERN COMPANY By: --------------------------------- Its: --------------------------------- "EMPLOYEE" WILLIAM L. WESTBROOK EXHIBIT 1 to Deferred Compensation Agreement with WILLIAM L. WESTBROOK RELEASE AGREEMENT THIS RELEASE ("Release') is made and entered into by WILLIAM L. WESTBROOK ("Employee") for the benefit of THE SOUTHERN COMPANY, and its successor or assigns ("Company"). WHEREAS, Employee and Company have agreed that Employee shall retire from employment with The Southern Company on the earlier of the last day of a month mutually agreed upon by Employee and the Company, the last day of the month following the date the Company makes a distribution to the holders of its common stock of all of the shares of Southern Energy, Inc. stock owned by the Company or June 30, 2001, but in no event shall Employee retire from employment with the Company prior to March 1, 2001; WHEREAS, Employee and the Company have previously entered into that certain Deferred Compensation Agreement, dated _________________, 2001 ("Agreement"), that this Release is incorporated therein by reference; WHEREAS, the Agreement delineates the Employee's and Company's respective rights, duties and obligations attendant to such retirement, and Employee and Company desire to reach an accord and satisfaction of all claims arising from Employee's employment, and his retirement from employment, with appropriate releases, in accordance with the Agreement; WHEREAS, the Company desires to provide Employee with deferred compensation in accordance with the Agreement for service he has or will provide for the Company prior to his retirement; NOW, THEREFORE, in consideration of the premises and the agreements of the parties set forth in this Release, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: 1. Release. Employee does hereby remise, release and forever discharge the Company and their officers, directors, employees, agents, shareholders, parent corporation and affiliates, and their respective predecessors, successors, assigns, heirs, executors and administrators (collectively, "Releasees"), of and from all manner of actions and causes of action, suits, debts, claims and demands whatsoever at law or in equity, known or unknown, actual or contingent, including, but not limited to, any claims which have been asserted, or could be asserted now or in the future, against any Releasees arising under any and all federal, state or local laws and any common law claims, and including, but not limited to, any claims Employee may have pursuant to the Age Discrimination in Employment Act and any claims to benefits under any and all offer letters, employment or separation agreements, or bonus, severance, workforce reduction, early retirement, out-placement, or other similar plans sponsored by the Company, now or hereafter recognized (collectively, "Claims"), which he ever had or now has or may in the future have, by reason of any matter, cause or thing arising out of his employment relationship and privileges, his serving as an employee of the Company or the separation from his employment relationship or affiliation as an employee of the Company as of the date of this Release against each of the Releasees. Notwithstanding the foregoing, Employee does not release (i) any Claims under the Age Discrimination in Employment Act that may arise after his execution of this Release; (ii) any rights to indemnification from the Company in respect of Employee's Services as an employee, officer and/or director of the Company or any of its subsidiaries or affiliates as provided by law or the Certificate of Incorporation and/or Bylaws (or like constitutive documents of the Company or any of its subsidiaries or affiliates); (iii) any rights that Employee may have under the Agreement; or (iv) any rights to benefits accrued by Employee as of his termination date. 2. No Assignment of Claim. Employee represents that he has not assigned or transferred, or purported to assign or transfer, any Claims or any portion thereof or interest therein to any party prior to the date of this Release. 3. Deferred Compensation. In accordance with the Deferred Compensation Agreement, the Company agrees to provide the Employee or his spouse, as the case may be, the benefits provided in Paragraphs 2 and 3 of the Agreement. 4. No Admission Of Liability. This Release shall not in any way be construed as an admission by the Company or Employee of any improper actions or liability whatsoever as to one another, and each specifically disclaims any liability to or improper actions against the other or any other person, on the part of itself or himself, its or his employees or agents. 5. Voluntary Execution. Employee warrants, represents and agrees that he has been encouraged in writing to seek advice from anyone of his choosing regarding this Release, including his attorney and accountant or tax advisor prior to his signing it; that this Release represents written notice to do so; that he has been given the opportunity and sufficient time to seek such advice; and that he fully understands the meaning and contents of this Release. He further represents and warrants that he was not coerced, threatened or otherwise forced to sign this Release, and that his signature appearing hereinafter is voluntary and genuine. EMPLOYEE UNDERSTANDS THAT HE MAY TAKE UP TO TWENTY-ONE (21) DAYS TO CONSIDER WHETHER OR NOT HE DESIRES TO ENTER INTO THIS RELEASE. 6. Ability to Revoke Agreement. EMPLOYEE UNDERSTANDS THAT HE MAY REVOKE THIS RELEASE BY NOTIFYING THE COMPANY IN WRITING OF SUCH REVOCATION WITHIN SEVEN (7) DAYS OF HIS EXECUTION OF THIS RELEASE AND THAT THIS RELEASE IS NOT EFFECTIVE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. HE UNDERSTANDS THAT UPON THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD THIS RELEASE WILL BE BINDING UPON HIM AND HIS HEIRS, ADMINISTRATORS, REPRESENTATIVES, EXECUTORS, SUCCESSORS AND ASSIGNS AND WILL BE IRREVOCABLE. I UNDERSTAND THAT BY SIGNING THIS RELEASE, I AM GIVING UP RIGHTS I MAY HAVE. I UNDERSTAND THAT I DO NOT HAVE TO SIGN THIS RELEASE. "EMPLOYEE" WILLIAM L. WESTBROOK -------------------------------------------- Date WITNESSED BY: - -------------------------------------------- - -------------------------------------------- Date EX-10 40 x10a95.txt Exhibit 10(a)95 DEFERRED COMPENSATION AGREEMENT THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered into by and between THE SOUTHERN COMPANY (the "Company") and ALFRED W. DAHLBERG, III ("Employee"). W I T N E S S E T H WHEREAS, Employee has been employed by the Company for approximately forty-one (41) years; WHEREAS, Employee is a highly compensated employee of the Company and is a member of its management; WHEREAS, the parties have agreed that Employee's employment with the Company shall terminate on or about April 1, 2001; WHEREAS, the parties desire to delineate their respective rights, duties, and obligations attendant to such termination of employment, and desire to reach an accord and satisfaction of all claims arising from Employee's employment and his termination of employment, with appropriate releases; and WHEREAS, the Company desires to provide Employee with deferred compensation and other severance benefits for service he has provided or will provide for the Company; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: 1. Termination of Employment. Upon Employee's execution of this Agreement, voluntary termination of employment with the Company on or about April 1, 2001 (the Employee's "Termination Date"), and effectiveness of the Release attached hereto as Exhibit 1 (such effectiveness being no earlier than the Employee's Termination Date), the Company agrees to pay to Employee or his spouse, if applicable, the amounts described in Paragraphs 3, 4, 5, 6, 8 and 9 hereof. Employee covenants and agrees that the consideration set forth in Paragraphs 2(b), 3, 4, 5, 6, 8 and 9 is in full satisfaction of all sums owed to Employee, if any, by the Company, and constitutes good and complete consideration for his Release attached hereto as Exhibit 1, those nondisclosure, non-compete and ownership obligations under Paragraph 11 hereof and all other obligations and covenants of Employee contained herein. Employee agrees that this Agreement provides him certain benefits to which he would not otherwise be entitled. 2. Stock Option Grant for Year 2001. (a) Company has granted to Employee an Award of Non-Qualified Stock Options ("Options") under The Southern Company Performance Stock Plan ("Performance Stock Plan") that when multiplied by The Southern Company's stock price at the time of grant equals or exceeds Six Million Six Hundred Forty Thousand Dollars and No Cents ($6,640,000.00). (b) In addition, Company has granted to Employee 350,000 Options which represents approximately thirty-three percent (33%) of Employee's outstanding and unexercised options granted prior to January 1, 2001. The amount of Options granted in accordance with the preceding sentence was based on the projected adjustment that the Company intends to make to all outstanding options on account of the anticipated spin-off of Mirant Corporation from the Southern Company. The adjustment is designed to provide option holders with a similar aggregate value in options before and after such transaction. (c) Options granted in accordance with 2(a) and (b) above shall be used to calculate Employee's Awards under The Southern Company Performance Dividend Plan and Supplemental Performance Dividend Payments under Paragraph 9 herein. 3. Severance Payment to Employee. Subject to Paragraph 1, on the effective date of the Release (such effective date being no earlier than the Employee's Termination Date), the Company shall pay to Employee a lump sum amount equal to Two Hundred Thousand Dollars and No Cents ($200,000.00) for miscellaneous perquisites. In accordance with Paragraph 22, Employee shall be responsible for all state and federal income taxes and his share of FICA taxes owed on the foregoing amount, and Company shall make appropriate withholding of these amounts. 4. Supplemental Pension Payments. Subject to the terms and conditions of this Agreement, including Paragraph 1 hereof, beginning the first day of the first month following both Employee's Termination Date and the effective date of the Release (such effective date being no earlier than the Employee's Termination Date), the Company shall pay to Employee an Employee Replacement Benefit adjusted pursuant to subparagraph 4(c) below. (a) "Employee Replacement Benefit" shall mean a monthly amount equal to the difference between Employee's Monthly Retirement Benefit and the Monthly Retirement Benefit which would have been payable to Employee if: (i) Employee's Accrued Retirement Income under The Southern Company Pension Plan ("Pension Plan"), SERP Benefit under The Southern Company Supplemental Executive Retirement Plan ("SERP") and Pension Benefit under The Southern Company Supplemental Benefit Plan ("Supplemental Benefit Plan") were not reduced for Early Retirement; (ii) Employee's Retirement Income under the Pension Plan, SERP Benefit under the SERP and Pension Benefit under the Supplemental Benefit Plan were calculated as if: (x) Employee's period of Accredited Service under the Pension Plan included an additional year and one month of Accredited Service; (y) Employee's Average Monthly Earnings were determined as if Employee received Earnings through April 30, 2002, with a three percent (3%) increase (or, if greater, his actual awarded increase) in base salary for the immediately preceding year on March 1, 2001, and a three percent (3%) increase in base salary on March 1, 2002; and (z) Employee received (i) an Incentive Pay Award for the 2001 Performance Period under The Southern Company Performance Pay Plan (Shareholder Approved) ("Performance Pay Plan"), or any other similar plans in which the Employee participates, equal to the greater of 150% of target as established by the Compensation and Management Succession Committee of the Board of Directors of The Southern Company ("Compensation Committee"), or the actual Awards which would have been paid to Employee under such plans if Employee had continued employment through the last day of the 2001 Performance Period and if Employee's 2001 Annual Salary was calculated taking into consideration the increase in base salary contemplated under subsection (y) immediately above, and (ii) an Incentive Pay Award for the 2002 Performance Period under the Performance Pay Plan, or any other similar plans in which the Employee participates, equal to the greater of 150% of target as established by the Compensation Committee or the actual Awards which would have been paid to Employee under such plans if Employee continued employment until, and retired on, April 30, 2002, and if Employee's 2002 Annual Salary was calculated taking into consideration the increases in base salary contemplated under subsection (y) immediately above. (b) "Monthly Retirement Benefit" shall mean the sum of the monthly amount payable to Employee as of his Termination Date under each of the Pension Plan, the SERP and the Supplemental Benefit Plan. (c) The benefits provided in this Paragraph 4 and Paragraph 5 below shall be adjusted to reflect the provisional payee option selected under the Pension Plan. For purposes of calculating the Retirement Income in these Paragraphs, no limitation on benefits imposed by the Internal Revenue Code as it now exists or is hereinafter amended, or any limiting legislation, shall be taken into account. Any amounts payable in accordance with this Paragraph 4 and Paragraph 5 below shall be recalculated from time to time to reflect future increases, if any, in Retirement Income of retirees following the Employee's retirement. 5. Minimum Pension Payments. Notwithstanding the terms of this Agreement, in no event shall the sum of the payments to Employee under the Pension Plan, the SERP, the Supplemental Benefit Plan and Paragraph 4 of this Agreement (collectively, "Pension Payments"), equal less than a single life annuity of One Million Seven Hundred Thirty-Three Thousand Dollars and No Cents ($1,733,000.00) per year ("Pension Payment Floor"), as adjusted to reflect the provisional payee option selected. Subject to Paragraph 1, if Employee's Pension Payments are less than the Pension Payment Floor, Company shall pay to Employee, commencing on the first day of the first month following both the Employee's Termination Date and the effective date of the Release (such effective date being no earlier than the Employee's Termination Date), and thereafter on the first day of each succeeding month during the lifetime of the Employee, an amount equal to the difference between the Pension Payments actually payable to Employee and the Pension Payment Floor, as adjusted pursuant to Paragraph 4(c). 6. Payments to Provisional Payee in the Event of Employee's Death. Employee shall only be entitled to the benefit payments set forth in Paragraphs 4 and 5 above that become due and payable between the Employee's Termination Date and his death. Upon the death of Employee, the provisional payee designated by the Employee (or designated for him by default) under the Pension Plan, if living, shall be entitled to the following amounts: (a) Provisional Payee Payments. Beginning on the first day of the first month following the Employee's Termination Date, the effective date of the Release and the Employee's death, the Company agrees to pay to such provisional payee (i) a monthly benefit determined pursuant to Paragraph 4 herein, and (ii) payments determined, if any, pursuant to Paragraph 5 herein. All payments to the Employee's provisional payee pursuant to this Paragraph 6(a) shall be adjusted pursuant to Paragraph 4(c). (b) Provisional Payee's Death. Upon the death of such provisional payee following the death of Employee, a Lump Sum Death Benefit shall be payable to such provisional payee's heirs or assigns. For purposes of the preceding sentence, "Lump Sum Death Benefit" means the Present Value of the Employee Replacement Benefit under Paragraph 4, plus any payments under Paragraph 5 herein less the amount of the Employee Replacement Benefit and any payments under Paragraph 5 actually paid to Employee and his provisional payee. For purposes of the preceding sentence, the "Present Value" of the Employee Replacement Benefit, plus any payments under Paragraph 5, shall be calculated using seven and one-half percent (7 1/2%) interest and the 1983 Group Annuity Mortality Table with male and female rates averaged determined as of the Employee's Termination Date. 7. Lump Sum Payments. Notwithstanding the terms of this Agreement, the Company may, in its sole discretion, at any time, pay a Lump Sum Payment to the Employee or his provisional payee, as applicable, in lieu of the benefits provided in Paragraphs 4 and 5. "Lump Sum Payment" shall mean the present value of the unpaid Employee Replacement Benefit under Paragraph 4 hereof, plus unpaid payments under Paragraph 5, if any, determined as of the date such Lump Sum Payment is paid to Employee. Present value shall be determined using seven and one-half percent (7 1/2%) interest and the 1983 Group Annuity Mortality Table with male and female rates averaged. 8. Supplemental Incentive Pay Award. Subject to Paragraph 1, Company shall credit to Employee's Account under the Southern Company Deferred Compensation Plan ("Deferred Compensation Plan") an amount equal to the difference between the Incentive Pay Award for the 2001 Performance Period payable to Employee in accordance with the terms of The Southern Company Performance Pay Plan (Shareholder Approved) (hereinafter referred to as the "Performance Pay Plan"), or any other similar plan in which Employee participates, and the amount which would have been payable to Employee under the Performance Pay Plan if Employee had been employed through December 31, 2001 at the same rate of salary he was receiving on his Termination Date ("Supplemental Incentive Pay Award"), and such Supplemental Pay Award shall be invested pursuant to Section 6.2 of the Deferred Compensation Plan. The Company shall credit such Supplemental Incentive Pay Award to Employee's Account under the Deferred Compensation Plan for investment pursuant to Section 6.2 of the Deferred Compensation Plan on the same date Employee's 2001 Incentive Pay Award under the Performance Pay Plan is credited to Employee's Account under the Deferred Compensation Plan. In the event Employee dies prior to the date the benefit provided under this Paragraph 8 is payable, the benefit in this Paragraph shall be paid pursuant to the terms of the Performance Pay Plan. Moreover, in the event Employee dies after the date the benefit provided under this Paragraph 8 is payable but before the benefit is fully distributed under the terms of the Deferred Compensation Plan, such benefit shall be paid under the terms of the Deferred Compensation Plan. 9. Performance Dividend Payments. Subject to Paragraph 1, Company shall pay to Employee (i) an amount equal to the Award Employee would have received under The Southern Company Performance Dividend Plan ("Performance Dividend Plan") based on its terms in effect as of the execution of this Agreement, if Employee were eligible to receive Awards under the Performance Dividend Plan for an additional Computation Period and if the Compensation Committee increased the Payout Percentage by a factor of two (2) for Employee pursuant to Section 4.1 of such Plan (i.e., total opportunity equals two times dividends) for the additional Computation Period; and (ii) amounts equal to the difference, if any, between each Award the Employee receives under the Performance Dividend Plan after his Termination Date as a retired Participant and the Award the Employee would have received under the Performance Dividend Plan based on its terms in effect as of the execution of this Agreement if the Compensation Committee increased the Payout Percentage by a factor of two (2) for Employee pursuant to Section 4.1 of such Plan (i.e., total opportunity provided by Performance Dividend Plan and this Agreement equals two times dividends). Payments under (i) and (ii) of this Paragraph 9 are collectively referred to herein as, "Supplemental Performance Dividend Payments". Company shall pay such Supplemental Performance Dividend Payments on the date such Payments would have been made under the Performance Dividend Plan if Employee were eligible or if such amounts were payable, as applicable. In the event Employee dies prior to the date the benefits provided under this Paragraph 9 are payable, the benefits in this Paragraph shall be paid pursuant to the terms of the Performance Dividend Plan. In the event, the Company's common stock is no longer traded on a United States securities exchange, Employee shall not be entitled to a payment under this Paragraph 9 except as may be provided under the Company's change in control program as incorporated by the Performance Dividend Plan. 10. Publicity; No Disparaging Statement. Except as otherwise provided in Paragraph 15 hereof, Employee and the Company covenant and agree that they shall not engage in any communications which shall disparage one another or interfere with their existing or prospective business relationships. 11. Non-Disclosure, Non-Solicitation and Non-Competition Provisions. (a) Preamble. As a material inducement to the Company to enter into this Agreement and provide the benefits set forth in Paragraphs 2(b), 3, 4, 5, 6, 8 and 9, and its recognition of the valuable experience, knowledge and proprietary information Employee gained from his employment with the Company, Employee warrants and agrees he will abide by and adhere to the following Non-Disclosure, Non-Solicitation and Non-Competition Provisions. (b) Definitions. For purposes of this Paragraph 11, the following terms shall have the following meanings: (i) "Confidential Information" shall mean the proprietary and confidential data or information belonging to or pertaining to the Company, or any of its affiliates other than "Trade Secrets" (as defined below), which is of tangible or intangible value to the Company, or any of its affiliates and that is not generally known to the public but is generally known only to the Company, or any of its affiliates and those of its employees, independent contractors or agents to whom such information must be confided for business purposes, regarding the products, services, contractual arrangements, customers, suppliers, and partners of the Company, or any of its affiliates gained by Employee as a result of his employment with the Company, including, but not limited to, all information known to Employee regarding any proceedings brought before the Georgia Public Service Commission during his employment with the Company. Confidential Information shall also include other items that the Company may from time to time mark or otherwise identify as confidential. (ii) "Entity" shall mean any business, individual, partnership, joint venture, agency, governmental subdivision, association, firm, corporation or other entity. (iii) "Territory" shall include Georgia, Alabama, Mississippi or Florida. (iv) "Trade Secrets" shall mean information of the Company or any of its affiliates which (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; it being agreed that such information includes, without limitation, non-public information related to the rate making process of the Company, or its affiliates, technical and non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans or a list of actual or potential customers or suppliers or any other information which is defined as a "trade secret" under applicable law. (v) "Work Product" shall mean all tangible work product, property, data, documentation, "know-how," concepts or plans, inventions, improvements, techniques and processes relating to the Company or any of its affiliates that were conceived, discovered, created or developed by Employee pursuant to his employment with the Company. (c) Nondisclosure: Ownership of Proprietary Property. (i) In recognition of the need of the Company to protect its legitimate business interests, Employee hereby covenants and agrees that: (a) with regard to each item constituting all or any portion of a Trade Secret at all times such information remains a "trade secret" under applicable law and (b) with regard to any Confidential Information, for a period of three (3) years following the Termination Date (hereafter the "Nondisclosure Period"), Employee shall regard and treat Trade Secrets and all Confidential Information as strictly confidential and wholly-owned by the Company and shall not, for any reason, in any fashion, either directly or indirectly, use, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, reproduce, copy, misappropriate or otherwise communicate any such item or information to any third party or Entity for any purpose other than in accordance with this Agreement or as required by applicable law. Employee shall exercise all reasonable best efforts to ensure the continued confidentiality of all Trade Secrets and Confidential Information of the Company known by, disclosed to or made available to Employee in connection with his employment relationship with the Company or any other past or present relationship with the Company. Employee shall immediately notify the Company of any unauthorized disclosure or use of any Trade Secrets or Confidential Information of which Employee becomes aware. Employee shall assist the Company, to the extent necessary, in the procurement of any protection of the Company's rights to or in any of the Trade Secrets or Confidential Information. (ii) All Work Product shall be owned exclusively by the Company. To the greatest extent possible, any Work Product shall be deemed to be "work made for hire" (as defined in the Copyright Act, 17 U.S.C.A.ss. 101 et seq., as amended), and Employee hereby unconditionally and irrevocably transfers and assigns to the Company all right, title and interest Employee currently has or may have by operation of law or otherwise in or to any Work Product, including, without limitation, all patents, copyrights, trademarks, trade secrets, service marks and other intellectual property rights. Employee agrees to execute and deliver to the Company any transfers, assignments, documents or other instruments which the Company may deem necessary or appropriate, from time to time, to vest complete title and ownership of any and all Work Product, and all associated intellectual property and other rights therein, exclusively in the Company. (iii) Employee represents and agrees that he will keep the terms and amount of this Agreement completely confidential, and except to his personal agents or to the extent required by law, he will not hereafter disclose this information concerning this Agreement to anyone, including, but not limited to, any past, present, or prospective employee or applicant for employment with the Company. Employee may only disclose to future, potential employers of Employee that he participates in a deferred compensation arrangement with the Company which imposes certain restrictions on him related to such future, potential employment. (d) No Employment. Employee agrees that he shall not hereafter seek any re-employment with the Company, its parent, its affiliates or its subsidiaries, other than Mirant Corporation (e) Non-Solicitation of Employees. Employee agrees, during the three (3) years following the Employee's separation from employment, that he will not, either directly or indirectly, alone or in conjunction with any other person or entity, actively recruit, engage in passive hiring efforts, solicit, attempt to solicit, or induce any person who, during such three (3) year period, or within one (1) year prior to Employee's separation from employment, was an exempt employee of the Company or any of its subsidiaries, or was an officer of the Company or any of its affiliates to leave or cease such employment for any reason whatsoever or hire or engage the services of such person in any business substantially similar or competitive with that in which The Southern Company and its affiliates were engaged during the employment. (f) Non-Solicitation of Customers. Employee acknowledges that in the course of employment, he has learned about Company's business, services, materials, programs and products and the manner in which they are developed, marketed, serviced and provided. Employee knows and acknowledges that the Company has invested considerable time and money in developing its programs, agreements, offices, representatives, services, products and marketing techniques and that they are unique and original. Employee further acknowledges that the Company must keep secret all pertinent information divulged to Employee and Company's business concepts, ideas, programs, plans and processes, so as not to aid Company's competitors. Accordingly, Company is entitled to the following protection, which Employee agrees is reasonable: Employee agrees that for a period of two (2) years following termination of employment, he will not, on his own behalf or on behalf of any person, firm, partnership, association, corporation, or other business organization, entity or enterprise, knowingly solicit, call upon, or initiate communication or contact with any person or entity or any representative of any person or entity, with whom Employee had contact during his employment, with a view toward the sale or the providing of any product, equipment or service sold or provided or under development by Company during the period of two (2) years immediately preceding the date of Employee's termination. The restrictions set forth in this section shall apply only to persons or entities with whom Employee had actual contact during the two (2) years prior to termination of employment with a view toward the sale or providing of any product, equipment or service sold or provided or under development by Company. (g) Non-Competition. Employee and Company expressly covenant and agree that the scope, territorial, time and other restrictions contained in this Agreement constitute the most reasonable and equitable restrictions possible to protect the business interest of the Company given: (i) the business of the Company; (ii) the competitive nature of the Company's industry; and (iii) that Employee's skills are such that he could easily find alternative, commensurate employment or consulting work in his field which would not violate any of the provisions of this Agreement. Therefore, Employee agrees to not engage within the Territory for a period of two (2) years from the date of separation from employment, other than on behalf of Mirant Corporation or an acquiror of Mirant Corporation, in any activity in which Employee has participated in or directed on behalf of the Company or any of its affiliates within the past two (2) years. 12. Return of Materials. Upon the Employee's termination, or at any point after that time upon the specific request of the Company, Employee shall return to the Company all written or descriptive materials of any kind belonging or relating to the Company or its Affiliates, including, without limitation, any Intellectual Property, Confidential Information and Trade Secrets, in Employee's possession. 13. Cooperation. The parties agree that as a result of Employee's duties and activities during his employment, Employee's reasonable availability may be necessary for the Company to meaningfully respond to or address actual or threatened litigation, or government inquiries or investigations, or required filings with state, federal or foreign agencies (hereinafter "Company Matters"). Upon request of the Company, and at any point following termination of employment, Employee will make himself available to the Company for reasonable periods consistent with his future employment, if any, by other Entities and will cooperate with its agents and attorneys as reasonably required by such Company matters. The Company will reimburse Employee for any reasonable out-of-pocket expenses associated with providing such cooperation. 14. Termination with Cause. In the event of Employee's termination of employment for Cause at any time, the Employee shall forfeit the entire benefit provided in Paragraphs 2(b), 3, 4, 5, 6, 8 and 9, and the Company shall have no further obligations with respect to any amount under this Agreement. As used in this Agreement, the term "Cause" shall mean gross negligence or willful misconduct in the performance of the duties and services required in the course of employment by the Company; the final conviction of a felony or misdemeanor involving moral turpitude; the carrying out of any activity or the making of any statement which would prejudice the good name and standing of the Company, or an affiliate or subsidiary of the Company (collectively "Southern") or would bring Southern into contempt, ridicule or would reasonably shock or offend any community in which Southern is located; a material breach of the fiduciary obligations owed by an officer and an employee to Southern; or the Employee's unsatisfactory performance of the duties and services required by his or his employment. 15. Confidentiality and Legal Process. Employee represents and agrees that he will keep the terms, amount and fact of this Agreement confidential and that he will not hereafter disclose any information concerning this Agreement to any one other than his personal agents, including, but not limited to, any past, present, or prospective employee or applicant for employment with Company. Notwithstanding the foregoing, nothing in this Agreement is intended to prohibit Employee from performing any duty or obligation that shall arise as a matter of law. Specifically, Employee shall continue to be under a duty to truthfully respond to any legal and valid subpoena or other legal process. This Agreement is not intended in any way to proscribe Employee's right and ability to provide information to any federal, state or local government in the lawful exercise of such governments' governmental functions. 16. Successors And Assigns; Applicable Law. This Agreement shall be binding upon and inure to the benefit of Employee and his heirs, administrators, representatives, executors, successors and assigns, and shall be binding upon and inure to the benefit of Southern, the Company and their officers, directors, employees, agents, shareholders, parent corporation and affiliates, and their respective predecessors, successors, assigns, heirs, executors and administrators and each of them, and to their heirs, administrators, representatives, executors, successors and assigns. This Agreement shall be construed and interpreted in accordance with the laws of the State of Georgia, United States of America (without giving effect to principles of conflicts of laws). 17. Complete Agreement. This Agreement shall constitute the full and complete Agreement between the parties concerning its subject matter and fully supersedes any and all other prior Agreements or understandings between the parties concerning the subject matter hereof. This Agreement shall not be modified or amended except by a written instrument signed by both Employee and an authorized representative of the Company. 18. Severability. The unenforceability or invalidity of any particular provision of this Agreement shall not affect its other provisions, and to the extent necessary to give such other provisions effect, they shall be deemed severable. 19. Waiver Of Breach; Specific Performance. The waiver of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other breach. Each of the parties to this Agreement will be entitled to enforce its or his rights under this Agreement, specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its or his favor including, but not limited to, the Company's right to recover amounts paid and/or to cease making payments under Paragraphs 2(b), 3, 4, 5, 6, 8 and 9. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its or his sole discretion apply to any court of law or equity of competent jurisdiction for specific performance or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 20. Unsecured General Creditor. The Company shall neither reserve nor specifically set aside funds for the payment of its obligations under this Agreement, and such obligations shall be paid solely from the general assets of the Company. Notwithstanding that Employee may be entitled to receive the value of his benefit under the terms and conditions of this Agreement, the assets from which such amount may be paid shall at all times be subject to the claims of the Company's creditors. 21. No Effect On Other Arrangements. It is expressly understood and agreed that the payments made in accordance with this Agreement are in addition to any other benefits or compensation to which Employee may be entitled or for which he may be eligible, whether funded or unfunded, by reason of his employment with the Company. 22. Tax Withholding. There shall be deducted from each payment under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Employee. 23. Compensation. Any compensation contributed on behalf of Employee under this Agreement shall not be considered "compensation," as the term is defined in The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, The Southern Company Performance Sharing Plan or The Southern Company Pension Plan. Payments under this Agreement shall not be considered wages, salaries or compensation under any other employee benefit plan. 24. No Guarantee of Employment. No provision of this Agreement shall be construed to affect in any manner the existing rights of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship of Employee and the Company. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, this ___ day of ________________, 2001. "COMPANY" THE SOUTHERN COMPANY By: ---------------------------------- Its: ---------------------------------- "EMPLOYEE" ALFRED W. DAHLBERG, III EXHIBIT 1 to Deferred Compensation Agreement with ALFRED W. DAHLBERG, III RELEASE AGREEMENT THIS RELEASE ("Release') is made and entered into by and between ALFRED W. DAHLBERG, III ("Employee") and THE SOUTHERN COMPANY, and its successor or assigns ("Company"). WHEREAS, Employee and Company have agreed that Employee's employment with The Southern Company shall terminate on or about April 1, 2001; WHEREAS, Employee and the Company have previously entered into that certain Deferred Compensation Agreement, dated _________________, 2001 ("Agreement"), that this Release is incorporated therein by reference; WHEREAS, Employee and Company desire to delineate their respective rights, duties and obligations attendant to such termination and desire to reach an accord and satisfaction of all claims arising from Employee's employment, and his termination of employment, with appropriate releases, in accordance with the Agreement; WHEREAS, the Company desires to provide Employee with deferred compensation in accordance with the Agreement for service he has or will provide for the Company; NOW, THEREFORE, in consideration of the premises and the agreements of the parties set forth in this Release, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: 1. Release. Employee does hereby remise, release and forever discharge the Company and their officers, directors, employees, agents, shareholders, parent corporation and affiliates, and their respective predecessors, successors, assigns, heirs, executors and administrators (collectively, "Releasees"), of and from all manner of actions and causes of action, suits, debts, claims and demands whatsoever at law or in equity, known or unknown, actual or contingent, including, but not limited to, any claims which have been asserted, or could be asserted now or in the future, against any Releasees arising under any and all federal, state or local laws and any common law claims, and including, but not limited to, any claims Employee may have pursuant to the Age Discrimination in Employment Act and any claims to benefits under any and all offer letters, employment or separation agreements, or bonus, severance, workforce reduction, early retirement, out-placement, or other similar plans sponsored by the Company, now or hereafter recognized (collectively, "Claims"), which he ever had or now has or may in the future have, by reason of any matter, cause or thing arising out of his employment relationship and privileges, his serving as an employee of the Company or the separation from his employment relationship or affiliation as an employee of the Company as of the date of this Release against each of the Releasees. Notwithstanding the foregoing, Employee does not release any Claims under the Age Discrimination in Employment Act that may arise after his execution of this Release. 2. No Assignment of Claim. Employee represents that he has not assigned or transferred, or purported to assign or transfer, any Claims or any portion thereof or interest therein to any party prior to the date of this Release. 3. Deferred Compensation. In accordance with the Deferred Compensation Agreement, the Company agrees to pay the Employee or his spouse, as the case may be, the amounts provided in Paragraphs 3, 4, 5, 6, 8 and 9 of the Agreement. 4. No Admission Of Liability. This Release shall not in any way be construed as an admission by the Company or Employee of any improper actions or liability whatsoever as to one another, and each specifically disclaims any liability to or improper actions against the other or any other person, on the part of itself or himself, its or his employees or agents. 5. Voluntary Execution. Employee warrants, represents and agrees that he has been encouraged in writing to seek advice from anyone of his choosing regarding this Release, including his attorney and accountant or tax advisor prior to his signing it; that this Release represents written notice to do so; that he has been given the opportunity and sufficient time to seek such advice; and that he fully understands the meaning and contents of this Release. he further represents and warrants that he was not coerced, threatened or otherwise forced to sign this Release, and that his signature appearing hereinafter is voluntary and genuine. EMPLOYEE UNDERSTANDS THAT HE MAY TAKE UP TO TWENTY-ONE (21) DAYS TO CONSIDER WHETHER OR NOT HE DESIRES TO ENTER INTO THIS RELEASE. 6. Ability to Revoke Agreement. EMPLOYEE UNDERSTANDS THAT HE MAY REVOKE THIS RELEASE BY NOTIFYING THE COMPANY IN WRITING OF SUCH REVOCATION WITHIN SEVEN (7) DAYS OF HIS EXECUTION OF THIS RELEASE AND THAT THIS RELEASE IS NOT EFFECTIVE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. HE UNDERSTANDS THAT UPON THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD THIS RELEASE WILL BE BINDING UPON HIM AND HIS HEIRS, ADMINISTRATORS, REPRESENTATIVES, EXECUTORS, SUCCESSORS AND ASSIGNS AND WILL BE IRREVOCABLE. Acknowledged and Agreed To: "COMPANY" THE SOUTHERN COMPANY By: ---------------------------------- Its: ---------------------------------- I UNDERSTAND THAT BY SIGNING THIS RELEASE, I AM GIVING UP RIGHTS I MAY HAVE. I UNDERSTAND THAT I DO NOT HAVE TO SIGN THIS RELEASE. "EMPLOYEE" ALFRED W. DAHLBERG, III -------------------------------------------- Date WITNESSED BY: - -------------------------------------------- - -------------------------------------------- Date EX-10 41 x10a96.txt SOUTHERN COMPANY CHANGE IN CONTROL BENEFIT PLAN DETERMINATION POLICY Troutman Sanders LLP Bank of America Plaza, Suite 5200 600 Peachtree Street, N.E. Atlanta, Georgia 30308 SOUTHERN COMPANY CHANGE IN CONTROL BENEFIT PLANS POLICY ARTICLE I - PURPOSE AND ADOPTION OF POLICY 1.1 Adoption of Policy. Southern Company Services, Inc. hereby adopts this Southern Company Change in Control Benefit Plan Determination Policy, effective July 10, 2000 1.2 Purpose. The Policy is designed to govern the determination of a Change in Control of Southern and/or the Employing Companies, and the benefits to be provided to employees of Southern and the Employing Companies under certain employee benefit plans. ARTICLE II - DEFINITIONS 2.1 "Administrative Committee" shall mean the Vice President of Human Resources of Southern Company, Director of System Compensation and Benefits and the Comptroller of Southern Company. 2.2 "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. 2.3 "Business Combination" shall mean a reorganization, merger or consolidation of Southern Company or sale or other disposition of all or substantially all of the assets of Southern Company. 2.4 "Change in Control" shall mean a Southern Change in Control and/or a Subsidiary Change in Control, as applicable. 2.5 "Common Stock" shall mean the common stock of Southern Company. 2.6 "Company" shall mean Southern Company Services, Inc., its successors and assigns. 2.7 "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or agencies. 2.8 "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. 2.9 "Employee Benefit Plan(s)" shall mean, collectively, the Southern Company Performance Stock Plan, the Southern Company Executive Stock Plan, the Southern Company Performance Pay Plan (Shareholder Approved), the Southern Company Performance Pay Plan, the Southern Company Executive Productivity Improvement Plan, and the Southern Company Performance Dividend Plan, the Southern Company Supplemental Benefit Plan, the Southern Company Supplemental Executive Retirement Plan and the Southern Company Deferred Compensation Plan, as may be amended from time to time in accordance with their terms. 2.10 "Employing Company" shall mean the Company, or any other corporation or other entity Controlled by Southern Company, which has adopted the Change in Control Program, and any successor of any of them. With respect to a Change in Control of Southern Energy, Inc. ("SEI"), employees of Southern Energy Resources, Inc. shall be deemed to be employed by SEI for purposes of being covered under this Policy. 2.11 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 2.12 "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. 2.13 "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998, plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern Company's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998, whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. 2.14 "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. 2.15 "Plan Termination" shall mean the termination of an Employee Benefit Plan by Southern Company or an Employing Company following a Southern Change in Control unless an equitable arrangement (embodied in an ongoing substitute or replacement plan) has been made with respect to the Employee Benefit Plan in connection with the Change in Control. For purposes of this Policy, an ongoing substitute or alternative plan shall be considered an "equitable arrangement" if a nationally recognized compensation consulting firm chosen by the Administrative Committee opines in writing that the post-Change in Control plan is an equitable substitute or replacement of the Employee Benefit Plan. 2.16 "Preliminary Change in Control" shall mean the occurrence of any of the following as determined by the Southern Committee. (1) Southern Company or an Employing Company has entered into a written agreement, such as, but not limited to, a letter of intent, which, if Consummated, would result in a Southern Change in Control or a Subsidiary Change in Control, as the case may be; (2) Southern Company, an Employing Company or any Person publicly announces an intention to take or to consider taking actions which, if Consummated, would result in a Southern Change of Control or a Subsidiary Change in Control under circumstances where the Consummation of the announced action or intended action is legally and financially possible; (3) Any Person achieves the Beneficial Ownership of fifteen percent (15%) or more of the Common Stock; or (4) The Southern Board or the board of directors of an Employing Company has declared that a Preliminary Change of Control has occurred. 2.17 "Southern Board" shall mean the board of directors of Southern Company. 2.18 "Southern Change in Control" shall mean any of the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern Company's Voting Securities; provided, however, that for purposes of this subsection (a), the following acquisitions of Southern Company's Voting Securities shall not constitute a Change in Control: (i) any acquisition directly from Southern Company; (ii) any acquisition by Southern Company; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern Company or any corporation controlled by Southern Company; (iv) any acquisition by a qualified pension plan or publicly held mutual fund; (v) any acquisition by an employee of Southern Company or its subsidiary of affiliate, or Group composed exclusively of such employees; or (vi) any Business Combination which would not otherwise constitute a Change in Control because of the application of clauses (i), (ii) and (iii) of this Section; (b) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; or (c) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met: (i) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern Company's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern Company's Voting Securities or all or substantially all of Southern Company's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Southern Company's Voting Securities; (ii) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of Employees or employee benefit plan (or related trust) of Southern Company, its subsidiaries or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. 2.19 "Southern Committee" shall mean the committee comprised of the Chairman of the Southern Board, Chief Financial Officer of Southern Company, General Counsel of Southern Company and the Chairman of the Administrative Committee. 2.20 "Southern Company" shall mean The Southern Company, its successors and assigns. 2.21 "Southern Termination" shall mean the following: (a) The Consummation of a reorganization, merger or consolidation of Southern Company under circumstances where either (i) Southern Company is not the surviving corporation or (ii) Southern Company's Voting Securities are no longer publicly traded; (b) The Consummation of a sale or other disposition of all or substantially all of Southern Company's assets; or (c) The Consummation of an acquisition by any Person of Beneficial Ownership of all of Southern Company's Voting Securities such that Southern Company's Voting Securities are no longer publicly traded. 2.22 "Subsidiary Change in Control" shall mean the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of an Employing Company; provided, however, that for purposes of this Subsection 2.22, any acquisition by an employee of Southern Company or its subsidiary of affiliate, or Group composed entirely of such employees, any qualified pension plan, publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern Company or any corporation Controlled by Southern Company shall not constitute a Change in Control; (b) Consummation of a reorganization, merger or consolidation of an Employing Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Company Controls the corporation surviving or resulting from such Employing Company Business Combination, or (c) Consummation of the sale or other disposition of all or substantially all of the assets of an Employing Company to an entity which Southern Company does not Control. Notwithstanding the foregoing, in no event shall "Subsidiary Change in Control" mean an initial public offering or a spin-off of an Employing Company. 2.23 "Subsidiary Employee" shall mean an Employee of an Employing Company which has undergone a Subsidiary Change in Control whose employment is not immediately transferred to another Employing Company upon such Subsidiary Change in Control. 2.24 "Surviving Company" shall mean the corporation which either survives or results from any reorganization, merger or consolidation of which Southern Company is a party under circumstances where Southern Company does not survive. 2.25 "Trust" shall mean the Southern Company Deferred Compensation Trust. 2.26 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. ARTICLE III - POOLING ACCOUNTING Notwithstanding anything to the contrary herein, if, but for any provision of this Policy, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Policy which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall automatically be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Policy, Pooling Accounting would be required for such Change in Control transaction and Pooling Accounting is in fact used for such Change in Control transaction. ARTICLE IV - PERFORMANCE STOCK PLAN CHANGE IN CONTROL PROVISIONS 4.1 Application. The provisions of this Article IV apply to benefits payable under the Southern Company Performance Stock Plan (the "PSP") and the Southern Company Executive Stock Plan ("ESP"), notwithstanding any provision in the PSP or ESP to the contrary. The meaning of capitalized terms not defined herein are determined under the PSP and ESP. 4.2 Subsidiary Change in Control. In the event of a Subsidiary Change in Control: (a) Any Options and Stock Appreciation Rights held by a Subsidiary Employee which are outstanding as of the date such Subsidiary Change in Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Subsidiary Employee holding a Stock Appreciation Right who is actually subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable unless it shall have been outstanding for at least six months as of the date such Subsidiary Change in Control is determined to have occurred. (b) The restrictions and deferral limitations applicable to any Restricted Stock held by a Subsidiary Employee shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (c) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Subsidiary Employees shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. 4.3 Southern Termination. In the event of a Southern Termination: (a) Any Options and Stock Appreciation Rights which are outstanding as of the date such Southern Termination is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Participant holding a Stock Appreciation Right who is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to the Participant under Section 16(b), provided further, that any such actions not taken as a result of the rules under Section 16(b) shall be effected as of the first date that such activity would no longer result in liability under such section. (b) The restrictions and deferral limitations applicable to any Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (c) The restrictions and deferral limitations and other conditions applicable to any other Awards under the PSP or ESP shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (d) Any Options, Stock Appreciation Rights or Restricted Stock which are outstanding as of the date such Southern Termination is determined to have occurred, shall be converted into or replaced by options, stock appreciation rights or restricted stock, as the case may be, in the Surviving Company, or the corporation which has acquired all of Southern Company's Common Stock or assets. In the event of such conversion or replacement, the terms of the replacement options or stock appreciation rights shall preserve with respect to each Option and each SAR the spread between the Fair Market Value of the shares subject to the Options or SARs and the Option Price or Base Value, as the case may be, as determined immediately prior to the Southern Termination. Similarly, the terms of replacement restricted stock shall preserve the Fair Market Value of each share of Restricted Stock as determined immediately prior to the Southern Termination. No replacement option, stock appreciation right or share of restricted stock received shall be subject to any terms which are less favorable than those which existed with respect to the original Option, SAR or share of Restricted Stock immediately prior to the Southern Termination. (e) In the event that it is not possible to effect the conversion set forth in Section 4.3(d) hereof, any and all outstanding Options, Stock Appreciation Rights and Restricted Stock as of the date of the Southern Termination which are not so converted shall be terminated and the affected Participants shall receive within thirty (30) days of the Southern Termination cash equal to the difference between the Option Price and Fair Market Value, in the case of Options, the Base Value and Fair Market Value, in the case of SARs and equal to the Fair Market Value, in the case of Restricted Stock. For purposes of this Section 4.3(e), Fair Market Value shall be determined as of the day prior to the date of the Southern Termination. ARTICLE V - PERFORMANCE PAY PLAN (SHAREHOLDER APPROVED) CHANGE IN CONTROL PROVISIONS 5.1 Application. The provisions of this Article V apply to benefits payable under the Southern Company Performance Pay Plan (Shareholder Approved) (the "Executive PPP"), notwithstanding any provision in the Executive PPP to the contrary. The meaning of capitalized terms not defined herein are determined under the Executive PPP. 5.2 Southern Change in Control. In the event of a Southern Change in Control, if there is no Plan Termination with respect to the Executive PPP, payout of Incentive Pay Awards to Participants for the Performance Period in which the Southern Change in Control shall have occurred shall be the greater of actual or target performance under the Executive PPP. 5.3 Plan Termination. In the event of a Plan Termination with respect to the Executive PPP within two (2) years following a Southern Change in Control, each Participant who is an Employee on the date of such Plan Termination shall be entitled to receive within thirty (30) days of the Plan Termination, cash in an amount equal to a pro-rated payout of his Incentive Pay Award under the Executive PPP for the Performance Period in which the Plan Termination shall have occurred, at the greater of target or actual performance under the Executive PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Plan Termination. 5.4 Subsidiary Change in Control. In the event of a Subsidiary Change in Control, each Subsidiary Employee on the date of such Change in Control whose employment is not transferred upon such Subsidiary Change in Control to another Business Unit shall be entitled to receive within thirty (30) days of the Subsidiary Change in Control, cash in an amount equal to a prorated payout of his Incentive Pay Award under the Executive PPP for the Performance Period in which the Subsidiary Change in Control shall have occurred, at the greater of actual or target performance under the Executive PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Subsidiary Change in Control. 5.5 Southern Termination. In the event of a Southern Termination, each Participant on the date of such Southern Termination shall be entitled to receive within thirty (30) days of the Southern Termination, cash in an amount equal to a prorated payout of his Incentive Pay Award under the Executive PPP for the Performance Period in which the Southern Termination shall have occurred, at the greater of actual or target performance under the Executive PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Southern Termination. The Executive PPP shall terminate immediately following the payments provided for in this Section 5.5. 5.6 Pro rata Calculation. For purposes of calculating any pro rata Incentive Pay Awards under this Article V, a month shall not be considered if the determining event occurs on or before the 14th day of the month, and a month shall be considered if the determining event occurs on or after the 15th day of the month. ARTICLE VI - PERFORMANCE PAY PLAN CHANGE IN CONTROL PROVISIONS 6.1 Application. The provisions of this Article VI apply to benefits payable under the Southern Company Performance Pay Plan (the "PPP"), notwithstanding any provision in the PPP to the contrary. The meaning of capitalized terms not defined herein are determined under the PPP. 6.2 Southern Change in Control. In the event of a Southern Change in Control, if there is no Plan Termination with respect to the PPP, payout of Incentive Pay Awards to Participants for the Performance Period in which the Southern Change in Control shall have occurred shall be the greater of actual or target performance under the PPP. 6.3 Plan Termination. In the event of a Plan Termination with respect to the PPP within two (2) years following a Southern Change in Control, each Participant who is an Employee on the date of such Plan Termination shall be entitled to receive within thirty (30) days of the Plan Termination, cash in an amount equal to a pro-rated payout of his Incentive Pay Award under the PPP for the Performance Period in which the Plan Termination shall have occurred, at the greater of target or actual performance under the PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Plan Termination. 6.4 Subsidiary Change in Control. In the event of a Subsidiary Change in Control, each Subsidiary Employee on the date of such Change in Control whose employment is not transferred upon such Subsidiary Change in Control to another Business Unit shall be entitled to receive within thirty (30) days of the Subsidiary Change in Control, cash in an amount equal to a prorated payout of his Incentive Pay Award under the PPP for the Performance Period in which the Subsidiary Change in Control shall have occurred, at the greater of actual or target performance under the PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Subsidiary Change in Control. 6.5 Southern Termination. In the event of a Southern Termination, each Participant on the date of such Southern Termination shall be entitled to receive within thirty (30) days of the Southern Termination, cash in an amount equal to a prorated payout of his Incentive Pay Award under the PPP for the Performance Period in which the Southern Termination shall have occurred, at the greater of actual or target performance under the PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Southern Termination. The PPP shall terminate immediately following the payments provided for in this Section 6.5. 6.6 Pro rata Calculation. For purposes of calculating any pro rata Incentive Pay Awards under this Article VI, a month shall not be considered if the determining event occurs on or before the 14th day of the month, and a month shall be considered if the determining event occurs on or after the 15th day of the month. ARTICLE VII - EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN CHANGE IN CONTROL PROVISIONS 7.1 Application. The provisions of this Article VII apply to benefits payable under the Southern Company Executive Productivity Improvement Plan (the "Executive PIP"), notwithstanding any provision in the Executive PIP to the contrary. The meaning of capitalized terms not defined herein are determined under the Executive PIP. 7.2 Southern Change in Control. In the event of a Plan Termination with respect to the Executive PIP within the two (2) year period following a Southern Change in Control, each Participant who is an Executive Employee on the date of the Plan Termination shall be entitled to receive within thirty (30) days of the Plan Termination, cash in an amount equal to his Award Opportunity or Award Units, as the case may be, for the Computation Period in which the Plan Termination shall have occurred, at a target Value of Performance Unit of $1.00, prorated for each Computation Period by the number of months which have passed since the beginning of the Computation Period until the date of the Plan Termination. 7.3 Subsidiary Change in Control. In the event of a Subsidiary Change in Control, each Subsidiary Employee on the date of such Change in Control whose employment is not transferred upon such Subsidiary Change in Control to another Employing Company shall be entitled to receive within thirty (30) days of the Subsidiary Change in Control, cash in an amount equal to his Award Opportunity, or Award Units, as the case may be, for the Computation Period in which the Subsidiary Change in Control shall have occurred, at a target Value of Performance Unit of $1.00, prorated for each Computation Period by the number of months which have passed since the beginning of the Computation Period until the date of the Subsidiary Change in Control. 7.4 Southern Termination. In the event of a Southern Termination, if the Executive PIP or an equitable replacement thereto remains effective on December 31st of the Plan Year in which the Southern Change in Control shall have occurred, the Executive PIP or Replacement Plan shall operate with respect to the Performance Period then ended in accordance with its terms, but in no event shall the Value of Performance Unit under the Plan or similar factor under a replacement plan for such Performance Period be less than $1.00 or target performance, respectively. ARTICLE VIII - PERFORMANCE DIVIDEND PLAN CHANGE IN CONTROL PROVISIONS 8.1 Application. The provisions of this Article VIII apply to benefits payable under the Southern Company Performance Dividend Plan (the "PDP"), notwithstanding any provision in the PDP to the contrary. The meaning of capitalized terms not defined herein are determined under the PDP. 8.2 Southern Change in Control. In the event of a Plan Termination with respect to the PDP within two (2) years following a Southern Change in Control, each Participant who is an employee of his Employing Company on the date of such Plan Termination shall be entitled to receive within thirty (30) days of the Plan Termination, cash for each Award held as of such date, based on actual performance under Section 4.1 of the PDP determined as of the date of the Plan Termination, and the Annual Dividend declared prior to the date of the Plan Termination. 8.3 Subsidiary Change in Control. In the event of a Subsidiary Change in Control, each Subsidiary Employee on the date of such Change in Control whose employment is not transferred upon such Subsidiary Change in Control to another Employing Company shall be entitled to receive within thirty (30) days of the Subsidiary Change in Control, cash for each Award held as of such date, based on actual performance under Section 4.1 of the PDP determined as of the date on which the Subsidiary Change in Control shall have occurred, and the Annual Dividend declared prior to the date of the Subsidiary Change in Control. 8.4 Southern Termination. In the event of a Southern Termination, each Participant who is an employee of his Employing Company on the date of such Southern Termination shall be entitled to receive within thirty (30) days of the Southern Termination, cash for each Award held as of such date, based on actual performance under Section 4.1 of the PDP determined as of the date on which the Southern Termination shall have occurred, and the Annual Dividend declared prior to the date of the Southern Termination. ARTICLE IX - SUPPLEMENTAL BENEFIT PLAN CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS 9.1 Application. The provisions of this Article IX apply to benefits payable under The Southern Company Supplemental Benefit Plan (the "SBP"), notwithstanding any provision in the SBP to the contrary. The meaning of capitalized terms not defined herein are determined under the SBP. 9.2 General. Notwithstanding any other terms of the SBP to the contrary, upon a Southern Change in Control or a Subsidiary Change in Control, the provisions of this Article IX shall become operative and apply to the calculation and payment of benefits under the SBP with respect to any Subsidiary Employee who is a Participant on such date. 9.3 Funding of Trust. The Trust has been established to hold assets of the Employing Companies under certain circumstances as a reserve for the discharge of the Employing Companies' obligations under the SBP. In the event of a Preliminary Change in Control of Southern Company, all Employing Companies shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund the Pension Benefit and Non-Pension Benefit payable under the SBP, the Pension Benefit to be determined under Section 9.5 hereof, in accordance with the procedures set forth in Section 9.4 hereof. In the event of a Preliminary Change in Control of an Employing Company, such Employing Company shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund the Pension Benefit and Non-Pension Benefit payable to its Subsidiary Employees under the SBP, the Pension Benefit to be determined under Section 9.6 hereof, in accordance with the procedures set forth in Section 9.4 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(b) of the Trust, the Employing Companies may fund the Trust prior to a Preliminary Change in Control of Southern Company or an Employing Company. All assets held in the Trust remain subject only to the claims of the Employing Companies' general creditors whose claims against the Employing Companies are not satisfied because of the Employing Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trust before the assets are paid to the Participant and all rights created under the Trust, as under the SBP, are unsecured contractual claims of the Participant against his Employing Company. 9.4 Calculation of Trust Contribution. As soon as practicable following either a Preliminary Change in Control of Southern Company or of an Employing Company, the affected Employing Companies shall contribute an amount based upon the funding strategy adopted by the Administrative Committee with the assistance of an appointed actuary necessary to fulfill the Employing Companies' obligations pursuant to this Article IX. In the event of a dispute after a Change in Control over such actuary's determination, the respective Employing Company(ies) and any complaining Participant(s) shall refer such dispute to an independent, third-party actuarial consultant, chosen by the Employing Company and such Participant. If the Employing Company and the Participant cannot agree on an independent, third-party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the affected Employing Companies and the Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Employing Companies shall be responsible for all of the fees and expenses of the independent actuarial consultant. 9.5 Pension Benefit Upon Southern Change in Control. On the date of a Southern Change in Control, the Pension Benefit of each Participant who is an Employee of an Employing Company and who has a non-forfeitable right to Retirement Income under the Pension Plan, will be calculated based on such Participant's Earnings and Accredited Service on such date, regardless of whether such Participant is retirement eligible on such date. Each Participant, who is an Employee of an Employing Company, will be entitled to receive the amount of his Pension Benefit based on such Participant's Earnings and Accredited Service as of the date of a Southern Change in Control adjusted to take into account appropriate early reduction factors, if any, based on the Participant's commencement of benefits. Such benefit shall be paid in lump sum, upon termination of employment or retirement. Any benefits accrued under the SBP subsequent to the date of a Southern Change in Control will be calculated and distributed pursuant to the terms of the SBP, without regard to this Article IX. 9.6 Pension Benefit Upon Subsidiary Change in Control. On the date of a Subsidiary Change in Control of an Employing Company, the Pension Benefit of each Participant who is an Employee of such Employing Company and who has a non-forfeitable right to Retirement Income under the Pension Plan, will be calculated based on such Participant's Earnings and Accredited Service on such date, regardless of whether such Participant is retirement eligible on such date. Each Participant, who is an Employee of such Employing Company, will be entitled to receive the amount of his Pension Benefit based on such Participant's Earnings and Accredited Service as of the date of a Subsidiary Change in Control adjusted to take into account appropriate early reduction factors, if any, based on the Participant's commencement of benefits. Such benefit shall be paid in lump sum, upon termination of employment or retirement. Any benefits accrued under the SBP subsequent to the date of a Subsidiary Change in Control will be calculated and distributed pursuant to the terms of the SBP, without regard to this Article IX. 9.7 Non-Pension Benefit Distribution Election upon Change in Control. In the event of a Southern Change in Control or a Subsidiary Change in Control, notwithstanding anything to the contrary in the SBP, upon termination or retirement from employment, that Non-Pension Benefit of a Participant who was an Employee of an Employing Company affected by such a Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Administrative Committee in its sole and absolute discretion. If no such election is made, the Participant shall receive payment of his Account solely in accordance with Article V of the SBP. ARTICLE X - SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS 10.1 Application. The provisions of this Article X apply to benefits payable under The Southern Company Supplemental Executive Retirement Plan (the "SERP"), notwithstanding any provision in the SERP to the contrary. The meaning of capitalized terms not defined herein are determined under the SERP. 10.2 General. Notwithstanding any other terms of the SERP to the contrary, upon a Southern Change in Control or a Subsidiary Change in Control, the provisions of this Article X shall become operative and apply to the calculation and payment of benefits under the SERP with respect to any Subsidiary Employee who is a Participant on such date. 10.3 Funding of Trust. The Trust has been established to hold assets of the Employing Companies under certain circumstances as a reserve for the discharge of the Employing Companies' obligations under the SERP. In the event of a Preliminary Change in Control of Southern Company, all Employing Companies shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all benefits payable under the SERP, as determined under Section 10.5 hereof, in accordance with the procedures set forth in Section 10.4 hereof. In the event of a Preliminary Change in Control of an Employing Company, such Employing Company shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all benefits payable to its Subsidiary Employees under the SERP, as determined under Section 10.6 hereof, in accordance with the procedures set forth in Section 10.4 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(b) of the Trust, the Employing Companies may fund the Trust prior to a Preliminary Change in Control of Southern Company or an Employing Company. All assets held in the Trust remain subject only to the claims of the Employing Companies' general creditors whose claims against the Employing Companies are not satisfied because of the Employing Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trust before the assets are paid to the Participant and all rights created under the Trust, as under the SERP, are unsecured contractual claims of the Participant against his Employing Company. 10.4 Calculation of Trust Contribution. As soon as practicable following either a Preliminary Change in Control of Southern Company or of an Employing Company, the affected Employing Companies shall contribute an amount based upon the funding strategy adopted by the Administrative Committee with the assistance of an appointed actuary necessary to fulfill the Employing Companies' obligations pursuant to this Article X. In the event of a dispute after a Change in Control over such actuary's determination, the respective Employing Company(ies) and any complaining Participant(s) shall refer such dispute to an independent, third-party actuarial consultant, chosen by the Employing Company and such Participant. If the Employing Company and the Participant cannot agree on an independent, third-party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the affected Employing Companies and the Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Employing Companies shall be responsible for all of the fees and expenses of the independent actuarial consultant. 10.5 SERP Benefit Upon Southern Change in Control. On the date of a Southern Change in Control, the SERP Benefit of each Participant, who is an Employee of an Employing Company and who has a non-forfeitable right to Retirement Income under the Pension Plan, will be calculated based on such Participant's Earnings and Accredited Service on such date, regardless of whether such Participant is retirement eligible on such date. Each such Participant, who is an Employee of an Employing Company, will be entitled to receive the amount of his SERP Benefit based on such Participant's Earnings and Accredited Service as of the date of a Southern Change in Control adjusted to take into account appropriate early reduction factors, if any, based on the Participant's commencement of benefits. Such benefit shall be paid in lump sum, upon termination of employment or retirement. Any benefits accrued under the SERP subsequent to the date of a Southern Change in Control will be calculated and distributed pursuant to the terms of the SERP, without regard to this Article X. 10.6 SERP Benefit Upon Subsidiary Change in Control. On the date of a Subsidiary Change in Control of an Employing Company, the SERP Benefit of each Participant, who is an Employee of such Employing Company and who has a non-forfeitable right to Retirement Income under the Pension Plan, will be calculated based on such Participant's Earnings and Accredited Service on such date, regardless of whether such Participant is retirement eligible on such date. Each such Participant, who is an Employee of such Employing Company, will be entitled to receive the amount of his SERP Benefit based on such Participant's Earnings and Accredited Service as of the date of a Subsidiary Change in Control adjusted to take into account appropriate early reduction factors, if any, based on the Participant's commencement of benefits. Such benefit shall be paid in lump sum, upon termination of employment or retirement. Any benefits accrued under the SERP subsequent to the date of a Subsidiary Change in Control will be calculated and distributed pursuant to the terms of the SERP, without regard to this Article X. ARTICLE XI - DEFERRED COMPENSATION PLAN CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS 11.1 Application. The provisions of this Article XI apply to benefits payable under the Southern Company Deferred Compensation Plan (the "DCP"), notwithstanding any provision in the DCP to the contrary. The meaning of capitalized terms not defined herein are determined under the DCP. 11.2 Notwithstanding any other terms of the DCP to the contrary, following a Southern Change in Control or a Subsidiary Change in Control, the provisions of this Article XI shall apply to the payment of benefits under the DCP with respect to any Subsidiary Employee who is a Participant on such date. 11.3 The Trust has been established to hold assets of the Employing Companies under certain circumstances as a reserve for the discharge of the Employing Companies' obligations under the DCP. In the event of a Preliminary Change in Control of Southern, all Employing Companies shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all benefits payable under the DCP in accordance with the procedures set forth in Section 11.4 hereof. In the event of a Preliminary Change in Control of an Employing Company, such Employing Company shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all benefits payable to its Subsidiary Employees under the DCP in accordance with the procedures set forth in Section 11.4 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(b) of the Trust, the Employing Companies may fund the Trust prior to a Preliminary Change in Control of Southern or an Employing Company in accordance with the terms of the Trust. All assets held in the Trust remain subject only to the claims of the Employing Companies' general creditors whose claims against the Employing Companies are not satisfied because of the Employing Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trust before the assets are paid to the Participant and all rights created under the Trust, as under the DCP, are unsecured contractual claims of the Participant against his Employing Company. 11.4 As soon as practicable following either a Preliminary Change in Control of Southern or of an Employing Company, the affected Employing Companies shall contribute an amount based upon the funding strategy adopted by the Committee with the assistance of an appointed actuary necessary to fulfill the Employing Companies' obligations pursuant to this Article XI. In the event of a dispute over such actuary's determination, the respective Employing Company(ies) and any complaining Participant(s) shall refer such dispute to an independent, third-party actuarial consultant, chosen by the Employing Company and such Participant. If the Employing Company and the Participant cannot agree on an independent, third-party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the Employing Company and the Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Employing Companies shall be responsible for all of the fees and expenses of the independent actuarial consultant. 11.5 In the event of a Southern Change in Control or a Subsidiary Change in Control, notwithstanding anything to the contrary in the DCP, upon termination or retirement from employment, the Account of a Participant who was an Employee of an Employing Company affected by such a Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Committee in its sole and absolute discretion. If no such election is made, the Participant shall receive payment of his Account solely in accordance with Article VII of the DCP. ARTICLE XII - ADMINISTRATION 12.1 Administrative Committee. The committee designated as administrator of each of the Employee Benefit Plans shall be responsible for the general administration of this Policy as it relates to such committee's respective Employee Benefit Plan. ARTICLE XIII - MISCELLANEOUS 13.1 Amendment and Termination. This Policy may be amended or terminated at any time by the board of directors of Southern Company Services, Inc. (or its successors and assigns, if applicable), provided, however, the Policy may not be amended in any material respect or terminated within the two (2) year period following a Change in Control nor shall any amendment or termination impair the rights of any Participant in the Employee Benefit Plans which have accrued hereunder prior to any such amendment or termination. 13.2 Additional Rights. Nothing in the Policy shall interfere with or limit in any way the right of the Employing Companies to terminate any employee's employment at any time, or confer upon any employee any right to continue in the employ of the Employing Companies. IN WITNESS WHEREOF, this Southern Company Change in Control Benefit Plan Determination Policy has been executed by duly authorized officers of Southern Company Services, Inc. pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this ______ day of ________________________, 2000. SOUTHERN COMPANY SERVICES, INC. By:________________________________________ Christopher C. Womack Senior Vice President, Human Resources ATTEST: By: _________________________________________ Its: _________________________________________ EX-10 42 x10a97.txt CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. Robert H. Haubein, Jr. ("Mr. Haubein") (hereinafter collectively referred to as the "Parties") is effective May 8, 2000. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Mr. Haubein is Senior Vice President of the Company; WHEREAS, the Company wishes to provide to Mr. Haubein certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company; NOW, THEREFORE, in consideration of the premises, and the agreements of the Parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Haubein's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus. (b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. (c) "Board" shall mean the board of directors of the Company. (d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern. (e) "Change in Control" shall mean any of the following: (i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (A) any acquisition directly from Southern; (B) any acquisition by Southern; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary; (D) any acquisition by a qualified pension plan or publicly held mutual fund; (E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary; (F) any acquisition by Mr. Haubein or any Group of which Mr. Haubein is a party; or (G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; (iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met: (A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Haubein, any Group of which Mr. Haubein is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination. (iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Haubein, any Group composed exclusively of employees of the Company, any Group of which Mr. Haubein is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; (v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or (vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company. (f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Haubein or his dependents may be entitled pursuant to Code Section 4980B. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Company" shall mean Southern Company Services, Inc., its successors and assigns. (i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. (j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. (k) "Effective Date" shall mean the date of execution of this Agreement. (l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services: (i) self-assessment, career decision and goal setting; (ii) job market research and job sources; (iii) networking and interviewing skills; (iv) planning and implementation strategy; (v) resume writing, job hunting methods and salary negotiation; and (vi) office support and job search resources. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (n) "Good Reason" shall mean, without Mr. Haubein's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events: (i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Haubein's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control; (ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Haubein's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Haubein's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); (iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Haubein participates or is a party as of the date of the Change in Control or the elimination of Mr. Haubein's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses. (iv) Relocation. A change in Mr. Haubein's work location to a location more than fifty (50) miles from the office where Mr. Haubein is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Haubein's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Haubein of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Haubein's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Haubein's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or (v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Haubein under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Haubein was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Haubein with the number of paid vacation days to which Mr. Haubein is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company). (vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above. (o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. (p) "Group Health Plan" shall mean the group health plan covering Mr. Haubein, as such plan may be amended from time to time. (q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Haubein, as such plan may be amended from time to time. (r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board. (s) "Month of Service" shall mean any calendar month during which Mr. Haubein has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern. (t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time. (u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time. (v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time. (w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time. (y) "Southern" shall mean The Southern Company, its successors and assigns. (z) "Southern Board" shall mean the board of directors of Southern. (aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern. (bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Haubein's employment by the Company upon the occurrence of any of the following: (i) The willful and continued failure by Mr. Haubein substantially to perform his duties with the Company (other than any such failure resulting from Mr. Haubein's Total Disability or from Mr. Haubein's retirement or any such actual or anticipated failure resulting from termination by Mr. Haubein for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or (ii) The willful engaging by Mr. Haubein in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following: (A) any willful act involving fraud or dishonesty in the course of Mr. Haubein's employment by the Company; (B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located; (C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense; (D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer; (E) assault or other act of violence against any person during the course of employment; or (F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Haubein shall be deemed "willful" unless done, or omitted to be done, by Mr. Haubein not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Mr. Haubein shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Haubein and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Haubein was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail. (cc) "Termination Date" shall mean the date on which Mr. Haubein's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan. (dd) "Total Disability" shall mean Mr. Haubein's total disability within the meaning of the Pension Plan. (ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. (ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A. (gg) "Year of Service" shall mean Mr. Haubein's Months of Service divided by twelve (12) rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Haubein has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years. 2. Severance Benefits. (a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Haubein's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Haubein voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Haubein shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Haubein shall not be eligible to receive benefits under this Agreement if Mr. Haubein: (i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause; (iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary; (iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or (v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement. (b) Severance Benefits. If Mr. Haubein meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Haubein an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Haubein under Code Section 280G exceeds three (3) times Mr. Haubein's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Haubein's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Haubein, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax. For purposes of this Paragraph 2.(b), whether any amount would constitute an Excess Parachute Payment and any other calculations of tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount, Capped Amount, etc., shall be determined by the tax department of the independent public accounting firm then responsible for preparing Southern's consolidated federal income tax return, and such calculations or determinations shall be binding upon the parties hereto. (c) Welfare Benefits. If Mr. Haubein meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c). (i) Mr. Haubein shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Haubein's Years of Service, not to exceed five (5) years. If Mr. Haubein elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Haubein's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Haubein's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan. (A) The extended medical coverage afforded to Mr. Haubein pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Haubein in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Haubein in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated. (B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Haubein or his dependents may elect. In the event that Mr. Haubein or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Haubein or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Haubein shall be entitled to receive cash in an amount equal to the Company's and Mr. Haubein's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control. (d) Incentive Plans. If Mr. Haubein meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans: (i) Stock Option Plan. (A) Any of Mr. Haubein's Options and Stock Appreciation Rights under the Performance Stock Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(i) by reference) which are outstanding as of the Termination Date and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Stock Appreciation Right, if Mr. Haubein is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to Mr. Haubein under Section 16(b) of the Exchange Act, provided further, that any such actions not taken as a result of the rules under Section 16(b) of the Exchange Act shall be effected as of the first date that such activity would no longer result in liability under Section 16(b) of the Exchange Act. (B) The restrictions and deferral limitations applicable to any of Mr. Haubein's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant. (C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Haubein under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (ii) Performance Pay Plan. Provided Mr. Haubein is not entitled to benefits under Article V of the PPP Plan, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP Plan is in place through Mr. Haubein's Termination Date and to the extent Mr. Haubein is entitled to participate therein, Mr. Haubein shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Awards under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date. (iii) Performance Dividend Plan. Provided Mr. Haubein is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Haubein's Termination Date and to the extent Mr. Haubein is entitled to participate therein, Mr. Haubein shall be entitled to receive cash for each Award held by Mr. Haubein on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date. (iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Haubein is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Haubein is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Haubein is entitled to participate therein, Mr. Haubein shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Haubein's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria. (e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Haubein's Termination Date, or (ii) upon Mr. Haubein's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company. (f) Benefits in the Event of Death. In the event of Mr. Haubein's death prior to the payment of all amounts due under this Agreement, Mr. Haubein's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release. (g) Legal Fees. In the event of a dispute between Mr. Haubein and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Haubein's favor, the Company shall reimburse Mr. Haubein's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000). (h) Employee Outplacement Services. Mr. Haubein shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Haubein's Termination Date. (i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Haubein for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Haubein's favor, the Company shall reimburse Mr. Haubein's legal fees in the manner provided in Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Haubein's employment by the Company is terminated during the two year period following a Change in Control and Mr. Haubein accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder. 4. No Mitigation. If Mr. Haubein is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Haubein hereunder shall not be reduced or suspended if Mr. Haubein accepts such subsequent employment. 5. Arbitration. (a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Haubein's employment by the Company or the termination thereof. (b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Haubein, in the case of the Company, or to the Southern Board, in the case of Mr. Haubein. (c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state. (d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Haubein, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA. (e) The arbitration filing fee shall be paid by Mr. Haubein. All other costs of arbitration shall be borne equally by Mr. Haubein and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Haubein's favor and Mr. Haubein is reimbursed legal fees under Paragraph 2.(g) hereof. (f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award. (g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5. 6. Miscellaneous. (a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Haubein under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors. (b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Haubein. (c) Assignment. Mr. Haubein shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. (d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties. (e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state. (f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000. THE SOUTHERN COMPANY By: ____________________________________ SOUTHERN COMPANY SERVICES, INC. By: ____________________________________ MR. HAUBEIN ----------------------------- Robert H. Haubein, Jr. Exhibit A CHANGE IN CONTROL AGREEMENT Waiver and Release The attached Waiver and Release is to be given to Mr. Robert H. Haubein, Jr. upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement. CHANGE IN CONTROL AGREEMENT Waiver and Release I, Robert H. Haubein, Jr., understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver. I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws. In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver. In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law. In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans. In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company. I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver. I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will. I understand that I may revoke this Waiver at any time during the seven (7) calendar day period after I sign and deliver this Waiver to the Company. If I revoke this Waiver, I must do so in writing delivered to the Company. I understand that this Waiver is not effective until the expiration of this seven (7) calendar day revocation period. I understand that upon the expiration of such seven (7) calendar day revocation period this entire Waiver will be binding upon me and will be irrevocable. I understand that by signing this Waiver I am giving up rights I may have. IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____. Robert H. Haubein, Jr. Sworn to and subscribed to me this ____ day of ____________, _____. Notary Public My Commission Expires: (Notary Seal) Acknowledged and Accepted by the Company, as defined in the Waiver. By: ----------------------------------- Date: ----------------------------------- EX-10 43 x10a98.txt DEFERRED COMPENSATION AGREEMENT THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") is made and entered into by and between THE SOUTHERN COMPANY ("Southern"), SOUTHERN COMPANY SERVICES, INC. (the "Company") and STEPHEN A. WAKEFIELD ("Employee"). W I T N E S S E T H WHEREAS, Employee is a highly compensated employee of the Company and is a member of its management; WHEREAS, the parties desire to provide Employee with deferred compensation upon the occurrence of certain enumerated events for service he has provided or will provide for the Company; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: 1. Severance Benefit. If the Employee's employment with the Company is terminated without cause, the Company shall pay to Employee a lump sum amount equal to two (2) times base pay in effect at the time of the Employee's termination. As used in this Agreement, the term "cause" shall mean fraud or dishonesty, willful failure to perform the duties and services required in the course of employment by the Company, the final conviction of a felony or misdemeanor involving moral turpitude, the carrying out of any activity or the making of any statement which would prejudice the good name and standing of the Company. Except for termination for cause, the Company shall give Employee at least thirty (30) days written notice in the event it terminates the Employee's employment. Employee shall be responsible for all state and federal income taxes and his share of FICA taxes owed on the foregoing amounts. 2. Supplemental Pension Payment to Employee. a. Upon the Employee's retirement from the Company and his entering into an effective Release in the form attached hereto as Exhibit 1, the Company agrees to pay the Employee an amount equal to the difference between his Retirement Income payable in accordance with the terms and provisions of The Southern Company Pension Plan as applicable to the Employee on his date of hire and as may be amended from time to time (hereinafter referred to as the "Pension Plan"), and the amount of Retirement Income the Employee would have been entitled to receive under the Pension Plan as if the Employee's period of Accredited Service under the Pension Plan included an additional ten (10) years. Similarly, such additional service shall also be credited to Employee for purposes of calculating a benefit under the Southern Company Supplemental Executive Retirement Plan ("SERP"). The benefits in this Paragraph 2(a) shall be recalculated from time to time to reflect future increases, if any, in the Retirement Income of retirees following the Employee's retirement. The Employee's years of service (or any portion thereof) provided in this Paragraph 2(a) and application of the special definition of "Final Average Pay" set forth in Paragraph 2(c) below granted under this Agreement shall not be recognized for purposes of calculating the above benefits in the event of his termination of service with the Company prior to accrual of five (5) years of vesting service as defined under the Pension Plan, unless such termination occurs on account of death or disability or unless such termination results in eligibility for severance benefits under Paragraph 2(a) of the Change in Control Agreement between the Employee and the Company and Southern (hereinafter referred to as the "Change in Control Agreement"). b. For purposes of calculating the Retirement Income amount provided in Paragraph 2(a) above, no limitation on benefits imposed by the Internal Revenue Code as it now exists or is hereinafter amended or any limiting legislation shall be taken into account. Any amounts payable in accordance with this Paragraph 2(b) shall be recalculated from time to time to reflect future increases, if any, in Retirement Income of retirees following the Employee's retirement. c. In determining the benefit described in Paragraphs 2(a) and (b) above, Final Average Pay shall be determined by uniformly substituting "three years" for "five years" in the definition of "Final Average Pay" in every instance it is necessary to calculate the benefit. d. For purposes of this Agreement, without regard to whether the Employee has accrued ten (10) years of Accredited Service, any termination of Employee's employment with the Company after Employee shall have completed five years of vesting service as defined under the Pension Plan, or termination at any time on account of death or disability, or eligibility for severance benefits under Paragraph 2(a) of the Change in Control Agreement, shall be deemed to be a retirement. The Employee's benefit under this Agreement shall be subject to such early retirement reduction factors as would apply to a participant in the Pension Plan based on the Employee's date of retirement under this Agreement. Subject to such reduction factors, the Employee shall be eligible under this Agreement upon retirement before attainment of age sixty-five (65) to receive a monthly benefit equal to the sum of the following: (i) the monthly benefit the Employee would be eligible to receive under the Pension Plan as of the Employee's retirement under this Agreement; (ii) the monthly benefit the Employee would be eligible to receive under the Southern Company Supplemental Benefit Plan ("Supplemental Benefit Plan") and the SERP; and (iii) the monthly benefit the Employee would be eligible to receive under this Agreement as provided for in Paragraphs 2(a) and (b) above as of the Employee's retirement under this Agreement. Upon attainment of age sixty-five (65), the Employee shall be eligible under this Agreement to receive a monthly benefit equal to that amount provided for in the preceding sentence above reduced, if necessary, so that the total amount of monthly payments received by the Employee considering the monthly benefits payable under this Agreement, the Pension Plan, Supplemental Benefit Plan and SERP, respectively, at age sixty-five (65) equals the total amount of payments provided for in the preceding sentence. 3. Consideration. Employee covenants and agrees that the consideration set forth in Paragraphs 1 and 2 shall be in full satisfaction of all sums owed to Employee, if any, by the Company and that the consideration set forth in Paragraph 2 shall constitute good and complete consideration for the Release attached hereto as Exhibit 1, those nondisclosure and ownership obligations under Paragraph 6 hereof, and all other obligations and covenants of Employee contained herein. 4. Commencement and Form of Payment of Supplemental Pension Benefit. The benefit provided in accordance with Paragraph 2 above shall be paid in monthly installments on the first day of each month in accordance with the election to receive Retirement Income under the Pension Plan. In the event the Employee is married, predeceases his spouse, and his spouse is entitled to payments as a Provisional Payee, monthly payments shall be made in the same manner as provided by the Provisional Payee option elected by the Employee under the Pension Plan taking into account the additional Accredited Service and the special three year "Final Average Pay" treatment set forth in Paragraphs 2(a) and (c) above. In the event the Employee shall not be married or shall not be survived by his spouse, the benefit described in the preceding sentence shall be forfeited. The Employee or his surviving spouse shall not, under any circumstances, have any option or right to require payments hereunder otherwise than in accordance with the terms hereof. 5. Publicity; No Disparaging Statement. Except as otherwise provided in Paragraph 8 hereof, Employee, Southern and the Company covenant and agree that they shall not engage in any communications which shall disparage one another or interfere with their existing or prospective business relationships. 6. Non-Disclosure and Non-Solicitation. a. Definitions. For purposes of this Paragraph 6, the following terms shall have the following meanings: i) "Entity" shall mean any business, individual, partnership, joint venture, agency, governmental subdivision, association, firm, corporation or other entity. ii) "Affiliate" shall mean the following Entities: (A) any Entity which owns an Interest (as defined below) in the Company either directly or indirectly through any other Entity, (B) any Entity an Interest in which is owned directly or indirectly by any Entity which owns directly or indirectly an Interest in the Company or (C) any Entity in which the Company owns an Interest either directly or indirectly through any other Entity. For purposes of this Agreement, the term "Interest" shall include any equity interest in an Entity in an amount equal to or greater than 30% of the Entity's total outstanding equity interests. iii) "Confidential Information" shall mean proprietary and confidential data or information other than Trade Secrets (as defined below), which is valuable to, and related to the business of, the Company, its Affiliates or non-affiliated Entities with whom the Company or its Affiliates has or have business relationships (collectively, "Third Parties"), and the details of which are generally unknown to the public or to the Company's competitors, including, without limitation, information regarding the Company's employees, business strategies, models and systems, customers, suppliers, partners and affiliates, gained by Employee as a result of his affiliation with the Company or its Affiliates, and other items that the Company or its Affiliates may from time to time mark or otherwise identify as confidential. iv) "Trade Secrets" shall mean information of or related to the Company, its Affiliates or Third Parties which (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; it being agreed that such information includes, without limitation, technical and non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans or a list of actual or potential customers or suppliers. v) "Intellectual Property" shall mean all work product, property, data, documentation, "know-how", concepts or plans, inventions, discovery, compositions, innovations, computer programs, improvements, techniques, processes, designs, article of manufacture or information of any kind, or any new or useful improvements of any of the foregoing and any Trade Secrets, patents, copyrights, Confidential Information, mask work, trademark or service mark, relating in any way to the Company or its Affiliates and its or their business prepared, conceived, revised, discovered, developed, or created by Employee for the Company or its Affiliates or by using the Company's or its Affiliates' time, personnel, facilities, or material. b. Nondisclosure: Ownership of Proprietary Property. i) Nondisclosure. In recognition of the Company's need to protect its legitimate business interests, Employee hereby acknowledges that he has been given access to valuable Trade Secrets and Confidential Information; and Employee hereby covenants and agrees that he will use the Trade Secrets and Confidential Information for the Company's business purposes only, and that he will not for any reason, in any fashion, form or manner, other than as instructed by a duly authorized representative of the Company, copy, disclose, disseminate, communicate, transfer or otherwise convey to any Entity any item: (A) which is a Trade Secret, for so long as such item remains a trade secret under applicable law; or (B) which is Confidential Information, other than Trade Secrets, for a period of two (2) years from the Employee's termination. ii) Notification of Unauthorized Disclosure. Employee shall exercise his best efforts to ensure the continued confidentiality of all Trade Secrets and Confidential Information known by, disclosed or made available to Employee. Employee shall immediately notify the Company of any unauthorized disclosure or use of any Trade Secrets or Confidential Information of which Employee becomes aware. Employee shall assist the Company, to the extent necessary, in the procurement or protection of the Company's or its Affiliates' rights to or in any Intellectual Property, Trade Secrets or Confidential Information and, upon the Company's request, shall assist, to the extent necessary, in the procurement or protection of any Third Party's rights to or in any Intellectual Property, Trade Secrets or Confidential Information. iii) Ownership. To the greatest extent possible, any and all Intellectual Property shall be deemed to be "work made for hire" (as defined in the Copyright Act, 17 U.S.C.A. ss.ss. 101 et seq.), and Employee hereby unconditionally and irrevocably transfers and assigns to the Company or its Affiliates all rights, title and interest Employee currently has or in the future may have by operation of law or otherwise in or to any Intellectual Property, including, without limitation, all patents, copyrights, trademarks, service marks and other Intellectual Property rights and agrees that the Company or its Affiliates shall have the exclusive world-wide ownership of such Intellectual Property, and that no Intellectual Property shall be treated as or deemed to be a "joint work" (as defined by the Copyright Act) of Employee and the Company, its Affiliates or otherwise. Employee agrees to execute and deliver to the Company or its Affiliates any transfers, assignments, documents or other instruments which the Company or its Affiliates may deem necessary or appropriate to vest complete title and ownership of any Intellectual Property, and all rights therein, exclusively in the Company or its Affiliates, as the case may be. iv) Return of Materials. Upon the Employee's termination, or at any point after that time upon the specific request of the Company, Employee shall return to the Company all written or descriptive materials of any kind belonging or relating to the Company or its Affiliates, including, without limitation, any Intellectual Property, Confidential Information and Trade Secrets, in Employee's possession. 7. Transfer of Employment to Southern or a Southern Subsidiary or Affiliate. In the event that Employee's employment by the Company is terminated and Employee shall become immediately re-employed by Southern or a subsidiary or an affiliate of Southern, the Company shall assign this Agreement to Southern or such subsidiary or affiliate, Southern shall accept such assignment or cause such affiliate or subsidiary to accept such assignment, such assignee shall become the "Company" for all purposes hereunder, including but not limited to the Release attached hereto and incorporated herein as Exhibit 1. In the event of such assignment, the expense of this Agreement shall be shared pro rata by the Company and any such assignee based upon the number of months after the effective date of this Agreement that the Employee is employed by the Company, and/or Southern and/or such affiliate or subsidiary of Southern, as the case may be. 8. Confidentiality and Legal Process. Employee represents and agrees that he will keep the terms, amount and fact of this Agreement confidential and that he will not hereafter disclose any information concerning this Agreement to any one other than his personal agents, including, but not limited to, any past, present, or prospective employee or applicant for employment with Company. Notwithstanding the foregoing, nothing in this Agreement is intended to prohibit Employee from performing any duty or obligation that shall arise as a matter of law. Specifically, Employee shall continue to be under a duty to truthfully respond to any legal and valid subpoena or other legal process. This Agreement is not intended in any way to proscribe Employee's right and ability to provide information to any federal, state or local government in the lawful exercise of such governments' governmental functions. 9. Successors And Assigns; Applicable Law. This Agreement shall be binding upon and inure to the benefit of Employee and his heirs, administrators, representatives, executors, successors and assigns, and shall be binding upon and inure to the benefit of Southern, the Company and their officers, directors, employees, agents, shareholders, parent corporation and affiliates, and their respective predecessors, successors, assigns, heirs, executors and administrators and each of them, and to their heirs, administrators, representatives, executors, successors and assigns. This Agreement shall be construed and interpreted in accordance with the laws of the State of Georgia, United States of America (without giving effect to principles of conflicts of laws). 10. Complete Agreement. This Agreement shall constitute the full and complete Agreement between the parties concerning its subject matter and fully supersedes any and all other prior Agreements or understandings between the parties concerning the subject matter hereof including but not limited to that certain employment agreement dated June 2, 1997. This Agreement shall not be modified or amended except by a written instrument signed by both Employee and an authorized representative of Southern and the Company. 11. Severability. The unenforceability or invalidity of any particular provision of this Agreement shall not affect its other provisions, and to the extent necessary to give such other provisions effect, they shall be deemed severable. 12. Waiver Of Breach; Specific Performance. The waiver of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other breach. Each of the parties to this Agreement will be entitled to enforce its or his rights under this Agreement, specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its or his favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its or his sole discretion apply to any court of law or equity of competent jurisdiction for specific performance or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 13. Unsecured General Creditor. The Company shall neither reserve nor specifically set aside funds for the payment of its obligations under this Agreement, and such obligations shall be paid solely from the general assets of the Company. Notwithstanding that Employee may be entitled to receive the value of his benefit under the terms and conditions of this Agreement, the assets from which such amount may be paid shall at all times be subject to the claims of the Company's creditors. 14. No Effect On Other Arrangements. It is expressly understood and agreed that the payments made in accordance with this Agreement are in addition to any other benefits or compensation to which Employee may be entitled or for which he may be eligible, whether funded or unfunded, by reason of his employment with the Company, and that the Release attached hereto as Exhibit 1 is not intended and does not waive any rights to such benefits. Notwithstanding the foregoing, the Employee shall not be eligible for the severance benefit under Paragraph 1 hereof if he elects to receive the severance benefits under the Change in Control Agreement or any voluntary or involuntary severance or separation program maintained by the Company or Southern. 15. Tax Withholding. There shall be deducted from each payment under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Employee. 16. Compensation. Any compensation contributed on behalf of Employee under this Agreement shall not be considered "compensation," as the term is defined in The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, The Southern Company Performance Sharing Plan or The Southern Company Pension Plan. Payments under this Agreement shall not be considered wages, salaries or compensation under any other employee benefit plan. 17. No Guarantee of Employment. No provision of this Agreement shall be construed to affect in any manner the existing rights of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship of Employee and the Company. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, this ___ day of ________________, 1999. "SOUTHERN" THE SOUTHERN COMPANY By: ---------------------------------- Its: ---------------------------------- "COMPANY" SOUTHERN COMPANY SERVICES, INC. By: -------------------------------- Its: -------------------------------- "EMPLOYEE" STEPHEN A. WAKEFIELD WITNESSED BY: EXHIBIT 1 to Deferred Compensation Agreement of Stephen A. Wakefield RELEASE AGREEMENT THIS RELEASE ("Release') is made and entered into by and between STEPHEN A. WAKEFIELD ("Employee"), THE SOUTHERN COMPANY ("Southern") and SOUTHERN COMPANY SERVICES, INC. and its successor or assigns ("Company"). WHEREAS, Employee, Southern and Company have agreed that Employee's employment with _________________ shall terminate on _____________, _______; WHEREAS, Employee, Southern and the Company have previously entered into that certain Deferred Compensation Agreement, dated _______, 1999 ("Agreement"), that this Release is incorporated into by reference; WHEREAS, Employee, Southern and Company desire to delineate their respective rights, duties and obligations attendant to such termination and desire to reach an accord and satisfaction of all claims arising from Employee's employment, and his termination of employment, with appropriate Releases, in accordance with the Agreement; WHEREAS, the Company desires to provide Employee with deferred compensation in accordance with the Agreement for service he has or will provide for the Company; NOW, THEREFORE, in consideration of the premises and the agreements of the parties set forth in this Release, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: 1. Release. Employee does hereby remise, Release and forever discharge Southern and the Company and their officers, directors, employees, agents, shareholders, parent corporation and affiliates, and their respective predecessors, successors, assigns, heirs, executors and administrators (collectively, "Releasees"), of and from all manner of actions and causes of action, suits, debts, claims and demands whatsoever at law or in equity, known or unknown, actual or contingent, including, but not limited to, any claims which have been asserted, or could be asserted now or in the future, against any Releasees arising under any and all federal, state or local laws and any common law claims, and including, but not limited to, any claims Employee may have pursuant to the Age Discrimination in Employment Act and any claims to benefits under any and all offer letters, employment or separation agreements, or bonus, severance, workforce reduction, early retirement, out-placement, or other similar plans sponsored by the Company, now or hereafter recognized (collectively, "Claims"), which he ever had or now has or may in the future have, by reason of any matter, cause or thing arising out of his employment relationship and privileges, his serving as an employee of the Company or the separation from his employment relationship or affiliation as an employee of the Company as of the date of this Release against each of the Releasees. Notwithstanding the foregoing, Employee does not Release any Claims under the Age Discrimination in Employment Act that may arise after his execution of this Release. 2. No Assignment of Claim. Employee represents that he has not assigned or transferred, or purported to assign or transfer, any Claims or any portion thereof or interest therein to any party prior to the date of this Release. 3. Deferred Compensation. In accordance with the Deferred Compensation Agreement, the Company agrees to pay the Employee or his spouse, as the case may be, the amounts outlined in Paragraphs 2 and 4 of the Agreement. 4. No Admission Of Liability. This Release shall not in any way be construed as an admission by Southern, the Company or Employee of any improper actions or liability whatsoever as to one another, and each specifically disclaims any liability to or improper actions against the other or any other person, on the part of itself or himself, its or his employees or agents. 5. Voluntary Execution. Employee warrants, represents and agrees that he has been encouraged in writing to seek advice from anyone of his choosing regarding this Release, including his attorney and accountant or tax advisor prior to his signing it; that this Release represents written notice to do so; that he has been given the opportunity and sufficient time to seek such advice; and that he fully understands the meaning and contents of this Release. He further represents and warrants that he was not coerced, threatened or otherwise forced to sign this Release, and that his signature appearing hereinafter is voluntary and genuine. EMPLOYEE UNDERSTANDS THAT HE MAY TAKE UP TO TWENTY-ONE (21) DAYS TO CONSIDER WHETHER OR NOT HE DESIRES TO ENTER INTO THIS RELEASE. 6. Ability to Revoke Agreement. EMPLOYEE UNDERSTANDS THAT HE MAY REVOKE THIS RELEASE BY NOTIFYING THE COMPANY IN WRITING OF SUCH REVOCATION WITHIN SEVEN (7) DAYS OF HIS EXECUTION OF THIS RELEASE AND THAT THIS RELEASE IS NOT EFFECTIVE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. HE UNDERSTANDS THAT UPON THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD THIS RELEASE WILL BE BINDING UPON HIM AND HIS HEIRS, ADMINISTRATORS, REPRESENTATIVES, EXECUTORS, SUCCESSORS AND ASSIGNS AND WILL BE IRREVOCABLE. Acknowledged and Agreed To: "SOUTHERN" THE SOUTHERN COMPANY By: ----------------------------------- Its: ----------------------------------- "COMPANY" SOUTHERN COMPANY SERVICES, INC. By: ----------------------------------- Its: ----------------------------------- I UNDERSTAND THAT BY SIGNING THIS RELEASE, I AM GIVING UP RIGHTS I MAY HAVE. I UNDERSTAND THAT I DO NOT HAVE TO SIGN THIS RELEASE. "EMPLOYEE" STEPHEN A. WAKEFIELD Date WITNESSED BY: Date EX-10 44 x10a99.txt Exhibit 10(a)99 DEFERRED COMPENSATION AGREEMENT THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered into by and between GEORGIA POWER COMPANY (the "Company") and WAYNE T. DAHLKE ("Employee"). W I T N E S S E T H WHEREAS, Employee has been employed by the Company for approximately thirty-five (35) years; WHEREAS, Employee is a highly compensated employee of the Company and is a member of its management; WHEREAS, the parties have agreed that Employee's employment with the Company shall terminate on September 1, 2000; WHEREAS, the parties desire to delineate their respective rights, duties, and obligations attendant to such termination of employment, and desire to reach an accord and satisfaction of all claims arising from Employee's employment and his termination of employment, with appropriate releases; and WHEREAS, the Company desires to provide Employee with deferred compensation for service he has provided or will provide for the Company; NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: 1. Termination of Employment. Upon Employee's execution of this Agreement, voluntary termination of employment with the Company on September 1, 2000 (the Employee's "Termination Date"), and effectiveness of the Release attached hereto as Exhibit 1, the Company agrees to pay to Employee or his spouse, if applicable, the amounts described in Paragraph 2 hereof. Employee covenants and agrees that the consideration set forth in Paragraph 2 is in full satisfaction of all sums owed to Employee, if any, by the Company, and constitutes good and complete consideration for his Release attached hereto as Exhibit 1, those nondisclosure, non-compete and ownership obligations under Paragraph 4 hereof and all other obligations and covenants of Employee contained herein. Employee agrees that this Agreement provides him certain benefits to which he would not otherwise be entitled. 2. Severance Payment to Employee. On the first day of the first month following both the Employee's Termination Date and the effective date of the Release attached hereto as Exhibit 1, the Company shall commence payments to Employee of sixty-five (65) monthly installments in an amount equal to Eleven Thousand Six Hundred Eighteen Dollars and Ninety-Five Cents ($11,618.95) per monthly installment payment with the sum of all payments equal to $755,231.75. In the event of a Southern Change in Control or a Subsidiary Change in Control affecting Employee as defined in the Southern Company Deferred Compensation Plan, unpaid installments shall be paid in a lump sum as soon as practicable after the occurrence of such an event. In the event Employee dies before receiving payment of the amount described in this Paragraph 2 hereof, it shall be paid to Employee's spouse, if living, or if not, to the Employee's estate. Upon application made by the Employee, his spouse, or an authorized legal representative, as applicable, the Company may in its sole discretion determine to accelerate installment payments due under this Agreement. In accordance with Paragraph 15, Employee shall be responsible for all state and federal income taxes and his share of FICA taxes owed on the foregoing amount, and Company shall make appropriate withholding of these amounts. 3. Publicity; No Disparaging Statement. Except as otherwise provided in Paragraph 8 hereof, Employee and the Company covenant and agree that they shall not engage in any communications which shall disparage one another or interfere with their existing or prospective business relationships. 4. Non-Disclosure, Non-Solicitation and Non-Competition Provisions. (a) Preamble. As a material inducement to the Company to enter into this Agreement, and its recognition of the valuable experience, knowledge and proprietary information Employee gained from his employment with the Company, Employee warrants and agrees he will abide by and adhere to the following Non-Disclosure, Non-Solicitation and Non-Competition Provisions. (b) Definitions. For purposes of this Paragraph 4, the following terms shall have the following meanings: (i) "Confidential Information" shall mean the proprietary and confidential data or information belonging to or pertaining to the Company, The Southern Company or any of its affiliates other than "Trade Secrets" (as defined below), which is of tangible or intangible value to the Company, The Southern Company or any of its affiliates and that is not generally known to the public but is generally known only to the Company, The Southern Company or any of its affiliates and those of its employees, independent contractors or agents to whom such information must be confided for business purposes, regarding the products, services, contractual arrangements, customers, suppliers, and partners of the Company, The Southern Company or any of its affiliates gained by Employee as a result of his employment with the Company, including, but not limited to, all information known to Employee regarding any proceedings brought before the Georgia Public Service Commission during his employment with the Company. Confidential Information shall also include other items that the Company may from time to time mark or otherwise identify as confidential. (ii) "Entity" shall mean any business, individual, partnership, joint venture, agency, governmental subdivision, association, firm, corporation or other entity. (iii) "Territory" shall include Georgia, Alabama, Mississippi or Florida. (iv) "Trade Secrets" shall mean information of the Company, The Southern Company or any of its affiliates which (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; it being agreed that such information includes, without limitation, non-public information related to the rate making process of the Company, The Southern Company or its affiliates, technical and non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans or a list of actual or potential customers or suppliers or any other information which is defined as a "trade secret" under applicable law. (v) "Work Product" shall mean all tangible work product, property, data, documentation, "know-how," concepts or plans, inventions, improvements, techniques and processes relating to the Company, The Southern Company or any of its affiliates that were conceived, discovered, created or developed by Employee pursuant to his employment with the Company. (c) Nondisclosure: Ownership of Proprietary Property. (i) In recognition of the need of the Company to protect its legitimate business interests, Employee hereby covenants and agrees that: (a) with regard to each item constituting all or any portion of a Trade Secret at all times such information remains a "trade secret" under applicable law and (b) with regard to any Confidential Information, for a period of three (3) years following the Termination Date (hereafter the "Nondisclosure Period"), Employee shall regard and treat Trade Secrets and all Confidential Information as strictly confidential and wholly-owned by the Company and shall not, for any reason, in any fashion, either directly or indirectly, use, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, reproduce, copy, misappropriate or otherwise communicate any such item or information to any third party or Entity for any purpose other than in accordance with this Agreement or as required by applicable law. Employee shall exercise all reasonable best efforts to ensure the continued confidentiality of all Trade Secrets and Confidential Information of the Company known by, disclosed to or made available to Employee in connection with his employment relationship with the Company or any other past or present relationship with the Company. Employee shall immediately notify the Company of any unauthorized disclosure or use of any Trade Secrets or Confidential Information of which Employee becomes aware. Employee shall assist the Company, to the extent necessary, in the procurement of any protection of the Company's rights to or in any of the Trade Secrets or Confidential Information. (ii) All Work Product shall be owned exclusively by the Company. To the greatest extent possible, any Work Product shall be deemed to be "work made for hire" (as defined in the Copyright Act, 17 U.S.C.A.ss. 101 et seq., as amended), and Employee hereby unconditionally and irrevocably transfers and assigns to the Company all right, title and interest Employee currently has or may have by operation of law or otherwise in or to any Work Product, including, without limitation, all patents, copyrights, trademarks, trade secrets, service marks and other intellectual property rights. Employee agrees to execute and deliver to the Company any transfers, assignments, documents or other instruments which the Company may deem necessary or appropriate, from time to time, to vest complete title and ownership of any and all Work Product, and all associated intellectual property and other rights therein, exclusively in the Company. (iii) Employee represents and agrees that he will keep the terms and amount of this Agreement completely confidential, and except to his personal agents or to the extent required by law, he will not hereafter disclose this information concerning this Agreement to anyone, including, but not limited to, any past, present, or prospective employee or applicant for employment with the Company. Employee may only disclose to future, potential employers of Employee that he participates in a deferred compensation and consulting arrangement with the Company which imposes certain restrictions on him related to such future, potential employment. (d) No Employment. Employee agrees that he shall not hereafter seek any re-employment with the Company, its parent, its affiliates or its subsidiaries. (e) Non-Solicitation Of Employees. Employee agrees, during the three years following the Employee's separation from employment, that he will not, either directly or indirectly, alone or in conjunction with any other person or entity, actively recruit, engage in passive hiring efforts, solicit, attempt to solicit, or induce any person who, during such three year period, or within one year prior to Employee's separation from employment, was an exempt employee of the Company or any of its subsidiaries, or was an officer of The Southern Company or any of its affiliates to leave or cease such employment for any reason whatsoever or hire or engage the services of such person in any business substantially similar or competitive with that in which The Southern Company and its affiliates were engaged during the employment. (f) Non-Solicitation of Customers. Employee acknowledges that in the course of employment, he has learned about Company's business, services, materials, programs and products and the manner in which they are developed, marketed, serviced and provided. Employee knows and acknowledges that the Company has invested considerable time and money in developing its programs, agreements, offices, representatives, services, products and marketing techniques and that they are unique and original. Employee further acknowledges that the Company must keep secret all pertinent information divulged to Employee and Company's business concepts, ideas, programs, plans and processes, so as not to aid Company's competitors. Accordingly, Company is entitled to the following protection, which Employee agrees is reasonable: Employee agrees that for a period of two (2) years following termination of employment, he will not, on his own behalf or on behalf of any person, firm, partnership, association, corporation, or other business organization, entity or enterprise, knowingly solicit, call upon, or initiate communication or contact with any person or entity or any representative of any person or entity, with whom Employee had contact during his employment, with a view toward the sale or the providing of any product, equipment or service sold or provided or under development by Company during the period of two (2) years immediately preceding the date of Employee's termination. The restrictions set forth in this section shall apply only to persons or entities with whom Employee had actual contact during the two (2) years prior to termination of employment with a view toward the sale or providing of any product, equipment or service sold or provided or under development by Company. (g) Non-Competition. Employee and Company expressly covenant and agree that the scope, territorial, time and other restrictions contained in this Agreement constitute the most reasonable and equitable restrictions possible to protect the business interest of the Company given: (i) the business of the Company; (ii) the competitive nature of the Company's industry; and (iii) that Employee's skills are such that he could easily find alternative, commensurate employment or consulting work in his field which would not violate any of the provisions of this Agreement. Therefore, Employee agrees to not engage within the Territory for a period of two years from the date of separation from employment in any activity in which Employee has participated in or directed on behalf of the Company, The Southern Company or any of its affiliates within the past two years. 5. Return of Materials. Upon the Employee's termination, or at any point after that time upon the specific request of the Company, Employee shall return to the Company all written or descriptive materials of any kind belonging or relating to the Company or its Affiliates, including, without limitation, any Intellectual Property, Confidential Information and Trade Secrets, in Employee's possession. 6. Cooperation. The parties agree that as a result of Employee's duties and activities during his employment, Employee's reasonable availability may be necessary for the Company to meaningfully respond to or address actual or threatened litigation, or government inquiries or investigations, or required filings with state, federal or foreign agencies (hereinafter "Company Matters"). Upon request of the Company, and at any point following termination of employment, Employee will make himself available to the Company for reasonable periods consistent with his future employment, if any, by other Entities and will cooperate with its agents and attorneys as reasonably required by such Company matters. The Company will reimburse Employee for any reasonable out-of-pocket expenses associated with providing such cooperation. 7. Termination with Cause. In the event of Employee's termination of employment for Cause at any time, the Employee shall forfeit the entire benefit provided in Paragraph 2 and the Company shall have no further obligations with respect to any amount under this Agreement. As used in this Agreement, the term "Cause" shall mean gross negligence or willful misconduct in the performance of the duties and services required in the course of employment by the Company; the final conviction of a felony or misdemeanor involving moral turpitude; the carrying out of any activity or the making of any statement which would prejudice the good name and standing of the Company, or an affiliate or subsidiary of the Southern Company (collectively "Southern") or would bring Southern into contempt, ridicule or would reasonably shock or offend any community in which Southern is located; a material breach of the fiduciary obligations owed by an officer and an employee to Southern; or the Employee's unsatisfactory performance of the duties and services required by his or her employment. 8. Confidentiality and Legal Process. Employee represents and agrees that he will keep the terms, amount and fact of this Agreement confidential and that he will not hereafter disclose any information concerning this Agreement to any one other than his personal agents, including, but not limited to, any past, present, or prospective employee or applicant for employment with Company. Notwithstanding the foregoing, nothing in this Agreement is intended to prohibit Employee from performing any duty or obligation that shall arise as a matter of law. Specifically, Employee shall continue to be under a duty to truthfully respond to any legal and valid subpoena or other legal process. This Agreement is not intended in any way to proscribe Employee's right and ability to provide information to any federal, state or local government in the lawful exercise of such governments' governmental functions. 9. Successors And Assigns; Applicable Law. This Agreement shall be binding upon and inure to the benefit of Employee and his heirs, administrators, representatives, executors, successors and assigns, and shall be binding upon and inure to the benefit of Southern, the Company and their officers, directors, employees, agents, shareholders, parent corporation and affiliates, and their respective predecessors, successors, assigns, heirs, executors and administrators and each of them, and to their heirs, administrators, representatives, executors, successors and assigns. This Agreement shall be construed and interpreted in accordance with the laws of the State of Georgia, United States of America (without giving effect to principles of conflicts of laws). 10. Complete Agreement. This Agreement shall constitute the full and complete Agreement between the parties concerning its subject matter and fully supersedes any and all other prior Agreements or understandings between the parties concerning the subject matter hereof. This Agreement shall not be modified or amended except by a written instrument signed by both Employee and an authorized representative of Southern and the Company. 11. Severability. The unenforceability or invalidity of any particular provision of this Agreement shall not affect its other provisions, and to the extent necessary to give such other provisions effect, they shall be deemed severable. 12. Waiver Of Breach; Specific Performance. The waiver of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other breach. Each of the parties to this Agreement will be entitled to enforce its or his rights under this Agreement, specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its or his favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its or his sole discretion apply to any court of law or equity of competent jurisdiction for specific performance or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 13. Unsecured General Creditor. The Company shall neither reserve nor specifically set aside funds for the payment of its obligations under this Agreement, and such obligations shall be paid solely from the general assets of the Company. Notwithstanding that Employee may be entitled to receive the value of his benefit under the terms and conditions of this Agreement, the assets from which such amount may be paid shall at all times be subject to the claims of the Company's creditors. 14. No Effect On Other Arrangements. It is expressly understood and agreed that the payments made in accordance with this Agreement are in addition to any other benefits or compensation to which Employee may be entitled or for which he may be eligible, whether funded or unfunded, by reason of his employment with the Company. 15. Tax Withholding. There shall be deducted from each payment under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Employee. 16. Compensation. Any compensation contributed on behalf of Employee under this Agreement shall not be considered "compensation," as the term is defined in The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, The Southern Company Performance Sharing Plan or The Southern Company Pension Plan. Payments under this Agreement shall not be considered wages, salaries or compensation under any other employee benefit plan. 17. No Guarantee of Employment. No provision of this Agreement shall be construed to affect in any manner the existing rights of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship of Employee and the Company. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, this ___ day of ________________, 2000. "COMPANY" GEORGIA POWER COMPANY By: ---------------------------------- Its: ---------------------------------- "EMPLOYEE" WAYNE T. DAHLKE EXHIBIT 1 to Deferred Compensation Agreement with Wayne T. Dahlke RELEASE AGREEMENT THIS RELEASE ("Release') is made and entered into by and between WAYNE T. DAHLKE ("Employee") and GEORGIA POWER COMPANY, and its successor or assigns ("Company"). WHEREAS, Employee and Company have agreed that Employee's employment with Georgia Power Company shall terminate on September 1, 2000; WHEREAS, Employee and the Company have previously entered into that certain Deferred Compensation Agreement, dated _________________, 2000 ("Agreement"), that this Release is incorporated therein by reference; WHEREAS, Employee and Company desire to delineate their respective rights, duties and obligations attendant to such termination and desire to reach an accord and satisfaction of all claims arising from Employee's employment, and his termination of employment, with appropriate releases, in accordance with the Agreement; WHEREAS, the Company desires to provide Employee with deferred compensation in accordance with the Agreement for service he has or will provide for the Company; NOW, THEREFORE, in consideration of the premises and the agreements of the parties set forth in this Release, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby covenant and agree as follows: 1. Release. Employee does hereby remise, release and forever discharge the Company and their officers, directors, employees, agents, shareholders, parent corporation and affiliates, and their respective predecessors, successors, assigns, heirs, executors and administrators (collectively, "Releasees"), of and from all manner of actions and causes of action, suits, debts, claims and demands whatsoever at law or in equity, known or unknown, actual or contingent, including, but not limited to, any claims which have been asserted, or could be asserted now or in the future, against any Releasees arising under any and all federal, state or local laws and any common law claims, and including, but not limited to, any claims Employee may have pursuant to the Age Discrimination in Employment Act and any claims to benefits under any and all offer letters, employment or separation agreements, or bonus, severance, workforce reduction, early retirement, out-placement, or other similar plans sponsored by the Company, now or hereafter recognized (collectively, "Claims"), which he ever had or now has or may in the future have, by reason of any matter, cause or thing arising out of his employment relationship and privileges, his serving as an employee of the Company or the separation from his employment relationship or affiliation as an employee of the Company as of the date of this Release against each of the Releasees. Notwithstanding the foregoing, Employee does not release any Claims under the Age Discrimination in Employment Act that may arise after his execution of this Release. 2. No Assignment of Claim. Employee represents that he has not assigned or transferred, or purported to assign or transfer, any Claims or any portion thereof or interest therein to any party prior to the date of this Release. 3. Deferred Compensation. In accordance with the Deferred Compensation Agreement, the Company agrees to pay the Employee or his spouse, as the case may be, the amounts provided in Paragraph 2 of the Agreement. 4. No Admission Of Liability. This Release shall not in any way be construed as an admission by the Company or Employee of any improper actions or liability whatsoever as to one another, and each specifically disclaims any liability to or improper actions against the other or any other person, on the part of itself or himself, its or his employees or agents. 5. Voluntary Execution. Employee warrants, represents and agrees that he has been encouraged in writing to seek advice from anyone of his choosing regarding this Release, including his attorney and accountant or tax advisor prior to his signing it; that this Release represents written notice to do so; that he has been given the opportunity and sufficient time to seek such advice; and that he fully understands the meaning and contents of this Release. He further represents and warrants that he was not coerced, threatened or otherwise forced to sign this Release, and that his signature appearing hereinafter is voluntary and genuine. EMPLOYEE UNDERSTANDS THAT HE MAY TAKE UP TO TWENTY-ONE (21) DAYS TO CONSIDER WHETHER OR NOT HE DESIRES TO ENTER INTO THIS RELEASE. 6. Ability to Revoke Agreement. EMPLOYEE UNDERSTANDS THAT HE MAY REVOKE THIS RELEASE BY NOTIFYING THE COMPANY IN WRITING OF SUCH REVOCATION WITHIN SEVEN (7) DAYS OF HIS EXECUTION OF THIS RELEASE AND THAT THIS RELEASE IS NOT EFFECTIVE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. HE UNDERSTANDS THAT UPON THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD THIS RELEASE WILL BE BINDING UPON HIM AND HIS HEIRS, ADMINISTRATORS, REPRESENTATIVES, EXECUTORS, SUCCESSORS AND ASSIGNS AND WILL BE IRREVOCABLE. Acknowledged and Agreed To: "COMPANY" GEORGIA POWER COMPANY By: --------------------------------- Its: --------------------------------- I UNDERSTAND THAT BY SIGNING THIS RELEASE, I AM GIVING UP RIGHTS I MAY HAVE. I UNDERSTAND THAT I DO NOT HAVE TO SIGN THIS RELEASE. "EMPLOYEE" WAYNE T. DAHLKE ----------------------------------------- Date WITNESSED BY: - -------------------------------------------- - -------------------------------------------- Date EX-10 45 x10a100.txt EXHIBIT 10(a)100 FORM OF MASTER SEPARATION AND DISTRIBUTION AGREEMENT BETWEEN THE SOUTHERN COMPANY AND SOUTHERN ENERGY, INC. 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
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 Troutman Sanders........................................................................23 Section 7.34 Underwriters............................................................................23 Section 7.35 Underwriting Agreement..................................................................23 Schedule 5.11 HoldCo Transaction Schedule 5.12 Plant Dahlberg Transaction Schedule 5.14 Transferred Agreements Schedule 7.1 Southern Energy Affiliated Companies
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. 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 Troutman Sanders LLP, 600 Peachtree Street, Suite 5200, Atlanta, Georgia 30308, 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, Troutman Sanders 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, Troutman Sanders 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"): 2 (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 3 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. 4 (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. 5 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. 6 (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. 7 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. 8 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 9 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. 10 (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 11 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 12 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 13 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 14 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 15 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. 16 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. 17 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 18 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 19 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. 20 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 21 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 22 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 Troutman Sanders. "Troutman Sanders" means Troutman Sanders 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. 23 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. Allen Franklin Name: S. Marce Fuller Title: President and Chief Operating Title: President and Chief Executive Officer Officer 24 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. 25 Schedule 5.14 Transferred Agreements Cooperation Agreement between The State Power Corporation of China and Southern Company dated February, 1999. 26 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. 27 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 28 EX-10 46 x10a101.txt EXHIBIT 10(a)101 FORM OF INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT BETWEEN THE SOUTHERN COMPANY AND SOUTHERN ENERGY, INC. 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....................................... 7 Section 2.3. Southern Energy Insurance Coverage After the Insurance Transition Period................................................................................. 7 Section 2.4. Responsibilities for Self-insured Obligations........................................... 8 Section 2.5. Procedures With Respect to Insured Southern Energy Liabilities.......................... 8 Section 2.6. Insufficient Limits of Liability for Southern Liabilities and Southern Energy Liabilities..................................................................... 9 Section 2.7. Cooperation............................................................................. 10 Section 2.8. No Assignment or Waiver................................................................. 10 Section 2.9. No Liability............................................................................ 10 Section 2.10. No Restrictions........................................................................ 10 Section 2.12. Further Agreements..................................................................... 10 Section 2.13. Matters Governed by Employee Matters Agreement......................................... 10 ARTICLE III MISCELLANEOUS.............................................................................. 11 Section 3.1. Entire Agreement........................................................................ 11 Section 3.2. Governing Law........................................................................... 11 Section 3.3. Notices................................................................................. 11 Section 3.4. Parties in Interest..................................................................... 11 Section 3.5. Other Agreements Evidencing Indemnification Obligations................................. 11 Section 3.6. Counterparts............................................................................ 11 Section 3.7. Assignment.............................................................................. 11 Section 3.8. Severability............................................................................ 12 Section 3.9. Failure or Indulgence Not Waiver........................................................ 12 Section 3.10. Amendment.............................................................................. 12 Section 3.11. Authority.............................................................................. 12 Section 3.12. Interpretation......................................................................... 12 Section 3.13. Governmental Approvals................................................................. 12 ARTICLE IV DEFINITIONS................................................................................. 13 Section 4.1. Action.................................................................................. 13 Section 4.2. Affiliated Company...................................................................... 13 Section 4.3. Claims Committee........................................................................ 13 Section 4.4. Commingled Claims....................................................................... 13 Section 4.5. Coverage Amount......................................................................... 13 Section 4.6. Credit Support Arrangements............................................................. 13
2 Section 4.7. Employee Matters Agreement.............................................................. 13 Section 4.8. Employment Liabilities.................................................................. 13 Section 4.9. Environmental Claim..................................................................... 14 Section 4.10. HoldCo Transaction..................................................................... 14 Section 4.11. Indemnitee............................................................................. 14 Section 4.12. Insurance Policies..................................................................... 14 Section 4.13. Insurance Transition Period............................................................ 14 Section 4.13. Insurance Transition Period............................................................ 14 Section 4.14. Insured Southern Energy Liability...................................................... 14 Section 4.15. Intercompany Agreements................................................................ 14 Section 4.16. IPO Registration Statement............................................................. 14 Section 4.17. Liabilities............................................................................ 14 Section 4.18. Person................................................................................. 15 Section 4.19. Separation............................................................................. 15 Section 4.20. Separation Agreement................................................................... 15 Section 4.21. Separation Date........................................................................ 15 Section 4.22. Southern Business...................................................................... 15 Section 4.23. Southern Energy Business............................................................... 15 Section 4.24. Southern Energy Covered Parties........................................................ 15 Section 4.25. Southern Energy Group.................................................................. 15 Section 4.26. Southern Energy Indemnitees............................................................ 15 Section 4.27. Southern Energy Liabilities............................................................ 15 Section 4.28. Southern Group......................................................................... 15 Section 4.29. Southern Indemnitees................................................................... 16 Section 4.30. Subsidiary............................................................................. 16 Section 4.31. Tax Indemnification Agreement.......................................................... 16 Section 4.32. Taxes.................................................................................. 16 Section 4.33. Third Party Claim...................................................................... 16
3 INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT THIS INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT (this "Agreement") is entered into as of September 1, 2000, between The Southern Company, a Delaware corporation ("Southern"), and Southern Energy, Inc., a Delaware corporation ("Southern Energy"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Article IV below. RECITALS WHEREAS, the Board of Directors of Southern has determined that it is in the best interest of Southern and its stockholders to separate Southern's existing businesses into two independent businesses; WHEREAS, as part of the foregoing, Southern and Southern Energy have agreed, pursuant to the Master Separation and Distribution Agreement dated as of September 1, 2000 (the "Separation Agreement"), which provides, among other things, the initial public offering of Southern Energy stock, the distribution of such stock and the execution and delivery of certain other agreements in order to facilitate and provide for the foregoing; and WHEREAS, the parties desire to set forth certain agreements regarding indemnification and insurance. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: ARTICLE I MUTUAL RELEASES; INDEMNIFICATION Section 1.1. Release of Pre-Closing Claims. (a) Southern Energy Release. Except as provided in Section 1.1(c), effective as of the Separation Date, Southern Energy does hereby, for itself and as agent for each member of the Southern Energy Group, remise, release and forever discharge the Southern Indemnitees from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Separation Date, including any such acts, events or conditions on or before the Separation Date in connection with the transactions and all other activities to implement any of the Separation, the IPO and the Distribution. (b) Southern Release. Except as provided in Section 1.1(c), effective as of the Separation Date, Southern does hereby, for itself and as agent for each member of the Southern Group, remise, release and forever discharge the Southern Energy Indemnitees from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Separation Date, including any such acts, events or conditions on or before the Separation Date in connection with the transactions and all other activities to implement any of the Separation, the IPO and the Distribution. (c) Excluded Liabilities; No Impairment. Nothing contained in Section 1.1(a) or (b) shall release any claims under, or impair any right of any Person to enforce, the Separation Agreement, any Ancillary Agreement (including this Agreement), or any Intercompany Agreement, in each case in accordance with its terms. (d) No Actions as to Released Claims. Southern Energy agrees, for itself and as agent for each member of the Southern Energy Group, not to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Southern or any member of the Southern Group, or any other Person released pursuant to Section 1.1(a), with respect to any Liabilities released pursuant to Section 1.1(a). Southern agrees, for itself and as agent for each member of the Southern Group, not to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Southern Energy or any member of the Southern Energy Group, or any other Person released pursuant to Section 1.1(b), with respect to any Liabilities released pursuant to Section 1.1(b). (e) Further Instruments. At any time, at the request of any other party, each party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof. Section 1.2. Indemnification by Southern Energy. Except as otherwise provided in this Agreement, Southern Energy shall, for itself and as agent for each member of the Southern Energy Group, indemnify, defend (or, where applicable, pay the defense costs for) and hold harmless the Southern Indemnitees from and against any and all Liabilities that any third party seeks to impose upon the Southern Indemnitees, or which are imposed upon the Southern Indemnitees, if and to the extent such Liabilities relate to, arise out of or result from any of the following items (without duplication): (i) any acts or omission or alleged acts or omissions by or on behalf of any member of the Southern Energy Group in the conduct of the Southern Energy Business or in connection with the IPO or the Distribution; (ii) any breach by Southern Energy or any member of the Southern Energy 2 Group of the Separation Agreement or any of the Ancillary Agreements (including this Agreement); and (iii) any Southern Energy Liability. In the event that any member of the Southern Energy Group makes a payment to the Southern Indemnitees hereunder, and any of the Southern Indemnitees subsequently diminishes the Liabilities on account of which such payment was made, either directly or through a third-party recovery, Southern will promptly repay (or will procure a Southern Indemnitee to promptly repay) such member of the Southern Energy Group the amount by which the payment made by such member of the Southern Energy Group exceeds the actual cost of the associated indemnified Liability. Section 1.3. Indemnification by Southern. Except as otherwise provided in this Agreement, Southern shall, for itself and as agent for each member of the Southern Group, indemnify, defend (or, where applicable, pay the defense costs for) and hold harmless the Southern Energy Indemnitees from and against any and all Liabilities that any third party seeks to impose upon the Southern Energy Indemnitees, or which are imposed upon the Southern Energy Indemnitees, if and to the extent such Liabilities relate to, arise out of or result from any of the following items (without duplication): (i) any acts or omissions or alleged acts or omissions by or on behalf of any member of the Southern Group in the conduct of the Southern Business or in connection with the IPO or the Distribution; (ii) any breach by Southern or any member of the Southern Group of the Separation Agreement or any of the Ancillary Agreements (including this Agreement); and (iii) any Liabilities of the Southern Group other than the Credit Support Arrangements. In the event that any member of the Southern Group makes a payment to the Southern Energy Indemnitees hereunder, and any of the Southern Energy Indemnitees subsequently diminishes the Liabilities on account of which such payment was made, either directly or through a third-party recovery, Southern Energy will promptly repay (or will procure a Southern Energy Indemnitee to promptly repay) such member of the Southern Group the amount by which the payment made by such member of the Southern Group exceeds the actual cost of the indemnified Liabilities. Section 1.4. Procedures for Defense, Settlement and Indemnification of Third Party Claims. (a) Notice of Claims. If a Southern Indemnitee or a Southern Energy Indemnitee (as applicable) (an "Indemnitee") shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) who is not a member of 3 the Southern Group or the Southern Energy Group of any claim or of the commencement by any such Person of any Action (collectively, a "Third Party Claim") with respect to which a party (an "Indemnifying Party") may be obligated to provide indemnification to such Indemnitee pursuant to Section 1.2 or 1.3, or any other section of the Separation Agreement or any Ancillary Agreement (including this Agreement), Southern and Southern Energy (as applicable) will ensure that such Indemnitee shall give such Indemnifying Party written notice thereof within thirty (30) days after becoming aware of such Third Party Claim. Any such notice shall describe the Third Party Claim in reasonable detail. Notwithstanding the foregoing, the delay or failure of any Indemnitee or other Person to give notice as provided in this Section 1.4(a) shall not relieve the related Indemnifying Party of its obligations under this Article I, except to the extent that such Indemnifying Party is actually and substantially prejudiced by such delay or failure to give notice. (b) Claims Committee. Any of the parties may refer any dispute regarding the provisions of this Agreement to the Claims Committee for resolution. All determinations of the Claims Committee, if unanimous, shall be binding on all of the parties and their respective successors and assigns. The Claims Committee shall reach a resolution that minimizes expenses for all parties and seeks to avoid hiring multiple counsel. In the event a Liability arises from both an event, act or omission relating primarily to the Southern Energy Business and an event, act or omission relating primarily to the Southern Business, the Claims Committee shall apportion the Liability in accordance with comparative fault, and it may re-apportion the Liability as it learns of additional facts bearing on that assessment. In the event that the Claims Committee cannot reach a unanimous determination as to the nature, status or handling of any such claims within thirty (30) days after such referral (unless the Claims Committee unanimously agrees to a longer time period), the issue will be submitted for resolution pursuant to the procedures set forth in the dispute resolution provisions contained in Section 5.7 of the Separation Agreement; provided, that the provisions of this Section 1.4(b) shall supercede the requirements of the second sentence of Section 5.7(a) of the Separation Agreement. (c) Defense of Commingled Claims. With respect to any Commingled Claim, the Claims Committee shall determine which party shall manage the defense of, and may seek to settle or compromise, such Commingled Claim based upon the specific facts of such claim. (d) Defense By Indemnifying Party. Other than in the case of a Commingled Claim, an Indemnifying Party will manage the defense of and (unless the Indemnifying Party has specified any reservations or exceptions to the obligation to manage the defense or to indemnify that have been referred to, but not resolved by, the Claims Committee) may settle or compromise any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnitee in accordance with Section 1.4(a) (or sooner, if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnitee that the Indemnifying Party will assume responsibility for managing the defense of such Third Party Claim, which notice shall specify any reservations or exceptions. 4 (e) Defense By Indemnitee. If an Indemnifying Party fails to assume responsibility for managing the defense of a Third Party Claim, or fails to notify an Indemnitee that it will assume responsibility as provided in Section 1.4(d), such Indemnitee may manage the defense of such Third Party Claim. (f) No Settlement By Indemnitee Without Consent. Unless the Indemnifying Party has failed to manage the defense of the Third Party Claim in accordance with the terms of this Agreement, no Indemnitee may settle or compromise any Third Party Claim without the consent of the Indemnifying Party. (g) No Consent to Certain Judgments or Settlements Without Consent. Notwithstanding Section 1.4(d) above, no party shall consent to entry of any judgment or enter into any settlement of a Third Party Claim without the consent of the other party (such consent not to be unreasonably withheld) if the effect of such judgment or settlement is to (A) permit any injunction, declaratory judgment, other order or other nonmonetary relief to be entered, directly or indirectly, against the other party or (B) materially affect the other party due to the allocation of Liabilities and related indemnities set forth in the Separation Agreement, this Agreement or any other Ancillary Agreement. Section 1.5. Additional Matters. (a) Cooperation in Defense and Settlement. With respect to any Third Party Claim that implicates both Southern Energy and Southern in a material fashion due to the allocation of Liabilities, responsibilities for management of defense and related indemnities set forth in the Separation Agreement, this Agreement or any of the Ancillary Agreements, the parties agree to cooperate fully and maintain a joint defense (in a manner that will preserve the attorney-client privilege with respect thereto) so as to minimize such Liabilities and defense costs associated therewith. The party that is not responsible for managing the defense of such Third Party Claims shall, upon reasonable request, be consulted with respect to significant matters relating thereto and may, if necessary or helpful, associate counsel to assist in the defense of such claims. (b) Substitution. In the event of an Action in which the Indemnifying Party is not a named defendant, if either the Indemnitee or the Indemnifying Party shall so request, the parties shall endeavor to substitute the Indemnifying Party for the named defendant. If such substitution or addition cannot be achieved for any reason or is not requested, the rights and obligations of the parties regarding indemnification and the management of the defense of claims as set forth in this Article I shall not be altered. (c) Subrogation. In the event of payment by or on behalf of any Indemnifying Party to or on behalf of any Indemnitee in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee, in whole or in part based upon whether the Indemnifying Party has paid all or only part of the Indemnitee's Liability, as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other 5 person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim. (d) Not Applicable to Taxes or Employment Liabilities. This Agreement shall not apply to Taxes (which are covered by the Tax Indemnification Agreement) or Employment Liabilities (which are covered by the Employee Matters Agreement). Section 1.6. Survival of Indemnities. Subject to Section 3.7, the rights and obligations of the members of the Southern Group and the Southern Energy Group under this Article I shall survive the sale or other transfer by any party of any assets or businesses or the assignment by it of any Liabilities or the sale by any member of the Southern Group or the Southern Energy Group of the capital stock or other equity interests of any Subsidiary to any Person. ARTICLE II INSURANCE MATTERS Section 2.1. Southern Energy Insurance Coverage During the Transition Period. (a) Maintain Comparable Insurance. Throughout the period beginning on the Separation Date and ending on the Insurance Transition End Date (the "Insurance Transition Period"), Southern shall, subject to insurance market conditions and other factors beyond its control, maintain policies of insurance, including for the benefit of Southern Energy or any of its Subsidiaries, directors, officers, employees or other covered parties (collectively, the "Southern Energy Covered Parties") which are comparable to those maintained generally by Southern; provided, however, if Southern determines that (i) the amount or scope of such coverage will be reduced during the Insurance Transition Period to a level materially inferior to the level of coverage in existence immediately prior to the Insurance Transition Period, or (ii) the retention or deductible level applicable to such coverage, if any, will be increased during the Insurance Transition Period to a level materially greater than the levels in existence immediately prior to the Insurance Transition Period, Southern shall give Southern Energy notice of such determination as promptly as practicable. Upon notice of such determination, Southern Energy shall be entitled to no less than sixty (60) days to evaluate its options regarding continuance of coverage hereunder and may cancel its interest in all or any portion of such coverage as of any day within such sixty (60) day period. Except as provided below, during the Insurance Transition Period, such policies of insurance shall cover Southern Energy Covered Parties for liabilities and losses insured prior to the Insurance Transition End Date. (b) Directors & Officers ("D&O") Insurance Coverage. With effect from August 1, 2000, Southern shall obtain, subject to market availability and favorable pricing, $200 million in D&O insurance coverage limits (in addition to Southern's current D&O insurance coverage), with an option for a six-year extended reporting period (the 6 "Additional D&O Insurance;" and, together with Southern's current D&O insurance coverage, the "D&O Insurance"). The D&O Insurance shall cover Southern and Southern Energy individually and collectively. The Additional D&O Insurance shall be maintained in force for a one-year period, unless the parties shall mutually agree to renew it for a further period. Upon policy expiration, Southern will exercise the option for the six-year extended reporting period. At the end of the extended reporting period, either party may request a further extension of the reporting period in respect of both parties. Upon such request, Southern shall effect such extension, subject to market availability. The cost of the Additional D&O Insurance, including any extended reporting period option, shall be shared equally between Southern and Southern Energy. (c) Reimbursement for Premiums. Southern Energy shall promptly pay or reimburse Southern, as the case may be, for premium expenses, and Southern Energy Covered Parties shall promptly pay or reimburse Southern for any costs and expenses which Southern may incur in connection with the insurance coverages maintained pursuant to this Section 2.1, including but not limited to any subsequent premium adjustments. All payments and reimbursements by Southern Energy and Southern Energy Covered Parties to Southern shall be made within fifteen (15) days after Southern Energy's receipt of an invoice from Southern. Section 2.2. Cooperation and Agreement Not to Release Carriers. Each of Southern and Southern Energy will share such information as is reasonably necessary in order to permit the other to manage and conduct its insurance matters in an orderly fashion. Each of Southern and Southern Energy, at the request of the other, shall cooperate with and use commercially reasonable efforts to assist the other in recoveries for claims made under any insurance policy for the benefit of any insured party, and neither Southern nor Southern Energy, nor any of their Subsidiaries, shall take any action which would intentionally jeopardize or otherwise interfere with either party's ability to collect any proceeds payable pursuant to any insurance policy. Except as otherwise contemplated by the Separation Agreement, this Agreement or any Ancillary Agreement, after the Separation Date, neither Southern nor Southern Energy shall (and shall ensure that no member of their respective Groups shall), without the consent of the other, provide any insurance carrier with a release, or amend, modify or waive any rights under any such policy or agreement, if such release, amendment, modification or waiver would adversely affect any rights or potential rights of any member of the other Group thereunder. However, nothing in this Section 2.2 shall (A) preclude any member of any Group from presenting any claim or from exhausting any policy limit, (B) require any member of any Group to pay any premium or other amount or to incur any Liability, (C) require any member of any Group to renew, extend or continue any policy in force or (D) except as otherwise provided in Section 2.12, apply to Southern in connection with rights to coverage for Environmental Actions under Insurance Policies in effect prior to the Separation Date. Section 2.3. Southern Energy Insurance Coverage After the Insurance Transition Period. 7 (a) Except as otherwise set forth herein, from and after the Insurance Transition End Date, Southern Energy, and Southern Energy alone, shall be responsible for obtaining and maintaining insurance programs for its risk of loss and such insurance arrangements shall be separate and apart from Southern's insurance programs. Notwithstanding the foregoing, Southern, upon the request of Southern Energy, shall use all commercially reasonable efforts to assist Southern Energy in the transition to its own separate insurance programs from and after the Insurance Transition Period, and shall provide Southern Energy with any information that is in the possession of Southern and is reasonably available and necessary to either obtain insurance coverages for Southern Energy or to assist Southern Energy in preventing unintended self-insurance, in whatever form. (b) D&O Insurance Coverage. After the Insurance Transition End Date, Southern will endeavor to maintain, subject to market availability, a minimum of $200 million D&O coverage insuring both Southern and Southern Energy under Southern's policy for all activities prior to the Insurance Transition End Date. With respect to Southern Energy, such coverage shall apply solely to Southern Energy's wrongful act(s) or alleged wrongful act(s) occurring prior to the Insurance Transition End Date. Section 2.4 Maintenance of D&O Insurance Limits. It is the intent of Southern and Southern Energy that the D&O Insurance shall be maintained in an amount sufficient to provide at least $100 million of coverage (the "Minimum D&O Coverage") to each of the parties for claims arising during the policy period which are unrelated to the IPO, the Distribution, the Separation or any other actions contemplated by the Separation Agreement and this Agreement ("Unrelated Claims"). In the event that either party should experience claims which, in the aggregate, are likely to erode D&O Insurance coverage limits available to the other party to below $100 million, then Southern shall arrange with its insurers, subject to market availability, for a reinstatement of coverage limits sufficient to maintain $100 million of D&O Insurance coverage for such other party's Unrelated Claims. Unless the parties shall mutually agree otherwise, determination of the eroded coverage amount to be reinstated shall be based on claims paid and reserves established by the insurers underwriting the applicable D&O Insurance. The cost to reinstate policy limits shall be borne by the party incurring the Unrelated Claims which have eroded the other party's Minimum D&O Coverage. Section 2.5. Responsibilities for Self-insured Obligations. Southern Energy will reimburse Southern for all amounts necessary to exhaust or otherwise satisfy all applicable self-insured retentions, amounts for fronted policies, deductibles and retrospective premium adjustments and similar amounts not covered by Insurance Policies in connection with Southern Energy Liabilities and Insured Southern Energy Liabilities. Section 2.6. Procedures With Respect to Insured Southern Energy Liabilities. (a) Reimbursement. Southern Energy will reimburse Southern for all amounts incurred to pursue insurance recoveries from Insurance Policies for Insured Southern 8 Energy Liabilities. (b) Management of Claims. The defense of claims, suits or actions giving rise to potential or actual Insured Southern Energy Liabilities will be managed (in conjunction with Southern's insurers, as appropriate) by the party that would have had responsibility for managing such claims, suits or actions had such Insured Southern Energy Liabilities been Southern Energy Liabilities. Section 2.7. Insufficient Limits of Liability for Southern Liabilities and Southern Energy Liabilities. In the event that there are insufficient limits of liability available under Southern's Insurance Policies provided in Sections 2.1(b), 2.3(b), 2.4 or other applicable polices in effect prior to the Insurance Transition End Date to cover the Liabilities of Southern and/or Southern Energy that would otherwise be covered by such Insurance Policies, then to the extent that other insurance is not available to Southern and/or Southern Energy for such Liabilities an adjustment will be made in accordance with the following procedures: (i) Each party will be allocated an amount equal to their proportional share of any Liabilities (which Liabilities would otherwise be covered under Southern's Insurance Policies) in excess of the Coverage Amount. Each party's proportional share of such excess Liabilities shall be calculated by multiplying (A) the aggregate amount of all Liabilities (net of any deductible) of both parties which are eligible for coverage under a Southern Insurance Policy in the coverage period applicable to such policy, less the Coverage Amount applicable to such policy, by (B) a fraction, the numerator of which is the amount of such Liabilities attributable to such party, and the denominator of which is the aggregate amount of all such Liabilities of both parties. Any dispute between the parties in determining the proper allocation of liabilities pursuant to this section shall be resolved pursuant to the procedures set forth in Section 1.4(b) hereof. (ii) A party who receives more than its share of the Coverage Amount (the "Overallocated Party") agrees to reimburse the other party (the "Underallocated Party") to the extent that the Liabilities of the Underallocated Party that would have been covered under such Insurance Policies (subject to the limitations of Section 2.12) is less than the Underallocated Party's share of the Coverage Amount. (iii) In addition to and without limiting the foregoing, Southern and Southern Energy shall cooperate and use their reasonable best efforts to maintain such general liability or other applicable shared coverage levels for both parties as are in existence on the Separation Date. To that effect, in the event that the coverage under any general liability or other applicable shared policy is eroded to less than 50% of the applicable level of coverage as of the Separation Date, the parties shall cooperate in equitably determining the appropriate allocation of the costs of and responsibility for the reinstatement, subject to market availability, of coverage under such policies to its original level. Additionally, Southern shall maintain Southern Energy's coverage for claims relating to Liabilities arising prior to the 9 Separation Date until such time as Southern Energy shall have arranged for "prior acts" coverage for such Liabilities; provided, that Southern Energy shall use commercially reasonable efforts to obtain such coverage as soon as practicable upon the reasonable request of Southern, and Southern shall, subject to market availability, use commercially reasonable efforts to assist Southern Energy in obtaining such coverage. Section 2.8. Cooperation. Southern and Southern Energy will cooperate with each other in all respects, and they shall execute any additional documents which are reasonably necessary, to effectuate the provisions of this Article II. Section 2.9. No Assignment or Waiver. This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the Southern Group in respect of any Insurance Policy or any other contract or policy of insurance. Section 2.10. No Liability. Southern Energy does hereby, for itself and as agent for each other member of the Southern Energy Group, agree that no member of the Southern Group or any Southern Indemnitee shall have any Liability whatsoever as a result of the insurance policies and practices of Southern and its Subsidiaries as in effect at any time prior to the Insurance Transition End Date, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise. Section 2.11. No Restrictions. Nothing in this Agreement shall be deemed to restrict any member of the Southern Energy Group from acquiring at its own expense any other insurance policy in respect of any Liabilities or covering any period. Section 2.12. Further Agreements. The Parties acknowledge that they intend to allocate financial obligations without violating any laws regarding insurance, self-insurance or other financial responsibility. If it is determined that any action undertaken pursuant to the Separation Agreement, this Agreement or any Ancillary Agreement is violative of any insurance, self-insurance or related financial responsibility law or regulation, the parties agree to work together to do whatever is necessary to comply with such law or regulation while trying to accomplish, as much as possible, the allocation of financial obligations as intended in the Separation Agreement, this Agreement and any Ancillary Agreement. Section 2.13. Matters Governed by Employee Matters Agreement. This Article II shall not apply to any insurance policies that are the subject of the Employee Matters Agreement. 10 ARTICLE III MISCELLANEOUS Section 3.1. Entire Agreement. This Agreement, the Master Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules attached hereto and thereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. Section 3.2. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia as to all matters regardless of the laws that might otherwise govern under principles of conflicts of laws applicable thereto. Section 3.3. Notices. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one (1) business day after being deposited with an overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of the party's General Counsel at the address of its principal executive office or such other address as a party may request by notifying the other in writing. Section 3.4. Parties in Interest. This Agreement, including the Schedules and Exhibits hereto, and the other documents referred to herein, shall be binding upon Southern, Southern's Subsidiaries, Southern Energy and Southern Energy's Subsidiaries and inure solely to the benefit of the Southern Energy Indemnitees and the Southern Indemnitees and their respective permitted assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Section 3.5. Other Agreements Evidencing Indemnification Obligations. Southern hereby agrees to execute, for the benefit of any Southern Energy Indemnitee, such documents as may be reasonably requested by such Southern Energy Indemnitee, evidencing Southern's agreement that the indemnification obligations of Southern set forth in this Agreement inure to the benefit of and are enforceable by such Southern Energy Indemnitee. Southern Energy hereby agrees to execute, for the benefit of any Southern Indemnitee, such documents as may be reasonably requested by such Southern Indemnitee, evidencing Southern Energy's agreement that the indemnification obligations of Southern Energy set forth in this Agreement inure to the benefit of and are enforceable by such Southern Indemnitee. Section 3.6. Counterparts. This Agreement, including the Schedules and Exhibits hereto, and the other documents referred to herein, may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. Section 3.7. Assignment. The rights and obligations in this Agreement may not be 11 assigned or delegated by any party hereto, in whole or in part, without the express prior written consent of the other party hereto. Section 3.8. Severability. If any term or other provision of this Agreement or the Schedules or Exhibits attached hereto is determined by a nonappealable decision by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest extent possible. Section 3.9. Failure or Indulgence Not Waiver. No failure or delay on the part of either party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. Section 3.10. Amendment. No change or amendment will be made to this Agreement except by an instrument in writing signed on behalf of each of the parties to this Agreement. Section 3.11. Authority. Each of the parties hereto represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other action, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. Section 3.12. Interpretation. The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table or contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article or a Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. Section 3.13. Governmental Approvals. The parties acknowledge that certain of the 12 provisions of this Agreement may be subject to certain conditions established by applicable government regulations, orders, and approvals ("Existing Authority"). The parties intend to implement this Agreement consistent with and to the extent permitted by Existing Authority and to cooperate toward obtaining and maintaining in effect such governmental agency consents, orders or approvals as may be required in order to implement this Agreement as fully as possible in accordance with its terms. ARTICLE IV DEFINITIONS Section 4.1. Action. "Action" means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international governmental authority or any arbitration or mediation tribunal. Section 4.2. Affiliated Company. "Affiliated Company" has the meaning set forth in the Separation Agreement. Section 4.3. Claims Committee. "Claims Committee" means a committee composed of (i) either the General Counsel or an Associate General Counsel of Southern and (ii) either the General Counsel or an Associate General Counsel of Southern Energy. Section 4.4. Commingled Claims. "Commingled Claims" means, collectively, any Third Party Claims (i) which involve an employee, consultant or contractor that was employed by both the Southern Energy Business and the Southern Business, (ii) in which both Southern and Southern Energy are named, or (iii) involving both the Southern Energy Business and the Southern Business. Section 4.5. Coverage Amount. "Coverage Amount" means the lesser of (A) the available limits of liability under Southern's Insurance Policies in effect prior to the Insurance Transition End Date, net of uncollectible amounts attributable to insurer insolvencies, and (B) the proceeds received from Southern's Insurance Policies if any Liabilities are the subject of disputed coverage claims and, following consultation with each other, Southern and/or Southern Energy agree to accept less than full policy limits from Southern's and Southern Energy's insurers. Section 4.6. Credit Support Arrangements. "Credit Support Arrangements" has the meaning set forth in Section 5.13 of the Separation Agreement. Section 4.7. Employee Matters Agreement. "Employee Matters Agreement" means the Employee Matters Agreement attached as an exhibit to the Separation Agreement. Section 4.8. Employment Liabilities. "Employment Liabilities" has the meaning set forth in Schedule 2.01 to the Employee Matters Agreement. 13 Section 4.9. Environmental Claim. "Environmental Claim" means any and all administrative or judicial actions, suits, orders, claims, liens, notices of violation, investigations, complaints, requests for information, proceedings or other written communication, whether criminal or civil, by any Person based upon, alleging, asserting, or claiming any (a) violation of, or liability under any environmental law, (b) violation of any permit, or (c) liability for investigatory costs, cleanup costs, removal costs, remedial costs, response costs, natural resource damages, property damage, personal injury, fines, or penalties arising out of, based upon, resulting from or related to, the presence, release, or threatened release into the environment of any hazardous materials or any other environmental condition. Section 4.10. HoldCo Transaction. "HoldCo Transaction" has the meaning set forth in the Separation Agreement. Section 4.11. Indemnitee. "Indemnitee" has the meaning set forth in Section 1.4(a) hereof. Section 4.12. Insurance Policies. "Insurance Policies" means insurance policies pursuant to which a Person makes a true risk transfer to an insurer. Section 4.13. Insurance Transition End Date. "Insurance Transition End Date" means the earlier of (i) the Distribution Date, or (ii) the first date on which Southern owns less than 50% of the common stock of Southern Energy then outstanding. Section 4.14. Insurance Transition Period. "Insurance Transition Period" has the meaning set forth in Section 2.1 of this Agreement. Section 4.15. Insured Southern Energy Liability. "Insured Southern Energy Liability" means any Southern Energy Liability to the extent that (i) it is covered under the terms of Southern's Insurance Policies in effect prior to the Insurance Transition End Date and (ii) Southern Energy is not a named insured under, or otherwise entitled to the benefits of, such Insurance Policies. Section 4.16. Intercompany Agreements. "Intercompany Agreements" means any written agreement between Southern or any of its Subsidiaries or Affiliated Companies and Southern Energy or any of its Subsidiaries or Affiliated Companies which is in effect prior to the Separation Date. Section 4.17. IPO Registration Statement. "IPO Registration Statement" means the registration statement on Form S-1 pursuant to the Securities Act to be filed with the SEC registering the shares of common stock of Southern Energy to be issued in the IPO, together with all amendments thereto. Section 4.18. Liabilities. "Liabilities" means all debts, liabilities, guarantees, assurances, commitments and obligations, whether fixed, contingent or absolute, asserted or unasserted, matured or unmatured, liquidated or unliquidated, accrued or not accrued, 14 known or unknown, due or to become due, whenever or however arising (including, without limitation, whether arising out of any contract or tort based on negligence or strict liability) and whether or not the same would be required by generally accepted principles and accounting policies to be reflected in financial statements or disclosed in the notes thereto. For purposes of any indemnification hereunder, "Liabilities" shall be deemed also to include any and all damages, claims, suits, judgments, fines, penalties, costs and expenses of any kind or character, including attorney's fees. Section 4.19. Person. "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. Section 4.20. Separation. "Separation" has the meaning set forth in the Separation Agreement. Section 4.21. Separation Agreement. "Separation Agreement" means the Master Separation and Distribution Agreement dated as of September 1, 2000, of which this is an exhibit thereto. Section 4.22. Separation Date. "Separation Date" means as of 12:01 a.m., Eastern Standard Time, September 1, 2000, or such date as may be fixed by the Board of Directors of Southern. Section 4.23. Southern Business. "Southern Business" has the meaning set forth in the Separation Agreement. Section 4.24. Southern Energy Business. "Southern Energy Business" has the meaning set forth in the Separation Agreement. Section 4.25. Southern Energy Covered Parties. "Southern Energy Covered Parties" shall have the meaning set forth in Section 2.1(a) of this Agreement. Section 4.26. Southern Energy Group. "Southern Energy Group" has the meaning set forth in the Separation Agreement. Section 4.27. Southern Energy Indemnitees. "Southern Energy Indemnitees" means Southern Energy, each member of the Southern Energy Group and each of their respective directors, officers and employees. Section 4.28. Southern Energy Liabilities. "Southern Energy Liabilities" means (i) all Liabilities of the Southern Energy Group, and (ii) the Credit Support Arrangements. Section 4.29. Southern Group. "Southern Group" has the meaning set forth in the Separation Agreement. 15 Section 4.30. Southern Indemnitees. "Southern Indemnitees" means Southern, each member of the Southern Group and each of their respective directors, officers and employees. Section 4.31. Subsidiary. "Subsidiary" has the meaning set forth in the Separation Agreement. Section 4.32. Tax Indemnification Agreement. "Tax Indemnification Agreement" means the Tax Indemnification Agreement attached as an exhibit to the Separation Agreement. Section 4.33. Taxes. "Taxes" has the meaning set forth in the Tax Indemnification Agreement. Section 4.34. Third Party Claim. "Third Party Claim" has the meaning set forth in Section 1.4(a) of this Agreement. [SIGNATURES ON FOLLOWING PAGE] 16 EX-10 47 x10a102.txt EXHIBIT 10(a)102 FORM OF TAX INDEMNIFICATION AGREEMENT BY AND AMONG THE SOUTHERN COMPANY AND ITS AFFILIATED COMPANIES AND SOUTHERN ENERGY, INC. AND ITS AFFILIATED COMPANIES TABLE OF CONTENTS TABLE OF CONTENTS RECITALS..........................................................................................................1 SECTION 1. DEFINITIONS...........................................................................................2 SECTION 2. PREPARATION AND FILING OF TAX RETURNS..................................................................6 2.1 In General.................................................................................................6 2.2 Information and Cooperation................................................................................7 2.3 Manner of Filing Tax Returns...............................................................................7 2.4 Agent......................................................................................................8 SECTION 3. REPRESENTATIONS AND COVENANTS..........................................................................8 3.1 Southern Energy Representations and Covenants..............................................................8 3.2 Southern Representations and Covenants.....................................................................9 SECTION 4. TAX SHARING AND PAYMENTS...............................................................................9 4.1 In General.................................................................................................9 4.2 Payments..................................................................................................10 SECTION 5. ALLOCATION OF CERTAIN TAX ITEMS.......................................................................10 5.1 Liability for Restructuring Taxes and Deconsolidation.....................................................10 5.2 Carryforwards and Carrybacks..............................................................................10 5.3 Refunds...................................................................................................11 5.4 Allocation of Tax Items...................................................................................11 5.5 Continuing Covenants......................................................................................11 SECTION 6. INDEMNIFICATION PROVISIONS............................................................................11 6.1 General Indemnification...................................................................................11 6.2 Spinoff Indemnification...................................................................................12 6.3 Indemnified Liability.....................................................................................13 6.4 Amount of Indemnified Liability for Income Taxes..........................................................13 6.5 Indemnity Amount..........................................................................................14 6.6 Alternate Remedy..........................................................................................14 6.7 Payments..................................................................................................14 6.8 Prompt Performance........................................................................................15 6.9 Interest..................................................................................................15 6.10 Tax Records..............................................................................................15 SECTION 7. AUDITS AND CONTEST RIGHTS.............................................................................15 7.1 In General................................................................................................15 7.2 Notice....................................................................................................16 7.3 Contests..................................................................................................16 7.4 Limitations...............................................................................................17 7.5 Failure to Notify, Etc....................................................................................18 7.6 Remedies..................................................................................................18 SECTION 8. STOCK OPTIONS.........................................................................................19 8.1 In General................................................................................................19 8.2 Notices, Withholding, Reporting...........................................................................19 8.3 Adjustments...............................................................................................19 SECTION 9. MISCELLANEOUS.........................................................................................19 9.1 Effectiveness.............................................................................................19 9.2 Notices...................................................................................................19
9.3 Changes in Law............................................................................................20 9.4 Confidentiality...........................................................................................20 9.5 Successors................................................................................................21 9.6 Affiliated Companies......................................................................................21 9.7 Authorization, Etc........................................................................................21 9.8 Entire Agreement..........................................................................................21 9.9 Governing Law; Jurisdiction...............................................................................21 9.10 Dispute Resolution.......................................................................................21 9.11 Counterparts.............................................................................................21 9.12 Severability.............................................................................................21 9.13 No Third Party Beneficiaries.............................................................................22 9.14 Waivers, Etc.............................................................................................22 9.15 Setoff...................................................................................................22
ii TAX INDEMNIFICATION AGREEMENT THIS TAX INDEMNIFICATION AGREEMENT (this "Agreement"), dated as of September 1, 2000, by and among The Southern Company ("Southern"), a Delaware corporation and each Southern Affiliated Company, and Southern Energy, Inc. ("Southern Energy"), a Delaware corporation and currently a direct, wholly owned subsidiary of Southern, and each Southern Energy Affiliated Company is entered into in connection with the Spinoff (as defined below). RECITALS WHEREAS, Southern is the common parent of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"), which currently files a consolidated federal income tax return, and which, together with Southern Energy and other affiliated corporations, is party to the Tax Allocation Agreement (as defined below); WHEREAS, as set forth in the Master Separation and Distribution Agreement dated as of September 1, 2000 (the "Separation Agreement"), and subject to the terms and conditions thereof, Southern and Southern Energy have determined it would be appropriate and desirable for Southern to separate the Southern Energy Group from the Southern Group, and in connection with such separation (as more fully discussed in the Separation Agreement), for Southern to acquire HoldCo (as defined below) from Southern Energy (the "HoldCo Transaction"); WHEREAS, Southern and Southern Energy contemplate that in addition to the HoldCo Transaction, Southern Energy will make an initial public offering (the "IPO") of Southern Energy common stock that will reduce Southern's ownership of Southern Energy on a fully-diluted basis to not less than 80.1 percent; WHEREAS, subsequent to the IPO, Southern intends to distribute all of its shares of Southern Energy common stock, on a pro rata basis, to the holders of the common stock of Southern, subject to the terms and conditions of the Separation Agreement (the "Distribution"); WHEREAS, the Distribution is intended to qualify as a tax free distribution under Section 355 of the Code; WHEREAS, upon the Distribution, Southern Energy will cease to be a member of the Southern Consolidated Group for federal income tax purposes; and WHEREAS, in contemplation of the Distribution pursuant to which Southern Energy and its domestic subsidiaries will cease to be members of the Southern Group (as defined below), the parties hereto have determined to enter into this Agreement, setting forth their agreement with respect to certain Tax matters. NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. DEFINITIONS 1.1 In General. As used in this Agreement, the following capitalized terms shall have the following meanings: "Adequate Assurances" means posting a bond or providing a letter of credit reasonably acceptable to the Indemnitee; provided, however, if the Indemnifying Party fails to post such bond or provide such letter of credit, the Indemnifying Party shall provide cash equal to the Indemnity Amount to the Indemnitee not less than thirty (30) days prior to the date on which such Tax would become due and payable by the Indemnitee. "Affiliated Company" means, for income tax purposes, any entity in which a common parent holds 80% or more of the voting power and value of such corporation. In the case of Southern, such term shall exclude Southern Energy and any Southern Energy Affiliated Company. "Audit" includes any audit, assessment of Taxes, other examination by any Tax Authority, proceeding, or appeal of such a proceeding relating to Taxes, whether administrative or judicial, including proceedings relating to competent authority determinations. "Code" means the Internal Revenue Code of 1986, as amended. "Consolidated Group" means a group of one or more corporations connected through stock ownership with a common parent in which the common parent owns at least 80% of the total voting power and value of such corporation and that files a Consolidated Return. "Consolidated Return" means any Tax Return with respect to Federal Income Taxes filed on a consolidated basis wherein Southern Energy or any Affiliated Company joins in the filing of such Tax Return (for any taxable period) with Southern or one more Southern Affiliated Companies. "Consolidated Return Year" means any taxable year for which a Consolidated Return is filed. "Control" means stock representing 50% or more of the total combined voting power of all classes of stock entitled to vote or at least 50% of the total value of shares of all classes of stock. "Distribution" has the meaning set forth in the Recitals to this Agreement. "Distribution Date" means the date on which the Distribution is effective. 2 "Federal Income Tax" means any Tax imposed under Subtitle A of the Code (including the Taxes imposed by Sections 11, 55, and 1201(a) of the Code), and any interest, additions to Tax or penalties applicable or related thereto, and any other income-based U.S. federal Tax which is hereinafter imposed upon corporations. "Filing Party" has the meaning set forth in Section 2.3(b) of this Agreement. "Final Determination" means with respect to any issue (i) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other order has become final and not subject to further appeal, (ii) a closing agreement (whether or not entered into under Section 7121 of the Code) or any other binding settlement agreement (whether or not with the IRS) entered into in connection with or in contemplation of an administrative or judicial proceeding, or (iii) the completion of the highest level of administrative proceedings if a judicial contest is not or is no longer available. "HoldCo" means the entity created by Southern Energy that will own all of the stock of SE Finance Capital Corporation and Southern Company Capital Funding, Inc. and will be merged with Southern Company Energy Solutions, Inc. "HoldCo Transaction" has the meaning set forth in the Recitals of this Agreement. "Income Taxes" means (1) any tax based upon, measured by, or calculated with respect to (A) net income or profits (including any capital gains tax, minimum tax and any tax on items of Tax preference, but not including sales, use, real or personal property, gross or net receipts, transfer or similar taxes) or (B) multiple bases if one or more of the bases upon which such tax may be based, measured by, or calculated with respect to, is described in clause (A) above, or (2) any U.S., state or local franchise tax. "Indemnified Liability" has the meaning set forth in Section 6.3. "Indemnifying Party" has the meaning set forth in Section 6.2(d) of this Agreement. "Indemnitee" has the meaning set forth in Section 6.2(d) of this Agreement. "Indemnity Amount" has the meaning set forth in Section 6.5. "Initial Private Letter Ruling" means the first private letter ruling issued by the Service to Southern in connection with the Spinoff. "Non-Filing Party" has the meaning set forth in Section 2.3(c) of this Agreement. "Option" means an option to acquire common stock, or other equity-based incentives the economic value of which is designed to mirror that of an option, including non-qualified stock options, discounted non-qualified stock options, cliff options to the extent stock is issued or issuable (as opposed to cash compensation), and tandem stock options to the extent stock is issued or issuable (as opposed to cash compensation). 3 "Post-Distribution Period" means any taxable period or portion thereof beginning after the Distribution Date. "Pre-Distribution Period" means any taxable period or portion thereof ending on or prior to the Distribution Date. "Prohibited Act" has the meaning set forth in Section 6.2(c). "Restricted Period" means the period beginning two years before the date of the Distribution and ending two years after the Distribution Date. "Restructuring" means the transactions undertaken by Southern and Southern Energy (and their respective Affiliated Companies) designed to accomplish the HoldCo Transaction. "Restructuring Tax" means any Tax imposed as a result of the transactions contemplated by the Restructuring. "Ruling Documents" means (1) the request for a ruling under Section 355 and various other Sections of the Code, filed with the Service in connection with the Spinoff, together with any supplemental filings or ruling requests or other materials subsequently submitted on behalf of Southern, its subsidiaries and shareholders to the Service, the appendices and exhibits thereto, and any rulings issued by the Service to Southern in connection with the Spinoff or (2) any similar filings submitted to, or rulings issued by, any other Tax Authority in connection with the Spinoff. "Separate Tax" means any Tax incurred by an entity that is not a Federal Income Tax arising from the filing of the Consolidated Return. "Separate Return" means any Tax Return filed by any entity that is not part of the Consolidated Tax Return. "Separation Agreement" has the meaning set forth in the Recitals to this Agreement. "Service" means the Internal Revenue Service. "Southern Energy Group" means Southern Energy and any Southern Energy Affiliated Company of which Southern Energy would be the common parent corporation after the HoldCo Transaction. "Southern Energy Historic Group" means Southern Energy or any Southern Energy Affiliated Company, including SE Finance Capital Corporation, in existence prior to the creation and transfer of HoldCo. 4 "Southern Group" means Southern, any Southern Affiliated Company or other entity of which Southern is the common parent corporation, and any corporation or other entity which may be, or may become a member of such group from time to time after the HoldCo Transaction. Southern Company Energy Solutions, Inc., shall at all times remain a member of the Southern Group notwithstanding any merger into HoldCo. "Southern Historic Group" means Southern or any Southern Affiliated Company (other than Southern Energy or any Southern Energy Affiliated Company) that was part of Southern's Consolidated Group prior to the HoldCo Transaction, including Southern Company Energy Solutions, Inc. "Spinoff" means the separation of the Southern Energy Group from the Southern Group through the Distribution. "Tax" includes any charges, fees, levies, imposts, duties, or other assessments of a similar nature, including income, alternative or add-on minimum, gross receipts, profits, lease, service, service use, wage, wage withholding, employment, workers compensation, business occupation, occupation, premiums, environmental, estimated, excise, employment, sales, use, transfer, license, payroll, franchise, severance, stamp, occupation, windfall profits, withholding, social security, unemployment, disability, ad valorem, estimated, highway use, commercial rent, capital stock, paid up capital, recording, registration, property, real property gains, value added, business license, custom duties, or other tax or governmental fee of any kind whatsoever, imposed or required to be withheld by any Tax Authority including any interest, additions to tax, or penalties applicable or related thereto. "Tax Allocation Agreement" means the Income Tax Allocation Agreement entered into by and among Southern and all the members of its Consolidated Group dated December 29, 1981, as amended, pursuant to which the parties agreed upon the allocation of Tax Items relating to the Consolidated Group and the Consolidated Return. "Tax Authority" means any governmental authority or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the Service). "Tax Benefit" means a reduction in the Tax liability of a taxpayer (or of the affiliated group of which it is a member) for any taxable period. Except as otherwise provided in this Agreement, a Tax Benefit shall be deemed to have been realized or received from a Tax Item in a taxable period only if and to the extent that the Tax liability of the taxpayer (or of the affiliated group of which it is a member) for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is less than it would have been if such Tax liability were determined without regard to such Tax Item. "Tax Detriment" means an increase in the Tax liability of a taxpayer (or of the affiliated group of which it is a member) for any taxable period. Except as otherwise provided in this Agreement, a Tax Detriment shall be deemed to have been realized or received from a Tax Item in a taxable period only if and to the extent that the Tax liability of the taxpayer (or of the 5 affiliated group of which it is a member) for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is more than it would have been if such Tax liability were determined without regard to such Tax Item. "Tax Item" means any item of income, gain, loss, deduction or credit, or other attribute that may have the effect of increasing or decreasing any Tax. "Tax Law" means any federal, state, local or foreign law with respect to Taxes, including the Code and Treasury Regulations. "Tax Return" means any return, report, certificate, form or similar statement or document (including, any related or supporting information or schedule attached thereto and any information return, amended Tax return, claim for refund or declaration of estimated Tax) required to be supplied to, or filed with, a Tax Authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax. "Treasury Regulations" means the final, temporary and proposed income Tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). 1.2 Construction Principles. As used in this Agreement, the singular shall be deemed to include the plural and vice versa, and the captions and section headings are inserted for convenience of reference only and are not intended to have any significance for the interpretation of, or construction of, the provisions of this Agreement. It is intended that this Agreement shall comply with the Public Utility Holding Company Act of 1935, Rule 45(c), to the extent relevant, and all ambiguities shall be interpreted and resolved accordingly. SECTION 2. PREPARATION AND FILING OF TAX RETURNS. 2.1 In General. (a) During the Pre-Distribution Period, Southern shall timely file or cause to be filed all Tax Returns that are filed on a consolidated, combined or unitary basis and include any member of the Southern Energy Group or Southern Energy Historic Group as provided in the Tax Allocation Agreement. Each entity required to file a Separate Return shall timely file or cause to be filed all such Separate Returns for any Pre-Distribution Period. Notwithstanding the foregoing, Southern shall timely file or cause to be filed all Tax Returns with respect to HoldCo. (b) Southern shall timely file or cause to be filed any Tax Return related to the Southern Group for any Post-Distribution Period. Southern Energy shall timely file or cause to be filed any Tax Return related to the Southern Energy Group for any Post-Distribution Period. 6 2.2 Information and Cooperation. (a) Southern and Southern Energy shall provide each other all documents and information, and make available employees and officers of Southern and Southern Energy, as reasonably requested by the other party, on a mutually convenient basis during normal business hours, to aid the other party in preparing any Tax Return described in Section 2.1 of this Agreement to the extent that such Tax Return relates to any Pre-Distribution Period or to contest any Audit of any such Tax Return. (b) In the case of any Tax Return for a Pre-Distribution Period described in Section 2.1 of this Agreement, Southern will provide Southern Energy with a copy of that portion of each such Tax Return to the extent it relates to Southern Energy or any Southern Energy Affiliated Company, together with all related tax accounting work papers, not later than five (5) days after the receipt of a written request therefor. In addition, Southern will provide to employees of Southern Energy responsible for preparing its Tax Returns with access to any private letter rulings, together with any requests therefor and related documents and any other relevant information, as it relates to Southern Energy for any period prior to the Distribution Date, and will provide Southern Energy with a copy of such rulings or documents to the extent that the issues discussed therein are relevant to Southern Energy or a Southern Energy Affiliated Company, not later than five (5) days after the receipt of a written request therefor. (c) Notwithstanding any other provision of this Agreement, neither Southern nor any Southern Affiliated Company shall be required to provide Southern Energy or any Southern Energy Affiliated Company access to or copies of any information that relate to Southern or any Southern Affiliated Company unless it also relates to Southern Energy or a Southern Energy Affiliated Company. In addition, in the event that Southern determines that the provision of any information to Southern Energy or any Southern Energy Affiliated Company could be commercially detrimental, violate any law or agreement or waive any privilege that may be asserted under applicable law including, any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege, and any privilege relating to internal evaluation processes, the parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence. In the event that Southern Energy determines that the provision of any information to Southern or any Southern Affiliated Company could be commercially detrimental, violate any law or agreement or waive any privilege that may be asserted under applicable law including, any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege, and any privilege relating to internal evaluation processes, the parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence. 2.3 Manner of Filing Tax Returns. (a) Southern (for itself and the Southern Affiliated Companies) and Southern Energy (for itself and the Southern Energy Affiliated Companies) agree to file all Tax Returns for any Pre-Distribution Period, and to take all other actions in a manner consistent with the position that 7 Southern Energy and the Southern Energy Affiliated Companies are part of the Southern Consolidated Group for all periods through and including the Distribution Date. (b) Except as otherwise provided in this Section 2.3 of this Agreement, the party that is required to file a return under Section 2.1 of this Agreement (the "Filing Party") shall have the exclusive right to determine (1) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions and principles of taxation to be used and the manner in which any Tax Item shall be reported, (2) whether any extensions may be requested, (3) the elections that will be made in such Tax Return, (4) whether any amended Tax Returns shall be filed, (5) whether any claims for refund shall be made, (6) whether any refunds shall be paid by way of refund or credited against any liability for the related Tax, and (7) whether to retain outside specialists to prepare such Tax Return, whom to retain for such purpose and the scope of any such retainer. Notwithstanding the foregoing, if Southern Energy requests Southern to make a particular determination under this Section 2.3(b) with respect to a Tax Return of Southern Energy or a Southern Energy Affiliated Company, Southern shall not unreasonably withhold its consent to such request. (c) Any Tax Return described in Section 2.1(a) of this Agreement (but only with respect to Tax Items of Southern Energy or an Southern Energy Affiliated Company), which Tax Return is filed after the date of this Agreement, shall be prepared on a basis consistent with the elections, methods of accounting, positions, conventions and principles of taxation and the manner in which any Tax Item or other information is reported as reflected on the most recently filed prior Tax Returns involving similar matters. The preceding sentence shall not apply if the Filing Party obtains the prior written consent (which consent shall not be unreasonably withheld) of the other party (the "Non-Filing Party"). 2.4 Agent. Southern Energy hereby irrevocably designates, and agrees to cause each Southern Energy Affiliated Company to so designate, Southern as its sole and exclusive agent and attorney-in-fact to take such action (including execution of documents) as Southern, in its sole discretion, may deem appropriate in any and all matters (including Audits) relating to any Consolidated Return described in Section 2.1(a) of this Agreement; provided, however, that Southern shall not exercise its rights as agent and attorney-in-fact in any manner that is inconsistent with the rights granted to Southern Energy under this Agreement, and nothing in this Section 2.4 shall limit the rights granted to Southern Energy under this Agreement. SECTION 3. REPRESENTATIONS AND COVENANTS. 3.1 Southern Energy Representations and Covenants. Southern Energy, for itself and the Southern Energy Affiliated Companies, hereby represents, warrants and covenants that: (a) Southern Energy has reviewed the information and representations made in the Ruling Documents submitted to the Service prior to the date of this Agreement and, to Southern Energy's knowledge, all of such information or representations that relate to Southern Energy or any Southern Energy Affiliated Company, or the business or operations of either, are true, correct and complete. 8 (b) Southern Energy will not, and will cause each Southern Energy Affiliated Company not to, take any action, or fail or omit to take any action, that would cause any of the information or representations made in the Ruling Documents that relate to Southern Energy, the Southern Energy Historic Group, or any Southern Energy Affiliated Company or the business or operations of each, to be untrue, regardless of whether such information or representations were included in the Initial Private Letter Ruling (or any supplemental ruling). 3.2 Southern Representations and Covenants. Southern, for itself and the Southern Affiliated Companies, hereby represents, warrants and covenants that: (a) Southern has reviewed the information and representations made in the Ruling Documents submitted to the Service prior to the date of this Agreement, and, to its knowledge, all of such information or representations that relate to Southern or any Southern Affiliated Company or the business or operations of either, are true, correct and complete. (b) Southern will not, and will cause each Southern Affiliated Company not to, take any action, or fail or omit to take any action, that would cause any of the information or representations made in the Ruling Documents to be untrue, regardless of whether such information or representations were included in the Initial Private Letter Ruling. SECTION 4. TAX SHARING AND PAYMENTS. 4.1 In General. Except to the extent specifically modified or supplemented herein, the Tax Allocation Agreement shall continue in full force and effect. Consequently, for example, for taxable periods ending on or before the Distribution Date, payments to Southern or Southern Energy, as the case may be, shall continue to be made in accordance with past practices. The provisions of the Tax Allocation Agreement shall fix the rights and obligations of the parties as to the matters covered thereby. Notwithstanding any other provision of this Agreement, the Tax Allocation Agreement shall not apply to any Post-Distribution Period of Southern Energy and the Southern Energy Group, except as provided in Section 5.2(b) of this Agreement. (a) Southern Energy shall be responsible for, and shall indemnify and hold harmless Southern against, any and all Taxes incurred by Southern Energy, the Southern Energy Group, or the Southern Energy Historic Group (except as provided below) for any Pre-Distribution Period in accordance with past practices and the principles set forth in the Tax Allocation Agreement other than any Restructuring Taxes for which Southern or any Southern Affiliated Company is liable under Section 5 of this Agreement. Southern shall be responsible for, and shall indemnify and hold harmless Southern Energy against, any and all Taxes incurred by Southern or any Southern Affiliated Company (other than Taxes attributable to Southern Energy or any Southern Energy Affiliated Company) for any Pre-Distribution Period (except as provided below) in accordance with past practices and the principles set forth in the Tax Allocation Agreement other than any Restructuring Taxes for which Southern Energy or any Southern Energy Affiliated Company is liable under Section 5 of this Agreement. 9 (b) Southern shall be responsible for, and shall indemnify and hold harmless Southern Energy against, any and all Taxes incurred by HoldCo and its Affiliated Companies for any tax period. (c) Southern Energy shall be responsible for all Taxes that relate to the Southern Energy Group with respect to any Post-Distribution Period. Southern shall be responsible for all Taxes that relate to the Southern Group with respect to any Post-Distribution Period. 4.2 Payments. (a) Federal Income Taxes. Southern shall pay (or cause to paid) to the Service all Federal Income Taxes, if any, of any Consolidated Group due and payable for all Pre-Distribution Periods. (b) Separate Taxes. Southern shall pay (or cause to be paid) to the appropriate Tax Authorities all Separate Taxes, if any, that relate to Southern, the Southern Historic Group, or the Southern Group. Southern Energy shall pay (or cause to be paid) to the appropriate Tax Authorities all Separate Taxes, if any, that relate to Southern Energy, the Southern Energy Historic Group or the Southern Energy Group. SECTION 5. ALLOCATION OF CERTAIN TAX ITEMS. 5.1 Liability for Restructuring Taxes and Deconsolidation. (a) Southern shall be responsible for, and shall indemnify and hold harmless Southern Energy against any and all Restructuring Taxes relating to HoldCo Transaction. (b) Except as otherwise provided by this Agreement, all Taxes arising from the deconsolidation of the Southern Energy Group from the Southern Group shall be the obligation of the entity that is liable for such Taxes under applicable Tax Law. 5.2 Carryforwards and Carrybacks. (a) Southern shall notify Southern Energy after the Distribution Date of any consolidated carryover item which may be partially or totally attributed to and carried over by a Southern Energy Affiliated Company and will notify Southern Energy of subsequent adjustments which may affect such carryover item. (b) Notwithstanding any other provision of this Agreement, Southern Energy shall not be required to make any election under Section 172(b)(3) of the Code and, to the extent feasible, any similar provision of any state or local Tax Law, to relinquish any right to carryback net operating losses. Upon a request by Southern Energy, Southern shall be required to include on an amended Consolidated Return any net operating losses of Southern Energy arising in a Post-Distribution Period to the extent allowed under the Code; provided, that if Southern incurs a Tax 10 Detriment related to the inclusion of such net operating losses on the Consolidated Return, Southern Energy shall indemnify Southern for the amount of such Tax Detriment. 5.3 Refunds. Any refund of Taxes received in a Pre-Distribution Period will be allocated in a manner consistent with the existing Tax Allocation Agreement. Any refund of Taxes received in a Post-Distribution Period resulting from an adjustment made to a Tax Return filed for a Pre-Distribution Period will be allocated to the party whose Return resulted in such refund, including any refund relating to the carryback of a net operating loss pursuant to Section 5.2(b). 5.4 Allocation of Tax Items. (a) All Tax computations (1) ending on the Distribution Date and (2) the immediate following Tax period of Southern Energy or any Southern Energy Affiliated Company, shall be made pursuant to the principles of Section 1.1502-76(b) of the Treasury Regulations or of a corresponding provision under the laws of other jurisdictions, as determined by Southern, taking into account all reasonable suggestions made by Southern Energy with respect thereto. (b) Earnings and Profits. Southern will advise Southern Energy in writing of the decrease in Southern earnings and profits attributable to the Distribution under Section 312(h) of the Code as a result of the Spin-Off not later than November 15, 2002, with respect to transactions completed during fiscal year 2001; provided, however, that Southern shall provide Southern Energy with estimates of such amounts (determined in accordance with past practice) as reasonably requested by Southern Energy. 5.5 Continuing Covenants. Southern (for itself and each Southern Affiliated Company) and Southern Energy (for itself and each Southern Energy Affiliated Company) agree (1) not to take any action reasonably expected to result in an increased Tax Detriment to the other party or a reduction in a Tax Benefit of the other party under this Agreement, and (2) to take any action reasonably requested by the other party that would reasonably be expected to result in a Tax Benefit or avoid a Tax Detriment to the other party, provided that such action does not result in any additional cost not fully compensated for by the requesting party. The parties hereby acknowledge that the preceding sentence is not intended to limit, and therefore shall not apply to, the rights of the parties with respect to matters otherwise covered by this Agreement. SECTION 6. INDEMNIFICATION PROVISIONS. 6.1 General Indemnification. (a) In General. Southern Energy and each Southern Energy Affiliated Company shall jointly and severally indemnify Southern, each Southern Affiliated Company and their respective directors, officers and employees, and hold them harmless from and against any and all Taxes for which Southern Energy or any Southern Energy Affiliated Company is liable under this Agreement and any loss, cost, damage or expense, including reasonable attorneys' fees and costs, that is attributable to, or results from, the failure of Southern Energy, any Southern Energy Affiliated Company or any director, officer, or employee to make any payment required to be made under this Agreement. Southern and each Southern Affiliated Company shall jointly and 11 severally indemnify Southern Energy, each Southern Energy Affiliated Company and their respective directors, officers and employees, and hold them harmless from and against any and all Taxes for which Southern or any Southern Affiliated Company is liable under this Agreement and any loss, cost, damage or expense, including reasonable attorneys' fees and costs, that is attributable to, or results from the failure of Southern any Southern Affiliated Company or any director, officer or employee to make any payment required to be made under this Agreement. (b) Inaccurate or Incomplete Information. Southern Energy and each Southern Energy Affiliated Company shall jointly and severally indemnify Southern, each Southern Affiliated Company and their respective directors, officers and employees, and hold them harmless from and against any cost, fine, penalty, or other expenses of any kind attributable to the negligence of Southern Energy or any Southern Energy Affiliated Company in supplying Southern or any Southern Affiliated Company with inaccurate or incomplete information, in connection with the preparation of any Tax Return. Southern and each Southern Affiliated Company shall jointly and severally indemnify Southern Energy, each Southern Energy Affiliated Company and their respective directors, officers and employees, and hold them harmless from and against any cost, fine, penalty, or other expense of any kind attributable to the negligence of Southern or any Southern Affiliated Company in supplying Southern Energy or any Southern Energy Affiliated Company with inaccurate or incomplete information, in connection with the preparation of any Tax Return. 6.2 Spinoff Indemnification. (a) In General. Notwithstanding anything herein or in the Tax Allocation Agreement to the contrary, the provisions of this Section 6 shall govern all matters among the parties hereto related to an Indemnified Liability (as defined in Section 6.3 below) and an Indemnity Amount (as defined in Section 6.5 below). (b) Continued Conduct of Business. During the Restricted Period, each of Southern and Southern Energy agrees that it will not cease the active conduct of its trade or business within the meaning of Section 355(b) of the Code nor cause or permit to be caused a change in its Control (other than the Distribution). (c) Ruling Requirement for Major Transactions Undertaken by Southern Energy during the Restricted Period. During the Restricted Period, Southern and Southern Energy will not enter into any of the following transactions, or enter into any other transaction which, by itself or in the aggregate, may cause the Distribution to be treated as part of a plan pursuant to which one or more persons acquire directly or indirectly stock representing Control of Southern or Southern Energy, as the case may be, within the meaning of Code Section 355(e): (i) merge or consolidate with or into any other corporation; (ii) liquidate or partially liquidate (within the meaning of such terms as defined in Section 346 and Section 302, respectively, of the Code); 12 (iii) sell or transfer all or substantially all its assets (within the meaning of Rev. Proc. 77-37, 1977 - 2 C.B. 568) in a single transaction or series of related transactions; (iv) redeem or otherwise repurchase any of Southern or Southern Energy's capital stock; or (v) make any change in its equity structure (including stock issuances, pursuant to the exercise of options or otherwise, option grants, the adoption of, or authorization of shares under a stock option plan, capital contributions or acquisition but not including the Distribution), (actions (i), (ii), (iii), (iv) and (v) are referred to as the "Prohibited Acts"), unless Southern or Southern Energy first obtains, and permits the other party to review, a supplemental ruling from the Service, that such transaction, and any transaction related thereto, will not affect the qualification of the Spin-Off under Section 355 of the Code. (d) Indemnification. If Southern or Southern Energy breaches any representations set forth in Section 3 of this Agreement or takes any action or enters into any agreement to take any action, including, without limitation, any breach of Sections 6.2(b) and (c), and the Spin-Off shall fail to qualify under Section 355 of the Code as a result of such action or actions, then such party (the "Indemnifying Party") shall indemnify and hold harmless the other party against any and all federal, state and local taxes, interest, penalties and additions to Tax imposed upon or incurred by Southern, the Southern Group, any shareholder of Southern, Southern Energy or the Southern Energy Group, as the case may be, (each such party an "Indemnitee") as a result of the failure of the Spin-Off to so qualify to the extent provided herein. For purposes of this Agreement, the failure of the Spin-Off to qualify under Section 355 of the Code shall include, without limitation, the imposition of any Tax upon any Indemnitee under Code Section 355(e). 6.3 Indemnified Liability. For purposes of this Agreement, the term "Indemnified Liability" means any liability imposed upon or incurred by (1) Southern, any member of the Southern Group, or Southern shareholder for which Southern, any other member of the Southern Group or Southern shareholder is indemnified and held harmless under Section 6.4, or (2) Southern Energy or any member of the Southern Energy Group, for which Southern Energy or any other member of the Southern Energy Group is indemnified and held harmless under Section 6.4, but shall not refer to the amount of such liability. 6.4 Amount of Indemnified Liability for Income Taxes. The amount of an Indemnified Liability for a federal or state Tax incurred by an Indemnitee based on or determined with reference to income shall be deemed to be the amount of Tax computed by multiplying (i) the taxing jurisdiction's highest effective Tax rate applicable to Indemnitee of the character subject to Tax as a result of the failure of the Spin-Off to qualify under Section 355 of the Code for the taxable period in which the Spin-Off occurs, times (ii) the gain or income of Indemnitee which is subject to Tax in the taxing jurisdiction as a result of the failure of the Spin-Off to qualify under Section 355 of the Code, and (iii) in the case of a state, times the percentage representing the extent to which such gain or income is apportioned or allocated to such state; provided, however, that in the case of a state Tax determined as a percentage of Federal Income Tax liability, the amount of Indemnified Liability shall be deemed to be the amount of Tax computed by 13 multiplying (i) that state's highest effective rate applicable to Indemnitee of the character subject to Tax as a result of the failure of the Spin-Off to qualify under Section 355 of the Code for taxable period in which the Spin-Off occurs, times (ii) the amount of deemed Federal Income Tax (whether or not incurred) imposed upon Indemnitee from the failure of the Spin-Off to qualify under Section 355 of the Code computed in accordance with this Section 6.6, times (iii) the percentage representing the extent to which the gain or income required to be recognized on the Spin-Off is apportioned to such state. 6.5 Indemnity Amount. With respect to any Indemnified Liability, the amount which the Indemnifying Party shall pay to Indemnitee as indemnification (the "Indemnity Amount") shall be the sum of (i) the amount of the Indemnified Liability, as determined under Section 6.4, (ii) any penalties and interest imposed with respect to the Indemnified Liability and (iii) an amount such that when the sum of the amounts set forth in clauses (i), (ii) and this clause (iii) of this Section 6.5 are reduced by all Taxes imposed as a result of the receipt of such sum, (taking into account any related current credits or deductions payable by the Indemnitee or any of its Affiliated Companies under any law or governmental authority) the reduced amount is equal to the sum of the amounts set forth in clauses (i) and (ii) of this Section 6.5 . 6.6 Alternate Remedy. Southern and Southern Energy, respectively, recognize that any failure by it or any Affiliated Company to comply with their obligations under this Section 6 may result in additional Taxes which could cause irreparable harm to Southern and its shareholders, the Southern Affiliated Companies, and/or Southern Energy and the Southern Energy Affiliated Companies, and that such entities may be inadequately compensated by monetary damages for such failure. Accordingly, if (A) (1) either party shall fail to comply with any obligation under this Section 6 which would be reasonably foreseeable to result in any additional Taxes, and (2) such party shall fail to provide the other party with a written opinion of a nationally recognized tax attorney, or a tax accountant that is a member of a nationally recognized law firm or accounting firm that the failure to comply with such obligation will not result in any increase in Taxes of Southern and its shareholders, any Southern Affiliated Company, Southern Energy or any Southern Energy Affiliated Company, as the case may be, and such opinion is provided to such party for its review and approval, which approval will not be unreasonably withheld, or (B) if it is probable that the failure by such party to comply with any such obligation under this Section 6 will result in an Indemnified Liability under this Agreement and the Indemnifying Party fails to provide Adequate Assurances to the Indemnitee of its ability to pay the Indemnity Amount under this Agreement, then Southern or Southern Energy, as the case may be, shall be entitled to injunctive relief in addition to all other remedies. 6.7 Payments. (a) In General. Except as otherwise provided under this Agreement, to the extent that any party has an indemnification or payment obligation to another party pursuant to this Agreement, the indemnitee shall provide the indemnifying party with its calculation of the amount of such indemnification payment. Such calculation shall provide sufficient detail to permit the indemnifying party to reasonably understand the calculations. All indemnification payments shall be made to such indemnitee or to the appropriate Tax Authority as specified by the indemnitee within the time prescribed for payment in this Agreement, or if no period is prescribed, within 14 thirty (30) days after delivery by the indemnitee to the indemnifying party of written notice of a payment or if such liability is contested pursuant to Section 7.3 of this Agreement, within thirty (30) days of the incurrence of such an amount based on a Final Determination, together with a computation of the amounts due. Any disputes with respect to indemnification payments shall be resolved in accordance with Section 9.10 below. (b) Electronic Payments. Any payment required under this Agreement in an amount in excess of one million dollars ($1,000,000.00) shall be made by electronic funds transfer of immediately available funds. 6.8 Prompt Performance. All actions required to be taken by any party under this Agreement shall be performed within the time prescribed for performance in this Agreement, or if no period is prescribed, such actions shall be performed promptly. 6.9 Interest. Payments pursuant to this Agreement that are not made within the period prescribed in this Section 6.7(a) shall bear interest for the period from and including the date immediately following the last date of the period through and including the date of payment at a per annum rate equal to the prime rate as published in The Wall Street Journal on the date of determination, plus two percent (2%). Such interest will be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of 365 days and the actual number of days for which due. 6.10 Tax Records. The parties to this Agreement hereby agree to retain and provide on proper demand by any Taxing Authority (subject to any applicable privileges) the books, records, documentation and other information relating to any Tax Return until the later of (a) the expiration of the applicable statute of limitations (giving effect to any extension, waiver or mitigation thereof) and (b) in the event any claim is made under this Agreement for which such information is relevant, until a Final Determination with respect to such claim. SECTION 7. AUDITS AND CONTEST RIGHTS. 7.1 In General. Upon the termination of Southern Energy and the Southern Energy Group as members of the Southern Consolidated Group, the Tax Allocation Agreement shall apply with respect to any period in which the income of the terminating member is included in the Consolidated Return. The terminating member shall remain liable to Southern for payments required under the Tax Allocation Agreement, including, but not limited to, payments of Tax and estimated Tax for periods in which the member's income is included in the Southern Consolidated Return. Subject to Section 2.2(c) of this Agreement, the terminating member shall cooperate and provide reasonable access to books, records and other information needed in connection with Audits, administrative proceedings, litigation and other similar matters related to periods in which the member was a member of the Southern Consolidated Group. Notwithstanding the foregoing, Southern Energy and the Southern Energy Group will not be required under the Tax Allocation Agreement to pay more on a combined or consolidated basis than that which it would have been required to pay had Southern Energy or a member of the Southern Energy Group filed a separate Federal Income Tax Return. 15 (b) Except as otherwise provided in this Agreement, the respective Filing Party shall have the right to control, contest, and represent the interests of Southern, any Southern Affiliated Company, Southern Energy or any Southern Energy Affiliated Company in any Audit relating to any Tax Return that the Filing Party is responsible for filing under Section 2.1 of this Agreement and to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit. The Filing Party's rights shall extend to any matter pertaining to the management and control of an Audit, including execution of waivers, choice of forum, scheduling of conferences and the resolution of any Tax Item. 7.2 Notice. If, after the date of this Agreement, Southern (or any Southern Affiliated Company) or Southern Energy (or any Southern Energy Affiliated Company) receives written notice of, or relating to, an Audit from a Tax Authority that asserts, proposes or recommends a deficiency, claim or adjustment that, if sustained, could result in Taxes for which the other party is responsible under this Agreement, then the party receiving such notice shall provide a copy of such notice to such other party within ten (10) days of receipt thereof. 7.3 Contests. (a) If any Tax Authority asserts, proposes or recommends a deficiency, claim or adjustment that, if sustained, could result in Taxes for which the Non-Filing Party is responsible under this Agreement, then upon request by the Non-Filing Party, the Filing Party shall contest, or continue to contest, any deficiency, claim or adjustment and the Filing Party shall keep the Non-Filing Party informed in a timely manner reasonably in advance of all actions taken or proposed to be taken by the Filing Party in connection with such deficiency, claim or adjustment. (b) In the case of an Audit with respect to any Tax Item, the Filing Party shall: (1) in the case of any material correspondence or filing submitted to the Tax Authority or any judicial authority that relates to the merits of such deficiency, claim or adjustment (i) reasonably in advance of such submission, but subject to applicable time constraints imposed by such Tax Authority or judicial authority, provide the Non-Filing Party with a draft copy of the portion of such correspondence or filing that relates to such deficiency, claim or adjustment, (ii) incorporate, subject to applicable time constraints imposed by such Tax Authority or judicial authority, the Non-Filing Party's comments and changes on such draft copy of such correspondence or filing, and (iii) provide the Non-Filing Party with a final copy of the portion of such correspondence or filing that relates to such deficiency, claim or adjustment; (2) provide the Non-Filing Party with notice reasonably in advance of, and the Non-Filing Party shall have the right to attend, any meetings with the Tax Authority (including meetings with examiners) or hearings or proceedings before any judicial authority to the extent they relate to such deficiency, claim or adjustment; and (3) at the Filing Party's reasonable request (or upon the Filing Party's consent to a request by the Non-Filing Party, which consent shall not be unreasonably withheld), the Non-Filing Party shall assume responsibility for (i) contesting and presenting the merits with respect to any deficiency, claim or adjustment that, if sustained, would result in Taxes for which the 16 Non-Filing Party is responsible under this Agreement, or (ii) resolving, settling or agreeing to any such deficiency, claim or adjustment. Any such request (or consent) by the Filing Party shall be subject to the Non-Filing Party's continued compliance with the conditions of Section 7.4 of this Agreement and to such other conditions as the Filing Party and Non-Filing Party reasonably agree. 7.4 Limitations. (a) In General. The Filing Party shall have no obligation to contest, or to continue to contest, any deficiency, claim or adjustment in accordance with Section 7.3, and the Non-Filing Party shall have no right to control or participate under Section 7.3 of this Agreement unless: (1) within thirty (30) days of a reasonable request by the Filing Party, the Non-Filing Party shall deliver to the Filing Party a written opinion of a nationally recognized tax attorney or tax accountant that is a member of a recognized law firm or accounting firm, to the effect that the Non-Filing Party's position with respect to such deficiency, claim or adjustment is supported by a reasonable basis (within the meaning of Treasury Regulations Section 1.6662-3(b)(3)); (2) the Non-Filing Party shall have agreed to be bound by a Final Determination of such deficiency, claim or adjustment; (3) the Non-Filing Party shall have agreed to pay, and shall be currently paying, all reasonable out of pocket costs and expenses incurred by the Filing Party to contest such deficiency, claim or assessment including reasonable outside attorneys', accountants' and investigatory fees and disbursements; (4) the Non-Filing Party shall have advanced to the Filing Party, on an interest-free basis (and with no additional net after-tax cost to the Filing Party), the amount of Tax in controversy (but not in excess of the lesser of (A) the amount of Tax for which the Non-Filing Party could be liable under this Agreement or (B) the amounts actually expended by the Filing Party for this item) to the extent necessary for the contest to proceed in the forum selected by the Filing Party; (5) the Non-Filing Party shall have provided to the Filing Party all documents and information, and shall have made available employees and officers of the Non-Filing Party, as may be necessary, useful or reasonably required by the Filing Party in contesting such deficiency, claim or adjustment; and (6) the contest of such deficiency, claim or adjustment shall involve no material danger of the sale, forfeiture or loss of, or the creation of any lien on, any asset of the Filing Party (except if the Non-Filing Party shall have adequately bonded such lien or otherwise made provision to protect the interests of the Filing Party in a manner reasonably satisfactory to the Filing Party). 17 (b) Settlement. Notwithstanding Section 7.4(a), the Filing Party may resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with any Audit of any Tax Return that it is responsible for filing under Section 2.1 of this Agreement if the Filing Party has provided the Non-Filing Party with a reasonable opportunity to review a copy of that portion of the settlement or compromise proposal which relates to the claim for which the Filing Party is seeking indemnification hereunder; provided, that if (a) the Filing Party fails to provide the Non-Filing Party such a reasonable opportunity to review such portion of such proposal, or (b) after such reasonable opportunity to review such proposal the Non-Filing Party in writing reasonably withholds its consent to all or part of such settlement or compromise proposal, then, unless the Filing Party was not required to continue the applicable contest under the terms of Section 7.4(a), the Non-Filing Party shall not be obligated to indemnify the Filing Party hereunder to the extent of the amount attributable to the loss to which such settlement or compromise relates as to which the Non-Filing Party has reasonably withheld its consent, or with respect to any other loss for which a successful contest is foreclosed because of such settlement or compromise as to which the Non-Filing Party has reasonably withheld its consent. If the Filing Party effects a settlement or compromise of such contest, notwithstanding that the Non-Filing Party has reasonably withheld its consent thereto, the Filing Party shall repay to the Non-Filing Party such amounts that the Non-Filing Party advanced pursuant to clause (a)(4) of this Section 7.4 hereof as relate to such claim, to the extent that the Non-Filing Party has reasonably withheld its consent to the settlement or compromise thereof (together with interest at the prime rate as published in the Wall Street Journal on any such amount paid by the Non-Filing Party from the date paid by Lessee to the date repaid by the Filing Party). (c) Waiver. Notwithstanding any other provision of this Section 7.4, the Filing Party may resolve, settle, or agree to any deficiency, claim or adjustment for any taxable period if the Filing Party waives it right to indemnity with respect to such Tax Item. In such event, the Filing Party shall promptly reimburse the Non-Filing Party for all amounts previously advanced by the Non-Filing Party to the Filing Party in connection with such deficiency, claim or adjustment under Section 7.4(a)(4) of this Agreement. In addition, the Filing Party shall reimburse the Non-Filing Party for any Tax Detriment that directly results from the settlement of such deficiency, claim or adjustment. No waiver by the Filing Party under this Section 7.4(c) with respect to any deficiency, claim or adjustment relating to any single Tax Item, position, issue or transaction or relating to any single Tax for any one taxable period shall operate as a waiver with respect to any other deficiency, claim or adjustment. 7.5 Failure to Notify, Etc. The failure of the Filing Party promptly to notify the Non-Filing Party of any matter relating to a particular Tax for a taxable period or to take any action specified in Section 7.3 of this Agreement shall not relieve the Non-Filing Party of any liability and/or obligation which it may have to the Filing Party under this Agreement with respect to such Tax for such taxable period except to the extent that the Non-Filing Party's rights hereunder are materially prejudiced by such failure and in no event shall such failure relieve the Non-Filing Party of any other liability and/or obligation which it may have to the Filing Party. 7.6 Remedies. Except as otherwise provided in this Agreement, the parties hereby agree that the sole and exclusive remedy for a breach by the Filing Party of the Filing Party's obligations to the Non-Filing Party with respect to a deficiency, claim or adjustment relating to 18 the redetermination of a Tax Item of the Non-Filing Party for a taxable period shall first be a reduction in the amount that would otherwise be payable by the Non-Filing Party for such taxable period and then an increase in amount that would otherwise be payable by the Filing Party for such taxable period, in either case because of the breach. The parties further agree that no claim against the Filing Party and no defense to the Non-Filing Party's liabilities to the Filing Party under this Agreement shall arise from the resolution by the Filing Party of any deficiency, claim or adjustment relating to the redetermination of any Tax Item of the Filing Party. SECTION 8. STOCK OPTIONS. 8.1 In General. The parties hereto agree that Southern shall be entitled to any Tax Benefit arising by reason of exercises of Options to purchase shares of Southern stock, and that Southern Energy shall be entitled to any Tax Benefit arising by reason of exercises of Options to purchase shares of Southern Energy stock. The parties hereto agree to report all Tax deductions with respect to stock options and other equity issued to their employees consistently with this Section 8.1, to the extent permitted by the Tax Law. 8.2 Notices, Withholding, Reporting. Southern shall promptly notify Southern Energy of any Post-Separation Date event giving rise to income to any Southern Energy Group employees or former employees in connection with exercises of options to purchase shares of Southern stock. If required by the Tax Law, Southern Energy shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection therewith. 8.3 Adjustments. If Southern Energy or any Southern Energy Affiliated Company receives any Tax Benefit to which Southern is entitled under Section 8.1 of this Agreement, Southern Energy shall pay the amount of such Tax Benefit to Southern. If Southern or any Southern Affiliated Company receives any Tax Benefit to which Southern Energy is entitled under Section 8.1 of this Agreement, Southern shall pay the amount of such Tax Benefit to Southern Energy. SECTION 9. MISCELLANEOUS 9.1 Effectiveness. This Agreement shall become effective as of the date hereof. In the event Southern does not effect the Distribution as contemplated by the Separation Agreement but Southern Energy and the Southern Energy Group cease to be members of the Southern Consolidated Group for any reason (a "Deconsolidation Event"), this Agreement shall continue in full force and effect subject to the following exceptions: (i) Sections 3, 5.4(b), and 6.2 - 6.6 hereof shall no longer be effective, (ii) the definition of "Distribution Date" shall mean the date on which a Deconsolidation Event is effective, (iii) the definition of "Post-Distribution Period" shall mean any taxable period or portion thereof beginning after the date of the Deconsolidation Event, and (iv) the definition of "Pre-Distribution Period" shall mean any taxable period or portion thereof ending on or prior to the date of the Deconsolidation Event. 9.2 Notices. Any notice, request, instruction or other document to be given or delivered under this Agreement by any party to another party shall be in writing and shall be deemed to have been duly given or delivered when (a) delivered in person, (b) deposited in the United 19 States mail, postage prepaid and sent certified mail, return receipt requested or (c) delivered to Federal Express or similar service for overnight delivery to the address of the party set forth below: If to Southern or any Southern Affiliated Company, to W. Dean Hudson, with a copy to the General Counsel of Southern, at: The Southern Company 270 Peachtree Street Atlanta, Georgia 30303 If to Southern Energy or any Southern Energy Affiliated Company, to James A. Ward, with a copy to the General Counsel of Southern Energy: Southern Energy, Inc. 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 Any party may, by written notice to the other parties, change the address or the party to which any notice, request, instruction or other document is to be delivered. 9.3 Changes in Law. (a) Any reference to a provision of the Code or a law of another jurisdiction shall include a reference to any applicable successor provision or law. (b) If, due to any change in applicable law or regulations or their interpretation by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated thereby shall become impracticable or impossible, the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision. 9.4 Confidentiality. For a period of three years, commencing on the date of this Agreement, each party shall hold and cause its directors, officers, employees, advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such party) concerning the other parties hereto furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (a) in the public domain through no fault of such party or (b) later lawfully acquired from other sources not under a duty of confidentiality by the party to which it was furnished), and each party shall not release or disclose such information to any other person, except its directors, officers, employees, auditors, attorneys, financial advisors, bankers and other consultants who shall be advised of and agree to be bound by the provisions of this Section 9.4. Each party shall be deemed to have satisfied its 20 obligation to hold confidential information concerning or supplied by the other party if it exercises the same care as it takes to preserve confidentiality for its own similar information. 9.5 Successors. This Agreement shall be binding on and inure to the benefit and detriment of any successor, by merger, acquisition of assets or otherwise, to any of the parties hereto, to the same extent as if such successor had been an original party. 9.6 Affiliated Companies. Southern shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Southern Affiliated Company, and Southern Energy shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Southern Energy Affiliated Company. 9.7 Authorization, Etc. Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of each such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding on such party. 9.8 Entire Agreement. This Agreement and the Tax Allocation Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof. 9.9 Governing Law; Jurisdiction. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia as to all matters regardless of the law that might otherwise govern under the principles of conflicts of law applicable thereto. 9.10 Dispute Resolution. The resolution of any and all disputes arising from or in connection with this Agreement shall be governed by and settled in accordance with the provisions of Section 5.7 of the Separation Agreement; provided, however, that at the request of Southern or Southern Energy, a nationally recognized tax attorney or tax accountant that is a member of a nationally recognized law firm or accounting firm, which firm is independent of both parties, will be appointed for purposes of the non-binding mediation procedures described in Section 5.7(b) of the Separation Agreement. 9.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. 9.12 Severability. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction (or an arbitrator or arbitration panel) to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants, and restrictions set forth herein shall remain in full force and effect, and shall in no way be affected, impaired, or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants, and restrictions without including any 21 of such which may be hereafter declared invalid, void, or unenforceable. In the event that any such term, provision, covenant or restriction is held to be invalid, void or unenforceable, the parties hereto shall use their best efforts to find and employ an alternate means to achieve the same or substantially the same result as that contemplated by such terms, provisions, covenant, or restriction. 9.13 No Third Party Beneficiaries. This Agreement is solely for the benefit of Southern, the Southern Affiliated Companies, Southern Energy and the Southern Energy Affiliated Companies. This Agreement should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other rights in excess of those existing without this Agreement. 9.14 Waivers, Etc. No failure or delay on the part of the parties in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No modification or waiver of any provision of this Agreement nor consent to any departure by the parties therefrom shall in any event be effective unless the same shall be in writing. 9.15 Setoff. All payments to be made by any party under this Agreement may be netted against payments due to such party under this Agreement, but otherwise shall be made without setoff, counterclaim or withholding, all of which are hereby expressly waived. 22 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by a duly authorized officer as of the date first above written. THE SOUTHERN COMPANY on behalf of itself and the Southern Affiliated Companies By: --------------------------------------------------------- Name: H. Allen Franklin Title: President and Chief Operating Officer SOUTHERN ENERGY, INC. on behalf of itself and the Southern Energy Affiliated Companies By: --------------------------------------------------------- Name: S. Marce Fuller Title: President and Chief Executive Officer 23 EX-10 48 x10a103.txt Exhibit 10(a)103 SOUTHERN COMPANY DEFERRED COMPENSATION TRUST AGREEMENT Troutman Sanders LLP 600 Peachtree Street, N.E. Suite 5200 Bank of America Plaza Atlanta, Georgia 30308-2216 (404) 885-3000 Amended and Restated Effective January 1, 2001 SOUTHERN COMPANY DEFERRED COMPENSATION TRUST AGREEMENT TABLE OF CONTENTS 1. Purpose...........................................................1 2. Trust Corpus......................................................1 3. Grantor Trust.....................................................2 4. Irrevocability of Trust...........................................2 5. Change in Control and Preliminary Change in Control...............3 6. Investment of Trust Assets........................................4 7. Distribution of Trust Assets......................................6 8. Termination of the Trust and Reversion of Trust Assets...........10 9. Powers of the Trustee............................................11 10. Termination of Trustee...........................................14 11. Resignation of Trustee and Appointment of Successor Trustee......15 12. Trustee Compensation.............................................16 13. Trustee's Consent to Act and Indemnification of the Trustee......16 14. Prohibition Against Assignment...................................16 15. Annual Accounting................................................16 16. Notices..........................................................17 17. Miscellaneous Provisions.........................................17 SOUTHERN COMPANY DEFERRED COMPENSATION TRUST AGREEMENT This amended and restated Trust Agreement entered into this _____ day of ___________, 2001 is between the Grantors as set forth on the signature page of this Trust Agreement and Wachovia Bank, N.A. (the "Trustee"). This Trust Agreement is effective January 1, 2001 ("Effective Date") and supersedes all previous Trust Agreements. 1. Purpose. The purpose of this trust (the "Trust") is to provide a vehicle to (a) hold assets of the Grantors as a reserve for the discharge of certain of the Grantors' obligations (i) upon the occurrence of a change in control, and (ii) in accordance with paragraph 7(b), to provide added protections for certain individuals who are actively employed by a Grantor on or after January 1, 1999 entitled to receive benefits under designated plans and arrangements and (b) invest, reinvest, disburse and distribute those assets and the earnings thereon as provided hereunder. Individuals eligible for benefits in accordance with the preceding sentence shall hereinafter be referred to as "Beneficiaries" under the Trust. Subject to approval by the Administrative Committee (the "Committee"), Grantors shall designate in writing to the Trustee in Exhibit A attached hereto and made a part hereof those plans or arrangements subject to all or certain provisions of the Trust (the "Plans"). Exhibit A shall also specify which provisions of the Trust apply to the various Plans. 2. Trust Corpus. The Grantors hereby transfer to the Trustee and the Trustee hereby accepts and agrees to hold, in trust, the sum of Ten Dollars ($10.00) plus such cash and/or property, if any, transferred to the Trustee by the Grantors or on behalf of the Grantors pursuant to obligations incurred under any or all of the Plans and the earnings thereon, and such cash and/or property, together with the earnings thereon and together with any other cash or property received by the Trustee pursuant to Section 9(a) of this Trust Agreement, shall constitute the trust estate and shall be held, managed and distributed as hereinafter provided. The Grantors shall execute any and all instruments necessary to vest the Trustee with full title to the property hereby transferred. 3. Grantor Trust. The Trust is intended to be a trust of which the Grantors are treated as individual owners for federal income tax purposes in accordance with the provisions of Sections 671 through 679 of the Internal Revenue Code of 1986, as amended (the "Code"). If the Trustee, in its sole and absolute discretion, deems it necessary or advisable for the Grantors and/or the Trustee to undertake or refrain from undertaking any actions (including, but not limited to, making or refraining from making any elections or filings) in order to ensure that the Grantors are at all times treated as individual owners of the Trust for federal income tax purposes, the Grantors and/or the Trustee will undertake or refrain from undertaking (as the case may be) such actions. The Grantors hereby irrevocably authorize the Trustee to be their attorney-in-fact for the purpose of performing any act which the Trustee, in its sole and absolute discretion, deems necessary or advisable in order to accomplish the purposes and the intent of this Section 3. The Trustee shall be fully protected in acting or refraining from acting in accordance with the provisions of this Section 3. 4. Irrevocability of Trust. Prior to the occurrence of a "Preliminary Change in Control" (hereinafter referred to as a "Preliminary CIC"), the Trust shall be revocable and may be altered or amended in any substantive respect, or revoked or terminated by the Grantors in whole or in part provided that no such amendment may increase the duties of the Trustee without its consent. In the event of a Preliminary CIC, the Trust may not be altered or amended in any substantive respect, or revoked or terminated by the Grantor or Grantors incurring a Preliminary CIC unless a majority of the Beneficiaries, determined as of the day before such Preliminary CIC, agree in writing to such an alteration, amendment, revocation or termination provided that no such amendment may increase the duties of the Trustee without its consent. If after a Preliminary CIC occurs but fails to become a Change in Control, thereafter the Trust shall again be revocable and may be altered or amended in any substantive respect, or revoked or terminated by the Grantors in whole or in part provided that no such amendment may increase the duties of the Trustee without its consent. Notwithstanding the preceding, the Trust may be amended following a Preliminary CIC or a Change in Control without approval of the Beneficiaries to protect the tax status or ERISA status of this Trust. For purposes of this Trust, Preliminary CIC and other capitalized terms if not defined in the Trust shall have the same meaning as set forth in the Southern Company Change in Control Program Policy as may be amended from time to time. 5. Contributions to Trust. The Grantors have obligated themselves under the terms of the Plans, which are hereby incorporated by reference, to make certain contributions to the Trust upon the occurrence of a Preliminary CIC. Upon such a Preliminary CIC, the Grantors affected thereby shall account for each Beneficiary's benefit funded by contributions to the Trust in a manner determined by the Committee. The Grantors have also obligated themselves to make certain contributions to the Trust in a manner determined by the Committee to provide for the protections set forth in Section 7(b) hereof. A return of such contributions and earnings thereon may only occur under the following circumstances: (a) if, on the second anniversary of a Preliminary CIC or any time thereafter, the Southern Committee determines that a Change in Control has not been Consummated, the Trustee upon its agreement with this determination shall, upon the request of the Grantor or Grantors incurring a Preliminary CIC, return to such Grantor or Grantors property contributed to the Trust on account of the occurrence of a Preliminary CIC; (b) if, at any time, following a Preliminary CIC, the Southern Committee provides evidence satisfactory to the Trustee that the Preliminary CIC will not become a Change in Control; or (c) if the Trustee determines in its sole and absolute discretion that a Southern Change in Control has occurred, and, on the second anniversary of the date of Consummation of such Change in Control 75% of the members of the Incumbent Board on such anniversary date shall continue to serve as determined by the Southern Committee, the Trustee upon its agreement with this determination shall return to the Grantor or Grantors incurring a Change in Control, upon such Grantor's request, any such property received and earnings thereon as a result of such Change in Control; or (d) prior to Change of Control, with respect to amounts contributed to fund benefits paid in accordance with Section 7(b) hereof, if the Trust assets equal or exceed 200% of the targeted funding level as established by the Committee prior to a Change in Control, assets shall be returned by the Trustee to the Grantor or Grantors designated by the Committee to reduce total assets to 150% of the targeted funding level. 6. Investment of Trust Assets. -------------------------- (a) Subject to the provisions of paragraph (b) below, until the Trustee has distributed all of the assets of the Trust in accordance with the terms hereof, the Trustee shall invest and reinvest such assets (without regard to any state law limiting the investment powers of fiduciaries) in such securities and other property as the Trustee deems advisable, considering the probable income (including capital appreciation potential) from any such investment, the probable safety of the assets of the Trust and, where appropriate, the rate of return at which the assets would have been invested on behalf of each Beneficiary under any applicable qualified defined benefit pension plan maintained by the Grantors. Within the limitations of the foregoing, the Trustee is specifically authorized to acquire, for cash or on credit, every kind of property, real, personal or mixed, and to make every kind of investment, specifically including, but not limited to, corporate and governmental obligations of every kind, preferred or common stocks, securities of any regulated investment company or trust, and property in which the Trustee owns an undivided interest in any other trust capacity. The Trustee is expressly authorized and empowered to hold or purchase such insurance in its own name (and with itself as the beneficiary) as it shall determine to be necessary or advisable to advance best the purposes of the Trust and the interests of the Beneficiaries. (b) The Trustee shall invest and reinvest the assets of the Trust in accordance with such investment objectives, guidelines, restrictions or directions as the Committee or its delegee may furnish to the Trustee at the time of the execution of the Trust or at any later date; provided, however, that if there is a Preliminary CIC, the Trust's investment objectives, guidelines, restrictions or directions may not be changed thereafter unless there is a return of Grantor contributions pursuant to Section 5(a), (b) or (c). Upon a Change of Control, the Trustee shall promptly contact all Beneficiaries at their last known addresses provided by the Grantors and put such Beneficiaries on notice of the funding of the Trust and the Trustee's obligations hereunder. The Committee shall promptly provide the Trustee with such information as it needs to carry out this duty. 7. Distribution of Trust Assets. ---------------------------- (a) The Grantors may make payment of benefits directly to Beneficiaries as they become due under the terms of the Plan(s). Upon a Change in Control, the Grantors shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan(s), the Grantors shall make the balance of each such payment as it falls due in accordance with the Plan(s). The Trustee shall notify the Grantors where principal and earnings are not sufficient. Nothing in this Agreement shall relieve the Grantors of their liabilities to pay benefits due under the Plan(s) except to the extent such liabilities are met by application of assets of the Trust. (b) At such time as a Beneficiary is entitled to payments under any of the Plans prior to a Change in Control, if the Grantors fail to make payment of all or a portion of the benefits to a Beneficiary under any Plan in accordance with paragraph (a) above, such Beneficiary can make application for payment in accordance with the provisions of paragraph (d)(i) below. If so requested, the Trustee shall make an independent determination in its sole and absolute discretion regarding the Beneficiary's right to payment under the Plan(s) within 60 days thereof. Such determination shall be made with advice from outside counsel independent of Southern and the Trustee. The Grantors agree to be bound by Trustee's determination and to make payment of benefits as they fall due commencing not later than 30 days following Trustee's determination regarding entitlement to benefits absent a manifest abuse of discretion by the Trustee. If Trustee determines benefits are payable to Beneficiary and Grantor fails to commence payment within 30 days following the Trustee's determination, Trustee shall make payment of such benefits and instruct Beneficiary in writing that he or she must bring suit within 180 days of the Trustee's claims determination or thereafter be barred from doing so. Trustee shall only make benefits payments until the first of the following to occur: (i) 180 days following its claims determination if the Beneficiary fails to bring a lawsuit to enforce his or her rights within this limitation period; or (ii) until there is a final adjudication or other final resolution of the Beneficiary's claim. In the event that such Beneficiary timely files a lawsuit within 180 days of Trustee's determination that Beneficiary is entitled to the disputed benefits, all reasonable costs of litigation (as determined in the sole and absolute discretion of the Trustee) shall be periodically, but no less than quarterly, advanced to the Beneficiary through the final adjudication of the claim; provided, however, that the Beneficiary shall repay such advanced costs of litigation if he or she fails to have finally resolved in the Beneficiary's favor a material issue supporting the underlying merits of the Beneficiary's claim for benefits in such dispute as determined in the sole and absolute discretion of the Trustee. Alternatively, in the event that a Beneficiary files a lawsuit to obtain benefits after the Trustee determines that such Beneficiary is not entitled to such benefits, all costs of litigation shall be borne by each party thereto; provided, however, that the Grantors, or the Trustee if the Grantors refuse, shall reimburse such reasonable costs in the event any material issue supporting the underlying merits of the Beneficiary's claim for benefits in such dispute as determined in the sole and absolute discretion of the Trustee is finally resolved in favor of the Beneficiary. (c) Subject to the provisions of paragraph (d) of this Section 7, after a Change in Control, a Beneficiary shall receive payment from the Trust in amount equal to the accrued benefit to which he is entitled under the Plans determined as of the Change in Control, less any payments previously made to him by the Grantors pursuant to the terms of the Plan(s). The form of payment will be consistent with the forms provided under the terms of the Plan(s). (d) (i) The commencement of payments from the Trust shall be conditioned on the Trustee's prior receipt of a written instrument from the Beneficiary in a form reasonably satisfactory to the Trustee. In addition to any other information the Trustee requires, such form should indicate the amount, if any, the Beneficiary has received from the Grantors under the Plans as of his request. All payments to a Beneficiary from the Trust shall be made in accordance with a good faith interpretation of the provisions of the applicable Plan(s). (ii) Except as provided below, the Trustee shall make or commence payment to the Beneficiary in accordance with his representations not later than 30 business days after its receipt thereof; provided, however, that before the Trustee makes or commences any such payment and not later than 7 business days after its receipt of the Beneficiary's representations, the Trustee shall request in writing the Grantors' agreement that the Beneficiary's representations are accurate with respect to the amount, fact, and time of payment to him. The Trustee shall enclose with such request a copy of the Beneficiary's representations and written advice to the Grantors that it must respond to the Trustee's request on or before the 20th business day (which date shall be set forth in such written advice) after the Beneficiary furnished such representations to the Trustee. If the Grantors in a writing delivered to the Trustee agrees with the Beneficiary's representations in all respects, or if the Grantors do not respond to the Trustee's request by the 20th-day deadline, the Trustee shall make payment in accordance with the Beneficiary's representations. If the Grantors advise the Trustee in writing on or before the 20th-day deadline that it does not agree with any or all of the Beneficiary's representations, the Trustee immediately shall take whatever steps it in its sole and absolute discretion deems appropriate, including, but not limited to, a review of any notice furnished by the Grantor pursuant to paragraph (e) hereof, to attempt to resolve the difference(s) between the Grantors and the Beneficiary. If, however, the Trustee is unable to resolve such difference(s) to its satisfaction within 60 days after its receipt of the Beneficiary's representations, the Trustee shall make an independent determination in its sole and absolute discretion with the advice of independent counsel regarding the Beneficiary's claim for benefits and commence such payment, if any, within such 60 day period. In the event Grantors do not agree with Beneficiary's right to payment of all or a portion of a benefit under any Plan(s), Grantors may bring a declaratory judgment action to clarify their rights. Trustee may rely on any final judgment concerning a declaratory judgment action with respect to the payment of benefits from the Trust. (e) Notwithstanding any other provision of the Trust to the contrary, after a Change in Control the Trustee shall make payments hereunder before such payments are otherwise due if it determines in its sole and absolute discretion, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, a final non-appealable decision by the Internal Revenue Service addressed to a Beneficiary, a final decision by a court of competent jurisdiction involving a Beneficiary, or a closing agreement made under Code Section 7121 that is approved by the Internal Revenue Service and involves a Beneficiary, that a Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to him under the Plans before they are paid to him. The Trustee in its sole and absolute discretion shall reimburse a Beneficiary all costs determined to be reasonable to defend any tax claims described herein which are asserted by the Internal Revenue Service against any Beneficiary, including attorney fees and cost of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Internal Revenue Service or by a lower court. The Trustee also shall reimburse any Beneficiary for any interest or penalties in respect of tax claims hereunder upon receipt of documentation of same. (f) Unless (contemporaneously with his submission of the written instrument referred to in paragraph (a) hereof) a Beneficiary furnishes documentation in form and substance satisfactory to the Trustee that no withholding is required with respect to a payment to be made to him from the Trust, the Trustee may deduct from any such payment any federal, state or local taxes required by law to be withheld by the Trustee. (g) The Trustee shall provide the Grantors with written confirmation of the fact and time of any commencement of payments hereunder within 10 business days after any payments commence to a Beneficiary. The Grantors shall notify the Trustee in the same manner of any payments it commences to make to a Beneficiary pursuant to the Plans. (h) The Trustee shall be fully protected in making any payment or any calculations in accordance with the provisions of this Section 7. 8. Termination of the Trust and Reversion of Trust Assets. The Trust shall terminate upon the first to occur of (i) the payment by the Grantors of all amounts due the Beneficiaries under each of the Plans or the receipt by the Trustee of a valid release to that effect from each of the Beneficiaries with respect to payments made to him, or (ii) the twenty-first anniversary of the death of the last survivor of the Beneficiaries who are in being on the date of the execution of this Trust Agreement. Upon termination of the Trust, any and all assets remaining in the Trust, after the payment to the Beneficiaries of all amounts to which they are entitled and after payment of the expenses and compensation in Sections 12 and 17(i) of this Trust Agreement, shall revert to the Grantors in accordance with their separate interest as accounted for by the Committee, and the Trustee shall promptly take such action as shall be necessary to transfer any such assets to the Grantors in accordance with such interest. Notwithstanding the above, the Grantors shall be obligated to take whatever steps are necessary to ensure that the Trust is not terminated for a period of five (5) years following a Change in Control, such steps to include, but not being limited to, the transfer to the Trustee of cash or other assets pursuant to the provisions of Section 9(a) hereof. 9. Powers of the Trustee. To carry out the purposes of the Trust and subject to any limitations herein expressed, the Trustee is vested with the following powers until final distribution, in addition to any now or hereafter conferred by law affecting the trust or estate created hereunder. In exercising such powers, the Trustee shall act in a manner reasonable and equitable in view of the interests of the Beneficiaries and in a manner in which persons of ordinary prudence, diligence, discretion and judgment would act in the management of their own affairs. (a) Receive and Retain Property. To receive and retain any property received at the inception of the Trust or at any other time, whether or not such property is unproductive of income or is property in which the Trustee is personally interested or in which the Trustee owns an undivided interest in any other trust capacity. (b) Dispose of, Develop, and Abandon Assets. To dispose of an asset, for cash or on credit, at public or private sale and, in connection with any sale or disposition, to give such warranties and indemnifications as the Trustee shall determine; to manage, develop, improve, exchange, partition, change the character of or abandon a Trust asset or any interest therein. (c) Borrow and Encumber. To borrow money for any Trust purpose upon such terms and conditions as may be determined by the Trustee; to obligate the Trust or any part thereof by mortgage, deed of trust, pledge or otherwise, for a term within or extending beyond the term of the Trust. (d) Lease. To enter for any purpose into a lease as lessor or lessee, with or without an option to purchase or renew, for a term. (e) Grant or Acquire Options. To grant or acquire options and rights of first refusal involving the sale or purchase of any Trust assets, including the power to write covered call options listed on any securities exchange. (f) Powers Respecting Securities. To have all the rights, powers, privileges and responsibilities of an owner of securities, including, without limiting the foregoing, the power to vote, to give general or limited proxies, to pay calls, assessments, and other sums; to assent to, or to oppose, corporate sales or other acts; to participate in, or to oppose, any voting trusts, pooling agreements, foreclosures, reorganizations, consolidations, mergers and liquidations, and, in connection therewith, to give warranties and indemnifications and to deposit securities with and transfer title to any protective or other committee; to exchange, exercise or sell stock subscription or conversion rights; and, regardless of any limitations elsewhere in this instrument relative to investments by the Trustee, to accept and retain as an investment hereunder any securities received through the exercise of any of the foregoing powers. (g) Use of Nominee. To hold securities or other property in the name of the Trustee, in the name of a nominee of the Trustee, or in the name of a custodian (or its nominee) selected by the Trustee, with or without disclosure of the Trust, the Trustee being responsible for the acts of such custodian or nominee affecting such property. (h) Advance Money. To advance money for the protection of the Trust, and for all expenses, losses and liabilities sustained or incurred in the administration of the Trust or because of the holding or ownership of any Trust assets, for which advances, with interest, the Trustee has a lien on the Trust assets as against the Beneficiaries. (i) Pay, Contest or Settle Claims. To pay, contest or settle any claim by or against the Trust by compromise, arbitration or otherwise; to release, in whole or in part, any claim belonging to the Trust to the extent that the claim is uncollectible. Notwithstanding the foregoing, the Trustee may only pay or settle a claim asserted against the Trust by a Grantor if it is compelled to do so by a final order of a court of competent jurisdiction. (j) Litigate. To prosecute or defend actions, claims or proceedings for the protection of Trust assets and of the Trustee in the performance of its duties. (k) Employ Advisers and Agents. To employ and reasonably compensate persons, corporations or associations, including attorneys, auditors, investment advisers or agents, even if they are associated with the Trustee, to advise or assist the Trustee in the performance of its administrative duties; to act without independent investigation upon their recommendations. (l) Use Custodian. If no bank or trust company is acting as Trustee hereunder, the Trustee shall appoint a bank or trust company to act as custodian (the "Custodian") for securities and any other Trust assets. Any such appointment shall terminate when a bank or trust company begins to serve as Trustee hereunder. The Custodian shall keep the deposited property, collect and receive the income and principal, and hold, invest, disburse or otherwise dispose of the property or its proceeds (specifically including selling and purchasing securities, and delivering securities sold and receiving securities purchased) upon the order of the Trustee. (m) Execute Documents. To execute and deliver all instruments which will accomplish or facilitate the exercise of the powers vested in the Trustee. (n) Grant of Powers Limited. The Trustee is expressly prohibited from exercising any powers vested in it primarily for the benefit of the Grantors rather than for the benefit of the Beneficiaries. The Trustee shall not have the power to purchase, exchange, or otherwise deal with or dispose of the assets of the Trust for less than adequate and full consideration in money or money's worth. (o) Deposit Assets. To deposit Trust assets in commercial, savings or savings and loan accounts (including such accounts in a corporate Trustee's banking department) and to keep such portion of the Trust assets in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Trust, without liability for interest thereon. 10. Termination of Trustee. Grantors may remove Trustee upon sixty (60) days notice or upon such shorter period of time if acceptable to Trustee; provided that upon a Preliminary CIC or subsequent Change in Control the Grantors may only remove the Trustee if a majority of the Beneficiaries approve such action. 11. Appointment of Successor Trustee. -------------------------------- (a) The Trustee shall have the right to resign upon 60 days' written notice to the Grantor, during which time the Grantor shall appoint a "Qualified Successor Trustee." If no Qualified Successor Trustee accepts such appointment, the resigning Trustee shall petition a court of competent jurisdiction for the appointment of a "Qualified Successor Trustee." For this purpose, a "Qualified Successor Trustee" must be a bank or trust company with a market capitalization of at least $10 billion but may not be the Grantor, any person who would be a "related or subordinate party" to the Grantor within the meaning of Section 672(c) of the Code or a corporation that would be a member of an "affiliated group" of corporations including the Grantor within the meaning of Section 1504(a) of the Code if the words "80 percent" wherever they appear in that section were replaced by the words "50 percent." Upon the written acceptance by the Qualified Successor Trustee of the trust and upon approval of the resigning Trustee's final account by those entitled thereto, the resigning Trustee shall be discharged. (b) Upon the occurrence of a corporate transaction involving the ownership or assets of a Grantor, the affected Grantors upon written acknowledgment to the Trustee of their obligations under the Trust and Plans may in their sole discretion direct the Trustee to transfer or assign all or a portion of the assets of the Trust to a Qualified Successor Trustee. The Committee shall instruct the Trustee regarding the assets to be transferred or assigned; provided, however, that no assets shall be transferred to such a Qualified Successor Trustee until the Trustee is satisfied that contributions required under the Plans have been made prior to or concurrent with this transfer or assignment. Notwithstanding the foregoing, the Trustee shall only be permitted to transfer or assign assets from the Trust to a Qualified Successor Trustee if the transfer and assignment are consistent with the purpose and intent of the Trust. 12. Trustee Compensation. The Trustee shall be entitled to receive as compensation for its services hereunder the compensation (a) as negotiated and agreed to by the Grantors and the Trustee, or (b) if not negotiated or if the parties are unable to reach agreement, as allowed a trustee under the laws of the State of Georgia in effect at the time such compensation is payable. Such compensation shall be paid by the Grantors; provided, however, that to the extent such compensation is not paid by the Grantors, subject to the provisions of Section 17(j) hereof, it shall be charged against and paid from the Trust and, subject to Section 4 of this Trust Agreement, upon a Preliminary Change in Control, the Grantors shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. 13. Trustee's Consent to Act and Indemnification of the Trustee. The Trustee hereby grants and consents to act as Trustee hereunder. The Grantors agree to indemnify the Trustee and hold it harmless from and against all claims, liabilities, legal fees and expenses that may be asserted against it, otherwise than on account of conduct of the Trustee which is found by a final judgment of a court of competent jurisdiction to be a breach of its fiduciary duty whether by reason of the Trustee's taking or refraining from taking any action in connection with the Trust, whether or not the Trustee is a party to a legal proceeding or otherwise. 14. Prohibition Against Assignment. No Beneficiary shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust before such assets are paid to the Beneficiary as provided in Section 7, and all rights created under the Trust and the Plans shall be unsecured contractual rights of the Beneficiary against the Grantor which is his employer for purposes of the Plans. No part of, or claim against, the assets of the Trust may be assigned, anticipated, alienated, encumbered, garnished, attached or in any other manner disposed of by any of the Beneficiaries, and no such part or claim shall be subject to any legal process or claims of creditors of any of the Beneficiaries. 15. Annual Accounting. The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and, within ninety days following the close of each calendar year, and within ninety days after the Trustee's resignation or termination of the Trust as provided herein, the Trustee shall render a written account of its administration of the Trust to the Grantors by submitting a record of receipts, investments, disbursements, distributions, gains, losses, assets on hand at the end of the accounting period and other pertinent information, including a description of all securities and investments purchased and sold during such calendar year. Trustee shall separately account for each Grantor's interest in Trust assets. Written approval of an account shall, as to all matters shown in the account, be binding upon the Grantors and shall forever release and discharge the Trustee from any liability or accountability. The Grantors will be deemed to have given their written approval if he does not object in writing to the Trustee within one hundred and twenty days (120) after the date of receipt of such account from the Trustee. The Trustee shall be entitled at any time to institute an action in a court of competent jurisdiction for a judicial settlement of its account. 16. Notices. Any notice or instructions required under any of the provisions of this Trust Agreement shall be deemed effectively given only if such notice is in writing and is delivered personally or by certified or registered mail, return receipt requested and postage prepaid, addressed to the addresses as set forth below of the parties hereto. The address of the parties are as follows: (i) The Grantors: Will be provided by Committee to Trustee (ii) The Trustee: Wachovia Bank, N.A. Attn: Executive Services NC 31013 P.O. Box 3099 Winston-Salem, NC 27150 The Grantors or Trustee may at any time change the address to which notices are to be sent to it by giving written notice thereof in the manner provided above. 17. Miscellaneous Provisions. ------------------------ (a) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts made and to be performed therein and the Trustee shall not be required to account in any court other than one of the courts of such state. (b) The Committee may give direction to Trustee on behalf of the Grantors with regard to those matters identified in writing by the Grantors. The Trustee will be fully protected in relying on such direction by the Committee. (c) All section headings herein have been inserted for convenience of reference only and shall in no way modify, restrict or affect the meaning or interpretation of any of the terms or provisions of this Trust Agreement. (d) This Trust Agreement is intended as a complete and exclusive statement of the agreement of the parties hereto, supersedes all previous agreements or understandings among them and may not be modified or terminated orally. (e) The term "Trustee" shall include any successor Trustee. (f) If a Trustee or Custodian hereunder is a bank or trust company, any corporation resulting from any merger, consolidation or conversion to which such bank or trust company may be a party, or any corporation otherwise succeeding generally to all or substantially all of the assets or business of such bank or trust company, shall be the successor to it as Trustee or Custodian hereunder, as the case may be without the execution of any instrument or any further action on the part of any party hereto. (g) If any provision of this Trust shall be invalid and unenforceable, the remaining provisions hereof shall subsist and be carried into effect. (h) The Plans are by this reference expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth at length. As of the date first stated above, the terms of the Plans are as set forth in Exhibit A attached hereto. (i) The assets of the Trust shall be subject only to the claims of the Grantor's general creditors in the event of one or more of the Grantors' bankruptcy or insolvency. A Grantor shall be considered "bankrupt" or "insolvent" if the Grantor is (A) unable to pay its debts when due or (B) engaged as a debtor in a proceeding under the Bankruptcy Code, 11 U.S.C. Section 101 et seq. The Board of Directors or the chief executive officer of a Grantor must notify the Trustee of the Grantor's bankruptcy or insolvency within three (3) days following the occurrence of such event. Upon receipt of such a notice, or, upon receipt of a written allegation from a person or entity claiming to be a creditor of a Grantor that such Grantor is bankrupt or insolvent, the Trustee shall discontinue payments to Beneficiaries. The Trustee shall, as soon as practicable after receipt of such notice or written allegation, determine whether such Grantor is bankrupt or insolvent. If the Trustee determines, based on such notice, written allegation, or such other information as it deems appropriate, that such Grantor is bankrupt or insolvent, the Trustee shall hold the assets of the Trust for the benefit of the general creditors of the Grantor or Grantors, and deliver any undistributed assets attributable to such Grantor or Grantors to satisfy the claims of such creditors as a court of competent jurisdiction may direct. The Committee in conjunction with the Trustee shall identify the amount of assets attributable to any bankrupt or insolvent Grantor in order to segregate such assets for the benefit of such Grantor's creditors. The Trustee shall resume payments to Beneficiaries only after it has determined that the Grantor in issue is not bankrupt or insolvent, is no longer bankrupt or insolvent (if the Trustee determined that the Grantor was bankrupt or insolvent), pursuant to an order of a court of competent jurisdiction. Unless the Trustee has actual knowledge of the Grantor's bankruptcy or insolvency of the Grantor or Grantors, the Trustee shall have no duty to inquire whether such Grantor(s) is bankrupt or insolvent. The Trustee may in all events rely on such evidence concerning the pertinent Grantor's solvency as may be furnished to the Trustee which will give the Trustee a reasonable basis for making a determination concerning such Grantor's solvency. If the Trustee discontinues payment of benefits from the Trust pursuant to this Section 17(h) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments which would have been made to each Beneficiary less the aggregate amount of payments made to the Beneficiary by the Grantor(s) in lieu of the payments provided for hereunder during any such period of discontinuance. In addition, interest at a rate equal to the average 90 day Treasury Bill rate during the period of such discontinuance shall be paid on the amount, if any, determined to be owed in accordance with the preceding sentence. (j) Any and all taxes, expenses (including, but not limited to, the Trustee's compensation) and costs of litigation relating to or concerning the adoption, administration and termination of the Trust shall be borne and promptly paid by the Grantors; provided, however, that, to the extent such taxes, expenses and costs relating to the Trust are due and owing and (A) are not paid by the Grantors, and (B) have not been paid for more than sixty (60) days, they shall be charged against and paid from the Trust, and, subject to Section 4 of this Trust Agreement, upon a Preliminary Change in Control, the Grantors shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. (k) Any reference hereunder to a Beneficiary shall expressly be deemed to include, where relevant, the beneficiaries of a Beneficiary duly appointed under the terms of the Plans. A Beneficiary shall cease to have such status once any and all amounts due such Beneficiary under the Plan have been satisfied. (l) Any reference hereunder to the Grantors shall expressly be deemed to include a Grantor's successor and assigns. (m) Whenever used herein, and to the extent appropriate, the masculine, feminine or neuter gender shall include the other two genders, the singular shall include the plural and the plural shall include the singular. IN WITNESS WHEREOF, the parties hereto have executed this amended and restated Trust Agreement as of this day of ________________, 2001. TRUSTEE: WACHOVIA BANK, N.A. By: -------------------------------------------------- GRANTOR: ALABAMA POWER COMPANY By: -------------------------------------------------- GRANTOR: GEORGIA POWER COMPANY By: -------------------------------------------------- GRANTOR: GULF POWER COMPANY By: -------------------------------------------------- GRANTOR: MISSISSIPPI POWER COMPANY By: -------------------------------------------------- GRANTOR: SAVANNAH ELECTRIC & POWER COMPANY By: -------------------------------------------------- GRANTOR: SOUTHERN COMMUNICATIONS SERVICES, INC. By: -------------------------------------------------- [Signatures continued on following page] [Signatures continued from preceding page] GRANTOR: SOUTHERN COMPANY ENERGY SOLUTIONS, INC. By: -------------------------------------------------- GRANTOR: SOUTHERN COMPANY SERVICES, INC. By: -------------------------------------------------- GRANTOR: SOUTHERN ENERGY, INC. By: -------------------------------------------------- GRANTOR: SOUTHERN NUCLEAR OPERATING COMPANY, INC. By: -------------------------------------------------- EXHIBIT A Plans and Arrangements Subject to the Trust1 EXHIBIT B Contacts and Addresses of Grantors - -------- 1 The parenthetical reference sets forth the Trust provisions applicable to the respective Plans listed herein. EX-10 49 x10a104.txt Exhibit 10(a)104 DEFERRED STOCK TRUST AGREEMENT FOR DIRECTORS OF SOUTHERN COMPANY AND ITS SUBSIDIARIES Amended and Restated Effective January 1, 2000 DEFERRED STOCK TRUST AGREEMENT FOR DIRECTORS OF SOUTHERN COMPANY AND ITS SUBSIDIARIES TABLE OF CONTENTS 1. Purpose.........................................................1 2. Trust Corpus....................................................1 3. Grantor Trust...................................................2 4. Irrevocability of Trust.........................................2 5. Change in Control and Preliminary Change in Control.............3 6. Investment of Trust Assets......................................5 7. Distribution of Trust Assets....................................6 8. Termination of the Trust and Reversion of Trust Assets.........11 9. Powers of the Trustee..........................................12 10. Termination of Trustee.........................................15 11. Resignation of Trustee and Appointment of Successor Trustee....15 12. Trustee Compensation...........................................17 13. Trustee's Consent to Act and Indemnification of the Trustee....17 14. Prohibition Against Assignment.................................17 15. Annual Accounting..............................................18 16. Notices........................................................18 17. Miscellaneous Provisions.......................................19 DEFERRED STOCK TRUST AGREEMENT FOR DIRECTORS OF SOUTHERN COMPANY AND ITS SUBSIDIARIES This Amended and Restated Trust Agreement entered into this _____ day of ___________, 2000 (the "Effective Date") is between the Grantors as set forth on the signature page of this Trust Agreement and Reliance Trust Company (the "Trustee"). 1. Purpose. The purpose of this trust (the "Trust") is to provide a vehicle to (a) hold assets of the Grantors as a reserve for the discharge of certain of the Grantors' obligations with respect to Deferred Stock Account balances under the respective Grantors' Deferred Compensation Plans for Directors (i) as directed by the Grantors in accordance with paragraph 7(a); (ii) upon the occurrence of a change in control; and (iii) in accordance with paragraph 7(c) and (b) invest, reinvest, disburse and distribute those assets and the earnings thereon as provided hereunder. Individuals eligible for benefits hereunder shall hereinafter be referred to as "Beneficiaries" under the Trust. Grantors shall designate in writing to the Trustee in Exhibit A attached hereto and made a part hereof those plans or arrangements subject to all or certain provisions of the Trust (the "Plans"). Exhibit A shall also specify which provisions of the Trust apply to the various Plans. 2. Trust Corpus. The Grantors hereby transfer to the Trustee and the Trustee hereby accepts and agrees to hold, in trust, the sum of One Dollar ($1.00) plus such cash and/or property, if any, transferred to the Trustee by the Grantors or on behalf of the Grantors pursuant to obligations incurred under any or all of the Plans and the earnings thereon, and such cash and/or property, together with the earnings thereon and together with any other cash or property received by the Trustee pursuant to Section 9(a) of this Trust Agreement, shall constitute the trust estate and shall be held, managed and distributed as hereinafter provided. The Grantors shall execute any and all instruments necessary to vest the Trustee with full title to the property hereby transferred. 3. Grantor Trust. The Trust is intended to be a trust of which the Grantors are treated as individual owners for federal income tax purposes in accordance with the provisions of Sections 671 through 679 of the Internal Revenue Code of 1986, as amended (the "Code"). If the Trustee, in its sole and absolute discretion, deems it necessary or advisable for the Grantors and/or the Trustee to undertake or refrain from undertaking any actions (including, but not limited to, making or refraining from making any elections or filings) in order to ensure that the Grantors are at all times treated as individual owners of the Trust for federal income tax purposes, the Grantors and/or the Trustee will undertake or refrain from undertaking (as the case may be) such actions. The Grantors hereby irrevocably authorize the Trustee to be their attorney-in-fact for the purpose of performing any act which the Trustee, in its sole and absolute discretion, deems necessary or advisable in order to accomplish the purposes and the intent of this Section 3. The Trustee shall be fully protected in acting or refraining from acting in accordance with the provisions of this Section 3. 4. Irrevocability of Trust. Prior to the occurrence of a "Preliminary Change in Control" (hereinafter referred to as a "Preliminary CIC"), the Trust shall be revocable and may be altered or amended in any substantive respect, or revoked or terminated by the Grantors in whole or in part provided that no such amendment may increase the duties of the Trustee without its consent. In the event of a Preliminary CIC, the Trust may not be altered or amended in any substantive respect, or revoked or terminated by the Grantor or Grantors incurring a Preliminary CIC unless a majority of the Beneficiaries, determined as of the day before such Preliminary CIC, agree in writing to such an alteration, amendment, revocation or termination provided that no such amendment may increase the duties of the Trustee without its consent. If after a Preliminary CIC occurs but fails to become a Change in Control, thereafter the Trust shall again be revocable and may be altered or amended in any substantive respect, or revoked or terminated by the Grantors in whole or in part provided that no such amendment may increase the duties of the Trustee without its consent. Notwithstanding the preceding, the Trust may be amended following a Preliminary CIC or a Change in Control without approval of the Beneficiaries to protect the tax status or ERISA status of this Trust. For purposes of this Trust, Preliminary CIC and other capitalized terms if not defined in the Trust shall have the same meaning as set forth in the Grantor's respective Deferred Compensation Plan for Directors. 5. Contributions to Trust. The Grantors may make periodic discretionary contributions to the Trust in order to satisfy distributions directed to be made in accordance with Section 7(a) herein. In addition, the Grantors have obligated themselves under the terms of the Plans, which are hereby incorporated by reference, to make certain contributions to the Trust upon the occurrence of a Preliminary CIC. Upon such a Preliminary CIC, the Grantors affected thereby shall account for each Beneficiary's benefit funded by contributions to the Trust in a manner determined by the Trust Administrative Committee. The Grantors have also obligated themselves, if necessary, to make certain contributions to the Trust in a manner determined by the Trust Administrative Committee to provide for the protections set forth in Section 7(c) hereof. A return of such contributions and earnings thereon may only occur under the following circumstances: (a) if, on the second anniversary of a Preliminary CIC or any time thereafter, the Southern Committee determines that a Change in Control has not been Consummated, the Trustee upon its agreement with this determination shall, upon the request of the Grantor or Grantors incurring a Preliminary CIC, return to such Grantor or Grantors property contributed to the Trust on account of the occurrence of a Preliminary CIC; (b) if, at any time, following a Preliminary CIC, the Southern Committee provides evidence satisfactory to the Trustee that the Preliminary CIC will not become a Change in Control; or (c) if the Trustee determines in its sole and absolute discretion that a Southern Change in Control has occurred, and, on the second anniversary of the date of Consummation of such Change in Control 75% of the members of the Incumbent Board on such anniversary date shall continue to serve as determined by the Southern Committee, the Trustee upon its agreement with this determination shall return to the Grantor or Grantors incurring a Change in Control, upon such Grantor's request, any such property received and earnings thereon as a result of such Change in Control; or (d) prior to Change of Control, with respect to amounts contributed to fund benefits paid in accordance with Section 7(c) hereof, if the Trust assets equal or exceed 200% of the targeted funding level as established by the Trust Administrative Committee prior to a Change in Control, assets shall be returned by the Trustee to the Grantor or Grantors designated by the Trust Administrative Committee to reduce total assets to 150% of the targeted funding level. 6. Investment of Trust Assets and Voting Rights. -------------------------------------------- (a) The Trustee may invest, in its sole discretion, in: (i) any form of marketable financial instruments traded on The New York Stock Exchange, including, in particular, shares of common stock of The Southern Company ("Shares"); or (ii) proprietary money market mutual funds. The Grantors acknowledges the discretion of the Trustee regarding its investment authority; however, to the extent of Deferred Stock Account balances under the Plans, the Trust corpus should be predominantly invested in Shares and the Grantors expressly waive any diversification of investments that otherwise might be required of a trustee under applicable state law. The Trustee is expressly authorized and empowered to hold or purchase such insurance in its own name (and with itself as the beneficiary) as it shall determine to be necessary or advisable to advance best the purposes of the Trust and the interest of the Beneficiaries. (b) All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercisable by or rest with Beneficiaries; provided, however, that voting rights with respect to all Shares held as Trust assets, and any decision to accept or reject a tender offer made for such shares, will be exercised by the Trustee in accordance with instructions received from the Trust Administrative Committee. (c) Each Beneficiary shall have the right, with respect to that number of Shares allocated to his or her Deferred Stock Account under the Plans, to direct the Trust Administrative Committee as to the manner in which he or she wishes that such number of Shares be voted on any and all matters put to a shareholder vote. The Trust Administrative Committee shall direct the Trustee to vote a corresponding number of Shares held in the Trust in accordance with such directions. To the extent that the Trust holds Shares either in excess of the number allocated to all Beneficiaries' Deferred Stock Accounts or as to which the Trust Administrative Committee does not receive timely and proper direction from the applicable Beneficiaries, the Trust Administrative Committee may direct the Trustee to vote such Shares in the same proportion as the other Shares are directed to be voted. If the Trust ever holds fewer Shares than there are Shares allocated to Deferred Stock Accounts under the Plans as to which timely and proper directions have been received from the applicable Beneficiaries, the Trust Administrative Committee shall direct the Trustee to vote all Shares held in the Trust in the same proportion as the total Shares covered by timely and proper directions have been directed to be voted. 7. Distribution of Trust Assets. ---------------------------- (a) If, prior to a Change In Control, a Grantor desires that a payment to a Beneficiary, attributable to a Deferred Stock Account under a Plan, be made from trust assets, the Trust Administrative Committee shall notify the Trustee at least ten days prior to the date the payment becomes due under such Plan. Such notification shall provide sufficient instructions acceptable to the Trustee for making the requisite payment. If the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan(s), the Grantors shall make the balance of each such payment as it falls due in accordance with the Plan(s). The Trustee shall notify the Grantors where principal and earnings are not sufficient. Nothing in this Agreement shall relieve the Grantors of their liabilities to pay benefits due under the Plan(s) except to the extent such liabilities are met by application of assets of the Trust. (b) The Grantors may make payment of benefits directly to Beneficiaries as they become due under the terms of the Plan(s). Upon a Change in Control, the Grantors shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Beneficiaries. (c) At such time as a Beneficiary is entitled to payments under any of the Plans prior to a Change in Control, if the Grantor fails to direct the Trustee to make payment under the Plan in accordance with paragraph (a) above or fails to make payment of all or a portion of the benefits to a Beneficiary under any Plan in accordance with paragraph (a) or (b) above, such Beneficiary can make application for payment in accordance with the provisions of paragraph (e)(i) below. If so requested, the Trustee shall make an independent determination in its sole and absolute discretion regarding the Beneficiary's right to payment under the Plan(s) within 60 days thereof. Such determination shall be made with advice from outside counsel independent of Southern and the Trustee. The Grantors agree to be bound by Trustee's determination and to make payment of or direct Trustee to make payment of, benefits as they fall due commencing not later than 30 days following Trustee's determination regarding entitlement to benefits absent a manifest abuse of discretion by the Trustee. If Trustee determines benefits are payable to Beneficiary and Grantor fails to commence payment, or direct Trustee to make payment, within 30 days following the Trustee's determination, Trustee shall make payment of such benefits and instruct Beneficiary in writing that he or she must bring suit within 180 days of the Trustee's claims determination or thereafter be barred from doing so. Trustee shall only make benefits payments hereunder until the first of the following to occur: (i) 180 days following its claims determination if the Beneficiary fails to bring a lawsuit to enforce his or her rights within this limitation period; or (ii) until there is a final adjudication or other final resolution of the Beneficiary's claim. In the event that such Beneficiary timely files a lawsuit within 180 days of Trustee's determination that Beneficiary is entitled to the disputed benefits, all reasonable costs of litigation (as determined in the sole and absolute discretion of the Trustee) shall be periodically, but no less than quarterly, advanced to the Beneficiary through the final adjudication of the claim; provided, however, that the Beneficiary shall repay such advanced costs of litigation if he or she fails to have finally resolved in the Beneficiary's favor a material issue supporting the underlying merits of the Beneficiary's claim for benefits in such dispute as determined in the sole and absolute discretion of the Trustee. Alternatively, in the event that a Beneficiary files a lawsuit to obtain benefits after the Trustee determines that such Beneficiary is not entitled to such benefits, all costs of litigation shall be borne by each party thereto; provided, however, that the Grantors, or the Trustee if the Grantors refuse, shall reimburse such reasonable costs in the event any material issue supporting the underlying merits of the Beneficiary's claim for benefits in such dispute is finally resolved in favor of the Beneficiary. (d) Subject to the provisions of paragraph (e) of this Section 7, after a Change in Control, a Beneficiary shall receive payment from the Trust in an amount equal to the accrued benefit to which he is entitled under the Plans determined as of the Change in Control, less any payments previously made to him by the Grantors or Trustee pursuant to the terms of the Plan(s) and this Trust. The form of payment will be consistent with the forms provided under the terms of the Plan(s). (e) (i) The commencement of payments from the Trust, other than pursuant to directions of a Grantor or Trust Administrative Committee, shall be conditioned on the Trustee's prior receipt of a written instrument from the Beneficiary in a form reasonably satisfactory to the Trustee. In addition to any other information the Trustee requires, such form should indicate the amount, if any, the Beneficiary has received from the Grantors under the Plans as of his request. All payments to a Beneficiary from the Trust shall be made in accordance with a good faith interpretation of the provisions of the applicable Plan(s). (ii) Except as provided below, the Trustee shall make or commence payment to the Beneficiary in accordance with his representations not later than 30 business days after its receipt thereof; provided, however, that before the Trustee makes or commences any such payment and not later than 7 business days after its receipt of the Beneficiary's representations, the Trustee shall request in writing the Grantors' agreement that the Beneficiary's representations are accurate with respect to the amount, fact, and time of payment to him. The Trustee shall enclose with such request a copy of the Beneficiary's representations and written advice to the Grantors that it must respond to the Trustee's request on or before the 20th business day (which date shall be set forth in such written advice) after the Beneficiary furnished such representations to the Trustee. If the Grantors in a writing delivered to the Trustee agree with the Beneficiary's representations in all respects, or if the Grantors do not respond to the Trustee's request by the 20th-day deadline, the Trustee shall make payment in accordance with the Beneficiary's representations. If the Grantors advise the Trustee in writing on or before the 20th-day deadline that it does not agree with any or all of the Beneficiary's representations, the Trustee immediately shall take whatever steps it in its sole and absolute discretion deems appropriate, including, but not limited to, a review of any notice furnished by the Grantor pursuant to paragraph (e) hereof, to attempt to resolve the difference(s) between the Grantors and the Beneficiary. If, however, the Trustee is unable to resolve such difference(s) to its satisfaction within 60 days after its receipt of the Beneficiary's representations, the Trustee shall make an independent determination in its sole and absolute discretion with the advice of independent counsel regarding the Beneficiary's claim for benefits and commence such payment, if any, within such 60 day period. In the event Grantors do not agree with Beneficiary's right to payment of all or a portion of a benefit under any Plan(s), Grantors may bring a declaratory judgment action to clarify their rights. Trustee may rely on any final judgment concerning a declaratory judgment action with respect to the payment of benefits from the Trust. (f) Notwithstanding any other provision of the Trust to the contrary, after a Change in Control the Trustee shall make payments hereunder before such payments are otherwise due if it determines in its sole and absolute discretion, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, a final non-appealable decision by the Internal Revenue Service addressed to a Beneficiary, a final decision by a court of competent jurisdiction involving a Beneficiary, or a closing agreement made under Code Section 7121 that is approved by the Internal Revenue Service and involves a Beneficiary, that a Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to him under the Plans before they are paid to him. The Trustee in its sole and absolute discretion shall reimburse a Beneficiary all costs determined to be reasonable to defend any tax claims described herein which are asserted by the Internal Revenue Service against any Beneficiary, including attorney fees and cost of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Internal Revenue Service or by a lower court. The Trustee also shall reimburse any Beneficiary for any interest or penalties in respect of tax claims hereunder upon receipt of documentation of same. (g) Unless (contemporaneously with his submission of the written instrument referred to in paragraph (b) hereof) a Beneficiary or Trust Administrative Committee furnishes documentation in form and substance satisfactory to the Trustee that no withholding is required with respect to a payment to be made to him from the Trust, the Trustee may deduct from any such payment any federal, state or local taxes required by law to be withheld by the Trustee. (h) The Trustee shall provide the Grantors with written confirmation of the fact and time of any commencement of payments hereunder within 10 business days after any payments commence to a Beneficiary. The Grantors shall notify the Trustee in the same manner of any payments it commences to make to a Beneficiary pursuant to the Plans. (i) The Trustee shall be fully protected in making any payment or any calculations in accordance with the provisions of this Section 7. 8. Termination of the Trust and Reversion of Trust Assets. The Trust shall terminate upon the first to occur of (i) the payment by the Grantors of all amounts due the Beneficiaries under each of the Plans or the receipt by the Trustee of a valid release to that effect from each of the Beneficiaries with respect to payments made to him, or (ii) the twenty-first anniversary of the death of the last survivor of the Beneficiaries who are in being on the date of the execution of this Trust Agreement. Upon termination of the Trust, any and all assets remaining in the Trust, after the payment to the Beneficiaries of all amounts to which they are entitled and after payment of the expenses and compensation in Sections 12 and 17(i) of this Trust Agreement, shall revert to the Grantors in accordance with their separate interest as accounted for by the Trust Administrative Trust, and the Trustee shall promptly take such action as shall be necessary to transfer any such assets to the Grantors in accordance with such interest. Notwithstanding the above, the Grantors shall be obligated to take whatever steps are necessary to ensure that the Trust is not terminated for a period of five (5) years following a Change in Control, such steps to include, but not being limited to, the transfer to the Trustee of cash or other assets pursuant to the provisions of Section 9(a) hereof. 9. Powers of the Trustee. To carry out the purposes of the Trust and subject to any limitations herein expressed, the Trustee is vested with the following powers until final distribution, in addition to any now or hereafter conferred by law affecting the trust or estate created hereunder. In exercising such powers, the Trustee shall act in a manner reasonable and equitable in view of the interests of the Beneficiaries and in a manner in which persons of ordinary prudence, diligence, discretion and judgment would act in the management of their own affairs. (a) Receive and Retain Property. To receive and retain any property received at the inception of the Trust or at any other time, whether or not such property is unproductive of income or is property in which the Trustee is personally interested or in which the Trustee owns an undivided interest in any other trust capacity. (b) Dispose of, Develop, and Abandon Assets. To dispose of an asset, for cash or on credit, at public or private sale and, in connection with any sale or disposition, to give such warranties and indemnifications as the Trustee shall determine; to manage, develop, improve, exchange, partition, change the character of or abandon a Trust asset or any interest therein. (c) Borrow and Encumber. To borrow money for any Trust purpose upon such terms and conditions as may be determined by the Trustee; to obligate the Trust or any part thereof by mortgage, deed of trust, pledge or otherwise, for a term within or extending beyond the term of the Trust. (d) Lease. To enter for any purpose into a lease as lessor or lessee, with or without an option to purchase or renew, for a term. (e) Grant or Acquire Options. To grant or acquire options and rights of first refusal involving the sale or purchase of any Trust assets, including the power to write covered call options listed on any securities exchange. (f) Powers Respecting Securities. Except as set forth in Paragraph 6(c) pertaining to voting rights in Shares held in the Trust, the Trustee shall have all the rights, powers, privileges and responsibilities of an owner of securities, including, without limiting the foregoing, the power to vote, to give general or limited proxies, to pay calls, assessments, and other sums; to assent to, or to oppose, corporate sales or other acts; to participate in, or to oppose, any voting trusts, pooling agreements, foreclosures, reorganizations, consolidations, mergers and liquidations, and, in connection therewith, to give warranties and indemnifications and to deposit securities with and transfer title to any protective or other committee; to exchange, exercise or sell stock subscription or conversion rights; and, regardless of any limitations elsewhere in this instrument relative to investments by the Trustee, to accept and retain as an investment hereunder any securities received through the exercise of any of the foregoing powers. (g) Use of Nominee. To hold securities or other property in the name of the Trustee, in the name of a nominee of the Trustee, or in the name of a custodian (or its nominee) selected by the Trustee, with or without disclosure of the Trust, the Trustee being responsible for the acts of such custodian or nominee affecting such property. (h) Advance Money. To advance money for the protection of the Trust, and for all expenses, losses and liabilities sustained or incurred in the administration of the Trust or because of the holding or ownership of any Trust assets, for which advances, with interest, the Trustee has a lien on the Trust assets as against the Beneficiaries. (i) Pay, Contest or Settle Claims. To pay, contest or settle any claim by or against the Trust by compromise, arbitration or otherwise; to release, in whole or in part, any claim belonging to the Trust to the extent that the claim is uncollectible. Notwithstanding the foregoing, the Trustee may only pay or settle a claim asserted against the Trust by a Grantor if it is compelled to do so by a final order of a court of competent jurisdiction. (j) Litigate. To prosecute or defend actions, claims or proceedings for the protection of Trust assets and of the Trustee in the performance of its duties. (k) Employ Advisers and Agents. To employ and reasonably compensate persons, corporations or associations, including attorneys, auditors, investment advisers or agents, even if they are associated with the Trustee, to advise or assist the Trustee in the performance of its administrative duties; to act without independent investigation upon their recommendations. (l) Use Custodian. If no bank or trust company is acting as Trustee hereunder, the Trustee shall appoint a bank or trust company to act as custodian (the "Custodian") for securities and any other Trust assets. Any such appointment shall terminate when a bank or trust company begins to serve as Trustee hereunder. The Custodian shall keep the deposited property, collect and receive the income and principal, and hold, invest, disburse or otherwise dispose of the property or its proceeds (specifically including selling and purchasing securities, and delivering securities sold and receiving securities purchased) upon the order of the Trustee. (m) Execute Documents. To execute and deliver all instruments that will accomplish or facilitate the exercise of the powers vested in the Trustee. (n) Grant of Powers Limited. The Trustee is expressly prohibited from exercising any powers vested in it primarily for the benefit of the Grantors rather than for the benefit of the Beneficiaries. The Trustee shall not have the power to purchase, exchange, or otherwise deal with or dispose of the assets of the Trust for less than adequate and full consideration in money or money's worth. (o) Deposit Assets. To deposit Trust assets in commercial, savings or savings and loan accounts (including such accounts in a corporate Trustee's banking department) and to keep such portion of the Trust assets in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Trust, without liability for interest thereon. 10. Termination of Trustee. Grantors may remove Trustee upon sixty (60) days notice or upon such shorter period of time if acceptable to Trustee; provided that upon a Preliminary CIC or subsequent Change in Control the Grantors may only remove the Trustee if a majority of the Beneficiaries approve such action. 11. Appointment of Successor Trustee. -------------------------------- (a) The Trustee shall have the right to resign upon 60 days' written notice to the Grantor, during which time the Grantor shall appoint a "Qualified Successor Trustee." If no Qualified Successor Trustee accepts such appointment, the resigning Trustee shall petition a court of competent jurisdiction for the appointment of a "Qualified Successor Trustee." For this purpose, a "Qualified Successor Trustee" must be a bank or trust company with a market capitalization of at least $10 billion but may not be the Grantor, any person who would be a "related or subordinate party" to the Grantor within the meaning of Section 672(c) of the Code or a corporation that would be a member of an "affiliated group" of corporations including the Grantor within the meaning of Section 1504(a) of the Code if the words "80 percent" wherever they appear in that section were replaced by the words "50 percent." Upon the written acceptance by the Qualified Successor Trustee of the trust and upon approval of the resigning Trustee's final account by those entitled thereto, the resigning Trustee shall be discharged. (b) Upon the occurrence of a corporate transaction involving the ownership or assets of a Grantor, the affected Grantors upon written acknowledgment to the Trustee of their obligations under the Trust and Plans may in their sole discretion direct the Trustee to transfer or assign all or a portion of the assets of the Trust to a Qualified Successor Trustee. The Trust Administrative Committee shall instruct the Trustee regarding the assets to be transferred or assigned; provided, however, that no assets shall be transferred to such a Qualified Successor Trustee until the Trustee is satisfied that contributions required under the Plans have been made prior to or concurrent with this transfer or assignment. Notwithstanding the foregoing, the Trustee shall only be permitted to transfer or assign assets from the Trust to a Qualified Successor Trustee if the transfer and assignment are consistent with the purpose and intent of the Trust. 12. Trustee Compensation. The Trustee shall be entitled to receive as compensation for its services hereunder the compensation (a) as negotiated and agreed to by the Grantors and the Trustee, or (b) if not negotiated or if the parties are unable to reach agreement, as allowed a trustee under the laws of the State of Georgia in effect at the time such compensation is payable. Such compensation shall be paid by the Grantors; provided, however, that to the extent such compensation is not paid by the Grantors, subject to the provisions of Section 17(i) hereof, it shall be charged against and paid from the Trust and the Grantors shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. 13. Trustee's Consent to Act and Indemnification of the Trustee. The Trustee hereby grants and consents to act as Trustee hereunder. The Grantors agree to indemnify the Trustee and hold it harmless from and against all claims, liabilities, legal fees and expenses that may be asserted against it, otherwise than on account of conduct of the Trustee which is found by a final judgment of a court of competent jurisdiction to be a breach of its fiduciary duty whether by reason of the Trustee's taking or refraining from taking any action in connection with the Trust, whether or not the Trustee is a party to a legal proceeding or otherwise. 14. Prohibition Against Assignment. No Beneficiary shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust before such assets are paid to the Beneficiary as provided in Section 7, and all rights created under the Trust and the Plans shall be unsecured contractual rights of the Beneficiary against the Grantor which is his employer for purposes of the Plans. No part of, or claim against, the assets of the Trust may be assigned, anticipated, alienated, encumbered, garnished, attached or in any other manner disposed of by any of the Beneficiaries, and no such part or claim shall be subject to any legal process or claims of creditors of any of the Beneficiaries. 15. Annual Accounting. The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and, within ninety days following the close of each calendar year, and within ninety days after the Trustee's resignation or termination of the Trust as provided herein, the Trustee shall render a written account of its administration of the Trust to the Grantors by submitting a record of receipts, investments, disbursements, distributions, gains, losses, assets on hand at the end of the accounting period and other pertinent information, including a description of all securities and investments purchased and sold during such calendar year. Trustee shall separately account for each Grantor's interest in Trust assets. Written approval of an account shall, as to all matters shown in the account, be binding upon the Grantors and shall forever release and discharge the Trustee from any liability or accountability. The Grantors will be deemed to have given their written approval if he does not object in writing to the Trustee within one hundred and twenty days after the date of receipt of such account from the Trustee. The Trustee shall be entitled at any time to institute an action in a court of competent jurisdiction for a judicial settlement of its account. 16. Notices. Any notice or instructions required under any of the provisions of this Trust Agreement shall be deemed effectively given only if such notice is in writing and is delivered personally or by certified or registered mail, return receipt requested and postage prepaid, addressed to the addresses as set forth below of the parties hereto. The addresses of the parties are as follows: (i) The Grantors: Secretary Southern Company 270 Peachtree Street, Suite 1400 Atlanta, GA 30303 (ii) The Trustee: Reliance Trust Company 3384 Peachtree Road Suite 900 Atlanta, GA 30326-1106 The Grantors or Trustee may at any time change the address to which notices are to be sent to it by giving written notice thereof in the manner provided above. 17. Miscellaneous Provisions. ------------------------ (a) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts made and to be performed therein and the Trustee shall not be required to account in any court other than one of the courts of such state. (b) The Trust Administrative Committee may give direction to Trustee on behalf of the Grantors with regard to those matters identified in writing by the Grantors. The Trustee will be fully protected in relying on such direction by the Trust Administrative Committee. (c) All section headings herein have been inserted for convenience of reference only and shall in no way modify, restrict or affect the meaning or interpretation of any of the terms or provisions of this Trust Agreement. (d) This Trust Agreement is intended as a complete and exclusive statement of the agreement of the parties hereto, supersedes all previous agreements or understandings among them and may not be modified or terminated orally. (e) The term "Trustee" shall include any successor Trustee. (f) If a Trustee or Custodian hereunder is a bank or trust company, any corporation resulting from any merger, consolidation or conversion to which such bank or trust company may be a party, or any corporation otherwise succeeding generally to all or substantially all of the assets or business of such bank or trust company, shall be the successor to it as Trustee or Custodian hereunder, as the case may be without the execution of any instrument or any further action on the part of any party hereto. (g) If any provision of this Trust shall be invalid and unenforceable, the remaining provisions hereof shall subsist and be carried into effect. (h) The Plans are by this reference expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth at length. As of the date first stated above, the terms of the Plans are as set forth in Exhibit A attached hereto. (i) The assets of the Trust shall be subject only to the claims of the Grantor's general creditors in the event of one or more of the Grantors' bankruptcy or insolvency. A Grantor shall be considered "bankrupt" or "insolvent" if the Grantor is (A) unable to pay its debts when due or (B) engaged as a debtor in a proceeding under the Bankruptcy Code, 11 U.S.C. Section 101 et seq. The Board of Directors or the chief executive officer of a Grantor must notify the Trustee of the Grantor's bankruptcy or insolvency within three (3) days following the occurrence of such event. Upon receipt of such a notice, or, upon receipt of a written allegation from a person or entity claiming to be a creditor of a Grantor that such Grantor is bankrupt or insolvent, the Trustee shall discontinue payments to Beneficiaries. The Trustee shall, as soon as practicable after receipt of such notice or written allegation, determine whether such Grantor is bankrupt or insolvent. If the Trustee determines, based on such notice, written allegation, or such other information as it deems appropriate, that such Grantor is bankrupt or insolvent, the Trustee shall hold the assets of the Trust for the benefit of the general creditors of the Grantor or Grantors, and deliver any undistributed assets attributable to such Grantor or Grantors to satisfy the claims of such creditors as a court of competent jurisdiction may direct. The Trust Administrative Committee in conjunction with the Trustee shall identify the amount of assets attributable to any bankrupt or insolvent Grantor in order to segregate such assets for the benefit of such Grantor's creditors. The Trustee shall resume payments to Beneficiaries only after it has determined that the Grantor in issue is not bankrupt or insolvent, is no longer bankrupt or insolvent (if the Trustee determined that the Grantor was bankrupt or insolvent), pursuant to an order of a court of competent jurisdiction. Unless the Trustee has actual knowledge of the Grantor's bankruptcy or insolvency of the Grantor or Grantors, the Trustee shall have no duty to inquire whether such Grantor(s) is bankrupt or insolvent. The Trustee may in all events rely on such evidence concerning the pertinent Grantor's solvency as may be furnished to the Trustee that will give the Trustee a reasonable basis for making a determination concerning such Grantor's solvency. If the Trustee discontinues payment of benefits from the Trust pursuant to this Section 17(h) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments which would have been made to each Beneficiary less the aggregate amount of payments made to the Beneficiary by the Grantor(s) in lieu of the payments provided for hereunder during any such period of discontinuance. In addition, interest at a rate equal to the average 90 day Treasury Bill rate during the period of such discontinuance shall be paid on the amount, if any, determined to be owed in accordance with the preceding sentence. (j) Any and all taxes, expenses (including, but not limited to, the Trustee's compensation) and costs of litigation relating to or concerning the adoption, administration and termination of the Trust shall be borne and promptly paid by the Grantors; provided, however, that, to the extent such taxes, expenses and costs relating to the Trust are due and owing and (A) are not paid by the Grantors, and (B) have not been paid for more than sixty (60) days, they shall be charged against and paid from the Trust, and the Grantors shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. (k) Any reference hereunder to a Beneficiary shall expressly be deemed to include, where relevant, the beneficiaries of a Beneficiary duly appointed under the terms of the Plans. A Beneficiary shall cease to have such status once any and all amounts due such Beneficiary under the Plan have been satisfied. (l) Any reference hereunder to the Grantors shall expressly be deemed to include a Grantor's successor and assigns. (m) Whenever used herein, and to the extent appropriate, the masculine, feminine or neuter gender shall include the other two genders, the singular shall include the plural and the plural shall include the singular. IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement as of ____________________, 2000. TRUSTEE: RELIANCE TRUST COMPANY GRANTOR: ----------------------------------------------------- ALABAMA POWER COMPANY GRANTOR: ----------------------------------------------------- GEORGIA POWER COMPANY GRANTOR: ----------------------------------------------------- GULF POWER COMPANY GRANTOR: ----------------------------------------------------- MISSISSIPPI POWER COMPANY GRANTOR: ----------------------------------------------------- SAVANNAH ELECTRIC AND POWER COMPANY GRANTOR: ----------------------------------------------------- THE SOUTHERN COMPANY EXHIBIT A Plans and Arrangements Subject to the Trust1 EXHIBIT B Contacts and Addresses of Grantors - -------- 1 The parenthetical reference sets forth the Trust provisions applicable to the respective Plans listed herein. EX-10 50 x10a105.txt Exhibit 10(a)105 DEFERRED CASH COMPENSATION TRUST AGREEMENT FOR DIRECTORS OF SOUTHERN COMPANY AND ITS SUBSIDIARIES DEFERRED CASH COMPENSATION TRUST AGREEMENT FOR DIRECTORS OF SOUTHERN COMPANY AND ITS SUBSIDIARIES TABLE OF CONTENTS 1. Purpose.............................................................1 2. Trust Corpus........................................................2 3. Grantor Trust.......................................................2 4. Irrevocability of Trust.............................................3 5. Change in Control and Preliminary Change in Control.................3 6. Investment of Trust Assets..........................................5 7. Distribution of Trust Assets........................................6 8. Termination of the Trust and Reversion of Trust Assets.............11 9. Powers of the Trustee..............................................12 10. Termination of Trustee.............................................15 11. Resignation of Trustee and Appointment of Successor Trustee........15 12. Trustee Compensation...............................................16 13. Trustee's Consent to Act and Indemnification of the Trustee........17 14. Prohibition Against Assignment.....................................17 15. Annual Accounting..................................................17 16. Notices............................................................18 17. Miscellaneous Provisions...........................................19 DEFERRED CASH COMPENSATION TRUST AGREEMENT FOR DIRECTORS OF SOUTHERN COMPANY AND ITS SUBSIDIARIES This Trust Agreement entered into this _____ day of ___________, 2000 (the "Effective Date") is between the Grantors as set forth on the signature page of this Trust Agreement and Wachovia Bank, N.A. (the "Trustee"). 1. Purpose. The purpose of this trust (the "Trust") is to provide a vehicle to (a) hold assets of the Grantors as a reserve for the discharge of certain of the Grantors' obligations with respect to Prime Rate Investment Accounts and Phantom Stock Investment Accounts under the respective Grantors' Deferred Compensation Plans for Directors (i) upon the occurrence of a change in control, and (ii) in accordance with paragraph 7(b), to provide added protections for certain individuals who actively serve on the Board of Directors of a Grantor on or after January 1, 1999, entitled to receive benefits under designated plans and arrangements and (b) invest, reinvest, disburse and distribute those assets and the earnings thereon as provided hereunder. Individuals eligible for benefits in accordance with the preceding sentence shall hereinafter be referred to as "Beneficiaries" under the Trust. Grantors shall designate in writing to the Trustee in Exhibit A attached hereto and made a part hereof those plans or arrangements subject to all or certain provisions of the Trust (the "Plans"). Exhibit A shall also specify which provisions of the Trust apply to the various Plans. 2. Trust Corpus. The Grantors hereby transfer to the Trustee and the Trustee hereby accepts and agrees to hold, in trust, the sum of Ten Dollars ($10.00) plus such cash and/or property, if any, transferred to the Trustee by the Grantors or on behalf of the Grantors pursuant to obligations incurred under any or all of the Plans and the earnings thereon, and such cash and/or property, together with the earnings thereon and together with any other cash or property received by the Trustee pursuant to Section 9(a) of this Trust Agreement, shall constitute the trust estate and shall be held, managed and distributed as hereinafter provided. The Grantors shall execute any and all instruments necessary to vest the Trustee with full title to the property hereby transferred. 3. Grantor Trust. The Trust is intended to be a trust of which the Grantors are treated as individual owners for federal income tax purposes in accordance with the provisions of Sections 671 through 679 of the Internal Revenue Code of 1986, as amended (the "Code"). If the Trustee, in its sole and absolute discretion, deems it necessary or advisable for the Grantors and/or the Trustee to undertake or refrain from undertaking any actions (including, but not limited to, making or refraining from making any elections or filings) in order to ensure that the Grantors are at all times treated as individual owners of the Trust for federal income tax purposes, the Grantors and/or the Trustee will undertake or refrain from undertaking (as the case may be) such actions. The Grantors hereby irrevocably authorize the Trustee to be their attorney-in-fact for the purpose of performing any act which the Trustee, in its sole and absolute discretion, deems necessary or advisable in order to accomplish the purposes and the intent of this Section 3. The Trustee shall be fully protected in acting or refraining from acting in accordance with the provisions of this Section 3. 4. Irrevocability of Trust. Prior to the occurrence of a "Preliminary Change in Control" (hereinafter referred to as a "Preliminary CIC"), the Trust shall be revocable and may be altered or amended in any substantive respect, or revoked or terminated by the Grantors in whole or in part provided that no such amendment may increase the duties of the Trustee without its consent. In the event of a Preliminary CIC, the Trust may not be altered or amended in any substantive respect, or revoked or terminated by the Grantor or Grantors incurring a Preliminary CIC unless a majority of the Beneficiaries, determined as of the day before such Preliminary CIC, agree in writing to such an alteration, amendment, revocation or termination provided that no such amendment may increase the duties of the Trustee without its consent. If after a Preliminary CIC occurs but fails to become a Change in Control, thereafter the Trust shall again be revocable and may be altered or amended in any substantive respect, or revoked or terminated by the Grantors in whole or in part provided that no such amendment may increase the duties of the Trustee without its consent. Notwithstanding the preceding, the Trust may be amended following a Preliminary CIC or a Change in Control without approval of the Beneficiaries to protect the tax status or ERISA status of this Trust. For purposes of this Trust, Preliminary CIC and other capitalized terms if not defined in the Trust shall have the same meaning as set forth in the Grantor's respective Deferred Compensation Plan for Directors. 5. Contributions to Trust. The Grantors have obligated themselves under the terms of the Plans, which are hereby incorporated by reference, to make certain contributions to the Trust upon the occurrence of a Preliminary CIC. Upon such a Preliminary CIC, the Grantors affected thereby shall account for each Beneficiary's benefit funded by contributions to the Trust in a manner determined by the Trust Administrative Committee. The Grantors have also obligated themselves to make certain contributions to the Trust in a manner determined by the Trust Administrative Committee to provide for the protections set forth in Section 7(c) hereof. A return of such contributions and earnings thereon may only occur under the following circumstances: (a) if, on the second anniversary of a Preliminary CIC or any time thereafter, the Southern Committee determines that a Change in Control has not been Consummated, the Trustee upon its agreement with this determination shall, upon the request of the Grantor or Grantors incurring a Preliminary CIC, return to such Grantor or Grantors property contributed to the Trust on account of the occurrence of a Preliminary CIC; (b) if, at any time, following a Preliminary CIC, the Southern Committee provides evidence satisfactory to the Trustee that the Preliminary CIC will not become a Change in Control; or (c) if the Trustee determines in its sole and absolute discretion that a Southern Change in Control has occurred, and, on the second anniversary of the date of Consummation of such Change in Control 75% of the members of the Incumbent Board on such anniversary date shall continue to serve as determined by the Southern Committee, the Trustee upon its agreement with this determination shall return to the Grantor or Grantors incurring a Change in Control, upon such Grantor's request, any such property received and earnings thereon as a result of such Change in Control; or (d) prior to Change of Control, with respect to amounts contributed to fund benefits paid in accordance with Section 7(b) hereof, if the Trust assets equal or exceed 200% of the targeted funding level as established by the Trust Administrative Committee prior to a Change in Control, assets shall be returned by the Trustee to the Grantor or Grantors designated by the Trust Administrative Committee to reduce total assets to 150% of the targeted funding level. 6. Investment of Trust Assets. -------------------------- (a) Subject to the provisions of paragraph (b) below, until the Trustee has distributed all of the assets of the Trust in accordance with the terms hereof, the Trustee shall invest and reinvest such assets (without regard to any state law limiting the investment powers of fiduciaries) in such securities and other property as the Trustee deems advisable, considering the probable income (including capital appreciation potential) from any such investment, the probable safety of the assets of the Trust and, where appropriate, the rate of return at which the assets would have been invested on behalf of each Beneficiary under any applicable qualified defined benefit pension plan maintained by the Grantors. Within the limitations of the foregoing, the Trustee is specifically authorized to acquire, for cash or on credit, every kind of property, real, personal or mixed, and to make every kind of investment, specifically including, but not limited to, corporate and governmental obligations of every kind, preferred or common stocks, securities of any regulated investment company or trust, and property in which the Trustee owns an undivided interest in any other trust capacity. The Trustee is expressly authorized and empowered to hold or purchase such insurance in its own name (and with itself as the beneficiary) as it shall determine to be necessary or advisable to advance best the purposes of the Trust and the interests of the Beneficiaries. (b) The Trustee shall invest and reinvest the assets of the Trust in accordance with such investment objectives, guidelines, restrictions or directions as the Trust Administrative Committee or its delegee may furnish to the Trustee at the time of the execution of the Trust or at any later date; provided, however, that if there is a Preliminary CIC, the Trust's investment objectives, guidelines, restrictions or directions may not be changed thereafter unless there is a return of Grantor contributions pursuant to Section 5(a), (b) or (c). Upon a Change in Control, the Trustee shall promptly contact all Beneficiaries at their last known addresses provided by the Grantors and put such Beneficiaries on notice of the funding of the Trust and the Trustee's obligations hereunder. The Trust Administrative Committee shall promptly provide the Trustee with such information as it needs to carry out this duty. 7. Distribution of Trust Assets. ---------------------------- (a) The Grantors may make payment of benefits directly to Beneficiaries as they become due under the terms of the Plan(s). Upon a Change in Control, the Grantors shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan(s), the Grantors shall make the balance of each such payment as it falls due in accordance with the Plan(s). The Trustee shall notify the Grantors where principal and earnings are not sufficient. Nothing in this Agreement shall relieve the Grantors of their liabilities to pay benefits due under the Plan(s) except to the extent such liabilities are met by application of assets of the Trust. (b) At such time as a Beneficiary is entitled to payments under any of the Plans prior to a Change in Control, if the Grantors fail to make payment of all or a portion of the benefits to a Beneficiary under any Plan in accordance with paragraph (a) above, such Beneficiary can make application for payment in accordance with the provisions of paragraph (d)(i) below. If so requested, the Trustee shall make an independent determination in its sole and absolute discretion regarding the Beneficiary's right to payment under the Plan(s) within 60 days thereof. Such determination shall be made with advice from outside counsel independent of Southern and the Trustee. The Grantors agree to be bound by Trustee's determination and to make payment of benefits as they fall due commencing not later than 30 days following Trustee's determination regarding entitlement to benefits absent a manifest abuse of discretion by the Trustee. If Trustee determines benefits are payable to Beneficiary and Grantor fails to commence payment within 30 days following the Trustee's determination, Trustee shall make payment of such benefits and instruct Beneficiary in writing that he or she must bring suit within 180 days of the Trustee's claims determination or thereafter be barred from doing so. Trustee shall only make benefits payments until the first of the following to occur: (i) 180 days following its claims determination if the Beneficiary fails to bring a lawsuit to enforce his or her rights within this limitation period; or (ii) until there is a final adjudication or other final resolution of the Beneficiary's claim. In the event that such Beneficiary timely files a lawsuit within 180 days of Trustee's determination that Beneficiary is entitled to the disputed benefits, all reasonable costs of litigation (as determined in the sole and absolute discretion of the Trustee) shall be periodically, but no less than quarterly, advanced to the Beneficiary through the final adjudication of the claim; provided, however, that the Beneficiary shall repay such advanced costs of litigation if he or she fails to have finally resolved in the Beneficiary's favor a material issue supporting the underlying merits of the Beneficiary's claim for benefits in such dispute as determined in the sole and absolute discretion of the Trustee. Alternatively, in the event that a Beneficiary files a lawsuit to obtain benefits after the Trustee determines that such Beneficiary is not entitled to such benefits, all costs of litigation shall be borne by each party thereto; provided, however, that the Grantors, or the Trustee if the Grantors refuse, shall reimburse such reasonable costs in the event any material issue supporting the underlying merits of the Beneficiary's claim for benefits in such dispute is finally resolved in favor of the Beneficiary. (c) Subject to the provisions of paragraph (d) of this Section 7, after a Change in Control, a Beneficiary shall receive payment from the Trust in amount equal to the accrued benefit to which he is entitled under the Plans determined as of the Change in Control, less any payments previously made to him by the Grantors pursuant to the terms of the Plan(s). The form of payment will be consistent with the forms provided under the terms of the Plan(s). (d) (i) The commencement of payments from the Trust shall be conditioned on the Trustee's prior receipt of a written instrument from the Beneficiary in a form reasonably satisfactory to the Trustee. In addition to any other information the Trustee requires, such form should indicate the amount, if any, the Beneficiary has received from the Grantors under the Plans as of his request. All payments to a Beneficiary from the Trust shall be made in accordance with a good faith interpretation of the provisions of the applicable Plan(s). (ii) Except as provided below, the Trustee shall make or commence payment to the Beneficiary in accordance with his representations not later than 30 business days after its receipt thereof; provided, however, that before the Trustee makes or commences any such payment and not later than 7 business days after its receipt of the Beneficiary's representations, the Trustee shall request in writing the Grantors' agreement that the Beneficiary's representations are accurate with respect to the amount, fact, and time of payment to him. The Trustee shall enclose with such request a copy of the Beneficiary's representations and written advice to the Grantors that it must respond to the Trustee's request on or before the 20th business day (which date shall be set forth in such written advice) after the Beneficiary furnished such representations to the Trustee. If the Grantors in a writing delivered to the Trustee agree with the Beneficiary's representations in all respects, or if the Grantors do not respond to the Trustee's request by the 20th-day deadline, the Trustee shall make payment in accordance with the Beneficiary's representations. If the Grantors advise the Trustee in writing on or before the 20th-day deadline that it does not agree with any or all of the Beneficiary's representations, the Trustee immediately shall take whatever steps it in its sole and absolute discretion deems appropriate, including, but not limited to, a review of any notice furnished by the Grantor pursuant to paragraph (e) hereof, to attempt to resolve the difference(s) between the Grantors and the Beneficiary. If, however, the Trustee is unable to resolve such difference(s) to its satisfaction within 60 days after its receipt of the Beneficiary's representations, the Trustee shall make an independent determination in its sole and absolute discretion with the advice of independent counsel regarding the Beneficiary's claim for benefits and commence such payment, if any, within such 60 day period. In the event Grantors do not agree with Beneficiary's right to payment of all or a portion of a benefit under any Plan(s), Grantors may bring a declaratory judgment action to clarify their rights. Trustee may rely on any final judgment concerning a declaratory judgment action with respect to the payment of benefits from the Trust. (e) Notwithstanding any other provision of the Trust to the contrary, after a Change in Control the Trustee shall make payments hereunder before such payments are otherwise due if it determines in its sole and absolute discretion, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, a final non-appealable decision by the Internal Revenue Service addressed to a Beneficiary, a final decision by a court of competent jurisdiction involving a Beneficiary, or a closing agreement made under Code Section 7121 that is approved by the Internal Revenue Service and involves a Beneficiary, that a Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to him under the Plans before they are paid to him. The Trustee in its sole and absolute discretion shall reimburse a Beneficiary all costs determined to be reasonable to defend any tax claims described herein which are asserted by the Internal Revenue Service against any Beneficiary, including attorney fees and cost of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Internal Revenue Service or by a lower court. The Trustee also shall reimburse any Beneficiary for any interest or penalties in respect of tax claims hereunder upon receipt of documentation of same. (f) Unless (contemporaneously with his submission of the written instrument referred to in paragraph (a) hereof) a Beneficiary furnishes documentation in form and substance satisfactory to the Trustee that no withholding is required with respect to a payment to be made to him from the Trust, the Trustee may deduct from any such payment any federal, state or local taxes required by law to be withheld by the Trustee. (g) The Trustee shall provide the Grantors with written confirmation of the fact and time of any commencement of payments hereunder within 10 business days after any payments commence to a Beneficiary. The Grantors shall notify the Trustee in the same manner of any payments it commences to make to a Beneficiary pursuant to the Plans. (h) The Trustee shall be fully protected in making any payment or any calculations in accordance with the provisions of this Section 7. 8. Termination of the Trust and Reversion of Trust Assets. The Trust shall terminate upon the first to occur of (i) the payment by the Grantors of all amounts due the Beneficiaries under each of the Plans or the receipt by the Trustee of a valid release to that effect from each of the Beneficiaries with respect to payments made to him, or (ii) the twenty-first anniversary of the death of the last survivor of the Beneficiaries who are in being on the date of the execution of this Trust Agreement. Upon termination of the Trust, any and all assets remaining in the Trust, after the payment to the Beneficiaries of all amounts to which they are entitled and after payment of the expenses and compensation in Sections 12 and 17(i) of this Trust Agreement, shall revert to the Grantors in accordance with their separate interest as accounted for by the Trust Administrative Trust, and the Trustee shall promptly take such action as shall be necessary to transfer any such assets to the Grantors in accordance with such interest. Notwithstanding the above, the Grantors shall be obligated to take whatever steps are necessary to ensure that the Trust is not terminated for a period of five (5) years following a Change in Control, such steps to include, but not being limited to, the transfer to the Trustee of cash or other assets pursuant to the provisions of Section 9(a) hereof. 9. Powers of the Trustee. To carry out the purposes of the Trust and subject to any limitations herein expressed, the Trustee is vested with the following powers until final distribution, in addition to any now or hereafter conferred by law affecting the trust or estate created hereunder. In exercising such powers, the Trustee shall act in a manner reasonable and equitable in view of the interests of the Beneficiaries and in a manner in which persons of ordinary prudence, diligence, discretion and judgment would act in the management of their own affairs. (a) Receive and Retain Property. To receive and retain any property received at the inception of the Trust or at any other time, whether or not such property is unproductive of income or is property in which the Trustee is personally interested or in which the Trustee owns an undivided interest in any other trust capacity. (b) Dispose of, Develop, and Abandon Assets. To dispose of an asset, for cash or on credit, at public or private sale and, in connection with any sale or disposition, to give such warranties and indemnifications as the Trustee shall determine; to manage, develop, improve, exchange, partition, change the character of or abandon a Trust asset or any interest therein. (c) Borrow and Encumber. To borrow money for any Trust purpose upon such terms and conditions as may be determined by the Trustee; to obligate the Trust or any part thereof by mortgage, deed of trust, pledge or otherwise, for a term within or extending beyond the term of the Trust. (d) Lease. To enter for any purpose into a lease as lessor or lessee, with or without an option to purchase or renew, for a term. (e) Grant or Acquire Options. To grant or acquire options and rights of first refusal involving the sale or purchase of any Trust assets, including the power to write covered call options listed on any securities exchange. (f) Powers Respecting Securities. To have all the rights, powers, privileges and responsibilities of an owner of securities, including, without limiting the foregoing, the power to vote, to give general or limited proxies, to pay calls, assessments, and other sums; to assent to, or to oppose, corporate sales or other acts; to participate in, or to oppose, any voting trusts, pooling agreements, foreclosures, reorganizations, consolidations, mergers and liquidations, and, in connection therewith, to give warranties and indemnifications and to deposit securities with and transfer title to any protective or other committee; to exchange, exercise or sell stock subscription or conversion rights; and, regardless of any limitations elsewhere in this instrument relative to investments by the Trustee, to accept and retain as an investment hereunder any securities received through the exercise of any of the foregoing powers. (g) Use of Nominee. To hold securities or other property in the name of the Trustee, in the name of a nominee of the Trustee, or in the name of a custodian (or its nominee) selected by the Trustee, with or without disclosure of the Trust, the Trustee being responsible for the acts of such custodian or nominee affecting such property. (h) Advance Money. To advance money for the protection of the Trust, and for all expenses, losses and liabilities sustained or incurred in the administration of the Trust or because of the holding or ownership of any Trust assets, for which advances, with interest, the Trustee has a lien on the Trust assets as against the Beneficiaries. (i) Pay, Contest or Settle Claims. To pay, contest or settle any claim by or against the Trust by compromise, arbitration or otherwise; to release, in whole or in part, any claim belonging to the Trust to the extent that the claim is uncollectible. Notwithstanding the foregoing, the Trustee may only pay or settle a claim asserted against the Trust by a Grantor if it is compelled to do so by a final order of a court of competent jurisdiction. (j) Litigate. To prosecute or defend actions, claims or proceedings for the protection of Trust assets and of the Trustee in the performance of its duties. (k) Employ Advisers and Agents. To employ and reasonably compensate persons, corporations or associations, including attorneys, auditors, investment advisers or agents, even if they are associated with the Trustee, to advise or assist the Trustee in the performance of its administrative duties; to act without independent investigation upon their recommendations. (l) Use Custodian. If no bank or trust company is acting as Trustee hereunder, the Trustee shall appoint a bank or trust company to act as custodian (the "Custodian") for securities and any other Trust assets. Any such appointment shall terminate when a bank or trust company begins to serve as Trustee hereunder. The Custodian shall keep the deposited property, collect and receive the income and principal, and hold, invest, disburse or otherwise dispose of the property or its proceeds (specifically including selling and purchasing securities, and delivering securities sold and receiving securities purchased) upon the order of the Trustee. (m) Execute Documents. To execute and deliver all instruments that will accomplish or facilitate the exercise of the powers vested in the Trustee. (n) Grant of Powers Limited. The Trustee is expressly prohibited from exercising any powers vested in it primarily for the benefit of the Grantors rather than for the benefit of the Beneficiaries. The Trustee shall not have the power to purchase, exchange, or otherwise deal with or dispose of the assets of the Trust for less than adequate and full consideration in money or money's worth. (o) Deposit Assets. To deposit Trust assets in commercial, savings or savings and loan accounts (including such accounts in a corporate Trustee's banking department) and to keep such portion of the Trust assets in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Trust, without liability for interest thereon. 10. Termination of Trustee. Grantors may remove Trustee upon sixty (60) days notice or upon such shorter period of time if acceptable to Trustee; provided that upon a Preliminary CIC or subsequent Change in Control the Grantors may only remove the Trustee if a majority of the Beneficiaries approve such action. 11. Appointment of Successor Trustee. -------------------------------- (a) The Trustee shall have the right to resign upon 60 days' written notice to the Grantor, during which time the Grantor shall appoint a "Qualified Successor Trustee." If no Qualified Successor Trustee accepts such appointment, the resigning Trustee shall petition a court of competent jurisdiction for the appointment of a "Qualified Successor Trustee." For this purpose, a "Qualified Successor Trustee" must be a bank or trust company with a market capitalization of at least $10 billion but may not be the Grantor, any person who would be a "related or subordinate party" to the Grantor within the meaning of Section 672(c) of the Code or a corporation that would be a member of an "affiliated group" of corporations including the Grantor within the meaning of Section 1504(a) of the Code if the words "80 percent" wherever they appear in that section were replaced by the words "50 percent." Upon the written acceptance by the Qualified Successor Trustee of the trust and upon approval of the resigning Trustee's final account by those entitled thereto, the resigning Trustee shall be discharged. (b) Upon the occurrence of a corporate transaction involving the ownership or assets of a Grantor, the affected Grantors upon written acknowledgment to the Trustee of their obligations under the Trust and Plans may in their sole discretion direct the Trustee to transfer or assign all or a portion of the assets of the Trust to a Qualified Successor Trustee. The Trust Administrative Committee shall instruct the Trustee regarding the assets to be transferred or assigned; provided, however, that no assets shall be transferred to such a Qualified Successor Trustee until the Trustee is satisfied that contributions required under the Plans have been made prior to or concurrent with this transfer or assignment. Notwithstanding the foregoing, the Trustee shall only be permitted to transfer or assign assets from the Trust to a Qualified Successor Trustee if the transfer and assignment are consistent with the purpose and intent of the Trust. 12. Trustee Compensation. The Trustee shall be entitled to receive as compensation for its services hereunder the compensation (a) as negotiated and agreed to by the Grantors and the Trustee, or (b) if not negotiated or if the parties are unable to reach agreement, as allowed a trustee under the laws of the State of Georgia in effect at the time such compensation is payable. Such compensation shall be paid by the Grantors; provided, however, that to the extent such compensation is not paid by the Grantors, subject to the provisions of Section 17(i) hereof, it shall be charged against and paid from the Trust and the Grantors shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. 13. Trustee's Consent to Act and Indemnification of the Trustee. The Trustee hereby grants and consents to act as Trustee hereunder. The Grantors agree to indemnify the Trustee and hold it harmless from and against all claims, liabilities, legal fees and expenses that may be asserted against it, otherwise than on account of conduct of the Trustee which is found by a final judgment of a court of competent jurisdiction to be a breach of its fiduciary duty whether by reason of the Trustee's taking or refraining from taking any action in connection with the Trust, whether or not the Trustee is a party to a legal proceeding or otherwise. 14. Prohibition Against Assignment. No Beneficiary shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust before such assets are paid to the Beneficiary as provided in Section 7, and all rights created under the Trust and the Plans shall be unsecured contractual rights of the Beneficiary against the Grantor which is his employer for purposes of the Plans. No part of, or claim against, the assets of the Trust may be assigned, anticipated, alienated, encumbered, garnished, attached or in any other manner disposed of by any of the Beneficiaries, and no such part or claim shall be subject to any legal process or claims of creditors of any of the Beneficiaries. 15. Annual Accounting. The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and, within ninety days following the close of each calendar year, and within ninety days after the Trustee's resignation or termination of the Trust as provided herein, the Trustee shall render a written account of its administration of the Trust to the Grantors by submitting a record of receipts, investments, disbursements, distributions, gains, losses, assets on hand at the end of the accounting period and other pertinent information, including a description of all securities and investments purchased and sold during such calendar year. Trustee shall separately account for each Grantor's interest in Trust assets. Written approval of an account shall, as to all matters shown in the account, be binding upon the Grantors and shall forever release and discharge the Trustee from any liability or accountability. The Grantors will be deemed to have given their written approval if he does not object in writing to the Trustee within one hundred and twenty days after the date of receipt of such account from the Trustee. The Trustee shall be entitled at any time to institute an action in a court of competent jurisdiction for a judicial settlement of its account. 16. Notices. Any notice or instructions required under any of the provisions of this Trust Agreement shall be deemed effectively given only if such notice is in writing and is delivered personally or by certified or registered mail, return receipt requested and postage prepaid, addressed to the addresses as set forth below of the parties hereto. The addresses of the parties are as follows: (i) The Grantors: Secretary Southern Company 270 Peachtree Street, Suite 1400 Atlanta, GA 30303 (ii) The Trustee: Wachovia Bank, N.A. Attn: Executive Services NC 31013 P.O. Box 3099 Winston-Salem, NC 27150 The Grantors or Trustee may at any time change the address to which notices are to be sent to it by giving written notice thereof in the manner provided above. 17. Miscellaneous Provisions. ------------------------ (a) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts made and to be performed therein and the Trustee shall not be required to account in any court other than one of the courts of such state. (b) The Trust Administrative Committee may give direction to Trustee on behalf of the Grantors with regard to those matters identified in writing by the Grantors. The Trustee will be fully protected in relying on such direction by the Trust Administrative Committee. (c) All section headings herein have been inserted for convenience of reference only and shall in no way modify, restrict or affect the meaning or interpretation of any of the terms or provisions of this Trust Agreement. (d) This Trust Agreement is intended as a complete and exclusive statement of the agreement of the parties hereto, supersedes all previous agreements or understandings among them and may not be modified or terminated orally. (e) The term "Trustee" shall include any successor Trustee. (f) If a Trustee or Custodian hereunder is a bank or trust company, any corporation resulting from any merger, consolidation or conversion to which such bank or trust company may be a party, or any corporation otherwise succeeding generally to all or substantially all of the assets or business of such bank or trust company, shall be the successor to it as Trustee or Custodian hereunder, as the case may be without the execution of any instrument or any further action on the part of any party hereto. (g) If any provision of this Trust shall be invalid and unenforceable, the remaining provisions hereof shall subsist and be carried into effect. (h) The Plans are by this reference expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth at length. As of the date first stated above, the terms of the Plans are as set forth in Exhibit A attached hereto. (i) The assets of the Trust shall be subject only to the claims of the Grantor's general creditors in the event of one or more of the Grantors' bankruptcy or insolvency. A Grantor shall be considered "bankrupt" or "insolvent" if the Grantor is (A) unable to pay its debts when due or (B) engaged as a debtor in a proceeding under the Bankruptcy Code, 11 U.S.C. Section 101 et seq. The Board of Directors or the chief executive officer of a Grantor must notify the Trustee of the Grantor's bankruptcy or insolvency within three (3) days following the occurrence of such event. Upon receipt of such a notice, or, upon receipt of a written allegation from a person or entity claiming to be a creditor of a Grantor that such Grantor is bankrupt or insolvent, the Trustee shall discontinue payments to Beneficiaries. The Trustee shall, as soon as practicable after receipt of such notice or written allegation, determine whether such Grantor is bankrupt or insolvent. If the Trustee determines, based on such notice, written allegation, or such other information as it deems appropriate, that such Grantor is bankrupt or insolvent, the Trustee shall hold the assets of the Trust for the benefit of the general creditors of the Grantor or Grantors, and deliver any undistributed assets attributable to such Grantor or Grantors to satisfy the claims of such creditors as a court of competent jurisdiction may direct. The Trust Administrative Committee in conjunction with the Trustee shall identify the amount of assets attributable to any bankrupt or insolvent Grantor in order to segregate such assets for the benefit of such Grantor's creditors. The Trustee shall resume payments to Beneficiaries only after it has determined that the Grantor in issue is not bankrupt or insolvent, is no longer bankrupt or insolvent (if the Trustee determined that the Grantor was bankrupt or insolvent), pursuant to an order of a court of competent jurisdiction. Unless the Trustee has actual knowledge of the Grantor's bankruptcy or insolvency of the Grantor or Grantors, the Trustee shall have no duty to inquire whether such Grantor(s) is bankrupt or insolvent. The Trustee may in all events rely on such evidence concerning the pertinent Grantor's solvency as may be furnished to the Trustee that will give the Trustee a reasonable basis for making a determination concerning such Grantor's solvency. If the Trustee discontinues payment of benefits from the Trust pursuant to this Section 17(h) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments which would have been made to each Beneficiary less the aggregate amount of payments made to the Beneficiary by the Grantor(s) in lieu of the payments provided for hereunder during any such period of discontinuance. In addition, interest at a rate equal to the average 90 day Treasury Bill rate during the period of such discontinuance shall be paid on the amount, if any, determined to be owed in accordance with the preceding sentence. (j) Any and all taxes, expenses (including, but not limited to, the Trustee's compensation) and costs of litigation relating to or concerning the adoption, administration and termination of the Trust shall be borne and promptly paid by the Grantors; provided, however, that, to the extent such taxes, expenses and costs relating to the Trust are due and owing and (A) are not paid by the Grantors, and (B) have not been paid for more than sixty (60) days, they shall be charged against and paid from the Trust, and the Grantors shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment. (k) Any reference hereunder to a Beneficiary shall expressly be deemed to include, where relevant, the beneficiaries of a Beneficiary duly appointed under the terms of the Plans. A Beneficiary shall cease to have such status once any and all amounts due such Beneficiary under the Plan have been satisfied. (l) Any reference hereunder to the Grantors shall expressly be deemed to include a Grantor's successor and assigns. (m) Whenever used herein, and to the extent appropriate, the masculine, feminine or neuter gender shall include the other two genders, the singular shall include the plural and the plural shall include the singular. IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement as of ____________________, 2000. TRUSTEE: WACHOVIA BANK, N.A. GRANTOR: ----------------------------------------------------- ALABAMA POWER COMPANY GRANTOR: ----------------------------------------------------- GEORGIA POWER COMPANY GRANTOR: ----------------------------------------------------- GULF POWER COMPANY GRANTOR: ----------------------------------------------------- MISSISSIPPI POWER COMPANY GRANTOR: ----------------------------------------------------- SAVANNAH ELECTRIC AND POWER COMPANY GRANTOR: ----------------------------------------------------- THE SOUTHERN COMPANY EXHIBIT A Plans and Arrangements Subject to the Trust1 EXHIBIT B Contacts and Addresses of Grantors - -------- 1 The parenthetical reference sets forth the Trust provisions applicable to the respective Plans listed herein. EX-10 51 x10b36.txt DEFERRED COMPENSATION PLAN FOR DIRECTORS OF ALABAMA POWER COMPANY Amended and Restated Effective January 1, 2000 SECTION 1 Definitions 1.1 "Beneficial Ownership" means beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. 1.2 "Board" or "Board of Directors" means the Board of Directors of the Company. 1.3 "Business Combination" means a reorganization, merger or consolidation or sale of Southern, or a sale of all or substantially all of Southern's assets. 1.4 "Cash Compensation" means the annual retainer fees and meeting fees payable to a Director in cash. 1.5 "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. 1.6 "Committee" means the Compensation Committee of the Board, or such other committee as may be designated by the Board to be responsible for administering the Plan. 1.7 "Common Stock" means the common stock of Southern, including any shares into which it may be split, subdivided, or combined. 1.8 "Company" means Alabama Power Company, or any successor thereto. 1.9 "Company Change in Control" means the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Section 1.9, any acquisition by an Employee, or Group composed entirely of Employees, any qualified pension plan, any publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation Controlled by Southern shall not constitute a Change in Control; (b) Consummation of a reorganization, merger or consolidation of the Company (a "Company Business Combination"), in each case, unless, following such Company Business Combination, Southern Controls the corporation surviving or resulting from such Company Business Combination; or (c) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to an entity which Southern does not Control. 1.10 "Compensation Payment Date" means the date on which compensation, including cash retainer, meeting fees, and the Stock Retainer, is payable to a Director or compensation would otherwise be payable to a Director if an election to defer such compensation had not been made. 1.11 "Consummation" means the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or agencies. 1.12 "Control" means, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. 1.13 "Deferred Cash Trust" means the Deferred Cash Compensation Trust for Directors of The Southern Company and its Subsidiaries. 1.14 "Deferred Compensation Account" means the Prime Rate Investment Account, the Phantom Stock Investment Account, and/or the Deferred Stock Account. 1.15 "Deferred Pension Election" means the election by a Director under Section 5.3 in connection with the deferral of receipt of the Director's Pension Benefit until termination from the Board. 1.16 "Deferred Stock Account" means the bookkeeping account established under Section 6.3 on behalf of a Director and includes shares of Common Stock credited thereto to reflect the reinvestment of dividends pursuant to Section 6.3(a)(iii). 1.17 "Deferred Stock Trust" means the Deferred Stock Trust for Directors of The Southern Company and its Subsidiaries. 1.18 "Director" means a member of the Board. 1.19 "Distribution Election" means the designation by a Director of the manner of distribution of the amounts and quantities held in the Director's Deferred Compensation Accounts upon the director's termination from the Board pursuant to Section 5.4. 1.20 "Effective Date" means January 1, 2000. 1.21 "Employee" means an employee of Southern or any of its subsidiaries that are "employing companies" as defined in the Southern Company Deferred Compensation Plan as amended and restated January 1, 2000, and as may be amended from time to time. 1.22 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.23 "Group" has the meaning set forth in Section 14(d) of the Exchange Act. 1.24 "Incumbent Board" means those individuals who constitute the Southern board of directors as of October 19, 1998, plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern board of directors subsequent to October 19, 1998, whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern board of directors shall be a member of the Incumbent Board. 1.25 "Market Value" means the average of the high and low prices of the Common Stock, as published in the Wall Street Journal in its report of New York Stock Exchange composite transactions, on the date such Market Value is to be determined, as specified herein (or the average of the high and low sale prices on the trading day immediately preceding such date if the Common Stock is not traded on the New York Stock Exchange on such date). 1.26 "Participant" means a Director or former Director who has an unpaid Deferred Compensation Account balance under the Plan. 1.27 "Participating Companies" means those companies whose boards of directors have authorized the establishment of trust(s) for the funding of their respective directors' Deferred Compensation Accounts under their respective Deferred Compensation Plans for Directors, including the Company. 1.28 "Pension Benefit" means the U.S. dollar amount of the actuarially-determined present value of benefits based on a Director's expected service at the required retirement date under The Southern Company Outside Directors Pension Plan, as calculated as of the Termination Date, plus accrued earnings on such amount calculated as if invested at the Prime Interest Rate from the Termination Date, until such amount is invested in Deferred Compensation Accounts pursuant to the provisions of Section 5.3. 1.29 "Pension Benefit Investment Date" means the date to be determined by the Committee, as of which the Director's Pension Benefit will be credited to a Deferred Compensation Account in accordance with the director's Deferred Pension Election under Section 5.3. 1.30 "Phantom Stock Investment Account" means the bookkeeping account established pursuant to Section 6.2 in which a Director may elect to defer Cash Compensation or make investments, and includes amounts credited thereto to reflect the reinvestment of dividends. 1.31 "Plan" means the Deferred Compensation Plan for Directors of Alabama Power Company as from time to time in effect. 1.32 "Plan Period" means the period designated in Section 4. 1.33 "Person" means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. 1.34 "Preliminary Change in Control" means the occurrence of any of the following as determined by the Southern Committee: (a) Southern or the Company has entered into a written agreement, such as, but not limited to, a letter of intent, which, if Consummated, would result in a Southern Change in Control or a Company Change in Control, as the case may be; (b) Southern, the Company or any Person publicly announces an intention to take or to consider taking actions which, if Consummated, would result in a Southern Change in Control or a Company Change in Control under circumstances where the Consummation of the announced action or intended action is legally and financially possible; (c) Any Person becomes the Beneficial Owner of fifteen percent (15%) or more of the Common Stock; or (d) The Southern board of directors or the board of directors of the Company has declared that a Preliminary Change in Control has occurred. 1.35 "Prime Interest Rate" means the prime rate of interest as determined by AmSouth Bank. 1.36 "Prime Rate Investment Account" means the bookkeeping account established pursuant to Section 6.1 in which a Director may elect to defer Cash Compensation or make investments, the investment return on which is computed at the Prime Interest Rate. 1.37 "Southern" means The Southern Company. 1.38 "Southern Change in Control" means any of the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this subsection (a), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (i) any acquisition directly from Southern, (ii) any acquisition by Southern, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation controlled by Southern, (iv) any acquisition by a qualified pension plan or publicly held mutual fund, (v) any acquisition by an Employee or Group composed exclusively of Employees, or (vi) any Business Combination which would not otherwise constitute a Change in Control because of the application of clauses (i), (ii) and (iii) of Section 1.38(c); (b) A change in the composition of Southern's board of directors whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of Southern's board of directors; or (c) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met: (i) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (ii) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of employees or employee benefit plan (or related trust) of Southern, its subsidiaries, or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern board of directors, providing for such Business Combination. 1.39 "Southern Committee" means Chairman of the Southern board of directors, Chief Financial Officer of Southern, General Counsel of Southern, and the Chairman of the "Administrative Committee", as defined in Section 3.1 of the Southern Company Deferred Compensation Plan, as restated and amended effective January 1, 2000. 1.40 "Stock Retainer" means the annual Board retainer fee that is paid to the Director in the form of Common Stock. 1.41 "Termination Date" means January 1, 1997, the date as of which The Southern Company Outside Directors Pension Plan was effectively terminated. 1.42 "Trust Administrator" means the individual or committee that is established in the Deferred Stock Trust and the Deferred Cash Trust, to administer such trusts on behalf of the Participating Companies. 1.43 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. Where the context requires, words in the masculine gender shall include the feminine gender, words in the singular shall include the plural, and words in the plural shall include the singular. SECTION 2 Purpose The Plan provides a method of deferring payment to a Director of his compensation until a date following the termination of his membership on the Board. SECTION 3 Eligibility An individual who serves as a Director and is not otherwise actively employed by the Company or any of its subsidiaries or affiliates is eligible to participate in the Plan. SECTION 4 Plan Periods Except as pertains to a Director's initial Plan Period, all Plan Periods shall be on a calendar year basis. The initial Plan Period applicable to any person elected to the Board who was not a Director on the preceding December 31, shall begin on the first day of such Director's membership on the Board. The initial Plan Period under this amended and restated plan shall begin January 1, 2000. Except as otherwise provided herein, the terms of the Plan in effect prior to the effective date of this Plan shall continue to be applicable to deferrals made pursuant to the Plan prior to January 1, 2000. SECTION 5 Elections 5.1 Cash Compensation (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all or any portion of Cash Compensation that otherwise would be paid to the Director for the Plan Period, be deferred in amounts as designated by the Director, and credited to (i) a Prime Rate Investment Account, (ii) a Phantom Stock Investment Account, or, effective with compensation payable on or after January 1, 2001, (iii) a Deferred Stock Account. Upon the Director's termination from the Board of Directors, such deferred compensation and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer Cash Compensation is irrevocable for a Plan Period. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer cash compensation payable in a future Plan Period prior to the beginning of such future Plan Period. (c) Cash Compensation deferred under this Section 5.1 shall be invested in Deferred Compensation Accounts as directed by the Director on the Compensation Payment Date. 5.2 Stock Retainer (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all of the Stock Retainer that otherwise would be paid to the Director for the Plan Period, be deferred by the Director, and credited to his Deferred Stock Account, such deferred compensation and accumulated investment return held in the Director's Deferred Stock Account shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer the Stock Retainer is irrevocable for a Plan Period. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer Stock Retainer paid in a future Plan Period prior to the beginning of such future Plan Period. (c) Stock Retainer deferred under this Section 5.2 shall be invested in Deferred Stock Account as directed by the Director on the Compensation Payment Date. 5.3 Deferred Pension Election Any Director, who had a Pension Benefit as of the Termination Date, made a single one-time election, to credit all of his Pension Benefit into (i) a Prime Rate Investment Account or (ii) a Phantom Stock Investment Account. Upon the Director's termination from the Board, such Pension Benefit and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election made in accordance with Section 5.4(b) and the provisions of Section 7. 5.4 Distribution Election (a) Except as set forth in Section 5.4(b), prior to the initial establishment of a Deferred Compensation Account for a Director, the Director must elect that upon termination from the Board of Directors the values and quantities held in the Directors Deferred Compensation Accounts be distributed to the Director, pursuant to the provisions of Section 7, in a lump sum or in a series of annual or quarterly installments not to exceed fifteen (15) years. The time for the commencement of distribution shall not be later than the first day of the month coinciding with or next following the second anniversary of termination of Board membership. (b) Any Director who made a Deferred Pension Election in accordance with Section 5.3 made a Distribution Election at the time the Deferred Pension Election was made, attributable to the Pension Benefit and any accumulated investment return. (c) Distribution Elections made under Sections 5.4 (a) and (b) are irrevocable except that a Director may amend either or both Distribution Elections then in effect not prior to the 390th day or later than the 360th day prior to his termination of Board membership. 5.5 Beneficiary Designation A Director or former Director may designate a beneficiary to receive distributions from the Plan in accordance with the provisions of Section 7 upon the death of the director. The beneficiary designation may be changed by a Director or former Director at any time, and without the consent of the prior beneficiary. 5.6 Form of Election All elections pursuant to the provisions of this Section 5 of the Plan shall be made in writing to the Secretary or Assistant Secretary of the Company on a form or forms available upon request of the Secretary or Assistant Secretary. SECTION 6 Accounts 6.1 Prime Rate Investment Account A Prime Rate Investment Account shall be established for each Director electing deferral or investment of Cash Compensation at the Prime Interest Rate. The amount directed by the Director to such account shall be credited to it as of the Pension Benefit Investment Date or Compensation Payment Date, as applicable, and credited thereafter with interest computed using the Prime Interest Rate. Interest shall be computed from the date such compensation is credited to the account and compounded quarterly at the end of each calendar quarter. The Prime Interest Rate in effect on the first day of a calendar quarter shall be deemed the Prime Interest Rate in effect for that entire quarter. Interest shall accrue and compound on any balance until the amount credited to the account is fully distributed. 6.2 Phantom Stock Investment Account The Phantom Stock Investment Account established for each Director electing deferral of Cash Compensation for investment at the Common Stock investment rate shall be credited with the number of shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock which could have been purchased on the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, as determined by dividing the applicable compensation by the Market Value on such date. On the date of the payment of dividends on the Common Stock, the Director's Phantom Stock Investment Account shall be credited with additional shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock, as follows: (a) In the case of cash dividends, such additional shares as would have been purchased as of the Common Stock dividend record date as if the credited shares had been outstanding on such date and dividends reinvested thereon under the Southern Investment Plan; (b) In the case of dividends payable in property other than cash or Common Stock, such additional shares as could be purchased at the Market Value as of the date of payment with the fair market value of the property which would have been payable if the credited shares had been outstanding; and (c) In the case of dividends payable in Common Stock, such additional shares as would have been payable on the credited shares as if they had been outstanding. 6.3 Deferred Stock Account (a) A Director's Deferred Stock Account will be credited: (i) with the number of shares of Common Stock (rounded to the next highest number of full shares) determined by dividing the amount of Cash Compensation subject to deferral or investment in the Deferred Stock Account by the Market Value on the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, (ii) as of the date on which Stock Retainer is paid, the shares of Common Stock payable to the Director as his Stock Retainer; and (iii) as of each date on which dividends are paid on the Common Stock, with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by multiplying the number of shares of Common Stock credited in the Director's Deferred Stock Account on the dividend record date, by the dividend rate per share of Common Stock, and dividing the product by the price per share of Common Stock attributable to the reinvestment of dividends on the shares of Common Stock held in the Deferred Stock Trust on the applicable dividend payment date or, if the Trustee of the Deferred Stock Trust has not reinvested in shares of Common Stock on the applicable dividend reinvestment date, the product shall be divided by the Market Value on the dividend payment date. (b) If Southern enters into transactions involving stock splits, stock dividends, reverse splits or any other recapitalization transactions, the number of shares of Common Stock credited to a Director's Deferred Stock Account will be adjusted (rounded to the nearest ten thousandth of a share) so that the Director's Deferred Stock Account reflects the same equity percentage interest in Southern after the recapitalization as was the case before such transaction. (c) If at least a majority of Southern's stock is sold or exchanged by its shareholders pursuant to an integrated plan for cash or property (including stock of another corporation) or if substantially all of the assets of Southern are disposed of and, as a consequence thereof, cash or property is distributed to Southern's shareholders, each Director's Deferred Stock Account will, to the extent not already so credited under this Section 6.3, be (i) credited with the amount of cash or property receivable by a Southern shareholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account and (ii) debited by that number of shares of Common Stock surrendered by such equivalent Southern shareholder. (d) Each Director who has a Deferred Stock Account also shall be entitled to provide directions to the Trust Administrator to cause such committee to similarly direct the Trustee of the Deferred Stock Trust to vote, on any matter presented for a vote to the shareholders of Southern, that number of shares of Common Stock held by the Deferred Stock Trust equivalent to the number of shares of Common Stock credited to the Director's Deferred Stock Account. Such committee shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the Southern shareholders as to which their votes are solicited. SECTION 7 Distributions 7.1 Upon termination of a Director's membership on the Board, the amount credited to a Director's Deferred Compensation Accounts will be paid to the Director or his beneficiary, as applicable. The amount credited to a Director's Prime Rate Investment Account and Phantom Stock Investment Account shall be paid in cash and the amount credited to his Deferred Stock Account shall, except as otherwise provided in Section 6.3(c), Section 9.5, or to the extent the Company is otherwise, in the reasonable judgment of the Committee, precluded from doing so, be paid in shares of Common Stock (with any fractional share interest therein paid in cash to the extent of the then Market Value thereof). Such payments shall be from the general assets of the Company (including the Deferred Cash Trust and the Deferred Stock Trust) in accordance with this Section 7. 7.2 Unless other arrangements are specified by the Committee on a uniform and nondiscriminatory basis, deferred amounts shall be paid in the form of (i) a lump sum payment, or (ii) in approximately equal annual or quarterly installments, as elected by the Director pursuant to the provisions of Section 5.4; provided, however, that payments shall be made only in a single lump sum if payment commences due to termination for cause. Such payments shall be made (or shall commence) as soon as practicable following the termination of Board membership or, if so elected in the Distribution Election, up to twenty-four (24) months following such termination. In the event a Director elected to receive the balance of his Deferred Compensation Accounts in a lump sum, distribution shall be made on the first day of the month selected by the Director on his Distribution Election, or as soon as reasonably possible thereafter. If the Director elected to receive annual installments, the first payment shall be made on the first day of the month selected by a Director, or as soon as reasonably possible thereafter, and shall be equal to the balance in the Director's Deferred Compensation Accounts on such date divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance in the Director's Deferred Compensation Accounts on the date of payment divided by the number of remaining annual payments and shall be paid on the anniversary of the preceding date of payment. Notwithstanding a Director's election to receive his Deferred Compensation Account balance in installments, the Compensation Committee, upon request of the Director and in its sole discretion, may accelerate the payment of any such installments for cause, such as financial hardship or financial emergency. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. Upon the death of a Director, or a former Director prior to the payment of all amounts credited to the Director's Deferred Compensation Accounts, the unpaid balance shall be paid in the sole discretion of the Committee (i) in a lump sum to the designated beneficiary of such Director or former Director within thirty (30) days of the date of death (or as soon as reasonably possible thereafter) or (ii) in accordance with the Distribution Election made by such Director or former Director. In the event a beneficiary designation has not been made, or the designated beneficiary is deceased or cannot be located, payment shall be made to the estate of the Director or former Director. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. SECTION 8 Change in Control and Other Special Provisions 8.1 Notwithstanding any other terms of the Plan to the contrary, following a Southern Change in Control or a Company Change in Control, the provisions of this Section 8 shall apply to the payment of benefits under the Plan with respect to any Director who is a Participant on such date. 8.2 The Deferred Cash Trust and the Deferred Stock Trust (collectively "Trusts") have been established to hold assets of the Participating Companies under certain circumstances as a reserve for the discharge of the Company's obligations under the Plan. In the event of a Preliminary Change in Control of Southern or the Company, the Company shall be obligated to immediately contribute such amounts to the Trusts as may be necessary to fully fund all benefits payable under the Plan in accordance with the procedures set forth in Section 8.3 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(c) of the Trust, the Company may fund the Trusts prior to a Preliminary Change in Control of Southern or the Company in accordance with the terms of the Trusts. All assets held in the Trusts remain subject only to the claims of the Participating Companies' general creditors whose claims against the Participating Companies are not satisfied because of the Participating Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trusts before the assets are paid to the Participant and all rights created under the Trusts, as under the Plan, are unsecured contractual claims of the Participant against the Company. 8.3 As soon as practicable following either a Preliminary Change in Control of Southern or of the Company, the Company shall contribute an amount based upon the funding strategy adopted by the Trust Administrator necessary to fulfill the Company's obligations pursuant to this Section 8. In the event of a dispute over such actuary's determination, the Company and any complaining Participant(s) shall refer such dispute to an independent, third party actuarial consultant, chosen by the Company and such Participant. If the Company and the Participant cannot agree on an independent, third party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the Company and the applicable Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Company shall be responsible for all of the fees and expenses of the independent actuarial consultant. 8.4 In the event of a Southern Change in Control or a Company Change in Control, notwithstanding anything to the contrary in the Plan, upon termination as a Director, that amount in the Deferred Compensation Plan Account(s) of a Participant who was a Director determined as of such Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Trust Administrator, in its sole and absolute discretion. If no such election is made, the Director shall receive payment of his Accounts solely in accordance with Section 7. SECTION 9 General Provisions 9.1 In the event that the Company shall decide to establish an advance accrual reserve on its books against the future expense of payments from any Deferred Compensation Accounts, such reserve shall not under any circumstances be deemed to be an asset of this Plan but, at all times, shall remain a part of the general assets of the Company, subject to claims of the Company's creditors. 9.2 A person entitled to any amount under this Plan shall be a general unsecured creditor of the Company with respect to such amount. Furthermore, a person entitled to a payment or distribution with respect to a Deferred Compensation Account shall have a claim upon the Company only to the extent of the balance in his Deferred Compensation Accounts. 9.3 All commissions, fees, and expenses that may be incurred in operating the Plan will be paid by the Company. 9.4 The Company will pay its prorated share of all commissions, fees, and expenses that may be incurred in operating any trust(s) established under the Plan (including the Deferred Stock Trust and the Deferred Cash Trust). 9.5 Notwithstanding any other provision of this Plan: (i) elections under this Plan may only be made by Directors while they are directors of the Company; (with the exception of the designation of beneficiaries) and (ii) distributions otherwise payable to a Director in the form of Common Stock shall be delayed and/or instead paid in cash in an amount equal to the fair market value thereof if such payment in Common Stock would violate any federal or State securities laws (including Section 16(b) of the Securities Exchange Act of 1934, as amended) and/or rules and regulations promulgated thereunder. 9.6 Directors, their legal representatives and their beneficiaries shall have no right to anticipate, alienate, sell, assign, transfer, pledge or encumber their interests in the Plan, nor shall such interests be subject to attachment, garnishment, levy or execution by or on behalf of creditors of the Directors or of their beneficiaries. SECTION 10 Administration Subject to the express provisions of the Plan, the Committee shall have the exclusive right to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for the administration of the Plan. The decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan. The Committee may delegate to such officers, employees, or departments of the Company or Southern, such authority, duties, and responsibilities of the Committee as it, in its sole discretion, considers necessary or appropriate for the proper and efficient operation of the Plan, including, without limitation, (i) interpretation of the Plan, (ii) approval and payment of claims, and (iii) establishment of procedures for administration of the Plan. SECTION 11 Amendment, Termination and Effective Date 11.1 Amendment of the Plan Except for the provisions of Section 8, which may not be amended following a Southern Change in Control or Company Change in Control, and subject to the provisions of Section 11.3, the Plan may be wholly or partially amended or otherwise modified at any time by written action of the Board of Directors. 11.2 Termination of the Plan Subject to the provisions of Section 11.3 herein, the Plan may be terminated at any time by written action of the Board of Directors. 11.3 No Impairment of Benefits Notwithstanding the provisions of Sections 11.1 and 11.2, herein no amendment to or termination of the Plan shall impair any rights to benefits that have accrued hereunder. 11.4 Governing Law This Plan shall be construed in accordance with and governed by the laws of the State of Alabama. IN WITNESS WHEREOF, the Plan, as amended and restated effective January 1, 2000, has been executed pursuant to resolutions of the Board of Directors of Alabama Power Company, this 21st day of January, 2000. ALABAMA POWER COMPANY By: ________________________________ Attest: By: ___________________________ EX-10 52 x10c71.txt DEFERRED COMPENSATION PLAN FOR DIRECTORS OF GEORGIA POWER COMPANY Amended and Restated Effective February 21, 2001 SECTION 1 Definitions 1.1 "Beneficial Ownership" means beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. 1.2 "Board" or "Board of Directors" means the Board of Directors of the Company. 1.3 "Business Combination" means a reorganization, merger or consolidation or sale of Southern, or a sale of all or substantially all of Southern's assets. 1.4 "Cash Compensation" means the annual retainer fees and meeting fees payable to a Director in cash. 1.5 "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. 1.6 "Committee" means the Compensation and Executive Committees of the Board, or such other committee as may be designated by the Board to be responsible for administering the Plan. 1.7 "Common Stock" means the common stock of Southern, including any shares into which it may be split, subdivided, or combined. 1.8 "Company" means the Georgia Power Company, or any successor thereto. 1.9 "Company Change in Control" means the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Section 1.9, any acquisition by an Employee, or Group composed entirely of Employees, any qualified pension plan, any publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation Controlled by Southern shall not constitute a Change in Control; (b) Consummation of a reorganization, merger or consolidation of the Company (a "Company Business Combination"), in each case, unless, following such Company Business Combination, Southern Controls the corporation surviving or resulting from such Company Business Combination; or (c) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to an entity which Southern does not Control. 1.10 "Compensation Payment Date" means the date on which compensation, including cash retainer, meeting fees, and the Stock Retainer, is payable to a Director or compensation would otherwise be payable to a Director if an election to defer such compensation had not been made. 1.11 "Consummation" means the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or agencies. 1.12 "Control" means, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. 1.13 "Deferred Cash Trust" means the Deferred Cash Compensation Trust for Directors of The Southern Company and its Subsidiaries. 1.14 "Deferred Compensation Account" means the Prime Rate Investment Account, the Phantom Stock Investment Account, the Deferred Stock Account, and/or the Subsidiary Company Investment Account. 1.15 "Deferred Pension Election" means the election by a Director under Section 5.3 in connection with the deferral of receipt of the Director's Pension Benefit until termination from the Board. 1.16 "Deferred Stock Account" means the bookkeeping account established under Section 6.3 on behalf of a Director and includes shares of Common Stock credited thereto to reflect the reinvestment of dividends pursuant to Section 6.3(a)(iii). 1.17 "Deferred Stock Trust" means the Deferred Stock Trust for Directors of The Southern Company and its Subsidiaries. 1.18 "Director" means a member of the Board. 1.19 "Distribution Election" means the designation by a Director of the manner of distribution of the amounts and quantities held in the Director's Deferred Compensation Accounts upon the director's termination from the Board pursuant to Section 5.4. 1.20 "Effective Date" means February 19, 2001. 1.21 "Employee" means an employee of Southern or any of its subsidiaries that are "employing companies" as defined in the Southern Company Deferred Compensation Plan as amended and restated January 1, 2000, and as may be amended from time to time. 1.22 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.23 "Group" has the meaning set forth in Section 14(d) of the Exchange Act. 1.24 "Incumbent Board" means those individuals who constitute the Southern board of directors as of October 19, 1998, plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern board of directors subsequent to October 19, 1998, whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern board of directors shall be a member of the Incumbent Board. 1.25 "Market Value" means the average of the high and low prices of the Common Stock, as published in the Wall Street Journal in its report of New York Stock Exchange composite transactions, on the date such Market Value is to be determined, as specified herein (or the average of the high and low sale prices on the trading day immediately preceding such date if the Common Stock is not traded on the New York Stock Exchange on such date). 1.26 "Participant" means a Director or former Director who has an unpaid Deferred Compensation Account balance under the Plan. 1.27 "Participating Companies" means those companies whose boards of directors have authorized the establishment of trust(s) for the funding of their respective directors' Deferred Compensation Accounts under their respective Deferred Compensation Plans for Directors, including the Company. 1.28 "Pension Benefit" means the U.S. dollar amount of the actuarially-determined present value of benefits based on a Director's expected service at the required retirement date under The Southern Company Outside Directors Pension Plan, as calculated as of the Termination Date, plus accrued earnings on such amount calculated as if invested at the Wachovia Bank of Georgia Prime Interest Rate from the Termination Date, until such amount is invested in Deferred Compensation Accounts pursuant to the provisions of Section 5.3. 1.29 "Pension Benefit Investment Date" means the date to be determined by the Committee, as of which the Director's Pension Benefit will be credited to a Deferred Compensation Account in accordance with the director's Deferred Pension Election under Section 5.3. 1.30 "Phantom Stock Investment Account" means the bookkeeping account established pursuant to Section 6.2 in which a Director may elect to defer Cash Compensation or make investments, and includes amounts credited thereto to reflect the reinvestment of dividends. 1.31 "Plan" means the Deferred Compensation Plan for Directors of Georgia Power Company as from time to time in effect. 1.32 "Plan Period" means the period designated in Section 4. 1.33 "Person" means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. 1.34 "Preliminary Change in Control" means the occurrence of any of the following as determined by the Southern Committee: (a) Southern or the Company has entered into a written agreement, such as, but not limited to, a letter of intent, which, if Consummated, would result in a Southern Change in Control or a Company Change in Control, as the case may be; (b) Southern, the Company or any Person publicly announces an intention to take or to consider taking actions which, if Consummated, would result in a Southern Change in Control or a Company Change in Control under circumstances where the Consummation of the announced action or intended action is legally and financially possible; (c) Any Person becomes the Beneficial Owner of fifteen percent (15%) or more of the Common Stock; or (d) The Southern board of directors or the board of directors of the Company has declared that a Preliminary Change in Control has occurred. 1.35 "Prime Interest Rate" means the prime rate of interest as listed with the Wachovia Bank of Georgia, or its successor on the 1st day of each quarter. 1.36 "Prime Rate Investment Account" means the bookkeeping account established pursuant to Section 6.1 in which a Director may elect to defer Cash Compensation or make investments, the investment return on which is computed at the Prime Interest Rate. 1.37 "Southern" means The Southern Company. 1.38 "Southern Change in Control" means any of the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this subsection (a), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (i) any acquisition directly from Southern, (ii) any acquisition by Southern, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation controlled by Southern, (iv) any acquisition by a qualified pension plan or publicly held mutual fund, (v) any acquisition by an Employee or Group composed exclusively of Employees, or (vi) any Business Combination which would not otherwise constitute a Change in Control because of the application of clauses (i), (ii) and (iii) of Section 1.37(c); (b) A change in the composition of Southern's board of directors whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of Southern's board of directors; or (c) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met: (i) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (ii) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of employees or employee benefit plan (or related trust) of Southern, its subsidiaries, or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern board of directors, providing for such Business Combination. 1.39 "Southern Committee" means Chairman of the Southern board of directors, Chief Financial Officer of Southern, General Counsel of Southern, and the Chairman of the "Administrative Committee", as defined in Section 3.1 of the Southern Company Deferred Compensation Plan, as restated and amended effective January 1, 2000, and as may be amended from time to time. 1.40 "Stock Retainer" means the annual Board retainer fee that is paid to the Director in the form of Common Stock. 1.41 "Subsidiary Company Investment Account" means the bookkeeping account(s) established pursuant to section 6.4 on behalf of a Director that is credited with shares of stock, other than Common Stock, distributed to holders of record of Common Stock on account of a spin-off of a Southern Company subsidiary. 1.42 "Termination Date" means January 1, 1997, the date as of which The Southern Company Outside Directors Pension Plan was effectively terminated. 1.43 "Transferred Amount" means an amount equal to the value of a Director's accounts under the applicable deferred compensation plan for directors of The Southern Company or one of its subsidiaries or affiliates, which has been transferred to the Plan in connection with the Director's transfer from the board of directors of The Southern Company or one of its subsidiaries or affiliates to the Board. 1.44 "Transferred Amount Investment Date" means the date as of which a Director's Transferred Amount will be credited to a Deferred Compensation Account in accordance with Section 5.4. 1.45 "Trust Administrator" means the individual or committee that is established in the Deferred Stock Trust and the Deferred Cash Trust, to administer such trusts on behalf of the Participating Companies. 1.46 "Voting Securities" means the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. Where the context requires, words in the masculine gender shall include the feminine gender, words in the singular shall include the plural, and words in the plural shall include the singular. SECTION 2 Purpose The Plan provides a method of deferring payment to a Director of his compensation until a date following the termination of his membership on the Board. SECTION 3 Eligibility An individual who serves as a Director and is not otherwise actively employed by the Company or any of its subsidiaries or affiliates is eligible to participate in the Plan. SECTION 4 Plan Periods Except as pertains to a Director's initial Plan Period, all Plan Periods shall be on a calendar year basis. The initial Plan Period applicable to any person elected to the Board who was not a Director on the preceding December 31, shall begin on the first day of such Director's membership on the Board. Except as otherwise provided herein, the terms of the Plan in effect prior to the Effective Date of this Plan shall continue to be applicable to deferrals made pursuant to the Plan prior to February 21, 2001. SECTION 5 Elections 5.1 Cash Compensation (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all or any portion of Cash Compensation that otherwise would be paid to the Director for the Plan Period, be deferred in amounts as designated by the Director, and credited to (i) a Prime Rate Investment Account, (ii) a Phantom Stock Investment Account, or, effective with compensation payable on or after January 1, 2001, (iii) a Deferred Stock Account. Upon the Director's termination from the Board of Directors, such deferred compensation and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer Cash Compensation is irrevocable. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer cash compensation payable in a future Plan Period prior to the beginning of such future Plan Period. The new deferral election should not affect amounts previously deferred. (c) Cash Compensation deferred under this Section 5.1 shall be invested in Deferred Compensation Accounts as directed by the Director on the Compensation Payment Date. 5.2 Stock Retainer (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all or none of the Stock Retainer that otherwise would be paid to the Director for the Plan Period, be deferred by the Directors, and credited to his Deferred Stock Account, such deferred compensation and accumulated investment return held in the Director's Deferred Stock Account shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer the Stock Retainer is irrevocable. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer Stock Retainer paid in a future Plan Period prior to the beginning of such future Plan Period. The new deferral election should not affect amounts previously deferred. (c) Stock Retainer deferred under this Section 5.2 shall be invested in Deferred Stock Account as directed by the Director on the Compensation Payment Date. 5.3 Deferred Pension Election Any Director, who had a Pension Benefit as of the Termination Date, made a single one-time election, to credit all of his Pension Benefit into (i) a Prime Rate Investment Account or (ii) a Phantom Stock Investment Account. Upon the Director's termination from the Board, such Pension Benefit and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election made in accordance with Section 5.4(b) and the provisions of Section 7. 5.4 Distribution Election (a) Except as set forth in Section 5.4(b) and (c), prior to the initial establishment of a Deferred Compensation Account for a Director, the Director must elect, in writing, that upon termination from the Board of Directors the values and quantities held in the Directors Deferred Compensation Accounts be distributed to the Director, pursuant to the provisions of Section 7, in a lump sum or in a series of annual installments not to exceed ten (10). The time for the commencement of distribution shall not be later than the first day of the month coinciding with or next following the second anniversary of termination of Board membership. (b) Any Director who made a Deferred Pension Election in accordance with Section 5.3 made a Distribution Election at the time the Deferred Pension Election was made, attributable to the Pension Benefit and any accumulated investment return. (c) In the event a Director terminates from the Board with Deferred Compensation Accounts established under Section 6.5, the Transferred Amounts and accumulated investment return held in such Accounts shall be distributed to the Director in accordance with the Director's distribution election in effect under the applicable deferred compensation plan for directors of The Southern Company or one of its subsidiaries or affiliates on the date the Director is transferred to the Board and the provisions of Section 7, unless such election is changed pursuant to Section 5.4(d). (d) Distribution Elections made under Sections 5.4 (a), (b) and (c) are irrevocable except that a Director may amend any of the Distribution Elections then in effect not prior to the 390th day or later than the 360th day prior to his termination of Board membership with approval of the Compensation committee on a form prescribed by the Compensation committee and delivered to the Secretary or Assistant Secretary. 5.5 Beneficiary Designation A Director or former Director may designate a beneficiary to receive distributions from the Plan in accordance with the provisions of Section 7 upon the death of the director. The beneficiary designation may be changed by a Director or former Director at any time, and without the consent of the prior beneficiary. 5.6 Form of Election All elections pursuant to the provisions of this Section 5 of the Plan shall be made in writing to the Secretary or Assistant Secretary of the Company on a form or forms available upon request of the Secretary or Assistant Secretary. SECTION 6 Accounts 6.1 Prime Rate Investment Account A Prime Rate Investment Account shall be established for each Director electing deferral of Cash Compensation for investment at the Prime Interest Rate. The amount directed by the Director to such account shall be credited to it as of the Pension Benefit Investment Date, Compensation Payment Date, or Transferred Amount Investment Date, as applicable, and credited thereafter with interest computed using the Prime Interest Rate. Interest shall be computed from the date such compensation is credited to the account and compounded quarterly at the end of each calendar quarter. The Prime Interest Rate in effect on the first day of a calendar quarter shall be deemed the Prime Interest Rate in effect for that entire quarter. Interest shall accrue and compound on any balance until the amount credited to the account is fully distributed. 6.2 Phantom Stock Investment Account The Phantom Stock Investment Account established for each Director electing deferral of Cash Compensation for investment at the Common Stock investment rate shall be credited with the number of shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock which could have been purchased on the Pension Benefit Investment Date, the Compensation Payment Date, or Transferred Amount Investment Date, as applicable, as determined by dividing the applicable compensation by the Market Value on such date. On the date of the payment of dividends on the Common Stock, the Director's Phantom Stock Investment Account shall be credited with additional shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock, as follows: (a) In the case of cash dividends, such additional shares as would have been purchased as of the Common Stock dividend record date as if the credited shares had been outstanding on such date and dividends reinvested thereon under the Southern Investment Plan; (b) In the case of dividends payable in property other than cash or Common Stock, such additional shares as could be purchased at the Market Value as of the date of payment with the fair market value of the property which would have been payable if the credited shares had been outstanding; and (c) In the case of dividends payable in Common Stock, such additional shares as would have been payable on the credited shares as if they had been outstanding. 6.3 Deferred Stock Account (a) A Director's Deferred Stock Account will be credited: (i) with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by dividing the amount of Cash Compensation subject to deferral or investment in the Deferred Stock Account by the average price paid by the Trustee of the Deferred Stock Trust for shares of Common Stock with respect to the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, as reported by the Trustee, or, if the Trustee shall not at such time purchase any shares of Common Stock, by the Market Value on such date; (ii) as of the date on which Stock Retainer is paid, the shares of Common Stock payable to the Director as his Stock Retainer; and (iii) as of each date on which dividends are paid on the Common Stock, with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by multiplying the number of shares of Common Stock credited in the Director's Deferred Stock Account on the dividend record date, by the dividend rate per share of Common Stock, and dividing the product by the price per share of Common Stock attributable to the reinvestment of dividends on the shares of Common Stock held in the Deferred Stock Trust on the applicable dividend payment date or, if the Trustee of the Deferred Stock Trust has not reinvested in shares of Common Stock on the applicable dividend reinvestment date, the product shall be divided by the Market Value on the dividend payment date. (b) If Southern enters into transactions involving stock splits, stock dividends, reverse splits or any other recapitalization transactions, the number of shares of Common Stock credited to a Director's Deferred Stock Account will be adjusted (rounded to the nearest ten thousandth of a share) so that the Director's Deferred Stock Account reflects the same equity percentage interest in Southern after the recapitalization as was the case before such transaction. (c) If at least a majority of Southern's stock is sold or exchanged by its shareholders pursuant to an integrated plan for cash or property (including stock of another corporation) or if substantially all of the assets of Southern are disposed of and, as a consequence thereof, cash or property is distributed to Southern's shareholders, each Director's Deferred Stock Account will, to the extent not already so credited under this Section 6.3, be (i) credited with the amount of cash or property receivable by a Southern shareholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account and (ii) debited by that number of shares of Common Stock surrendered by such equivalent Southern shareholder. (d) Each Director who has a Deferred Stock Account also shall be entitled to provide directions to the Trust Administrator to cause such committee to similarly direct the Trustee of the Deferred Stock Trust to vote, on any matter presented for a vote to the shareholders of Southern, that number of shares of Common Stock held by the Deferred Stock Trust equivalent to the number of shares of Common Stock credited to the Director's Deferred Stock Account. Such committee shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the Southern shareholders as to which their votes are solicited. 6.4 Subsidiary Company Investment Account (a) A Director's Subsidiary Company Investment Account will be credited as of the date on which a distribution is paid to the Company's common stockholders in stock other than Common Stock with the number of shares of the other corporation's stock receivable by a Southern stockholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account. (b) Each Director who has a Subsidiary Company Investment Account also shall be entitled to provide directions to the Trust Administrator to similarly direct the Trustee of the Deferred Stock Trust to vote on any matter presented for a vote to the applicable corporation's shareholders, that number of shares of the applicable corporation's common stock held by the Deferred Stock Trust equivalent to the number of shares credited to the Director's Subsidiary Company Investment Account. The Trust Administrator shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the applicable corporation's shareholders as to which their votes are solicited. 6.5 Transferred Amounts (a) As soon as administratively practicable, the Company shall establish for a Director transferring to the Board from the board of directors of The Southern Company or any of its subsidiaries or affiliates such Deferred Compensation Accounts as are necessary to implement Section 6.5(b). (b) Any Transferred Amounts will be credited to the Deferred Compensation Account(s) established that are comparable to the deferred compensation accounts to which such amounts were credited under the applicable deferred compensation plan for directors of The Southern Company or one of its subsidiaries or affiliates, as soon as administratively practicable following the date the Transferred Amounts are transferred to the Plan. Thereafter, the Transferred Amounts shall be credited with investment returns as applicable under this Section 6 of the Plan. SECTION 7 Distributions 7.1 Upon the termination of a Director's membership on the Board the amount credited to a Director's Deferred Compensation Accounts will be paid to the Director or his beneficiary, as applicable, in the following manner: (a) the amount credited to a Director's Prime Rate Investment Account and Phantom Stock Investment Account shall be paid in cash; (b) the amount credited to a Director's Deferred Stock Account shall, except as otherwise provided in Section 6.3 and Section 9.5, or to the extent the Company is otherwise, in the reasonable judgment of the Committee, precluded from doing so, be paid in shares of Common Stock (with any fractional share interest therein paid in cash to the extent of the then Market Value thereof); and (c) the amount credited to a Subsidiary Company Investment Account shall, except as otherwise provided in section 9.5, be paid from the assets in the Deferred Stock Trust in shares of the applicable corporation, however if there is not a sufficient number of shares held in the Trust, the remainder shall be paid in cash based upon the average of the high and low price of the stock as reported in the Wall Street Journal on the business day immediately proceeding the distribution date. Such payments shall be from the general assets of the Company (including the Deferred Cash Trust and the Deferred Stock Trust) in accordance with this Section 7. Notwithstanding the foregoing, in the event the Company enters into an agreement described in Section 7.3 with respect to a Director prior to the Director's termination of membership, the Company shall have no obligation to make distributions to the Director under this Section 7.1 in connection with such Director's termination of membership on the Board. 7.2 Unless other arrangements are specified by the Committee on a uniform and nondiscriminatory basis, deferred amounts shall be paid in the form of (i) a lump sum payment, or (ii) in approximately equal annual installments, as elected by the Director pursuant to the provisions of Section 5.4. Such payments shall be made (or shall commence) as soon as practicable following the termination of Board membership or, if so elected in the Distribution Election, up to twenty-four (24) months following such termination. In the event a Director elected to receive the balance of his Deferred Compensation Accounts in a lump sum, distribution shall be made on the first day of the month selected by the Director on his Distribution Election, or as soon as reasonably possible thereafter. If the Director elected to receive annual installments, the first payment shall be made on the first day of the month selected by a Director, or as soon as reasonably possible thereafter, and shall be equal to the balance in the Director's Deferred Compensation Accounts on such date divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance in the Director's Deferred Compensation Accounts on the date of payment divided by the number of remaining annual payments and shall be paid on the anniversary of the preceding date of payment. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. Upon the death of a Director, or a former Director prior to the payment of all amounts credited to the Director's Deferred Compensation Accounts, the unpaid balance shall be paid in the sole discretion of the Committee (i) in a lump sum to the designated beneficiary of such Director or former Director within thirty (30) days of the date of death (or as soon as reasonably possible thereafter) or (ii) in accordance with the Distribution Election made by such Director or former Director. In the event a beneficiary designation has not been made, or the designated beneficiary is deceased or cannot be located, payment shall be made to the estate of the Director or former Director. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. 7.3 If the Company enters into a written agreement with a parent or affiliate of the Company under which the parent or affiliate assumes liability for a Director's benefits accrued under the Plan in connection with, but prior to, such Director's termination of membership on the Board and the Director either has been or will be elected to the Board of Directors of such parent or affiliate of the Company, the value of the Director's benefits which have accrued under the Plan as of the date the Director terminates from the Board shall be transferred from the Company to the parent or affiliate of the Company, and the Company shall have no further obligation to make any distributions to the Director under Section 7.1 or any other section herein. SECTION 8 Change in Control and Other Special Provisions 8.1 Notwithstanding any other terms of the Plan to the contrary, following a Southern Change in Control or a Company Change in Control, the provisions of this Section 8 shall apply to the payment of benefits under the Plan with respect to any Director who is a Participant on such date. 8.2 The Deferred Cash Trust and the Deferred Stock Trust (collectively "Trusts") have been established to hold assets of the Participating Companies under certain circumstances as a reserve for the discharge of the Company's obligations under the Plan. In the event of a Preliminary Change in Control of Southern or the Company, the Company shall be obligated to immediately contribute such amounts to the Trusts as may be necessary to fully fund all benefits payable under the Plan in accordance with the procedures set forth in Section 8.3 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(c) of the Trust, the Company may fund the Trusts prior to a Preliminary Change in Control of Southern or the Company in accordance with the terms of the Trusts. All assets held in the Trusts remain subject only to the claims of the Participating Companies' general creditors whose claims against the Participating Companies are not satisfied because of the Participating Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trusts before the assets are paid to the Participant and all rights created under the Trusts, as under the Plan, are unsecured contractual claims of the Participant against the Company. 8.3 As soon as practicable following either a Preliminary Change in Control of Southern or of the Company, the Company shall contribute an amount based upon the funding strategy adopted by the Trust Administrator necessary to fulfill the Company's obligations pursuant to this Section 8. In the event of a dispute over such actuary's determination, the Company and any complaining Participant(s) shall refer such dispute to an independent, third party actuarial consultant, chosen by the Company and such Participant. If the Company and the Participant cannot agree on an independent, third party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the Company and the applicable Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Company shall be responsible for all of the fees and expenses of the independent actuarial consultant. 8.4 In the event of a Southern Change in Control or a Company Change in Control, notwithstanding anything to the contrary in the Plan, upon termination as a Director, that amount in the Deferred Compensation Plan Account(s) of a Participant who was a Director determined as of such Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Trust Administrator, in its sole and absolute discretion. If no such election is made, the Director shall receive payment of his Accounts solely in accordance with Section 7. SECTION 9 General Provisions 9.1 In the event that the Company shall decide to establish an advance accrual reserve on its books against the future expense of payments from any Deferred Compensation Accounts, such reserve shall not under any circumstances be deemed to be an asset of this Plan but, at all times, shall remain a part of the general assets of the Company, subject to claims of the Company's creditors. 9.2 A person entitled to any amount under this Plan shall be a general unsecured creditor of the Company with respect to such amount. Furthermore, a person entitled to a payment or distribution with respect to a Deferred Compensation Account shall have a claim upon the Company only to the extent of the balance in his Deferred Compensation Accounts. 9.3 All commissions, fees, and expenses that may be incurred in operating the Plan will be paid by the Company. 9.4 The Company will pay its prorated share of all commissions, fees, and expenses that may be incurred in operating any trust(s) established under the Plan (including the Deferred Stock Trust and the Deferred Cash Trust). 9.5 Notwithstanding any other provision of this Plan: (i) elections under this Plan may only be made by Directors while they are directors of the Company; (with the exception of the designation of beneficiaries) and (ii) distributions otherwise payable to a Director in the form of Common Stock shall be delayed and/or instead paid in cash in an amount equal to the fair market value thereof if such payment in Common Stock would violate any federal or State securities laws (including Section 16(b) of the Securities Exchange Act of 1934, as amended) and/or rules and regulations promulgated thereunder. 9.6 Directors, their legal representatives and their beneficiaries shall have no right to anticipate, alienate, sell, assign, transfer, pledge or encumber their interests in the Plan, nor shall such interests be subject to attachment, garnishment, levy or execution by or on behalf of creditors of the Directors or of their beneficiaries. SECTION 10 Administration Subject to the express provisions of the Plan, the Committee shall have the exclusive right to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for the administration of the Plan. The decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan. The Committee may delegate to such officers, employees, or departments of the Company or Southern, such authority, duties, and responsibilities of the Committee as it, in its sole discretion, considers necessary or appropriate for the proper and efficient operation of the Plan, including, without limitation, (i) interpretation of the Plan, (ii) approval and payment of claims, and (iii) establishment of procedures for administration of the Plan. SECTION 11 Amendment, Termination and Effective Date 11.1 Amendment of the Plan Except for the provisions of Section 8, which may not be amended following a Southern Change in Control or Company Change in Control, and subject to the provisions of Section 11.3, the Plan may be wholly or partially amended or otherwise modified at any time by written action of the Board of Directors. 11.2 Termination of the Plan Subject to the provisions of Section 11.3 herein, the Plan may be terminated at any time by written action of the Board of Directors. 11.3 No Impairment of Benefits Notwithstanding the provisions of Sections 11.1 and 11.2, herein no amendment to or termination of the Plan shall impair any rights to benefits that have accrued hereunder. 11.4 Governing Law This Plan shall be construed in accordance with and governed by the laws of the State of Georgia. IN WITNESS WHEREOF, the Plan, as amended and restated effective February 21, 2001, has been executed pursuant to resolutions of the Board of Directors of Georgia Power Company, this ____ day of _______________, 2001. GEORGIA POWER COMPANY By: ________________________________ Attest: By: ___________________________ EX-10 53 x10d33.txt DEFERRED COMPENSATION PLAN FOR DIRECTORS OF GULF POWER COMPANY Amended and Restated Effective January 1, 2000 SECTION 1 Definitions 1.1 "Beneficial Ownership" means beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. 1.2 "Board" or "Board of Directors" means the Board of Directors of the Company. 1.3 "Business Combination" means a reorganization, merger or consolidation or sale of Southern, or a sale of all or substantially all of Southern's assets. 1.4 "Cash Compensation" means the annual retainer fees and meeting fees payable to a Director in cash. 1.5 "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. 1.6 "Committee" means the Compensation Committee of the Board, or such other committee as may be designated by the Board to be responsible for administering the Plan. 1.7 "Common Stock" means the common stock of Southern, including any shares into which it may be split, subdivided, or combined. 1.8 "Company" means Gulf PowerCompany, or any successor thereto. 1.9 "Company Change in Control" means the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Section 1.9, any acquisition by an Employee, or Group composed entirely of Employees, any qualified pension plan, any publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation Controlled by Southern shall not constitute a Change in Control; (b) Consummation of a reorganization, merger or consolidation of the Company (a "Company Business Combination"), in each case, unless, following such Company Business Combination, Southern Controls the corporation surviving or resulting from such Company Business Combination; or (c) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to an entity which Southern does not Control. 1.10 "Compensation Payment Date" means the date on which compensation, including cash retainer, meeting fees, and the Stock Retainer, is payable to a Director or compensation would otherwise be payable to a Director if an election to defer such compensation had not been made. 1.11 "Consummation" means the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or agencies. 1.12 "Control" means, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. 1.13 "Deferred Cash Trust" means the Deferred Cash Compensation Trust for Directors of The Southern Company and its Subsidiaries. 1.14 "Deferred Compensation Account" means the Prime Rate Investment Account, the Phantom Stock Investment Account, and/or the Deferred Stock Account. 1.15 "Deferred Pension Election" means the election by a Director under Section 5.3 in connection with the deferral of receipt of the Director's Pension Benefit until termination from the Board. 1.16 "Deferred Stock Account" means the bookkeeping account established under Section 6.3 on behalf of a Director and includes shares of Common Stock credited thereto to reflect the reinvestment of dividends pursuant to Section 6.3(a)(iii). 1.17 "Deferred Stock Trust" means the Deferred Stock Trust for Directors of The Southern Company and its Subsidiaries. 1.18 "Director" means a member of the Board. 1.19 "Distribution Election" means the designation by a Director of the manner of distribution of the amounts and quantities held in the Director's Deferred Compensation Accounts upon the director's termination from the Board pursuant to Section 5.4. 1.20 "Effective Date" means January 1, 2000. 1.21 "Employee" means an employee of Southern or any of its subsidiaries that are "employing companies" as defined in the Southern Company Deferred Compensation Plan as amended and restated January 1, 2000, and as may be amended from time to time. 1.22 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.23 "Group" has the meaning set forth in Section 14(d) of the Exchange Act. 1.24 "Incumbent Board" means those individuals who constitute the Southern board of directors as of October 19, 1998, plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern board of directors subsequent to October 19, 1998, whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern board of directors shall be a member of the Incumbent Board. 1.25 "Market Value" means the average of the high and low prices of the Common Stock, as published in the Wall Street Journal in its report of New York Stock Exchange composite transactions, on the date such Market Value is to be determined, as specified herein (or the average of the high and low sale prices on the trading day immediately preceding such date if the Common Stock is not traded on the New York Stock Exchange on such date). 1.26 "Participant" means a Director or former Director who has an unpaid Deferred Compensation Account balance under the Plan. 1.27 "Participating Companies" means those companies whose boards of directors have authorized the establishment of trust(s) for the funding of their respective directors' Deferred Compensation Accounts under their respective Deferred Compensation Plans for Directors, including the Company. 1.28 "Pension Benefit" means the U.S. dollar amount of the actuarially-determined present value of benefits based on a Director's expected service at the required retirement date under The Southern Company Outside Directors Pension Plan, as calculated as of the Termination Date, plus accrued earnings on such amount calculated as if invested at the Prime Interest Rate from the Termination Date, until such amount is invested in Deferred Compensation Accounts pursuant to the provisions of Section 5.3. 1.29 "Pension Benefit Investment Date" means the date to be determined by the Committee, as of which the Director's Pension Benefit will be credited to a Deferred Compensation Account in accordance with the director's Deferred Pension Election under Section 5.3. 1.30 "Phantom Stock Investment Account" means the bookkeeping account established pursuant to Section 6.2 in which a Director may elect to defer Cash Compensation or make investments, and includes amounts credited thereto to reflect the reinvestment of dividends. 1.31 "Plan" means the Deferred Compensation Plan for Directors of Gulf Power Company as from time to time in effect. 1.32 "Plan Period" means the period designated in Section 4. 1.33 "Person" means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. 1.34 "Preliminary Change in Control" means the occurrence of any of the following as determined by the Southern Committee: (a) Southern or the Company has entered into a written agreement, such as, but not limited to, a letter of intent, which, if Consummated, would result in a Southern Change in Control or a Company Change in Control, as the case may be; (b) Southern, the Company or any Person publicly announces an intention to take or to consider taking actions which, if Consummated, would result in a Southern Change in Control or a Company Change in Control under circumstances where the Consummation of the announced action or intended action is legally and financially possible; (c) Any Person becomes the Beneficial Owner of fifteen percent (15%) or more of the Common Stock; or (d) The Southern board of directors or the board of directors of the Company has declared that a Preliminary Change in Control has occurred. 1.35 "Prime Interest Rate" means the prime rate of interest as published in the Wall Street Journal. 1.36 "Prime Rate Investment Account" means the bookkeeping account established pursuant to Section 6.1 in which a Director may elect to defer Cash Compensation or make investments, the investment return on which is computed at the Prime Interest Rate. 1.37 "Southern" means The Southern Company. 1.38 "Southern Change in Control" means any of the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this subsection (a), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (i) any acquisition directly from Southern, (ii) any acquisition by Southern, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation controlled by Southern, (iv) any acquisition by a qualified pension plan or publicly held mutual fund, (v) any acquisition by an Employee or Group composed exclusively of Employees, or (vi) any Business Combination which would not otherwise constitute a Change in Control because of the application of clauses (i), (ii) and (iii) of Section 1.37(c); (b) A change in the composition of Southern's board of directors whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of Southern's board of directors; or (c) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met: (i) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (ii) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of employees or employee benefit plan (or related trust) of Southern, its subsidiaries, or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern board of directors, providing for such Business Combination. 1.39 "Southern Committee" means Chairman of the Southern board of directors, Chief Financial Officer of Southern, General Counsel of Southern, and the Chairman of the "Administrative Committee", as defined in Section 3.1 of the Southern Company Deferred Compensation Plan, as restated and amended effective January 1, 2000. 1.40 "Stock Retainer" means the annual Board retainer fee that is paid to the Director in the form of Common Stock. 1.41 "Termination Date" means January 1, 1997, the date as of which The Southern Company Outside Directors Pension Plan was effectively terminated. 1.42 "Trust Administrator" means the individual or committee that is established in the Deferred Stock Trust and the Deferred Cash Trust, to administer such trusts on behalf of the Participating Companies. 1.43 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. Where the context requires, words in the masculine gender shall include the feminine gender, words in the singular shall include the plural, and words in the plural shall include the singular. SECTION 2 Purpose The Plan provides a method of deferring payment to a Director of his compensation until a date following the termination of his membership on the Board. SECTION 3 Eligibility An individual who serves as a Director and is not otherwise actively employed by the Company or any of its subsidiaries or affiliates is eligible to participate in the Plan. SECTION 4 Plan Periods Except as pertains to a Director's initial Plan Period, all Plan Periods shall be on a calendar year basis. The initial Plan Period applicable to any person elected to the Board who was not a Director on the preceding December 31, shall begin on the first day of such Director's membership on the Board. The initial Plan Period under this amended and restated plan shall begin January 1, 2000. Except as otherwise provided herein, the terms of the Plan in effect prior to the effective date of this Plan shall continue to be applicable to deferrals made pursuant to the Plan prior to January 1, 2000. SECTION 5 Elections 5.1 Cash Compensation (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all or any portion of Cash Compensation that otherwise would be paid to the Director for the Plan Period, be deferred in amounts as designated by the Director, and credited to (i) a Prime Rate Investment Account, (ii) a Phantom Stock Investment Account, or, effective with compensation payable on or after January 1, 2001, (iii) a Deferred Stock Account. Upon the Director's termination from the Board of Directors, such deferred compensation and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer Cash Compensation is irrevocable. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer cash compensation payable in a future Plan Period prior to the beginning of such future Plan Period. (c) Cash Compensation deferred under this Section 5.1 shall be invested in Deferred Compensation Accounts as directed by the Director on the Compensation Payment Date. 5.2 Stock Retainer (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all of the Stock Retainer that otherwise would be paid to the Director for the Plan Period, be deferred by the Directors, and credited to his Deferred Stock Account, such deferred compensation and accumulated investment return held in the Director's Deferred Stock Account shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer the Stock Retainer is irrevocable. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer Stock Retainer paid in a future Plan Period prior to the beginning of such future Plan Period. (c) Stock Retainer deferred under this Section 5.2 shall be invested in Deferred Stock Account as directed by the Director on the Compensation Payment Date. 5.3 Deferred Pension Election Any Director, who had a Pension Benefit as of the Termination Date, made a single one-time election, to credit all of his Pension Benefit into (i) a Prime Rate Investment Account or (ii) a Phantom Stock Investment Account. Upon the Director's termination from the Board, such Pension Benefit and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election made in accordance with Section 5.4(b) and the provisions of Section 7. 5.4 Distribution Election (a) Except as set forth in Section 5.4(b), prior to the initial establishment of a Deferred Compensation Account for a Director, the Director must elect that upon termination from the Board of Directors the values and quantities held in the Directors Deferred Compensation Accounts be distributed to the Director, pursuant to the provisions of Section 7, in a lump sum or in a series of annual installments not to exceed ten (10). The time for the commencement of distribution shall not be later than the first day of the month coinciding with or next following the second anniversary of termination of Board membership. (b) Any Director who made a Deferred Pension Election in accordance with Section 5.3 made a Distribution Election at the time the Deferred Pension Election was made, attributable to the Pension Benefit and any accumalated investment return. (c) Distribution Elections made under Sections 5.4 (a) and (b) are irrevocable except that a Director may amend either or both Distribution Elections then in effect not prior to the 390th day or later than the 360th day prior to his termination of Board membership. 5.5 Beneficiary Designation A Director or former Director may designate a beneficiary to receive distributions from the Plan in accordance with the provisions of Section 7 upon the death of the director. The beneficiary designation may be changed by a Director or former Director at any time, and without the consent of the prior beneficiary. 5.6 Form of Election All elections pursuant to the provisions of this Section 5 of the Plan shall be made in writing to the Secretary or Assistant Secretary of the Company on a form or forms available upon request of the Secretary or Assistant Secretary. SECTION 6 Accounts 6.1 Prime Rate Investment Account A Prime Rate Investment Account shall be established for each Director electing deferral or investment of Cash Compensation at the Prime Interest Rate. The amount directed by the Director to such account shall be credited to it as of the Pension Benefit Investment Date or Compensation Payment Date, as applicable, and credited thereafter with interest computed using the Prime Interest Rate. Interest shall be computed from the date such compensation is credited to the account and compounded quarterly at the end of each calendar quarter. The Prime Interest Rate in effect on the first day of a calendar quarter shall be deemed the Prime Interest Rate in effect for that entire quarter. Interest shall accrue and compound on any balance until the amount credited to the account is fully distributed. 6.2 Phantom Stock Investment Account The Phantom Stock Investment Account established for each Director electing deferral of Cash Compensation for investment at the Common Stock investment rate shall be credited with the number of shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock which could have been purchased on the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, as determined by dividing the applicable compensation by the Market Value on such date. On the date of the payment of dividends on the Common Stock, the Director's Phantom Stock Investment Account shall be credited with additional shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock, as follows: (a) In the case of cash dividends, such additional shares as would have been purchased as of the Common Stock dividend record date as if the credited shares had been outstanding on such date and dividends reinvested thereon under the Southern Investment Plan; (b) In the case of dividends payable in property other than cash or Common Stock, such additional shares as could be purchased at the Market Value as of the date of payment with the fair market value of the property which would have been payable if the credited shares had been outstanding; and (c) In the case of dividends payable in Common Stock, such additional shares as would have been payable on the credited shares as if they had been outstanding. 6.3 Deferred Stock Account (a) A Director's Deferred Stock Account will be credited: (i) with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by dividing the amount of Cash Compensation subject to deferral or investment in the Deferred Stock Account by the average price paid by the Trustee of the Deferred Stock Trust for shares of Common Stock with respect to the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, as reported by the Trustee, or, if the Trustee shall not at such time purchase any shares of Common Stock, by the Market Value on such date; (ii) as of the date on which Stock Retainer is paid, the shares of Common Stock payable to the Director as his Stock Retainer; and (iii) as of each date on which dividends are paid on the Common Stock, with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by multiplying the number of shares of Common Stock credited in the Director's Deferred Stock Account on the dividend record date, by the dividend rate per share of Common Stock, and dividing the product by the price per share of Common Stock attributable to the reinvestment of dividends on the shares of Common Stock held in the Deferred Stock Trust on the applicable dividend payment date or, if the Trustee of the Deferred Stock Trust has not reinvested in shares of Common Stock on the applicable dividend reinvestment date, the product shall be divided by the Market Value on the dividend payment date. (b) If Southern enters into transactions involving stock splits, stock dividends, reverse splits or any other recapitalization transactions, the number of shares of Common Stock credited to a Director's Deferred Stock Account will be adjusted (rounded to the nearest ten thousandth of a share) so that the Director's Deferred Stock Account reflects the same equity percentage interest in Southern after the recapitalization as was the case before such transaction. (c) If at least a majority of Southern's stock is sold or exchanged by its shareholders pursuant to an integrated plan for cash or property (including stock of another corporation) or if substantially all of the assets of Southern are disposed of and, as a consequence thereof, cash or property is distributed to Southern's shareholders, each Director's Deferred Stock Account will, to the extent not already so credited under this Section 6.3, be (i) credited with the amount of cash or property receivable by a Southern shareholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account and (ii) debited by that number of shares of Common Stock surrendered by such equivalent Southern shareholder. (d) Each Director who has a Deferred Stock Account also shall be entitled to provide directions to the Trust Administrator to cause such committee to similarly direct the Trustee of the Deferred Stock Trust to vote, on any matter presented for a vote to the shareholders of Southern, that number of shares of Common Stock held by the Deferred Stock Trust equivalent to the number of shares of Common Stock credited to the Director's Deferred Stock Account. Such committee shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the Southern shareholders as to which their votes are solicited. SECTION 7 Distributions 7.1 Upon termination of a Director's membership on the Board, the amount credited to a Director's Deferred Compensation Accounts will be paid to the Director or his beneficiary, as applicable. The amount credited to a Director's Prime Rate Investment Account and Phantom Stock Investment Account shall be paid in cash and the amount credited to his Deferred Stock Account shall, except as otherwise provided in Section 6.3(c), Section 9.5, or to the extent the Company is otherwise, in the reasonable judgment of the Committee, precluded from doing so, be paid in shares of Common Stock (with any fractional share interest therein paid in cash to the extent of the then Market Value thereof). Such payments shall be from the general assets of the Company (including the Deferred Cash Trust and the Deferred Stock Trust) in accordance with this Section 7. 7.2 Unless other arrangements are specified by the Committee on a uniform and nondiscriminatory basis, deferred amounts shall be paid in the form of (i) a lump sum payment, or (ii) in approximately equal annual installments, as elected by the Director pursuant to the provisions of Section 5.4. Such payments shall be made (or shall commence) as soon as practicable following the termination of Board membership or, if so elected in the Distribution Election, up to twenty-four (24) months following such termination. In the event a Director elected to receive the balance of his Deferred Compensation Accounts in a lump sum, distribution shall be made on the first day of the month selected by the Director on his Distribution Election, or as soon as reasonably possible thereafter. If the Director elected to receive annual installments, the first payment shall be made on the first day of the month selected by a Director, or as soon as reasonably possible thereafter, and shall be equal to the balance in the Director's Deferred Compensation Accounts on such date divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance in the Director's Deferred Compensation Accounts on the date of payment divided by the number of remaining annual payments and shall be paid on the anniversary of the preceding date of payment. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. Notwithstanding a Director's election to receive his Deferred Compensation Account Balance in installments, the Committee, in its sole discretion upon request of the Director or his legal representative, may accelerate the payment of any such installments for cause. Upon the death of a Director, or a former Director prior to the payment of all amounts credited to the Director's Deferred Compensation Accounts, the unpaid balance shall be paid in the sole discretion of the Committee (i) in a lump sum to the designated beneficiary of such Director or former Director within thirty (30) days of the date of death (or as soon as reasonably possible thereafter) or (ii) in accordance with the Distribution Election made by such Director or former Director. In the event a beneficiary designation has not been made, or the designated beneficiary is deceased or cannot be located, payment shall be made to the estate of the Director or former Director. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. SECTION 8 Change in Control and Other Special Provisions 8.1 Notwithstanding any other terms of the Plan to the contrary, following a Southern Change in Control or a Company Change in Control, the provisions of this Section 8 shall apply to the payment of benefits under the Plan with respect to any Director who is a Participant on such date. 8.2 The Deferred Cash Trust and the Deferred Stock Trust (collectively "Trusts") have been established to hold assets of the Participating Companies under certain circumstances as a reserve for the discharge of the Company's obligations under the Plan. In the event of a Preliminary Change in Control of Southern or the Company, the Company shall be obligated to immediately contribute such amounts to the Trusts as may be necessary to fully fund all benefits payable under the Plan in accordance with the procedures set forth in Section 8.3 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(c) of the Trust, the Company may fund the Trusts prior to a Preliminary Change in Control of Southern or the Company in accordance with the terms of the Trusts. All assets held in the Trusts remain subject only to the claims of the Participating Companies' general creditors whose claims against the Participating Companies are not satisfied because of the Participating Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trusts before the assets are paid to the Participant and all rights created under the Trusts, as under the Plan, are unsecured contractual claims of the Participant against the Company. 8.3 As soon as practicable following either a Preliminary Change in Control of Southern or of the Company, the Company shall contribute an amount based upon the funding strategy adopted by the Trust Administrator necessary to fulfill the Company's obligations pursuant to this Section 8. In the event of a dispute over such actuary's determination, the Company and any complaining Participant(s) shall refer such dispute to an independent, third party actuarial consultant, chosen by the Company and such Participant. If the Company and the Participant cannot agree on an independent, third party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the Company and the applicable Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Company shall be responsible for all of the fees and expenses of the independent actuarial consultant. 8.4 In the event of a Southern Change in Control or a Company Change in Control, notwithstanding anything to the contrary in the Plan, upon termination as a Director, that amount in the Deferred Compensation Plan Account(s) of a Participant who was a Director determined as of such Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Trust Administrator, in its sole and absolute discretion. If no such election is made, the Director shall receive payment of his Accounts solely in accordance with Section 7. SECTION 9 General Provisions 9.1 In the event that the Company shall decide to establish an advance accrual reserve on its books against the future expense of payments from any Deferred Compensation Accounts, such reserve shall not under any circumstances be deemed to be an asset of this Plan but, at all times, shall remain a part of the general assets of the Company, subject to claims of the Company's creditors. 9.2 A person entitled to any amount under this Plan shall be a general unsecured creditor of the Company with respect to such amount. Furthermore, a person entitled to a payment or distribution with respect to a Deferred Compensation Account shall have a claim upon the Company only to the extent of the balance in his Deferred Compensation Accounts. 9.3 All commissions, fees, and expenses that may be incurred in operating the Plan will be paid by the Company. 9.4 The Company will pay its prorated share of all commissions, fees, and expenses that may be incurred in operating any trust(s) established under the Plan (including the Deferred Stock Trust and the Deferred Cash Trust). 9.5 Notwithstanding any other provision of this Plan: (i) elections under this Plan may only be made by Directors while they are directors of the Company; (with the exception of the designation of beneficiaries) and (ii) distributions otherwise payable to a Director in the form of Common Stock shall be delayed and/or instead paid in cash in an amount equal to the fair market value thereof if such payment in Common Stock would violate any federal or State securities laws (including Section 16(b) of the Securities Exchange Act of 1934, as amended) and/or rules and regulations promulgated thereunder. 9.6 Directors, their legal representatives and their beneficiaries shall have no right to anticipate, alienate, sell, assign, transfer, pledge or encumber their interests in the Plan, nor shall such interests be subject to attachment, garnishment, levy or execution by or on behalf of creditors of the Directors or of their beneficiaries. SECTION 10 Administration Subject to the express provisions of the Plan, the Committee shall have the exclusive right to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for the administration of the Plan. The decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan. The Committee may delegate to such officers, employees, or departments of the Company or Southern, such authority, duties, and responsibilities of the Committee as it, in its sole discretion, considers necessary or appropriate for the proper and efficient operation of the Plan, including, without limitation, (i) interpretation of the Plan, (ii) approval and payment of claims, and (iii) establishment of procedures for administration of the Plan. SECTION 11 Amendment, Termination and Effective Date 11.1 Amendment of the Plan Except for the provisions of Section 8, which may not be amended following a Southern Change in Control or Company Change in Control, and subject to the provisions of Section 11.3, the Plan may be wholly or partially amended or otherwise modified at any time by written action of the Board of Directors. 11.2 Termination of the Plan Subject to the provisions of Section 11.3 herein, the Plan may be terminated at any time by written action of the Board of Directors. 11.3 No Impairment of Benefits Notwithstanding the provisions of Sections 11.1 and 11.2, herein no amendment to or termination of the Plan shall impair any rights to benefits that have accrued hereunder. 11.4 Governing Law This Plan shall be construed in accordance with and governed by the laws of the State of Maine. IN WITNESS WHEREOF, the Plan, as amended and restated effective January 1, 2000, has been executed pursuant to resolutions of the Board of Directors of Gulf Power Company, this 16th day of October, 2000. GULF POWER COMPANY By: ________________________________ Travis J. Bowden President and Chief Executive Officer Attest: By: ___________________________ Linda G. Malone Assistant Secretary FIRST AMENDMENT TO THE AMENDED AND RESTATED DEFERRED COMPENSATION PLAN FOR DIRECTORS OF GULF POWER COMPANY WHEREAS, Gulf Power Company ("Company") established the Amended and Restated Deferred Compensation Plan for Directors of Gulf Power Company ("Plan") to provide a method for a Director to defer payment of his Director's compensation until a date following the termination of his membership on the Board; and WHEREAS, pursuant to the authority granted to it under Section 11.1 of the Plan, the Company desires to amend the Plan to provide for an additional bookkeeping account that is credited with shares of stock, other than Common Stock, that is paid as a dividend on shares of Common Stock. NOW THEREFORE, effective January 1, 2001, the Plan is hereby amended in the following particulars: By amending Section 1.12 to read in its entirety: 1.12 "Deferred Compensation Account" means the Prime Rate Investment Account, the Phantom Stock Investment Account, the Deferred Stock Account and/or the Stock Dividend Investment Account. By renumbering Sections 1.40 through 1.43 to Sections 1.41 through 1.44. By adding new Section 1.40 to read in its entirety: 1.40 "Stock Dividend Investment Account" means the bookkeeping account(s) established pursuant to section 6.4 on behalf of a Director that is credited with shares of stock, other than Common Stock, paid as a dividend on shares of Common Stock. By adding new Section 6.4 to read in its entirety: 6.4 Stock Dividend Investment Account (a) A Director's Stock Dividend Investment Account will be credited as of the date on which a dividend is paid to the Company's common stockholders in stock other than Common Stock with the number of shares of the other corporation's stock receivable by a Southern stockholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account. (b) Each Director who has a Stock Dividend Investment Account also shall be entitled to provide directions to the Trust Administrator to similarly direct the Trustee of the Deferred Stock Trust to vote on any matter presented for a vote to the applicable corporation's shareholders, that number of shares of the applicable corporation's common stock held by the Deferred Stock Trust equivalent to the number of shares credited to the Director's Stock Dividend Investment Account. The Trust Administrator shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the applicable corporation's shareholders as to which their votes are solicited. By adding new Section 7.1(c) to read in its entirety: (c) the amount credited to a Stock Dividend Investment Account shall, except as otherwise provided in section 9.5, be paid from the assets in the Deferred Stock Trust in shares of the applicable corporation, however if there is not a sufficient number of shares held in the Trust, the remainder shall be paid in cash based upon the average of the high and low price of the stock as reported in the Wall Street Journal on the business day immediately proceeding the distribution date. IN WITNESS WHEREOF, the First Amendment has been executed by a duly authorized officer of Gulf Power Company pursuant to resolutions of the Board of Directors of the Company, this 27th day of October, 2000. GULF POWER COMPANY By: ------------------------------- Travis J. Bowden Its: President and CEO ------------------------------ ATTEST: By: -------------------------------------------------- W. E. Tate Its: Secretary ------------------------------------------------- EX-10 54 x10e30.txt FIRST AMENDMENT TO THE AMENDED AND RESTATED DEFERRED COMPENSATION PLAN FOR DIRECTORS OF MISSISSIPPI POWER COMPANY WHEREAS, Mississippi Power Company ("Company") established the Amended and Restated Deferred Compensation Plan for Directors of Mississippi Power Company ("Plan") to provide a method for a Director to defer payment of his Director's compensation until a date following the termination of his membership on the Board; and WHEREAS, pursuant to the authority granted to it under Section 11.1 of the Plan, the Company desires to amend the Plan to provide for an additional bookkeeping account that is credited with shares of stock, other than Common Stock, that is paid as a dividend on shares of Common Stock. NOW THEREFORE, effective January 1, 2001, the Plan is hereby amended in the following particulars: By amending Section 1.12 to read in its entirety: 1.12 "Deferred Compensation Account" means the Prime Rate Investment Account, the Phantom Stock Investment Account, the Deferred Stock Account and/or the Stock Dividend Investment Account. By renumbering Sections 1.40 through 1.43 to Sections 1.41 through 1.44. By adding new Section 1.40 to read in its entirety: 1.40 "Stock Dividend Investment Account" means the bookkeeping account(s) established pursuant to section 6.4 on behalf of a Director that is credited with shares of stock, other than Common Stock, paid as a dividend on shares of Common Stock. By adding new Section 6.4 to read in its entirety: 6.4 Stock Dividend Investment Account (a) A Director's Stock Dividend Investment Account will be credited as of the date on which a dividend is paid to the Company's common stockholders in stock other than Common Stock with the number of shares of the other corporation's stock receivable by a Southern stockholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account. (b) Each Director who has a Stock Dividend Investment Account also shall be entitled to provide directions to the Trust Administrator to similarly direct the Trustee of the Deferred Stock Trust to vote on any matter presented for a vote to the applicable corporation's shareholders, that number of shares of the applicable corporation's common stock held by the Deferred Stock Trust equivalent to the number of shares credited to the Director's Stock Dividend Investment Account. The Trust Administrator shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the applicable corporation's shareholders as to which their votes are solicited. By adding new Section 7.1(c) to read in its entirety: (c) the amount credited to a Stock Dividend Investment Account shall, except as otherwise provided in section 9.5, be paid from the assets in the Deferred Stock Trust in shares of the applicable corporation, however if there is not a sufficient number of shares held in the Trust, the remainder shall be paid in cash based upon the average of the high and low price of the stock as reported in the Wall Street Journal on the business day immediately proceeding the distribution date. IN WITNESS WHEREOF, the First Amendment has been executed by a duly authorized officer of Mississippi Power Company pursuant to resolutions of the Board of Directors of the Company, this 25th day of October, 2000. MISSISSIPPI POWER COMPANY By: ----------------------------------------------- Michael W. Southern Its: Vice President, Secretary, Treasurer and CFO ATTEST: By: -------------------------------------------------- Vicki L. Pierce Its: Assistant Secretary ------------------------------------------------- EX-10 55 x10f13.txt Exhibit 10(f)13 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF SAVANNAH ELECTRIC AND POWER COMPANY Amended and Restated Effective October 26, 2000 TABLE OF CONTENTS ARTICLE I ADOPTION AND PURPOSE......................................1 1.1 Adoption of Plan..........................................1 1.2 Purpose...................................................1 ARTICLE II DEFINITIONS...............................................1 2.1 Accrued SERP Retirement Benefit...........................1 2.2 Assumed Pension Plan Retirement Benefit.................... 1 2.3 Change in Control Benefit Plans Policy....................2 2.4 Committee.................................................2 2.5 Company...................................................2 2.6 Credited Service..........................................2 2.7 Designated Beneficiary....................................2 2.8 Disability Benefit........................................2 2.9 Disability Date...........................................2 2.10 Early Retirement Date.....................................2 2.11 Early Retirement Factor...................................2 2.12 Eligible Spouse...........................................3 2.13 FICA Adjustment...........................................3 2.14 Final Average Salary......................................3 2.15 Normal Retirement Date....................................3 2.16 Participant...............................................4 2.17 Plan......................................................4 2.18 Postponed Retirement Date.................................4 2.19 Salary....................................................4 2.20 SEPCO Schedule............................................4 2.21 SERP Death Benefit........................................4 2.22 SERP Disability Benefit...................................4 2.23 SERP Retirement Benefit...................................4 2.24 Severance Date............................................4 2.25 Social Security Amount....................................5 2.26 Southern Pension Plan.....................................5 2.27 Total Disability and Totally Disabled.....................5 2.28 Vested Percentage.........................................5 ARTICLE III ELIGIBILITY AND PARTICIPATION.............................5 3.1 Eligibility...............................................5 3.2 Participation.............................................5 ARTICLE IV RETIREMENT BENEFITS.......................................6 4.1 Normal Retirement.........................................6 4.2 Early Retirement..........................................6 4.3 Postponed Retirement......................................7 4.4 Commencement and Form of Payment..........................7 4.5 Re-employment of Retired Participant......................7 4.6 Transfers between Companies and Other Special Events....................................................7 4.7 Effect of Other Arrangement on Plan Benefits..............9 4.8 Effect of Certain Pre-Retirement Death Benefit Elections................................................10 ARTICLE V PRERETIREMENT DEATH BENEFITS.............................10 5.1 Death Benefit............................................10 5.2 Payment..................................................10 ARTICLE VI DISABILITY BENEFITS......................................11 6.1 Disability Prior to Retirement Date......................11 6.2 Benefit at Retirement Date...............................12 ARTICLE VII SEVERANCE BENEFITS.......................................12 7.1 Eligibility..............................................12 7.2 Participant Benefit......................................12 7.3 Spousal Benefit..........................................13 7.4 Resumption of Employment After Severance.................13 ARTICLE VIII CHANGE IN CONTROL........................................13 ARTICLE IX ADMINISTRATIVE COMMITTEE.................................14 9.1 Authority................................................14 9.2 Voting...................................................14 9.3 Records..................................................14 9.4 Liability................................................14 ARTICLE X AMENDMENT AND TERMINATION................................14 10.1 Amendment and Termination................................14 ARTICLE XI MISCELLANEOUS............................................14 11.1 Non-Alienation of Benefits...............................14 11.2 No Trust Created.........................................15 11.3 No Employment Agreement..................................15 11.4 Binding Effect...........................................15 11.5 Suicide..................................................15 11.6 Claims for Benefits......................................15 11.7 Recourse Against Deferred Compensation Trust.............16 11.8 Post-Retirement Adjustments..............................16 11.9 Entire Plan..............................................16 11.10 Merger or Consolidation..................................16 11.11 Age Differential of Spouse...............................16 ARTICLE XII CONSTRUCTION.............................................17 12.1 Governing Law............................................17 12.2 Gender...................................................17 12.3 Headings, etc............................................17 12.4 Children.................................................17 12.5 Action...................................................17 ARTICLE I ADOPTION AND PURPOSE 1.1 Adoption of Plan. The Company previously established the Supplemental Executive Retirement Plan of Savannah Electric and Power Company, effective as of January 1, 1984. The Plan was subsequently amended and restated by the Company, effective as of January 1, 1987, was again amended and restated, effective as of January 1, 1996 and was subsequently amended three more times. It was then amended and restated effective January 1, 1998. The Company hereby again amends and restates the Supplemental Executive Retirement Plan of Savannah Electric and Power Company, as hereinafter stated, to be effective as of October 26, 2000. 1.2 Purpose. This Plan is designed and implemented for the purpose of enhancing the earnings and growth of Savannah Electric and Power Company by providing to the limited group of management employees largely responsible for such earnings and long-term growth deferred compensation in the form of supplemental retirement income benefits, thereby increasing the incentive of such key management employees to make the Company more profitable. The benefits are normally payable to Participants upon retirement, disability or death. The terms of the benefits operate in conjunction with the Participant's benefits payable under The Southern Company Pension Plan and the Southern Company Services, Inc. Long Term Disability Plan, as adopted by Savannah Electric and Power Company, and are designed to supplement such benefits and provide the Participant with additional financial security upon retirement, disability or death. ARTICLE II DEFINITIONS Unless otherwise clearly required by the context, the terms used herein shall have the following meanings: 2.1 "Accrued SERP Retirement Benefit" shall mean the amount determined by multiplying the Participant's SERP Retirement Benefit times a fraction (not exceeding 1.0), the numerator of which is the number of years and months of Credited Service completed on the Participant's Early Retirement Date, Severance Date or any other date, whichever is applicable, and the denominator of which shall be the greater of (a) the number of years and months of Credited Service which the Participant would have completed upon attainment of age 62 if he had remained employed until such time or (b) 15 years of Credited Service. 2.2 "Assumed Pension Plan Retirement Benefit" shall mean the annual retirement benefit a Participant would receive under the Southern Pension Plan (determined after any reductions for early retirement but before adjustments attributable to elections of optional forms of benefit and/or pre-retirement survivor annuities), calculated with the following assumptions: (a) A married Participant elects to receive his retirement benefit on a life and seventy-five percent (75%) joint survivor basis. (b) A single Participant elects to receive his retirement benefit on a life and ten-year certain basis. The calculation of the above-referenced forms of payment shall be done utilizing the assumptions set forth in Section 1.15 of the SEPCO Schedule. 2.3 "Change in Control Benefit Plans Policy" shall mean the change in control benefit plans policy for Company only plans, as approved by the Board of Directors of the Company, as it may be amended from time to time in accordance with the provisions therein 2.4 "Committee" shall mean the Administrative Benefits Committee appointed by the Board of Directors of the Company to administer the Plan. 2.5 "Company" shall mean Savannah Electric and Power Company and any successor to Savannah Electric and Power Company by merger, purchase or otherwise. 2.6 "Credited Service" shall have the same meaning as set forth in the Southern Pension Plan. 2.7 "Designated Beneficiary" shall mean one or more beneficiaries, as designated by a Participant in writing delivered to the Committee, to whom certain pre-retirement death benefit payments shall be made pursuant to the provisions of Article V. In the event no such written designation is made by the Participant or if such beneficiary shall not be living or in existence at the time for commencement of payment, the Participant shall be deemed to have designated his estate as such beneficiary. 2.8 "Disability Benefit" shall mean a Totally Disabled Participant's actual annual disability benefit paid pursuant to the Southern Company Services, Inc. Long Term Disability Plan, as adopted by Savannah Electric and Power Company. 2.9 "Disability Date" shall be the day first following the expiration of the "Waiting Period" as that term is set forth in the Southern Company Services, Inc. Long Term Disability Plan, as adopted by Savannah Electric and Power Company. 2.10 "Early Retirement Date" shall have the same meaning as set forth in the Southern Pension Plan. 2.11 "Early Retirement Factor" shall be for a Participant who has attained age 55 and retires a fraction not exceeding 1.0, the numerator of which shall be the number of years and months of Credited Service which the Participant would have completed at the commencement of benefits from this Plan if he had remained employed until such time and the denominator of which shall be the Participant's number of years and months of Credited Service which he would have completed at attainment of age 62 if he had remained employed until such age. In addition to the foregoing, the Early Retirement Factor shall include for a Participant who elects to retire on or after attainment of age 50 but before attainment of age 55 (in accordance with the terms of the Southern Pension Plan) a reduction of one-third of one percent (0[OBJECT OMITTED]%) for each month, by which the Participant's age at the time payment commences precedes the Participant's attainment of age 55. 2.12 "Eligible Spouse" shall mean the spouse of a Participant who under the laws of the state where the marriage was contracted, is deemed married to that Participant on the date on which the payments from this Plan are to begin to the Participant, except that for purposes of Article V, Eligible Spouse shall mean a person who is married to a Participant for a period of at least twelve months prior to his death. 2.13 "FICA Adjustment" shall mean the benefit that is paid under the terms of this Plan except that the amount of the monthly benefit will be modified at the appropriate time based on the commencement of payments as follows. Payments shall be adjusted to include three components: (a) the amount necessary to pay the tax due under the Federal Insurance Contributions Act with respect to the benefit determined upon eligibility to commence payments (or such other appropriate "resolution date" as defined under Treasury Regulation ss. 31.3121(v)-2) calculated in accordance with the applicable provisions of this Plan; (b) the amount estimated to pay the federal and state income tax withholding liability due on the amount paid under Paragraph (a) above; and (c) an adjusted monthly benefit determined on an actuarially equivalent basis in accordance with the terms of the [Pension Plan] which takes into account the amounts paid under Paragraphs (a) and (b) above and taking into account the form of benefit elected by the Participant under this Plan. Upon adjustment, the remaining monthly payment shall equal the amount described in Paragraph (c) above. 2.14 "Final Average Salary" shall mean a Participant's average yearly Salary during the 36 months of highest compensation within the 120 month period immediately preceding the earliest to occur of the Participant's Severance Date, Disability Date, date of death, Early Retirement Date, Normal Retirement Date, or Postponed Retirement Date, whichever is applicable. For purposes of the preceding sentence, effective January 1, 1994, the determination of the 36 highest consecutive months with the 120 month period shall only include those months in which the Participant receives Salary. In the event the Participant does not have at least 36 months of regular employment with the Company, Final Average Salary shall mean the average yearly Salary for the Participant's total number of calendar months of employment; provided, however, that if a Participant dies during Total Disability, Final Average Salary shall be determined for the appropriate months immediately preceding the Participant's Disability Date. 2.15 "Normal Retirement Date" shall mean the first day of the calendar month following the birthday on which a Participant attains the age of 65. 2.16 "Participant" shall mean an employee or former employee of the Company who is eligible and is participating in the Plan in accordance with Article III of this Plan. 2.17 "Plan" shall mean the Supplemental Executive Retirement Plan of Savannah Electric and Power Company, as contained herein and as may be amended from time to time hereafter. 2.18 "Postponed Retirement Date" shall mean the first day of the calendar month on which a Participant actually retires after his Normal Retirement Date. 2.19 "Salary" shall mean the annual compensation, excluding any long term or short term incentive plan compensation, paid by the Company to a Participant plus compensation, other than short term or long term incentive amounts, deferred under any defined compensation plan or arrangement (including without limitation, the Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company). 2.20 "SEPCO Schedule" shall mean that same named schedule attached to the Southern Pension Plan, as may be amended from time to time. 2.21 "SERP Death Benefit" shall mean an amount equal to fifty-two and one-half percent (52 1/2%) of the Participant's Final Average Salary, reduced by both of the following: (a) the Participant's Southern Pension Plan pre-retirement death benefit, if any (determined without respect to adjustments attributable to elections under Sections 7.1(a) or 7.6(a) of the Southern Pension Plan); and (b) fifty percent (50%) of the Participant's Social Security Amount. 2.22 "SERP Disability Benefit" shall mean an amount equal to seventy percent (70%) of the Participant's Final Average Salary, reduced by both of the following: (a) the Participant's Disability Benefit, if any; and (b) the Participant's Social Security Amount. 2.23 "SERP Retirement Benefit" shall mean an amount equal to seventy percent (70%) of the Participant's Final Average Salary, reduced by both of the following: (a) the Participant's Assumed Pension Plan Retirement Benefit; and (b) fifty percent (50%) of the Participant's Social Security Amount. 2.24 "Severance Date" shall mean the date a Participant leaves the employ of the Company other than for retirement, Total Disability or death. 2.25 "Social Security Amount" shall have the same meaning as set forth in Section 1.29 of the SEPCO Schedule. 2.26 "Southern Pension Plan" shall mean The Southern Company Pension Plan, as amended and restated effective January 1, 1997, as may be amended from time to time. 2.27 "Total Disability and Totally Disabled" shall have the same meaning as set forth in the Southern Company Services, Inc. Long Term Disability Plan, as adopted by Savannah Electric and Power Company. 2.28 "Vested Percentage" shall mean a Participant's vested percentage in his benefits under the Plan as determined in accordance with the following schedule: Years of Credited Service at Severance Date Vested Percentage ------------------------- ----------------- 6 10% 7 20% 8 30% 9 40% 10 50% 11 60% 12 70% 13 80% 14 90% 15 or more 100% Notwithstanding anything to the contrary above, the Vested Percentage of a Participant who has attained age 60 shall be 100%. ARTICLE III ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. The Committee shall have the sole discretion to determine the employees or former employees that are eligible to become or remain Participants, as the case may be, in accordance with the purposes of the Plan. Notwithstanding the preceding sentence, on and after January 1, 1998, the Committee shall not authorize the participation of any employee in the Plan other than those employees who have Participant status on December 31, 1997. The Committee may, however, authorize, in its sole discretion, former employees to remain Participants. 3.2 Participation. The Committee shall notify those employees selected as Participants of their participation and resulting benefits. ARTICLE IV RETIREMENT BENEFITS 4.1 Normal Retirement. (a) Participant Benefit. Upon retirement at his Normal Retirement Date, a Participant shall become entitled to receive an amount equal to 1/12th of the Participant's SERP Retirement Benefit, payable monthly during the Participant's lifetime. (b) Spousal Benefit. Upon the death of a retired Participant who is either receiving or entitled to receive a Normal Retirement Benefit in accordance with Section 4.1(a), the surviving Eligible Spouse of such a Participant, if any, shall become entitled to receive an amount equal to 75% of the deceased Participant's Normal Retirement Benefit, payable monthly to the Eligible Spouse during her lifetime. 4.2 Early Retirement. (a) Participant Benefit. Upon retirement at his Early Retirement Date, a Participant shall become entitled to receive an amount equal to 1/12th of the Participant's Accrued SERP Retirement Benefit (as adjusted below, where applicable), payable monthly during the Participant's lifetime. For purposes of determining the Participant's Accrued SERP Retirement Benefit, 70% of Final Average Salary shall be reduced by the Early Retirement Factor when the Participant's retirement income under the Pension Plan commences prior to the Participant's attainment of age 62. (b) Spousal Benefit. Upon the death of a retired Participant who is either receiving or entitled to receive an Early Retirement Benefit in accordance with Section 4.2(a), the surviving Eligible Spouse of such Participant, if any, shall become entitled to receive the benefit described in Section 4.2(b)(1) or (b)(2) below, whichever is applicable: (1) If the Participant was receiving his Early Retirement Benefit at the time of his death, his surviving Eligible Spouse, if any, shall receive a monthly amount equal to 75% of the deceased Participant's actual Early Retirement Benefit, payable monthly to the Eligible Spouse during her lifetime. (2) If the Participant's death occurs prior to commencement of payment of his Early Retirement Benefit, his surviving Eligible Spouse, if any, shall receive a monthly amount equal to 75% of the deceased Participant's Early Retirement Benefit calculated as if payment of such Participant's Early Retirement Benefit had commenced at his date of death, payable monthly to the Eligible Spouse during her lifetime. 4.3 Postponed Retirement. (a) Participant Benefit. Upon retirement at a Postponed Retirement Date, a Participant shall become entitled to receive an amount equal to 1/12th of the Participant's SERP Retirement Benefit, payable monthly during the Participant's lifetime. (b) Spousal Benefit. Upon the death of a retired Participant who is either receiving or entitled to receive a Postponed Retirement Benefit in accordance with Section 4.3(a), the surviving Eligible Spouse of such a Participant, if any, shall become entitled to receive an amount equal to 75% of the deceased Participant's Postponed Retirement Benefit, payable monthly to the Eligible Spouse during her lifetime. 4.4 Commencement and Form of Payment. The payment of a Participant's benefits under this Article IV taking into account the FICA Adjustment shall commence at the same time as his retirement payments from the Southern Pension Plan. All benefits payable to an Eligible Spouse under this Article IV shall commence within 60 days of the Participant's death. The Participant may elect any form of payment available under the Southern Pension Plan except for the level income option coordinated with Social Security described in Section 5.5 of the Southern Pension Plan. The calculation of the above-referenced forms of payment shall be done utilizing the assumptions set forth in Section 1.15 of the SEPCO Schedule. 4.5 Re-employment of Retired Participant. A retired Participant who is receiving or eligible to receive retirement benefits under this Article IV who is re-employed by the Company shall not be eligible to resume participation in the Plan. 4.6 Transfers between Companies and Other Special Events. Except as provided below, following a transfer of employment or after incurring certain other enumerated events, the Participant shall not be entitled to or accrue any benefits under the Plan except as provided in this Section 4.6. (a) (1) In the event a Participant in the Plan incurs one or more of the following adverse events prior to commencement of payment of his benefits under the Plan but after the Participant is eligible to retire as of an Early Retirement Date, such Participant will be entitled to the benefit described in Section 4.6(a)(2): (A) The Participant is involuntarily transferred to another subsidiary or affiliate of The Southern Company ("Transferee Company") on account of the functionalization of his job or on account of a merger or consolidation of the Company (including if such merger or consolidation constitutes a Change in Control as defined in the Change in Control Benefit Plans Policy) and for reasons other than for cause is terminated by the Transferee Company, demoted to a lower grade level position or incurs a salary reduction or freeze, provided he otherwise remains eligible to participate in this Plan as a key management level employee as determined in Article III; and (B) For reasons other than for cause, the Participant is terminated, demoted to a lower grade level position or incurs a salary reduction or freeze by the Company on account of the functionalization of his job, merger or consolidation of the Company (including if such merger or consolidation constitutes a Change in Control as defined in the Change in Control Benefit Plans Policy) or an announced restructuring of management level job positions, provided he otherwise remains eligible to participate in this Plan as a key management level employee as determined in Article III. (2) The Participant shall be entitled to a benefit described in Section 4.1 as if he had attained his Normal Retirement Date commencing upon the later of age 55 or the first day of the month first following his termination of employment from the Transferee Company or Company, as applicable. In the event a Participant elects to commence his benefit prior to attainment of age 55, his benefit shall be calculated as provided in Section 4.1 as if he had attained his Normal Retirement Date but shall be reduced by one-twelfth (1/12) of five percent (5%) for each month the benefit commences prior to the date the Participant would attain age 55. (3) For purposes of calculating any benefit paid to a Participant pursuant to this Section 4.6(a), the Participant's Final Average Salary, Social Security Amount, Assumed Pension Plan Retirement Benefit and any other component of the benefit formula under this Plan shall be determined as of the Participant's date of termination from the Company or, if later, from the Transferee Company. (b) In the event a Participant in the Plan transfers to a Transferee Company prior to commencement of payment of his benefits under the Plan and subsequently retires from the Transferee Company or another subsidiary or affiliate of The Southern Company, the benefits to be paid to such Participant under the Plan shall be the amount determined by multiplying the amount determined in accordance with Section 4.6(b)(1) times the amount determined in accordance with Section 4.6(b)(2) below. (1) Seventy percent (70%) of such Participant's Final Average Salary reduced by both of the following: (A) fifty percent (50%) of such Participant's Social Security Amount. (B) such Participant's Assumed Pension Plan Retirement Benefit as of the effective date of such transfer of employment. (2) The Participant's number of years and months of Credited Service as of the effective date of such transfer plus one year of Credited Service for each year of subsequent employment at the other subsidiary or affiliate of The Southern Company, divided by the number of years and months of Credited Service which the Participant will have completed at age 62 if he remains employed until such age. For purposes of calculating any benefit paid a transferred Participant pursuant to this Section 4.6(b), the Participant's Final Average Salary, Social Security Amount, Assumed Pension Plan Retirement Benefit and any other such component of the benefit formula under this Plan, except for Credited Service as set forth in Section 4.6(b)(2) above, shall be determined as of the Participant's date of transfer. If the transferred Participant retires from another subsidiary or affiliate of The Southern Company or the Company on a date other than his Normal Retirement Date, dies, becomes disabled or otherwise ceases to be employed by another subsidiary or affiliate of The Southern Company or the Company, such Participant, or surviving spouse in the event of the death of the Participant, shall receive the benefit available under this Plan due upon the occurrence of such event as if the Participant continued to accrue service under this Section 4.6(b). Any such alternative benefit shall be subject to all applicable limitations, adjustments and reductions described in this Plan that apply in the event that a Participant retires on a date other than his Normal Retirement Date, dies, becomes disabled or otherwise terminates employment with the Company, including, but not limited to, those set forth in Sections 4.2, 4.3 and 4.6 hereof and Articles V, VI and VII hereof. 4.7 Effect of Other Arrangement on Plan Benefits. In the event a Participant in the Plan enters into a supplemental benefit arrangement with the Company or Transferee Company other than in accordance with this Plan, in the sole discretion of the Chief Executive Officer of the Company or any comparable successor thereto, the benefits to be paid to such Participant under this Plan may be reduced on an actuarially equivalent basis by the benefits payable to such Participant under the other supplemental benefit arrangement. The determination as to whether there exists another supplemental benefit arrangement shall be made by the Chief Executive Officer of the Company or any comparable successor thereto in its sole discretion. Notwithstanding the above, in no event shall a supplemental benefit arrangement include any arrangement related to a "Change in Control" (as defined in the Change in Control Benefit Plans Policy) which has been approved by the Board of Directors of the Company. 4.8 Effect of Certain Pre-Retirement Death Benefit Elections. In the event that a Participant elects a death benefit subject to a charge under Section 7.4(a) of the Southern Pension Plan or Section 7.03(d) of the SEPCO Schedule but does not die before commencing benefits under this Plan, such Participant's benefit under this Article IV shall be calculated as if the aforementioned election had not occurred. ARTICLE V PRERETIREMENT DEATH BENEFITS 5.1 Death Benefit. (a) Upon the death of a Participant while employed or while receiving disability retirement benefits pursuant to Article 6.1 hereof, prior to his retirement under Article IV, a pre-retirement death benefit shall be payable if the deceased Participant is survived by either an Eligible Spouse or children under age 21. The monthly death benefit described herein shall be an amount equal to 1/12th of the Participant's SERP Death Benefit. (b) In the event that a Participant elects a death benefit subject to a charge under Section 7.4(a) of the Southern Pension Plan or Section 7.03(d) of the SEPCO Schedule and dies before commencing benefits under this Plan, the Designated Beneficiary's benefit under this Plan shall be calculated as if the aforementioned election had not occurred. 5.2 Payment. (a) If the deceased Participant is survived by an Eligible Spouse, the pre-retirement death benefit shall be paid monthly taking into account the FICA Adjustment to such Eligible Spouse during her lifetime. Notwithstanding the foregoing, if, upon the death of such Eligible Spouse, there be then living any children of the Participant under age 21, the pre-retirement death benefit described in Section 5.1 shall be paid monthly to the Participant's Designated Beneficiary until the last such surviving child reaches age 21. (b) If the deceased Participant is not survived by an Eligible Spouse but is survived by children under age 21, the pre-retirement death benefit described in Section 5. 1 shall be paid monthly taking into account the FICA Adjustment to the Participant's Designated Beneficiary until the last such surviving child reaches age 21. ARTICLE VI DISABILITY BENEFITS 6.1 Disability Prior to Retirement Date. (a) Benefit. In the event of Total Disability prior to his Normal Retirement Date, the Participant shall become entitled to receive a disability retirement benefit commencing on his Disability Date. Such monthly disability retirement benefit shall be determined as of the date of the Participant's Disability Date and shall be equal to 1/12th of the Participant's SERP Disability Benefit. (b) Payment. Such disability benefits shall be payable monthly taking into account the FICA Adjustment to the Totally Disabled Participant until the earliest of the following dates: (1) he resumes working; (2) he refuses to submit to a medical examination or a related series of examinations by a physician or physicians acceptable to the Committee when such examination or related series of examinations is requested by the Committee (but not more often than semi-annually), to determine whether he is eligible for continuation of his disability retirement benefit. These examinations requested by the Committee shall be at the expense of the Company; (3) the Committee determines on the basis of a medical examination herein authorized, or other evidence obtained by said Committee that he has sufficiently recovered to work; (4) he dies; (5) he elects to retire at his Early Retirement Date; or (6) he reaches his Normal Retirement Date. (c) Re-employment of Disabled Participant. A Totally Disabled Participant who returns to regular active employment with the Company shall be considered to have been on an authorized leave of absence during the period he was disabled and, if he shall in due course become entitled to retirement benefits hereunder, the period of his Total Disability shall be included in his Credited Service and his Salary during such period of Total Disability shall be considered to have been at the rate of his annual salary in effect during the calendar year next preceding commencement of his Total Disability. 6.2 Benefit at Retirement Date. (a) Benefit. Upon reaching the earlier of his Early Retirement Date and electing to retire or his Normal Retirement Date, a Participant receiving the disability retirement benefit described in Section 6.1 above shall become entitled to the disability retirement benefits as described in this Section 6.2(a) taking into account the FICA Adjustment in lieu of the retirement benefits provided in Article IV. Such benefits shall be calculated at either the Participant's Early Retirement Date as elected by the Participant or Normal Retirement Date, as the case may be, and shall be equal to the Participant's Early Retirement Benefit, and associated Eligible Spouse's benefit, or Normal Retirement Benefit, and associated Eligible Spouse's benefit, as the case may be, as described in Sections 4.1 and 4.2, as if such disabled Participant had actually retired upon his Early Retirement Date or his Normal Retirement Date with the prior period of Total Disability being treated as Credited Service; provided, however, that in determining such Early Retirement Benefit or Normal Retirement Benefit, as the case may be, the Participant's Final Average Salary shall be calculated as of his Disability Date. (b) Payment. The disability retirement benefits described in Section 6.2(a) above shall be payable in the same manner as the retirement benefits described in Sections 4. 1 or 4.2, taking into account the FICA Adjustment as the case may be, as if the Participant had actually retired. ARTICLE VII SEVERANCE BENEFITS 7.1 Eligibility. A Participant whose employment is terminated for reasons other than death, Total Disability or retirement prior to completing five (5) years of Credited Service shall not be entitled to receive any benefits under this Plan. A Participant whose employment is transferred to another subsidiary or affiliate of The Southern Company shall not be eligible to receive benefits pursuant to Article VII, but shall instead be entitled to the benefits, if any, described in Section 4.6 above. 7.2 Participant Benefit. A Participant whose employment is terminated for reasons other than death, Total Disability or retirement after completing five (5) years of Credited Service shall be entitled to receive a monthly severance benefit in an amount equal to 1/12th of the Participant's Vested Percentage of his Accrued SERP Retirement Benefit calculated as of his Severance Date, adjusted as follows: for purposes of determining the Participant's Accrued SERP Retirement Benefit, 70% of Final Average Salary shall be reduced by the early retirement factor under Section 5.02(b) of the SEPCO Schedule where the Participant's benefit commences prior to the Participant's attainment of age 62. In addition to the foregoing, the reductions shall include for a Participant who commences his severance benefit after attainment of age 50 but before attainment of age 55 a reduction of one-third of one percent (0[OBJECT OMITTED]%) for each month by which the Participant's age at the time payment commences precedes the Participant's attainment of age 55. A Participant's severance benefit shall be paid monthly to him taking into account the FICA Adjustment for his lifetime, beginning at the same time when retirement income payments under the Southern Pension Plan commence. 7.3 Spousal Benefit. Upon the death of a Participant who (i) has attained age 50; (ii) is either receiving or entitled to receive a severance benefit in accordance with Section 7.2; and (iii) is survived by an Eligible Spouse, such Eligible Spouse shall become entitled to receive the benefit described in Section 7.3(a) or (b) below, whichever is applicable: (a) If the Participant was receiving his severance benefit at the time of his death, the Eligible Spouse's benefit shall be an amount equal to 75% of the deceased Participant's actual severance benefit, payable monthly to the Eligible Spouse for her lifetime. (b) If the Participant's death occurs prior to commencement of payment of his severance benefit, the Eligible Spouse's benefit is a monthly amount equal to 75% of the deceased Participant's severance benefit calculated as if payment of such Participant's severance benefit had commenced at his date of death, payable monthly to the Eligible Spouse during her lifetime. All benefit payments to an Eligible Spouse hereunder taking into account the FICA Adjustment shall commence within 60 days of the Participant's death. 7.4 Resumption of Employment After Severance. In the event a Participant becomes entitled to a severance benefit but prior to commencement of payment of such benefit such Participant is re-employed by the Company in a capacity which entitles him to participate in this Plan, he shall forfeit such severance benefit and shall again participate in the Plan as if his service with the Company had never terminated; provided, however, that such Participant shall not receive any Credited Service for the period of time between his termination of employment and his re-employment. Notwithstanding anything to the contrary above, if, at the time of the Participant's re-employment, payment of his severance benefit has already commenced, such Participant shall not be eligible to commence participation in this Plan and shall, therefore, have no right, claim or entitlement to any benefits hereunder other than to payment of such severance benefit. ARTICLE VIII CHANGE IN CONTROL The provisions of the Change in Control Benefit Plans Policy are incorporated herein by reference to determine the occurrence of a Change in Control or Preliminary Change in Control of the Company or The Southern Company (as defined in such Policy), the benefits to be provided hereunder and the funding of the Trust (as defined in such Policy) in the event of such a Change in Control. Any modifications to the Change in Control Benefit Plans Policy are likewise incorporated herein. ARTICLE IX ADMINISTRATIVE COMMITTEE 9.1 Authority. This Plan shall be administered by an Administrative Committee of not less than three (3) members appointed by the Board of Directors of the Company. The Board of Directors may from time to time appoint members of the Committee in substitution for the members previously appointed and may fill vacancies, however caused. The Committee shall have all powers necessary to enable it to carry out its duties in the administration of the Plan. Not in limitation, but in application of the foregoing, the Committee shall have the discretion, duty and power to determine all questions that may arise hereunder as to the status and rights of participants in the Plan. 9.2 Voting. The Committee shall act by a majority of the number then constituting the Committee, and such action may be taken either by a vote at a meeting or in writing without a meeting. 9.3 Records. The Committee shall keep a complete record of all its proceedings and all data relating to the administration of the Plan. The Committee shall select one of its members as a Chairman. The Committee shall appoint a Secretary to keep minutes of its meetings and the Secretary may or may not be a member of the Committee. The Committee shall make such rules and regulations for the conduct of its business as it shall deem advisable. 9.4 Liability. No member of the Committee shall be personally liable for any actions taken by the Committee unless the member's action involves willful misconduct. ARTICLE X AMENDMENT AND TERMINATION 10.1 Amendment and Termination. Except for the provisions of Article VIII hereof, which may not be amended following a "Savannah Change in Control" or "Southern Change in Control" (as defined in the Change in Control Benefit Plans Policy), the Company reserves the right, at any time or from time to time, by action of its Board of Directors, to modify or amend in whole or in part any or all provisions of the Plan. In addition, the Company reserves the right by action of its Board of Directors to terminate the Plan in whole or in part; provided, however, that such termination shall not affect any vested accrued benefits of Participants hereunder. ARTICLE XI MISCELLANEOUS 11.1 Non-Alienation of Benefits. No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit under the Plan shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefits. If the Participant, Eligible Spouse, or any other beneficiary hereunder shall become bankrupt, or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right hereunder, then such right or benefit shall, in the discretion of the Committee, cease and terminate, and in such event, the Committee may hold or apply the same or any part thereof for the benefit of the Participant or his spouse, children or other dependents, or any of them, in such manner and in such amounts and proportions as the Committee may deem proper. 11.2 No Trust Created. The obligations of the Company to make payments hereunder shall constitute a liability of the Company to a Participant. Except as expressly limited under the terms of the Trust (as defined in the Change in Control Benefit Plans Policy), such payments shall be made from the general funds of the Company, and the Company shall not be required to establish or maintain any special or separate fund, or purchase or acquire life insurance on a Participant's life, or otherwise to segregate assets to assure that such payment shall be made, and neither a Participant, Eligible Spouse, or any other beneficiary shall have any interest in any particular asset of the Company by reason of its obligations hereunder. Nothing contained in the Plan shall create or be construed as creating a trust of any kind or any other fiduciary relationship between the Company and a Participant or any other person. Notwithstanding the foregoing, in the event a Participant who is employed on or after January 1, 1999 with the Company disputes the calculation of his benefit under the terms of this Plan or payment of amounts due under the terms of this Plan, the Participant has recourse against the Company, the Plan and the Trust (as defined in the Change in Control Benefit Plans Policy) for the payment of benefits to the extent such Trust provides. When a Participant becomes entitled to payment of a benefit hereunder, the Company may, in its sole discretion, elect to purchase an annuity from a reputable third party annuity provider to secure payment of all or any portion of the Participant's benefit, pursuant to a uniform annuitization program adopted by the Committee. 11.3 No Employment Agreement. Neither the execution of this Plan nor any action taken by the Company pursuant to this Plan shall be held or construed to confer on a Participant any legal right to be continued as an Employee of the Company in an executive position or in any other capacity whatsoever. This Plan shall not be deemed to constitute a contract of employment between the Company and a Participant, nor shall any provision herein restrict the right of any Participant to terminate his employment with the Company. 11.4 Binding Effect. Obligations incurred by the Company pursuant to this Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participant, his Eligible Spouse or other beneficiary. 11.5 Suicide. Except as hereinafter provided, no benefit shall be payable under the Plan to a Participant, Eligible Spouse or other beneficiary where such Participant dies as a result of suicide within two (2) years of his commencement of participation herein. 11.6 Claims for Benefits. Each Participant or beneficiary must claim any benefit to which he is entitled under this Plan by a written notification to the Committee. If a claim is denied, it must be denied within a reasonable period of time, and be contained in a written notice stating the following: (a) The specific reason for the denial; (b) Specific reference to the Plan provision on which the denial is based; (c) Description of additional information necessary for the claimant to present his claim, if any, and an explanation of why such material is necessary. (d) An explanation of the Plan's claims review procedure. The claimant will have 60 days to request a review of the denial by the Committee, which will provide a full and fair review. The request for review must be in writing delivered to the Committee. The claimant may review pertinent documents, and he may submit issues and comments in writing. The decision by the Committee with respect to the review must be given within 60 days after receipt of the request, unless special circumstances require an extension (such as for a hearing). In no event shall the decision be delayed beyond 120 days after receipt of the request for review. The decision shall be written in a manner calculated to be understood by the claimant, and it shall include specific reasons and refer to special Plan provisions as to its effect. 11.7 Recourse Against Deferred Compensation Trust. In addition to Section 11.6, in the event a Participant who is employed on or after January 1, 1999 with the Company disputes the calculation of his SERP Benefit, the Participant has recourse against the Company, the Plan, and the Southern Company Deferred Compensation Trust for payment of benefits to the extent such Trust so provides. 11.8 Post-Retirement Adjustments. To the extent that a Participant's Retirement Income or Allowance under the Southern Pension Plan is recalculated as a result of an amendment in order to increase the amount of his Retirement Income or Allowance, the Participant's benefit under this Plan shall also be recalculated in order to properly reflect such increase in determining payments of such benefit made on and after the effective date of the increase. 11.9 Entire Plan. This document and any amendments contain all the terms and provisions of the Plan and shall constitute the entire Plan, any other alleged terms or provisions being of no effect. 11.10 Merger or Consolidation. In the event of a merger or a consolidation by the Company with another corporation or the acquisition of substantially all of the assets or outstanding stock of the Company by another corporation, then and in such event the obligations and responsibilities of the Company under this Plan shall be assumed by any such successor or acquiring corporation, and all of the rights, privileges and benefits of the Participants hereunder shall continue. 11.11 Age Differential of Spouse. If a Participant's Eligible Spouse at the time of commencement of a (a) Normal Retirement Benefit;(b) Early Retirement Benefit; (c) Postponed Retirement Benefit; (d) pre-retirement death benefit; or (e) Severance Benefit is more than ten years younger than the Participant, the monthly benefits payable hereunder shall be reduced actuarially using actuarial assumptions under Section 1.15 of the SEPCO Schedule and assuming that the Eligible Spouse is ten years older than such spouse's attained age. ARTICLE XII CONSTRUCTION 12.1 Governing Law. This Plan shall be construed and governed in accordance with the laws of the State of Georgia. 12.2 Gender. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. 12.3 Headings, etc.. The cover page of this Plan, the Table of Contents and all headings used in this Plan are for convenience of reference only and are not part of the substance of this Plan. 12.4 Children. All references in the Plan to a Participant's children shall include both natural and adopted children. 12.5 Action. Any action under this Plan required or permitted by the Company shall be by action of its Board of Directors or its duly authorized designee. IN WITNESS WHEREOF, this Plan has been executed by duly authorized officers of Savannah Electric and Power Company this 16th day of November, 2000 to be effective as of October 26, 2000. SAVANNAH ELECTRIC AND POWER COMPANY By: _______________________________________ By: Vice President, Treasurer, and Chief Financial Officer ATTEST: - --------------------------------------- Comptroller and Secretary EX-10 56 x10f14.txt Exhibit 10(f)14 DEFERRED COMPENSATION PLAN FOR ---------------------- KEY EMPLOYEES --------------------- OF SAVANNAH ELECTRIC AND POWER COMPANY AS AMENDED AND RESTATED EFFECTIVE OCTOBER 26, 2000 TABLE OF CONTENTS ARTICLE I STATEMENT OF PURPOSE...................................1 ARTICLE II DEFINITIONS............................................1 ARTICLE III ELIGIBILITY AND PARTICIPATION..........................3 ARTICLE IV RETIREMENT BENEFITS....................................6 ARTICLE V SURVIVOR BENEFITS......................................8 ARTICLE VI DISABILITY BENEFITS...................................10 ARTICLE VII SEVERANCE BENEFITS....................................11 ARTICLE VIII ADDITIONAL BENEFITS...................................12 ARTICLE IX ACCRUAL OF BENEFITS...................................12 ARTICLE X CHANGE IN CONTROL BENEFIT PLANS POLICY................13 ARTICLE XI ADMINISTRATIVE COMMITTEE..............................13 ARTICLE XII AMENDMENT AND TERMINATION.............................14 ARTICLE XIII MISCELLANEOUS.........................................14 ARTICLE XIV CONSTRUCTION..........................................17 DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES OF SAVANNAH ELECTRIC AND POWER COMPANY AS AMENDED AND RESTATED EFFECTIVE OCTOBER 26, 2000 This Plan amends and restates the Company's Deferred Compensation Plan for Key Employees, as originally effective December 1, 1983, and subsequently amended. ARTICLE I STATEMENT OF PURPOSE The purpose of this Plan is to benefit Savannah Electric and Power Company through increased incentive on the part of key employees of the Company and to further the long-term growth and earnings of the Company by offering long-term incentives in addition to current compensation to the limited group of management employees of the Company who will be largely responsible for such growth. ARTICLE II DEFINITIONS When used herein the following terms shall have the meanings indicated unless a different meaning is clearly required by the context. 1. "Annuity Starting Date": The date on which payment of a benefit payable hereunder is to commence. 2. "Change in Control Benefit Plans Policy": shall mean the change in control benefit plans policy for Company only plans, as approved by the Company, as it may be amended from time to time in accordance with the provisions therein. 3. "Committee": The Administrative Benefits Committee appointed by the Board of Directors of the Company to administer the Plan. 4. "Company": Savannah Electric and Power Company, a Georgia corporation, and its corporate successors. 5. "Deferred Compensation Agreement": An Omnibus Deferred Compensation Agreement entered into between the Company and a Participant or such other prior agreements if the Participant elects not to enter into an Omnibus Deferred Compensation Agreement. 6. "Defined Contribution Plan": Shall include, but not be limited to, any of the following qualified employer contribution plans: (i) 401-K, cash or deferred profit sharing plan; (ii) Thrift plans; (iii) defined contribution pension plans; (iv) profit sharing plan; (v) employee stock ownership plan (ESOP); and (vi) any other qualified defined contribution plan meeting the qualifications prescribed by the Internal Revenue Code, as described in TEFRA, or any subsequent amendments thereto. 7. "Designated Beneficiary": One or more beneficiaries, as designated in writing to the Committee, to whom payments otherwise due to or for the benefit of the Participant hereunder shall be made in the event of his death prior to the complete payment of such benefit. In the event no such written designation is made by a participant or if such beneficiary shall not be in existence at the Participant's death or if such beneficiary predeceases the Participant, the Participant shall be deemed to have designated his estate as such beneficiary. 8. "Disability Retirement": Retirement from the employ of the Company because of Total Disability. 9. "Disability Retirement Date": The date upon which a Participant retires from the employ of the Company because of Total Disability. 10. "Early Retirement": Retirement from the employ of the Company upon or after attaining age sixty (60) but prior to age sixty-five (65). 11. "Early Retirement Date": The date upon which a Participant who has attained an age of at least sixty (60) but has not yet reached age sixty-five (65) retires from the employ of the Company. 12. "Employee": A person who is employed by the Company. 13. "Insurable": The life of a Participant is insurable at the time of an election to defer compensation under this Plan by an insurance company approved by the Committee and at premium rates acceptable to the Committee in the exercise of its sole and absolute discretion. 14. "Normal Retirement": Retirement from the employ of the Company upon the Normal Retirement Date. 15. "Normal Retirement Date": The date upon which such Participant attains the age of sixty-five (65). 16. "Participant": An Employee who is or hereafter becomes eligible to participate in the Plan and does participate by electing, in the manner specified herein, to defer compensation pursuant to this Plan. 17. "Plan": The Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company contained herein, and as may be amended from time to time hereafter. 18. "Postponed Retirement": Retirement from the employ of the Company after attaining age sixty-five (65). 19. "Postponed Retirement Date": The date upon which a Participant over age sixty-five (65) retires from the employ of the Company. 20. "Salary": The annual compensation paid by the Company to a Participant including (i) any payments from an executive incentive compensation plan and (ii) amounts of compensation deferred under any deferred compensation plan or arrangement. 21. "Total Disability": A Participant is to be deemed totally disabled when he has been wholly and continuously disabled by reason of sickness or injury, and has been under the regular care of a physician approved by the Committee during the preceding six (6) months. The Participant shall thereafter be deemed to be permanently disabled so long as he is prevented from engaging in any occupation as determined by the Committee, for which he is reasonably qualified, by training, education, background and experience, as a result of said sickness or injury, provided he is still under the regular care of a physician acceptable to the Committee. 22. "Year of Service": A period of twelve (12) consecutive months (no month to be counted in more than one Year of Service) during which the Participant has been or hereafter (i) is continuously employed by the Company, or (ii) is continuously on leave of absence approved by the Company. ARTICLE III ELIGIBILITY AND PARTICIPATION 1. Eligibility. The Committee shall have the sole discretion to determine the employees that are eligible to become Participants in accordance with the purposes of the Plan. 2. Participation. (a) An eligible Employee may participate in the Plan by irrevocably electing, in the manner specified herein, to defer future Salary for a one (1) or three (3) year deferral opportunity in 1997, a one (1) or two (2) year deferral opportunity in 1998 and a final one (1) year deferral opportunity in 1999 (or such fewer years remaining until the Employee's Normal Retirement Date). An eligible Employee may defer a minimum of $1,000 per year under the three (3) or two (2) year election and $2,500 per year under the one (1) year election. The maximum annual amount of Salary which may be deferred shall be equal to fifty percent (50%) of such Employee's Salary (as defined in Article II) for the calendar year in which such election is made; (b) An eligible Employee becomes a Participant in the Plan upon the execution and delivery of a Deferred Compensation Agreement. Such Agreement must be executed on or before December 31 to defer compensation to be earned in succeeding calendar years; (c) During a deferral period(s), the annual amount of compensation to be deferred shall be deferred on a basis as determined by the Committee. (d) The Committee shall be vested with the authority to deny Participants the right to defer Salary pursuant to the Plan in any calendar year, provided, however, any such denial shall apply to all eligible Participants. 3. Benefits. Benefits payable pursuant to any election made hereunder will be calculated and based upon both a Participant's age at the time of a deferral election and the amount of deferrals. In addition, the amount of Survivor Benefits will depend on whether the Participant is Insurable or non-Insurable. 4. Conditions Subsequent. (a) In the event of a legislative, judicial or regulatory development ("Development") that meets both requirements below, the Committee shall be vested with the authority to condition the Company's obligations under a Deferred Compensation Agreement: (i) The Development adversely, fundamentally and materially affects the taxation of corporate owned life insurance owned by the Company, including, but not limited to, a change in any of the following federal income tax provisions: (A) the current provisions related to the exclusion from gross income of proceeds of life insurance contracts payable upon the death of the insured; (B) the current exclusion from income of any increase in the "cash value" or "inside build up" of life insurance contracts from time to time; (C) the current exclusion from income of any "policy loan" obtained by the owner of a life insurance contract; and (D) the current exclusion from income of "dividends" on a life insurance contract which are used to purchase additional insurance; and (ii) The Development occurs prior to the commencement of payment of benefits pursuant to a Deferred Compensation Agreement. In the event the Company's obligations under a Deferred Compensation Agreement are so conditioned, and the event constituting the condition subsequent occurs, the Company shall have the right, for a period of one (1) year following such event, to refund to the Participant or his Designated Beneficiary the deferrals made under the Deferred Compensation Agreement with interest from the date of deferral accrued at the rate equal to the greater of the rate of return for the (x) "prime interest rate" investment option, or (y) the Southern Company "Common Stock" investment option determined in the same manner as calculated under the Southern Company Deferred Compensation Plan if the Participant has executed an Omnibus Deferred Compensation Agreement; or if the Participant has not, the rate set forth in the prior Deferred Compensation Agreement(s) entered into by Participant. The payment of such refund shall fully and completely discharge the Company's obligations under the Deferred Compensation Agreement and shall fully and completely satisfy all the Participant's and his Designated Beneficiary's rights thereunder. (b) Notwithstanding any other provision in Paragraph (a) above, the Company shall not have the right to condition payment after the earlier of any of the foregoing events: (A) the Company cashes out a majority of its investment in Company owned life insurance which has been purchased in conjunction with the provision of benefits under the Plan; or (B) the Company incurs a Savannah Change in Control or a Southern Change in Control as defined under the Change in Control Benefit Plans Policy in effect as of the execution of this Agreement. ARTICLE IV RETIREMENT BENEFITS 1. Normal Retirement Benefit. (a) Upon the Normal Retirement of a Participant, such Participant becomes entitled to his Normal Retirement Benefit. The Normal Retirement Benefit is a level fifteen (15) year annuity payable in one hundred eighty (180) equal monthly installments in the amount stated in the Participant's Deferred Compensation Agreement. Payment of the Normal Retirement Benefit shall commence on the January 1st immediately following the Participant's Normal Retirement Date (such date being the "Regular Annuity Starting Date") and shall continue on the first day of each month thereafter until one hundred eighty (180) monthly payments have been made. (b) The Normal Retirement Benefit amount which the Company will agree to pay depends upon a number of factors, including, among other things, the amount of the deferral and the length of time between the date of the deferral and the Annuity Starting Date of the benefit. 2. Postponed Retirement Benefit. (a) Upon the Postponed Retirement of a Participant, such Participant becomes entitled to his Postponed Retirement Benefit. The Postponed Retirement Benefit is a level fifteen (15) year annuity payable in equal monthly installments. Payment of the Postponed Retirement Benefit shall commence on the January 1st immediately following the Participant's Postponed Retirement Date (such date being the "Postponed Annuity Starting Date"), and shall continue on the first day of each month thereafter until one hundred eighty (180) monthly payments have been made. (b) The monthly benefit of the Postponed Retirement Benefit shall be an amount equal to the monthly benefit of the Normal Retirement Benefit increased by six percent (6%) compounded annually for each year that the Regular Annuity Starting Date precedes his Postponed Annuity Starting Date. 3. Early Retirement Benefit. (a) Upon the Early Retirement of a Participant, such Participant becomes entitled to his Early Retirement Benefit. The Early Retirement Benefit is a level fifteen (15) year annuity payable in equal monthly installments, the amount of which shall be the same as those of the Normal Retirement Benefit. Subject to Sections 3(b) and 3(c) of this Article IV, payment of the Early Retirement Benefit shall commence on the January 1st immediately following the Participant's Normal Retirement Date (such date being the "Regular Annuity Starting Date"), and shall continue on the first day of each month thereafter until one hundred eighty (180) monthly payments have been made. (b) Subject to the Committee's approval, a Participant is entitled to elect to have payment of his Early Retirement Benefit commence on any January 1st following his Early Retirement Date and preceding his Regular Annuity Starting Date (such date being the "Accelerated Annuity Starting Date"). Such election shall be made in writing delivered to the Committee at least thirty (30) days prior to the requested accelerated Annuity Starting Date. (c) In the event a Participant elects an Accelerated Annuity Starting Date and it is approved by the Committee, his Early Retirement Benefit shall be reduced by seven percent (7%) compounded annually for each year that the Accelerated Annuity Starting Date precedes his Regular Annuity Starting Date. 4. Death Prior to Commencement of Benefit. Anything herein to the contrary notwithstanding, in the event a Participant dies after becoming entitled to his Normal Retirement Benefit or Early Retirement Benefit and prior to the Annuity Starting Date of such Retirement Benefit, the Participant's Designated Beneficiary shall receive, in lieu of such Retirement Benefit, the Survivor Benefit specified in Article V hereof. 5. Payments to Beneficiary. In the event a Participant dies prior to full payment of his Retirement Benefit under this Article IV, all remaining payments due hereunder shall be made to such Participant's Designated Beneficiary. ARTICLE V SURVIVOR BENEFITS 1. Survivor Benefit. Upon the occurrence of any of the following events, the Company shall pay to the Participant's Designated Beneficiary the Survivor Benefits as defined in this Article V. The Survivor Benefits payable hereunder are in lieu of any other benefit under this Plan. (a) The death of the Participant while employed by the Company; (b) The death of the Participant after becoming entitled to a Retirement Benefit of Article IV hereof, but prior to commencement of payment of such benefit; (c) The death of the Participant after becoming entitled to the Disability Benefit of Article VI, Section 2, hereof, but prior to commencement of payment of such benefit; or (d) The death of the Participant after becoming entitled to the Severance Benefit of Article VII, Section l(b), hereof, but prior to commencement of payment of such benefit. 2. Payment. Payment of the Survivor Benefit will commence on the first day of the month following receipt by the Committee of written proof of the Participant's death and shall continue on the first day of each month thereafter until one hundred eighty (180) monthly payments have been made. 3. Amount. (a) If the Participant is Insurable, then the Survivor Benefit is a level fifteen (15) year annuity payable to his Designated Beneficiary in one hundred eighty (180) equal monthly installments in the amount(s) stated in the Participant's Deferred Compensation Agreement. (b) If the Participant is not Insurable and his death both (i) occurs after attaining age sixty (60) and (ii) constitutes one of the events described in Sections l(a), l(b), and l(c) of this Article V, then the Survivor Benefit is a level fifteen (15) year annuity payable in one hundred eighty (180) equal monthly installments in a monthly amount equal to the present value at the Participant's date of death of the Participant's monthly Normal Retirement Benefit, as set forth in the Participants Deferred Compensation Agreement, discounted, for the period between the Participant's Regular Annuity Starting Date (as defined in Article IV, Section 1) and the Participant's date of death, by the Present Value Interest Rate stated in the Participant's Deferred Compensation Agreement or, if no such rate is so stated, ten percent (10%) per annum, compounded annually. (c) Anything to the contrary herein notwithstanding, if the Survivor Benefit is payable by reason of the Participant's death occurring at a time when, had he retired on the day of his death, he would have been entitled to the Postponed Retirement Benefit (as provided in Article IV, Section 2), then the monthly amount of the Survivor Benefit shall equal the monthly amount of the Participant's Normal Retirement Benefit, as set forth in the Participant's Deferred Compensation Agreement, increased by six percent (6%) per annum compounded annually for the period between the Participant's Regular Annuity Starting Date (as defined in Article IV, Section 1) and the Participant's death. (d) If the Participant is not Insurable and either the Participant has not attained age sixty (60) at the time of his death or his death constitutes the event described in Section l(d) of this Article V, then the total amount of the Survivor Benefit shall equal his actual gross deferrals plus interest thereon at nine percent (9%) per annum compounded annually until his date of death. Such amount shall be payable to the Participant's Designated Beneficiary at the option of the Committee in either a lump sum on the first day of the month immediately following receipt by the Committee of written proof of the Participant's death or in up to one hundred eighty (180) equal consecutive monthly installments with interest at nine percent (9%) per annum, compounded annually, commencing on the first day of the month immediately following receipt by the Committee of proof of the Participant's death. (e) Notwithstanding anything herein to the contrary, in the event the Participant's death occurs prior to April 1st of the year following the year in which the Participant enters into a Deferred Compensation Agreement, then no Survivor Benefit shall be payable pursuant to such Deferred Compensation Agreement. In lieu of any such Survivor Benefit, the Company shall pay to the Participant's Designated Beneficiary, in one lump sum, the actual gross deferrals made, if any, pursuant to such Deferred Compensation Agreement plus interest thereon at nine percent (9%) per annum until date of payment. ARTICLE VI DISABILITY BENEFITS 1. Entitlement. Upon Disability Retirement a Participant becomes entitled to the Disability Benefit described in this Article VI. 2. Disability Benefit. (a) The Disability Benefit shall be a benefit identical to the Retirement Benefits as provided in Article IV hereof (either the Normal Retirement Benefit or Early Retirement Benefit, as the case may be), to which the retired Participant would have become entitled if he had retired after attaining age sixty (60). Provided, however, in the event such Participant dies prior to commencement of payment of such Disability Benefit, the Participant's Designated Beneficiary shall receive, in lieu of such Disability Benefit, the Survivor Benefit specified in Article V hereof. (b) Notwithstanding the foregoing, such retired Participant may request to receive, in lieu of the Disability Benefit provided by subparagraph (a) above, a benefit equal to his actual gross deferrals plus interest thereon at nine percent (9%) per annum compounded annually until his Disability Retirement Date. Payment of such benefit is at the discretion of the Committee and shall commence on the first day of the month following both (i) the retired Participant's Disability Retirement Date and (ii) the expiration of six (6) months of Total Disability. Such benefit shall be payable in the option of the Committee either in a lump sum or in up to sixty (60) equal consecutive monthly installments with interest at nine percent (9%) per annum. 3. Re-Employment. In the event a retired Participant entitled to a Disability Benefit hereunder but prior to commencement of payment of such benefit is reemployed by the Company in a capacity which entitles him to participate in the Plan, he shall forfeit such Disability Benefit and shall participate in the Plan as if his service with the Company had never terminated. Anything in the foregoing to the contrary notwithstanding, however, if at the time of the retired Participant's reemployment payment of his Disability Benefit hereunder has already commenced, he shall be ineligible to again commence participation in the Plan and shall, therefore, have no right, claim or entitlement to any benefits hereunder other than full payment of such Disability Benefit. 4. Payments to Beneficiary. In the event that a retired disabled Participant dies after commencement of the payment of his disability benefit under this Article VI but prior to full payment of such Disability Benefit, all remaining payments due hereunder shall be made to such Participant's Designated Beneficiary. ARTICLE VII SEVERANCE BENEFITS 1. Severance Benefits. (a) In the event a Participant's employment with the Company terminates for any reason other than death, Total Disability, Early Retirement or Normal Retirement, and at the time of such termination such Participant has neither accrued ten (10) Years of Service nor attained age forty-eight (48) the Participant's participation in the Plan shall cease as of the date of such termination. In such event, the Company shall pay the former Participant the amount of his actual gross deferrals plus interest thereon at seven percent (7%) per annum, compounded annually. Such amount shall be payable to the former Participant at the option of the Committee in either a lump sum within ninety (90) days following such termination or in up to sixty (60) equal consecutive monthly installments with interest at seven percent (7%) per annum commencing within ninety (90) days following such termination. (b) In the event a Participant's employment with the Company terminates for any reason other than death, Total Disability, Early Retirement or Normal Retirement, and at the time of such termination such Participant has either accrued ten (10) or more Years of Service or attained age forty-eight (48) such Participant shall receive a benefit identical to the Retirement Benefits of Article IV (either the Early Retirement Benefit or Normal Retirement Benefit, as the case may be) to which such Participant would have become entitled if he retired upon or after attaining age sixty (60). Provided, however, in the event a Participant dies prior to commencement of payment of such Severance Benefit, the Participant's Designated Beneficiary shall receive, in lieu of such Severance Benefit, the Survivor Benefit specified in Article V hereof. 2. Payments to Beneficiary. In the event a Participant dies prior to full payment of his Severance Benefit under this Article VII, all remaining payments due hereunder shall be made to such Participant's Designated Beneficiary. ARTICLE VIII ADDITIONAL BENEFITS 1. Loss of Benefits. It is possible that the deferral of a Participant's Salary pursuant to this Plan will result in a loss of benefits through a reduction of amounts actually or potentially credited to his account(s) under a qualified Defined Contribution Plan sponsored by the Company. 2. Additional Benefits. If the Committee determines that a Participant has suffered a Benefit Loss in any year, additional benefits shall be provided to the Participant under this Plan as if the Participant had made a one (1) year deferral election to defer Salary in an amount equal to the Benefit Loss. Such one (1) year deferral election shall be deemed to occur in the same year in which the deferral under this Plan causes such Benefit Loss. ARTICLE IX ACCRUAL OF BENEFITS 1. If the employment of a Participant terminates for any reason prior to the completion of the deferrals agreed upon in the Deferred Compensation Agreement or if the agreed deferrals are not made for any other reason, then all of his benefits under the Plan shall be reduced by a fraction, the numerator of which is the amount of the gross deferrals agreed to be deferred which were not deferred, and the denominator of which is the amount of gross deferrals agreed to be deferred. 2. The reduction of benefits under Section 1 of this Article IX shall not apply to any benefits receivable by a Participant or his Designated Beneficiary under: (a) Article V, Section 1, (a) only, but only when the Participant is Insurable; (b) Article V, Section 3, (d) only; (c) Article VI, Section 2, (b) only; (d) Article VII, Section 1, (a) only; (e) Article VIII. ARTICLE X CHANGE IN CONTROL BENEFIT PLANS POLICY The provisions of the Change in Control Benefit Plans Policy are incorporated herein by reference to determine the occurrence of a change in control or preliminary change in control of Southern or the Company (as such terms are defined in such Policy), the benefits to be provided hereunder and the funding of the Trust (as defined in such Policy) in the event of such a change in control. Any modifications to the Change in Control Benefit Plans Policy are likewise incorporated herein. ARTICLE XI ADMINISTRATIVE COMMITTEE 1. This Plan shall be administered by an Administrative Committee of not less than three (3) members appointed by the Board of Directors of the Company. The Board of Directors may from time to time appoint members of the Committee in substitution for the members previously appointed and may fill vacancies, however caused. The Committee shall have all powers necessary to enable it to carry out its duties in the administration of the Plan. Not in limitation, but in application of the foregoing, the Committee shall have the duty and power to determine all questions that may arise hereunder as to the status and rights of participants in the Plan. 2. The Committee shall act by a majority of the number then constituting the Committee, and such action may be taken either by a vote at a meeting or in writing without a meeting. 3. The Committee shall keep a complete record of all its proceedings and all data relating to the administration of the Plan. 4. The Committee shall select one of its members as a Chairman. The Committee shall appoint a Secretary to keep minutes of its meetings and the Secretary may or may not be a member of the Committee. The Committee shall make such rules and regulations for the conduct of its business as it shall deem advisable. 5. No member of the Committee shall be personally liable for any actions taken by the Committee unless the member's action involves willful misconduct. ARTICLE XII AMENDMENT AND TERMINATION Except for the provisions of Article X hereof which may not be amended following a "Southern Change in Control" or "Savannah Change in Control" (as defined in the Change in Control Benefit Plans Policy), the Company reserves the right, at any time or from time to time, by action of its Board of Directors, to modify or amend in whole or in part any or all provisions of the Plan. In addition, the Company reserves the right by action of its Board of Directors to terminate the Plan in whole or in part. Provided, however, notwithstanding the preceding sentences, such amendment or termination shall not affect in any way the Deferred Compensation Agreements then in effect. ARTICLE XIII MISCELLANEOUS 1. Suicide. Except as hereafter provided, no benefit shall be payable under the Plan with respect to a deferral election to a Participant or his Designated Beneficiary who dies as a result of suicide with twenty-five (25) months of the December 31st preceding a deferral period to defer compensation to be earned in the succeeding calendar year or years. In the event of such suicide, the Participant's Designated Beneficiary shall receive within a reasonable period the actual gross deferrals, if any, made by such Participant with interest at seven percent (7%) per annum to date of payment. 2. Non-Alienation of Benefits. No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit under this Agreement shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such benefits. If the Participant or any beneficiary hereunder shall become bankrupt, or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right hereunder, then such right or benefit shall, in the discretion of the Committee, cease and terminate, and in such event, the Committee may hold or apply the same or any part thereof for the benefit of the Participant or his beneficiary, spouse, children or other dependents, or any of them in such manner and in such amounts and proportions as the Committee may deem proper. 3. No Trust Created. The obligations of the Company to make payments hereunder shall constitute a liability of the Company to a Participant. Except as expressly limited under the terms of the Trust (as defined in the Change in Control Benefit Plans Policy), such payments shall be made from the general funds of the Company, and the Company shall not be required to establish or maintain any special or separate fund, or purchase or acquire life insurance on a Participant's life, or otherwise to segregate assets to assure that such payment shall be made, and neither a Participant, his estate nor Designated Beneficiary shall have any interest in any particular asset of the Company by reason of its obligations hereunder. Nothing contained in the Plan shall create or be construed as creating a trust of any kind or other fiduciary relationship between the Company and a Participant or any other person. Notwithstanding the foregoing, in the event a Participant who is employed on or after January 1, 1999 with the Company disputes the calculation of his benefit under the terms of this Plan or payment of amounts due under the terms of this Plan, the Participant has recourse against the Company, the Plan and the Trust (as defined in the Change in Control Benefit Plans Policy) for the payment of benefits to the extent such Trust provides. 4. No Employment Agreement. Neither the execution of this Plan nor any action taken by the Company pursuant to this Plan shall be held or construed to confer on a Participant any legal right to be continued as an Employee of the Company in an executive position or in any other capacity whatsoever. This Plan shall not be deemed to constitute a contract of employment between the Company and a Participant, nor shall any provision herein restrict the right of the Company to discharge any Participant or restrict the right of any Participant to terminate his employment with the Company. 5. Designation of Beneficiary. Participants shall file with the Company a notice in writing designating one or more Designated Beneficiaries to whom payments otherwise due to or for the benefit of the Participant hereunder shall be made in the event of his death prior to the complete payment of such benefit. Participants shall have the right to change the beneficiary or beneficiaries so designated from time to time; provided, however, that any change shall not become effective until received in writing by the Committee. 6. Claims for Benefits. Each Participant or beneficiary must claim any benefit to which he is entitled under this Plan by a written notification to the Committee. If a claim is denied, it must be denied within a reasonable period of time, and be contained in a written notice stating the following: A. The specific reason for the denial. B. Specific reference to the Plan provision on which the denial is based. C. Description of additional information necessary for the claimant to present his claim, if any, and an explanation of why such material is necessary. D. An explanation of the Plan's claims review procedure. The claimant will have 60 days to request a review of the denial by the Committee, which will provide a full and fair review. The request for review must be in writing delivered to the Committee. The claimant may review pertinent documents, and he may submit issues and comments in writing. The decision by the Committee with respect to the review must be given within 60 days after receipt of the request, unless special circumstances require an extension (such as for a hearing). In no event shall the decision be delayed beyond 120 days after receipt of the request for review. The decision shall be written in a manner calculated to be understood by the claimant, and it shall include specific reasons and refer to special Plan provisions as to its effect. 7. Binding Effect. Obligations incurred by the Company pursuant to this Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participant and the beneficiary or beneficiaries designated pursuant to Article IX, Section 5 hereinabove. 8. Entire Plan. This document and any amendments contains all the terms and provisions of the Plan and shall constitute the entire Plan, any other alleged terms or provisions being of no effect. 9. Merger or Consolidation. In the event of a merger or a consolidation by the Company with another corporation, or the acquisition of substantially all of the assets or outstanding stock of the Company by another corporation, then and in such event the obligations and responsibilities of the Company under this Plan shall be assumed by any such successor or acquiring corporation, and all of the rights, privileges and benefits of the Participants hereunder shall continue. ARTICLE XIV CONSTRUCTION 1. Governing Law. This Plan shall be construed and governed in accordance with the laws of the State of Georgia. 2. Gender. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. 3. Headings, etc. The cover page of this Plan, the Table of Contents and all headings used in this Plan are for convenience of reference only and are not part of the substance of this Plan. SAVANNAH ELECTRIC AND POWER COMPANY By: _____________________________________________ G. Edison Holland, Jr. President and Chief Executive Officer ATTEST: - ---------------------------------------------------------- Nancy E. Frankenhauser Comptroller and Corporate Secretary EX-10 57 x10f18.txt 1997 DEFERRED COMPENSATION PLAN FOR DIRECTORS OF SAVANNAH ELECTRIC AND POWER COMPANY Amended and Restated Effective October 26, 2000 SECTION 1 Definitions 1.1 "Beneficial Ownership" means beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act. 1.2 "Board" or "Board of Directors" means the Board of Directors of the Company. 1.3 "Business Combination" means a reorganization, merger or consolidation or sale of Southern, or a sale of all or substantially all of Southern's assets. 1.4 "Cash Compensation" means the annual retainer fees and meeting fees payable to a Director in cash. 1.5 "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. 1.6 "Committee" means the Audit and Compensation Committee of the Board, or such other committee as may be designated by the Board to be responsible for administering the Plan. 1.7 "Common Stock" means the common stock of Southern, including any shares into which it may be split, subdivided, or combined. 1.8 "Company" means Savannah Electric and Power Company, or any successor thereto. 1.9 "Company Change in Control" means the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Section 1.9, any acquisition by an Employee, or Group composed entirely of Employees, any qualified pension plan, any publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation Controlled by Southern shall not constitute a Change in Control; (b) Consummation of a reorganization, merger or consolidation of the Company (a "Company Business Combination"), in each case, unless, following such Company Business Combination, Southern Controls the corporation surviving or resulting from such Company Business Combination; or (c) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to an entity which Southern does not Control. 1.10 "Compensation Payment Date" means the date on which compensation, including cash retainer, meeting fees, and the Stock Retainer, is payable to a Director or compensation would otherwise be payable to a Director if an election to defer such compensation had not been made. 1.11 "Consummation" means the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or agencies. 1.12 "Control" means, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests. 1.13 "Deferred Cash Trust" means the Deferred Cash Compensation Trust for Directors of The Southern Company and its Subsidiaries. 1.14 "Deferred Compensation Account" means the Prime Rate Investment Account, the Phantom Stock Investment Account, the Deferred Stock Account and/or the Stock Dividend Investment Account. 1.15 "Deferred Pension Election" means the election by a Director under Section 5.3 in connection with the deferral of receipt of the Director's Pension Benefit until termination from the Board. 1.16 "Deferred Stock Account" means the bookkeeping account established under Section 6.3 on behalf of a Director and includes shares of Common Stock credited thereto to reflect the reinvestment of dividends pursuant to Section 6.3(a)(iii). 1.17 "Deferred Stock Trust" means the Deferred Stock Trust for Directors of The Southern Company and its Subsidiaries. 1.18 "Director" means a member of the Board. 1.19 "Distribution Election" means the designation by a Director of the manner of distribution of the amounts and quantities held in the Director's Deferred Compensation Accounts upon the director's termination from the Board pursuant to Section 5.4. 1.20 "Effective Date" means October 26, 2000. 1.21 "Employee" means an employee of Southern or any of its subsidiaries that are "employing companies" as defined in the Southern Company Deferred Compensation Plan as amended and restated January 1, 2000, and as may be amended from time to time. 1.22 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.23 "Group" has the meaning set forth in Section 14(d) of the Exchange Act. 1.24 "Incumbent Board" means those individuals who constitute the Southern board of directors as of October 19, 1998, plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern board of directors subsequent to October 19, 1998, whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern board of directors shall be a member of the Incumbent Board. 1.25 "Market Value" means the average of the high and low prices of the Common Stock, as published in the Wall Street Journal in its report of New York Stock Exchange composite transactions, on the date such Market Value is to be determined, as specified herein (or the average of the high and low sale prices on the trading day immediately preceding such date if the Common Stock is not traded on the New York Stock Exchange on such date). 1.26 "Participant" means a Director or former Director who has an unpaid Deferred Compensation Account balance under the Plan. 1.27 "Participating Companies" means those companies whose boards of directors have authorized the establishment of trust(s) for the funding of their respective directors' Deferred Compensation Accounts under their respective Deferred Compensation Plans for Directors, including the Company. 1.28 "Pension Benefit" means the U.S. dollar amount of the actuarially-determined present value of benefits based on a Director's expected service at the required retirement date under The Southern Company Outside Directors Pension Plan, as calculated as of the Termination Date, plus accrued earnings on such amount calculated as if invested at the Prime Interest Rate from the Termination Date, until such amount is invested in Deferred Compensation Accounts pursuant to the provisions of Section 5.3. 1.29 "Pension Benefit Investment Date" means the date to be determined by the Committee, as of which the Director's Pension Benefit will be credited to a Deferred Compensation Account in accordance with the director's Deferred Pension Election under Section 5.3. 1.30 "Phantom Stock Investment Account" means the bookkeeping account established pursuant to Section 6.2 in which a Director may elect to defer Cash Compensation or make investments, and includes amounts credited thereto to reflect the reinvestment of dividends. 1.31 "Plan" means the Deferred Compensation Plan for Directors of Savannah Electric and Power Company as from time to time in effect. 1.32 "Plan Period" means the period designated in Section 4. 1.33 "Person" means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. 1.34 "Preliminary Change in Control" means the occurrence of any of the following as determined by the Southern Committee: (a) Southern or the Company has entered into a written agreement, such as, but not limited to, a letter of intent, which, if Consummated, would result in a Southern Change in Control or a Company Change in Control, as the case may be; (b) Southern, the Company or any Person publicly announces an intention to take or to consider taking actions which, if Consummated, would result in a Southern Change in Control or a Company Change in Control under circumstances where the Consummation of the announced action or intended action is legally and financially possible; (c) Any Person becomes the Beneficial Owner of fifteen percent (15%) or more of the Common Stock; or (d) The Southern board of directors or the board of directors of the Company has declared that a Preliminary Change in Control has occurred. 1.35 "Prime Interest Rate" means the prime rate of interest as published in the Wall Street Journal. 1.36 "Prime Rate Investment Account" means the bookkeeping account established pursuant to Section 6.1 in which a Director may elect to defer Cash Compensation or make investments, the investment return on which is computed at the Prime Interest Rate. 1.37 "Southern" means The Southern Company. 1.38 "Southern Change in Control" means any of the following: (a) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this subsection (a), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control: (i) any acquisition directly from Southern, (ii) any acquisition by Southern, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any corporation controlled by Southern, (iv) any acquisition by a qualified pension plan or publicly held mutual fund, (v) any acquisition by an Employee or Group composed exclusively of Employees, or (vi) any Business Combination which would not otherwise constitute a Change in Control because of the application of clauses (i), (ii) and (iii) of Section 1.37(c); (b) A change in the composition of Southern's board of directors whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of Southern's board of directors; or (c) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met: (i) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities; (ii) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of employees or employee benefit plan (or related trust) of Southern, its subsidiaries, or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern board of directors, providing for such Business Combination. 1.39 "Southern Committee" means Chairman of the Southern board of directors, Chief Financial Officer of Southern, General Counsel of Southern, and the Chairman of the "Administrative Committee", as defined in Section 3.1 of the Southern Company Deferred Compensation Plan, as restated and amended effective January 1, 2000. 1.40 "Stock Dividend Investment Account" means the bookkeeping account(s) established pursuant to section 6.4 on behalf of a Director that is credited with shares of stock, other than Common Stock, paid as a dividend on shares of Common Stock. 1.41 "Stock Retainer" means the annual Board retainer fee that is paid to the Director in the form of Common Stock. 1.42 "Termination Date" means January 1, 1997, the date as of which The Southern Company Outside Directors Pension Plan was effectively terminated. 1.43 "Trust Administrator" means the individual or committee that is established to in the Deferred Stock Trust and the Deferred Cash Trust, to administer such trusts on behalf of the Participating Companies. 1.44 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors. Where the context requires, words in the masculine gender shall include the feminine gender, words in the singular shall include the plural, and words in the plural shall include the singular. SECTION 2 Purpose The Plan provides a method of deferring payment to a Director of his compensation until a date following the termination of his membership on the Board. SECTION 3 Eligibility An individual who serves as a Director and is not otherwise actively employed by the Company or any of its subsidiaries or affiliates is eligible to participate in the Plan. SECTION 4 Plan Periods Except as pertains to a Director's initial Plan Period, all Plan Periods shall be on a calendar year basis. The initial Plan Period applicable to any person elected to the Board who was not a Director on the preceding December 31, shall begin on the first day of such Director's membership on the Board. The initial Plan Period under this amended and restated plan shall begin January 1, 2001. Except as otherwise provided herein, the terms of the Plan in effect prior to the effective date of this Plan shall continue to be applicable to deferrals made pursuant to the Plan prior to January 1, 2000. SECTION 5 Elections 5.1 Cash Compensation (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all or any portion of Cash Compensation that otherwise would be paid to the Director for the Plan Period, be deferred in amounts as designated by the Director, and credited to (i) a Prime Rate Investment Account, (ii) a Phantom Stock Investment Account, or (iii) a Deferred Stock Account. Upon the Director's termination from the Board of Directors, such deferred compensation and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer Cash Compensation is irrevocable. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer cash compensation paid in a future Plan Period prior to the beginning of such future Plan Period. (c) Cash Compensation deferred under this Section 5.1 shall be invested in Deferred Compensation Accounts as directed by the Director on the Compensation Payment Date. 5.2 Stock Retainer (a) Prior to the beginning of a Plan Period, a Director may direct that payment of all of the Stock Retainer that otherwise would be paid to the Director for the Plan Period, be deferred by the Directors, and credited to his Deferred Stock Account, such deferred compensation and accumulated investment return held in the Director's Deferred Stock Account shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. (b) An election to defer the Stock Retainer is irrevocable. Such an election shall continue from Plan Period to Plan Period unless the Director changes his election to defer Stock Retainer paid in a future Plan Period prior to the beginning of such future Plan Period. (c) Stock Retainer deferred under this Section 5.2 shall be invested in Deferred Stock Account as directed by the Director on the Compensation Payment Date. 5.3 Deferred Pension Election Any Director, who had a Pension Benefit as of the Termination Date, made a single one-time election, , to credit all of his Pension Benefit into a Deferred Compensation Account. The Pension Benefit was credited on the Pension Benefit Investment Date, at the election of the Director, to (i) a Prime Rate Investment Account or (ii) a Phantom Stock Investment Account. Upon the Director's termination from the Board, such Pension Benefit and accumulated investment return held in the Director's Deferred Compensation Accounts shall be distributed to the Director in accordance with the Director's Distribution Election and the provisions of Section 7. 5.4 Distribution Election (a) Except as set forth in Section 5.4(b), prior to the initial establishment a Deferred Compensation Account for a Director, the Director must elect that upon termination from the Board of Directors the values and quantities held in the Directors Deferred Compensation Accounts be distributed to the Director, pursuant to the provisions of Section 7, in a lump sum or in a series of annual installments not to exceed ten (10). The time for the commencement of distribution shall not be later than the first day of the month coinciding with or next following the second anniversary of termination of Board membership. (b) Any Director who made a Deferred Pension Election in accordance with Section 5.3 made a Distribution Election at the time the Deferred Pension Election was made, attributable to the Pension Benefit and any accumalated investment return. (c) Distribution Elections made under Sections 5.4 (a) and (b) are irrevocable except that a Director may amend either or both Distribution Elections then in effect not prior to the 390th day or later than the 360th day prior to his termination of Board membership. 5.5 Beneficiary Designation A Director or former Director may designate a beneficiary to receive distributions from the Plan in accordance with the provisions of Section 7 upon the death of the director. The beneficiary designation may be changed by a Director or former Director at any time, and without the consent of the prior beneficiary. 5.6 Form of Election All elections pursuant to the provisions of this Section 5 of the Plan shall be made in writing to the Secretary of the Company on a form or forms available upon request of the Secretary or Assistant Secretary. SECTION 6 Accounts 6.1 Prime Rate Investment Account A Prime Rate Investment Account shall be established for each Director electing deferral or investment of Cash Compensation at the Prime Interest Rate. The amount directed by the Director to such account shall be credited to it as of the Pension Benefit Investment Date or Compensation Payment Date, as applicable, and credited thereafter with interest computed using the Prime Interest Rate. Interest shall be computed from the date such compensation is credited to the account and compounded quarterly at the end of each calendar quarter. The Prime Interest Rate in effect on the first day of a calendar quarter shall be deemed the Prime Interest Rate in effect for that entire quarter. Interest shall accrue and compound on any balance until the amount credited to the account is fully distributed. 6.2 Phantom Stock Investment Account The Phantom Stock Investment Account established for each Director electing deferral of Cash Compensation for investment at the Common Stock investment rate shall be credited with the number of shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock which could have been purchased on the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, as determined by dividing the applicable compensation by the Market Value on such date. On the date of the payment of dividends on the Common Stock, the Director's Phantom Stock Investment Account shall be credited with additional shares (including fractional shares rounded to the nearest ten-thousandth) of Common Stock, as follows: (a) In the case of cash dividends, such additional shares as would have been purchased as of the Common Stock dividend record date as if the credited shares had been outstanding on such date and dividends reinvested thereon under the Southern Investment Plan; (b) In the case of dividends payable in property other than cash or Common Stock, such additional shares as could be purchased at the Market Value as of the date of payment with the fair market value of the property which would have been payable if the credited shares had been outstanding; and (c) In the case of dividends payable in Common Stock, such additional shares as would have been payable on the credited shares as if they had been outstanding. 6.3 Deferred Stock Account (a) A Director's Deferred Stock Account will be credited: (i) with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by dividing the amount of Cash Compensation subject to deferral or investment in the Deferred Stock Account by the average price paid by the Trustee of the Deferred Stock Trust for shares of Common Stock with respect to the Pension Benefit Investment Date or the Compensation Payment Date, as applicable, as reported by the Trustee, or, if the Trustee shall not at such time purchase any shares of Common Stock, by the Market Value on such date; (ii) as of the date on which Stock Retainer is paid, the shares of Common Stock payable to the Director as his Stock Retainer; and (iii) as of each date on which dividends are paid on the Common Stock, with the number of shares of Common Stock (rounded to the nearest ten thousandth of a share) determined by multiplying the number of shares of Common Stock credited in the Director's Deferred Stock Account on the dividend record date, by the dividend rate per share of Common Stock, and dividing the product by the price per share of Common Stock attributable to the reinvestment of dividends on the shares of Common Stock held in the Deferred Stock Trust on the applicable dividend payment date or, if the Trustee of the Deferred Stock Trust has not reinvested in shares of Common Stock on the applicable dividend reinvestment date, the product shall be divided by the Market Value on the dividend payment date. (b) If Southern enters into transactions involving stock splits, stock dividends, reverse splits or any other recapitalization transactions, the number of shares of Common Stock credited to a Director's Deferred Stock Account will be adjusted (rounded to the nearest ten thousandth of a share) so that the Director's Deferred Stock Account reflects the same equity percentage interest in Southern after the recapitalization as was the case before such transaction. (c) If at least a majority of Southern's stock is sold or exchanged by its shareholders pursuant to an integrated plan for cash or property (including stock of another corporation) or if substantially all of the assets of Southern are disposed of and, as a consequence thereof, cash or property is distributed to Southern's shareholders, each Director's Deferred Stock Account will, to the extent not already so credited under this Section 6.3, be (i) credited with the amount of cash or property receivable by a Southern shareholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account and (ii) debited by that number of shares of Common Stock surrendered by such equivalent Southern shareholder. (c) Each Director who has a Deferred Stock Account also shall be entitled to provide directions to the Trust Administrator to cause such committee to similarly direct the Trustee of the Deferred Stock Trust to vote, on any matter presented for a vote to the shareholders of Southern, that number of shares of Common Stock held by the Deferred Stock Trust equivalent to the number of shares of Common Stock credited to the Director's Deferred Stock Account. Such committee shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the Southern shareholders as to which their votes are solicited. 6.4 Stock Dividend Investment Account (a) A Director's Stock Dividend Investment Account will be credited as of the date on which a dividend is paid to the Company's common stockholders in stock other than Common Stock with the number of shares of the other corporation's stock receivable by a Southern stockholder directly holding the same number of shares of Common Stock as is credited to such Director's Deferred Stock Account. (b) Each Director who has a Stock Dividend Investment Account also shall be entitled to provide directions to the Trust Administrator to similarly direct the Trustee of the Deferred Stock Trust to vote on any matter presented for a vote to the applicable corporation's shareholders, that number of shares of the applicable corporation's common stock held by the Deferred Stock Trust equivalent to the number of shares credited to the Director's Stock Dividend Investment Account. The Trust Administrator shall arrange for distribution to all Directors in a timely manner of all communications directed generally to the applicable corporation's shareholders as to which their votes are solicited. SECTION 7 Distributions 7.1 Upon termination of a Director's membership on the Board, the amount credited to a Director's Deferred Compensation Accounts will be paid to the Director or his beneficiary, as applicable. The amount credited to a Director's Prime Rate Investment Account and Phantom Stock Investment Account shall be paid in cash and the amount credited to his Deferred Stock Account shall, except as otherwise provided in Section 6.3(c), Section 9.5, or to the extent the Company is otherwise, in the reasonable judgment of the Committee, precluded from doing so, be paid in shares of Common Stock (with any fractional share interest therein paid in cash to the extent of the then Market Value thereof). Such payments shall be from the general assets of the Company (including the Deferred Cash Trust and the Deferred Stock Trust) in accordance with this Section 7. The amount credited to a Stock Dividend Investment Account shall, except as otherwise provided in section 9.5, be paid from the assets in the Deferred Stock Trust in shares of the applicable corporation, however if there is not a sufficient number of shares held in the Trust, the remainder shall be paid in cash based upon the average of the high and low price of the stock as reported in the Wall Street Journal on the business day immediately proceeding the distribution date. 7.2 Unless other arrangements are specified by the Committee on a uniform and nondiscriminatory basis, deferred amounts shall be paid in the form of (i) a lump sum payment, or (ii) in approximately equal annual installments, as elected by the Director pursuant to the provision of Section 5.4. Such payments shall be made (or shall commence) as soon as practicable following the termination of Board membership or, if so elected in the Distribution Election, up to twenty-four (24) months following such termination. In the event a Director elected to receive the balance of his Deferred Compensation Accounts in a lump sum, distribution shall be made on the first day of the month selected by the Director on his Distribution Election, or as soon as reasonably possible thereafter. If the Director elected to receive annual installments, the first payment shall be made on the first day of the month selected by a Director, or as soon as reasonably possible thereafter, and shall be equal to the balance in the Director's Deferred Compensation Accounts on such date divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance in the Director's Deferred Compensation Accounts on the date of payment divided by the number of remaining annual payments and shall be paid on the anniversary of the preceding date of payment. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. Upon the death of a Director, or a former Director prior to the payment of all amounts credited to the Director's Deferred Compensation Accounts, the unpaid balance shall be paid in the sole discretion of the Committee (i) in a lump sum to the designated beneficiary of such Director or former Director within thirty (30) days of the date of death (or as soon as reasonably possible thereafter) or (ii) in accordance with the Distribution Election made by such Director or former Director. In the event a beneficiary designation has not been made, or the designated beneficiary is deceased or cannot be located, payment shall be made to the estate of the Director or former Director. The Market Value of any shares of Common Stock credited to a Director's Phantom Stock Investment Account shall be determined as of the twenty-fifth (25th) day of the month immediately preceding the date of any lump sum or installment distribution. SECTION 8 Change in Control and Other Special Provisions 8.1 Notwithstanding any other terms of the Plan to the contrary, following a Southern Change in Control or a Company Change in Control, the provisions of this Section 8 shall apply to the payment of benefits under the Plan with respect to any Director who is a Participant on such date. 8.2 The Deferred Cash Trust and the Deferred Stock Trust (collectively "Trusts") have been established to hold assets of the Participating Companies under certain circumstances as a reserve for the discharge of the Company's obligations under the Plan. In the event of a Preliminary Change in Control of Southern or the Company, the Company shall be obligated to immediately contribute such amounts to the Trusts as may be necessary to fully fund all benefits payable under the Plan in accordance with the procedures set forth in Section 8.3 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(c) of the Trust, the Company may fund the Trusts prior to a Preliminary Change in Control of Southern or the Company in accordance with the terms of the Trusts. All assets held in the Trusts remain subject only to the claims of the Participating Companies' general creditors whose claims against the Participating Companies are not satisfied because of the Participating Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trusts before the assets are paid to the Participant and all rights created under the Trusts, as under the Plan, are unsecured contractual claims of the Participant against the Company. 8.3 As soon as practicable following either a Preliminary Change in Control of Southern or of the Company, the Company shall contribute an amount based upon the funding strategy adopted by the Trust Administrator necessary to fulfill the Company's obligations pursuant to this Section 8. In the event of a dispute over such actuary's determination, the Company and any complaining Participant(s) shall refer such dispute to an independent, third party actuarial consultant, chosen by the Company and such Participant. If the Company and the Participant cannot agree on an independent, third party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the Company and the applicable Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Company shall be responsible for all of the fees and expenses of the independent actuarial consultant. 8.4 In the event of a Southern Change in Control or a Company Change in Control, notwithstanding anything to the contrary in the Plan, upon termination as a Director, that amount in the Deferred Compensation Plan Account(s) of a Participant who was a Director determined as of such Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Trust Administrator, in its sole and absolute discretion. If no such election is made, the Director shall receive payment of his Accounts solely in accordance with Section 7. SECTION 9 General Provisions 9.1 In the event that the Company shall decide to establish an advance accrual reserve on its books against the future expense of payments from any Deferred Compensation Accounts, such reserve shall not under any circumstances be deemed to be an asset of this Plan but, at all times, shall remain a part of the general assets of the Company, subject to claims of the Company's creditors. 9.2 A person entitled to any amount under this Plan shall be a general unsecured creditor of the Company with respect to such amount. Furthermore, a person entitled to a payment or distribution with respect to a Deferred Compensation Account shall have a claim upon the Company only to the extent of the balance in his Deferred Compensation Accounts. 9.3 All commissions, fees, and expenses that may be incurred in operating the Plan will be paid by the Company. 9.4 The Company will pay its prorated share of all commissions, fees, and expenses that may be incurred in operating any trust(s) established under the Plan (including the Deferred Stock Trust and the Deferred Cash Trust). 9.5 Notwithstanding any other provision of this Plan: (i) elections under this Plan may only be made by Directors while they are directors of the Company; (with the exception of the designation of beneficiaries) and (ii) distributions otherwise payable to a Director in the form of Common Stock shall be delayed and/or instead paid in cash in an amount equal to the fair market value thereof if such payment in Common Stock would violate any federal or State securities laws (including Section 16(b) of the Securities Exchange Act of 1934, as amended) and/or rules and regulations promulgated thereunder. 9.6 Directors, their legal representatives and their beneficiaries shall have no right to anticipate, alienate, sell, assign, transfer, pledge or encumber their interests in the Plan, nor shall such interests be subject to attachment, garnishment, levy or execution by or on behalf of creditors of the Directors or of their beneficiaries. SECTION 10 Administration Subject to the express provisions of the Plan, the Committee shall have the exclusive right to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for the administration of the Plan. The decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan. The Committee may delegate to such officers, employees, or departments of the Company or Southern, such authority, duties, and responsibilities of the Committee as it, in its sole discretion, considers necessary or appropriate for the proper and efficient operation of the Plan, including, without limitation, (i) interpretation of the Plan, (ii) approval and payment of claims, and (iii) establishment of procedures for administration of the Plan. SECTION 11 Amendment, Termination and Effective Date 11.1 Amendment of the Plan Except for the provisions of Section 8, which may not be amended following a Southern Change in Control or Company Change in Control, and subject to the provisions of Section 11.3, the Plan may be wholly or partially amended or otherwise modified at any time by written action of the Board of Directors. 11.2 Termination of the Plan Subject to the provisions of Section 11.3 herein, the Plan may be terminated at any time by written action of the Board of Directors. 11.3 No Impairment of Benefits Notwithstanding the provisions of Sections 11.1 and 11.2, herein no amendment to or termination of the Plan shall impair any rights to benefits that have accrued hereunder. 11.4 Governing Law This Plan shall be construed in accordance with and governed by the laws of the State of Georgia. IN WITNESS WHEREOF, the Plan, as amended and restated effective October 26, 2000 has been executed pursuant to resolutions of the Board of Directors of Savannah Electric and Power Company, this 26th day of October, 2000. SAVANNAH ELECTRIC AND POWER COMPANY By: ________________________________ Attest: By: ___________________________ EX-10 58 x10f34.txt AGREEMENT THIS AGREEMENT made and entered into effective as of December 1, 1983 by and between Savannah Electric and Power Company, a Georgia corporation, hereinafter referred to as the "Company", and William Miles Greer, hereinafter referred to as the "Employee." WHEREAS, Employee became an employee of the Company as of December 1, 1983; and WHEREAS, during the period prior to his employment with the Company, the Employee acquired knowledge valuable to the Company's affairs and its business; and WHEREAS, under the prevailing interpretations of the sections of the Internal Revenue Code and the Employee Retirement Income Security Act of 1974, as amended, applicable to the Employees' Retirement Plan of Savannah Electric and Power Company (hereinafter referred to as the "Pension Plan"), the Employee's years of service with his former employer may not be recognized for purposes of calculating the Employee's retirement Allowance under the Pension Plan; and WHEREAS, the Company has agreed to establish an agreement with Employee to recognize such service; and WHEREAS, the Company desires not only to recognize the valuable knowledge acquired by the Employee while employed by his former employer, but also desires to secure the continued services of the Employee; and WHEREAS, the Employee is willing to continue to service the Company faithfully, diligently, and competently; NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Company and the Employee hereby agree as follows: 1. Upon the Employee's termination of service with the Company, the Company agrees to pay the Employee a monthly amount equal to the difference between his retirement Allowance payable in accordance with the terms and provisions of the Pension Plan, as amended from time to time, and the monthly retirement Allowance the Employee would have been entitled to receive under the Pension Plan as if he had first been employed by the Company on July 1, 1974 (considering the one year waiting period under the Plan, this would allow Credited Service to be recognized starting July 1, 1975). If, however, Employee terminates employment with the Company prior to April 1, 1993, the Credited Service recognized in the sentence above shall be limited to the number of years and months of actual service the Employee has served with the Company. The Employee's additional years of Credited Service under the Pension Plan after December 1, 1983 shall also be recognized for purposes of calculating the Employee's retirement Allowance under this Paragraph 1 in the event of his termination of service with the Company for reasons other than death, transfer to an affiliated or associated company, or retirement under the Pension Plan. Notwithstanding the foregoing, in the event such Credited Service is for any reason disregarded in calculating benefits under the Pension Plan, it shall also be disregarded for purposes of this Agreement. The amount paid pursuant to this Paragraph 1 shall be recalculated from time to time to reflect any future increases in the retirement Allowance of retirees under the Pension Plan following the Employee's retirement at his early retirement date, Normal Retirement Date, or deferred retirement date under the Pension Plan, as appropriate. 2. The amount calculated in accordance with Paragraph 1 shall be paid in monthly increments on the first day of each month concurrently with the Employee's retirement Allowance under the Pension Plan. In the event the Employee is married and the Employee's spouse is living on the date payments commence under this Paragraph 2, the monthly payments shall be paid in the same manner as the 100% joint and survivor annuity option under the Pension Plan, including any adjustments for post-retirement survivor coverage as would be made under the Pension Plan, in which case 100% of the monthly amount payable to the Employee shall be payable to his Surviving Spouse after his death until the death of such Surviving Spouse. In the event the Employee shall die before payments commence under this Paragraph 2 and he shall be survived by his Surviving Spouse, such Surviving Spouse shall be entitled to a monthly survivor benefit calculated pursuant to Paragraph 1 and payable in accordance with the Pension Plan. In the event the Employee shall not be married on the date payments commence under this Paragraph 2, the monthly amounts payable under Paragraph 1 shall be paid to the Employee as a single life annuity. The Employee or his Surviving Spouse shall not, under any circumstances, have any option or right to require payments hereunder otherwise than in accordance with the terms hereof. 3. Neither the entering into nor the termination of this Agreement for any reason shall affect the Employee's right to such salary, fees or other compensation for services as an employee, officer or director of the Company, as may be agreed upon from time to time, nor his right to participate in all of the employee benefit plans maintained by the Company on the same basis as any other regular full-time employee of the Company. 4. Nothing contained in this Agreement shall be construed to affect in any manner the existing rights of the Company to suspend, terminate, alter or modify, whether or not for cause, the employment relationship of the parties hereto. 5. Neither the Employee nor the Surviving Spouse or other beneficiary under this Agreement shall have any right to sell, assign, transfer, encumber or otherwise convey this right to receive payment of any amounts payable hereunder, which payment and the right thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect. 6. The Company shall not reserve or otherwise set aside funds for the payment of its obligations hereunder, which obligations shall be paid from the general assets of the Company. Notwithstanding that the Employee shall be entitled to receive the entire amounts stated herein, the assets from which such amounts shall be paid shall at all times be subject to the claims of the Company's creditors. 7. The Company and the Employee agree that the Employee is highly compensated and holds a management position with the Company. 8. The Company and the Employee agree that this Agreement is an employee benefit plan for an individual who is a member of management and is highly compensated, as described in ss.ss. 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974. 9. Except as preempted by federal law, this Agreement shall be construed in accordance with and governed by the laws of the State of Georgia. 10. This Agreement shall be binding upon and inure to the benefit of the parties hereto and any successor to the business of the Company, and in any event, the Agreement shall, if not sooner terminated, terminate for all purposes upon the death of the Employee or, if his spouse shall survive the Employee and shall be entitled to receive any payments hereunder, upon the death of the Employee's Surviving Spouse, and the satisfaction by the Company of its obligations hereunder. 11. In the event the Employee is transferred to or accepts employment with an affiliate of the Company, it is the intent of the Company to have the Employee's new employer assume the Company's responsibilities under this Agreement. If, however, such new employer does not assume this Agreement, the Company shall continue to be obligated to provide benefits under this Agreement as if the Employee had remained employed with the Company during the period he is employed by such affiliate, but for purposes of determining the Employee's benefit under this Agreement, the Employee shall be deemed to have become Employed by such affiliate on July 1, 1974 and the affiliate's defined benefit pension plan shall be used to determine the benefit due hereunder in lieu of using the Pension Plan to determine Employee's benefit hereunder. Any benefit so calculated shall be reduced by the benefit due employee under the Pension Plan and the affiliate's defined benefit Pension Plan. Notwithstanding any of the above, in no event shall Employee's benefit under this Agreement, the Pension Plan and the affiliate's defined benefit pension plan be less than Employee's benefit under this Plan and the Pension Plan at the time of the Employee's transfer or acceptance of employment with any such affiliate. IN WITNESS WHEREOF, this Agreement has been executed by the Employee and Southern Company Services, Inc., through its duly authorized officers this ______ day of November, 1995. EMPLOYEE: WILLIAM MILES GREER Sworn to and subscribed before me this ___ day of ________, 1995. Notary Public, State of Georgia My Commission Expires: (NOTARIAL SEAL) EMPLOYER: SAVANNAH ELECTRIC AND POWER COMPANY BY: -------------------------------------- ATTEST: ------------------------------------ Sworn to and subscribed before me this ___ day of ________, 1995. Notary Public, State of Georgia My Commission Expires: (NOTARIAL SEAL) EX-10 59 x10f35.txt STATE OF GEORGIA ) ) COUNTY OF CHATHAM ) THIS AGREEMENT is made and entered into as of the 3rd day of December, 1990, by and between W. MILES GREER, of Chatham County, Georgia ("Employee"), and SAVANNAH ELECTRIC AND POWER COMPANY, a Georgia public utility corporation, with its principal office and place of business in Chatham county, Georgia (the "Company"). W I T N E S S E T H : WHERAS, Employee was employed by the Company on December 1, 1983, and was thereafter duly elected as an officer of the Company; and WHEREAS, prior to accepting employment by the Company, Employee and the Company negotiated a contract providing for Employee's compensation; and WHEREAS, the Company agreed, in connection with Employee's compensation, to credit Employee with eight (8) years of additional service with the Company under the terms and provisions of the Company's supplemental Executive Retirement Plan ("SERP") and the Company's Deferred Compensation Plan for Key Employees ("Deferred Compensation Plan"), copies of which are attached hereto as Exhibits "A" and "B," respectively, and made a part hereof by reference; and WHEREAS, the Company and Employee desire to confirm and reduce to writing their mutual understanding and agreement for such service credit of the Employee under the SERP and the Deferred Compensation Plan of the Company; NOW, THEREFORE, for and in consideration of the premises, and other good and valuable legal consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Additional Credited Service for Employee. The Company hereby credits Employee with eight (8) years of additional service under the provisions of the Company's SERP and Deferred Compensation Plan. Such eight (8) years of additional service of Employee shall be added to Employee's "Credited Service" as defined under Section 2.06 of said SERP and added to Employee's "Year of Service" as defined under Article II, Section 21, of said Deferred Compensation Plan. 2. Confirmation of SERP and Deferred Compensation Plan. Except as amended hereby with respect to Employee, all of the terms and provisions of the SERP and Deferred Compensation Plan with respect to the Employee shall remain in full force and effect, including, without limitation, the provisions thereof providing for amendment and termination. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officers and its corporate seal to be affixed and Employee has hereunto set his hand and seal as of the day and year first above written. SAVANNAH ELECTRIC AND POWER COMPANY By:________________________________________ President Attest:______________________________________ Treasurer and Secretary (Corporate Seal) ------------------------------ W Miles Greer EX-24 60 x24a.txt February 19, 2001 Tommy Chisholm, and Wayne Boston Dear Sirs: The Southern Company proposes to file or join in the filing of reports under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission with respect to the following: (1) the filing of this Company's Annual Report on Form 10-K for the year ended December 31, 2000 and (2) the filing of Quarterly Reports on Form 10-Q during 2001 and any Current Reports on Form 8-K The Southern Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, said Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any necessary or appropriate amendment or amendments to any such reports, to be accompanied in each case by any necessary or appropriate exhibits or schedules thereto. Yours very truly, THE SOUTHERN COMPANY By /s/A. W. Dahlberg A. W. Dahlberg Chairman of the Board and Chief Executive Officer - 2 - /s/Daniel P. Amos /s/Donald M. James Daniel P. Amos Donald M. James /s/Dorrit J. Bern /s/Zack T. Pate Dorrit J. Bern Zack T. Pate /s/Thomas F. Chapman /s/Gerald J. St. Pe' Thomas F. Chapman Gerald J. St. Pe' /s/A. W. Dahlberg /s/Stephen A. Wakefield A. W. Dahlberg Stephen A. Wakefield /s/H. Allen Franklin /s/W. L. Westbrook H. Allen Franklin W. L. Westbrook ________________________________ /s/Tommy Chisholm Bruce S. Gordon Tommy Chisholm /s/L. G. Hardman III /s/W. Dean Hudson L. G. Hardman III W. Dean Hudson ________________________________ Elmer B. Harris March 14, 2001 Tommy Chisholm and Wayne Boston Dear Sirs: As an officer of The Southern Company, I hereby make, constitute, and appoint each of you my true and lawful Attorney in my name, place, and stead, to sign and cause to be filed with the Securities and Exchange Commission (1) this Company's Annual Report on Form 10-K for the year ended December 31, 2000, (2) Quarterly Reports on Form 10-Q during 2001, (3) any Current Reports on Form 8-K, and (4) any necessary or appropriate amendment or amendments to any such reports, each such report or amendments to such reports to be accompanied in each case by any necessary or appropriate exhibits or schedules thereto. Yours very truly, /s/Gale E. Klappa Extract from minutes of meeting of the board of directors of The Southern Company. - - - - - - - - - - RESOLVED: That for the purpose of signing the Company's Annual Report on Form 10-K for the year ended December 31, 2000 and 2001 Form 10-Q's and Form 8-K's, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company, the members of its board of directors, and its officers, are authorized to give their several powers of attorney to Tommy Chisholm and Wayne Boston. - - - - - - - - - - The undersigned officer of The Southern Company does hereby certify that the foregoing is a true and correct copy of a resolution duly and regularly adopted at a meeting of the board of directors of The Southern Company, duly held on February 19, 2001, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 28, 2001 THE SOUTHERN COMPANY By /s/Tommy Chisholm Tommy Chisholm Secretary EX-24 61 x24b.txt January 26, 2001 W. L. Westbrook Wayne Boston 270 Peachtree Street, N.W. 241 Ralph McGill Blvd. NE Atlanta, Georgia 30303 Atlanta, Georgia 30308-3374 Dear Sirs: Alabama Power Company proposes to file with the Securities and Exchange Commission, under the Securities Exchange Act of 1934, (1) its Annual Report on Form 10-K for the year ended December 31, 2000, and (2) its quarterly reports on Form 10-Q during 2001. Alabama Power Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint W. L. Westbrook and Wayne Boston our true and lawful Attorneys for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q, and any appropriate amendment or amendments thereto and any necessary exhibits. Yours very truly, ALABAMA POWER COMPANY By /s/Elmer B. Harris Elmer B. Harris President and Chief Executive Officer - 2 - /s/Whit Armstrong /s/William V. Muse Whit Armstrong William V. Muse ______________________________ /s/John T. Porter David J. Cooper John T. Porter /s/H. Allen Franklin /s/Robert D. Powers H. Allen Franklin Robert D. Powers /s/Elmer B. Harris /s/Andreas Renschler Elmer B. Harris Andreas Renschler /s/R. Kent Henslee /s/C. Dowd Ritter R. Kent Henslee C. Dowd Ritter /s/Carl E. Jones, Jr. /s/James H. Sanford Carl E. Jones, Jr. James H. Sanford ______________________________ /s/John Cox Webb, IV Patricia M. King John Cox Webb, IV /s/James K. Lowder /s/James W. Wright James K. Lowder James W. Wright /s/Wallace D. Malone, Jr. /s/William B. Hutchins, III Wallace D. Malone, Jr. William B. Hutchins, III /s/Thomas C. Meredith /s/Art P. Beattie Thomas C. Meredith Art P. Beattie ______________________________ Mayer Mitchell Extract from minutes of meeting of the board of directors of Alabama Power Company. - - - - - - - - - - RESOLVED: That for the purpose of signing and filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, Alabama Power Company's annual report on Form 10-K for the year ended December 31, 2000, and its 2001 quarterly reports on Form 10-Q, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, Alabama Power Company, the members of its Board of Directors, and its officers are authorized to give their several powers of attorney to W. L. Westbrook and Wayne Boston, in substantially the form of power of attorney presented to this meeting. - - - - - - - - - - The undersigned officer of Alabama Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Alabama Power Company, duly held on January 26, 2001, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 28, 2001 ALABAMA POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-24 62 x24c.txt February 21, 2001 Thomas A. Fanning, W. L. Westbrook, Gale Klappa and Wayne Boston Dear Sirs: Georgia Power Company proposes to file or join in the filing of reports under the Securities Exchange Act of 1934 with the Securities and Exchange Commission with respect to the following: (1) the filing of its Annual Report on Form 10-K for the year ended December 31, 2000, and (2) the filing of its quarterly reports on Form 10-Q during 2001. Georgia Power Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any appropriate amendment or amendments thereto and any necessary exhibits. Yours very truly, GEORGIA POWER COMPANY By /s/David M. Ratcliffe David M. Ratcliffe President and Chief Executive Officer - 2 - /s/Daniel P. Amos /s/David M. Ratcliffe Daniel P. Amos David M. Ratcliffe /s/Juanita P. Baranco /s/William Jerry Vereen Juanita P. Baranco William Jerry Vereen /s/William A. Fickling, Jr. /s/Carl Ware William A. Fickling, Jr. Carl Ware /s/H. Allen Franklin /s/E. Jenner Wood, III H. Allen Franklin E. Jenner Wood, III /s/L. G. Hardman III /s/Thomas A. Fanning L. G. Hardman III Thomas A. Fanning /s/James R. Lientz, Jr. /s/Judy M. Anderson James R. Lientz, Jr. Judy M. Anderson /s/G. Joseph Prendergast /s/Cliff S. Thrasher G. Joseph Prendergast Cliff S. Thrasher Extract from minutes of meeting of the board of directors of Georgia Power Company. - - - - - - - - - - RESOLVED: That for the purpose of signing reports under the Securities Exchange Act of 1934 to be filed with the Securities and Exchange Commission with respect to (a) the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, and (b) quarterly filings on Form 10-Q during 2001; and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company and the members of its Board of Directors authorize their several powers of attorney to Thomas A. Fanning, W. L. Westbrook Gale Klappa and Wayne Boston. - - - - - - - - - - The undersigned officer of Georgia Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Georgia Power Company, duly held on February 21, 2001, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 28, 2001 GEORGIA POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-24 63 x24d.txt February 21, 2001 Mr. W. L. Westbrook Mr. Wayne Boston The Southern Company Southern Company Services, Inc. 270 Peachtree Street, N.W. 241 Ralph McGill Blvd. NE Atlanta GA 30303 Atlanta GA 30308-3374 Dear Sirs: Re: Forms 10-K and 10-Q Gulf Power Company proposes to file or join in the filing of reports under the Securities Exchange Act of 1934 with the Securities and Exchange Commission with respect to the following: (1) its Annual Report on Form 10-K for the year ended December 31, 2000, and (2) its 2001 quarterly reports on Form 10-Q. Gulf Power Company and the undersigned Directors and Officers of said Company, individually as a Director and/or as an Officer of the Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any appropriate amendment or amendments thereto and any necessary exhibits. Sincerely, By /s/Travis J. Bowden Travis J. Bowden President and Chief Executive Officer - 2 - /s/Travis J. Bowden /s/Barbara H. Thames Travis J. Bowden Barbara H. Thames /s/Fred C. Donovan /s/Ronnie R. Labrato Fred C. Donovan Ronnie R. Labrato /s/H. Allen Franklin /s/Warren E. Tate H. Allen Franklin Warren E. Tate /s/W. D. Hull, Jr. W. D. Hull, Jr. Extract from minutes of meeting of the board of directors of Gulf Power Company. - - - - - - - - - - RESOLVED, That for the purpose of signing the reports under the Securities Exchange Act of 1934 to be filed with the Securities and Exchange Commission with respect to the filing of this Company's Annual Report on Form 10-K for the year ended December 31, 2000, and its 2001 quarterly reports on Form 10-Q, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company, the members of its Board of Directors, and its Officers, are authorized to give their several powers of attorney to W. L. Westbrook and Wayne Boston. - - - - - - - - - - The undersigned officer of Gulf Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Gulf Power Company, duly held on February , 2001, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 28, 2001 GULF POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-24 64 x24e.txt February 28, 2001 Gale E. Klappa and Wayne Boston Dear Sirs: Mississippi Power Company proposes to file or join in the filing of reports under the Securities Exchange Act of 1934 with the Securities and Exchange Commission with respect to the following: (1) the filing of its Annual Report on Form 10-K for the year ended December 31, 2000, and (2) the filing of its quarterly reports on Form 10-Q during 2001. Mississippi Power Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any appropriate amendment or amendments thereto and any necessary exhibits. Yours very truly, MISSISSIPPI POWER COMPANY By /s/Dwight H. Evans Dwight H. Evans President and Chief Executive Officer - 2 - /s/Dwight H. Evans /s/George A. Schloegel Dwight H. Evans George A. Schloegel /s/Robert S. Gaddis /s/Philip J. Terrell Robert S. Gaddis Philip J. Terrell /s/Linda T. Howard /s/Gene Warr Linda T. Howard Gene Warr /s/Aubrey K. Lucas /s/Michael W. Southern Aubrey K. Lucas Michael W. Southern /s/Malcolm Portera /s/Frances V. Turnage Malcolm Portera Frances V. Turnage Extract from minutes of meeting of the board of directors of Mississippi Power Company. - - - - - - - - - - RESOLVED: That this Company, the members of this Company's Board of Directors and its officers are authorized to give their several powers of attorney to Gale E. Klappa and Wayne Boston for the purpose of signing the reports under the Securities Exchange Act of 1934 to be filed with the Securities and Exchange Commission with respect to the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2000, and the filing of this Company's quarterly reports to the Securities and Exchange Commission on Form 10-Q for the year 2001. - - - - - - - - - - The undersigned officer of Mississippi Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Mississippi Power Company, duly held on February 28, 2001, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 28, 2001 MISSISSIPPI POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-24 65 x24f.txt February 22, 2001 Gale E. Klappa and Wayne Boston Dear Sirs: Savannah Electric and Power Company proposes to file with the Securities and Exchange Commission, under the Securities Exchange Act of 1934, (1) its Annual Report on Form 10-K for the year ended December 31, 2000, and (2) its quarterly reports on Form 10-Q during 2001. Savannah Electric and Power Company and the undersigned directors and officers of said Company, individually as a director and/or as an officer of the Company, hereby make, constitute and appoint W. L. Westbrook and Wayne Boston our true and lawful Attorneys for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q, and any appropriate amendment or amendments thereto and any necessary exhibits. Yours very truly, SAVANNAH ELECTRIC AND POWER COMPANY By /s/G. Edison Holland, Jr. G. Edison Holland, Jr. President and Chief Executive Officer - 2 - /s/Gus H. Bell III /s/Robert B. Miller III Gus H. Bell III Robert B. Miller III /s/Archie H. Davis /s/Arnold M. Tenenbaum Archie H. Davis Arnold M. Tenenbaum /s/Walter D. Gnann /s/K. R. Willis Walter D. Gnann K. R. Willis /s/G. Edison Holland, Jr /s/Nancy E. Frankenhauser G. Edison Holland, Jr. Nancy E. Frankenhauser Extract from minutes of meeting of the board of directors of Savannah Electric and Power Company. - - - - - - - - - - RESOLVED: That for the purpose of signing reports required to be filed by the Company under the Securities Exchange Act of 1934 to be filed with the Securities and Exchange Commission including (a) the filing of this Company's Annual Report on Form 10-K for the year ended December 31, 2000, and (b) quarterly reports on Form 10-Q during calendar year 2001; and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, this Company and the members of its Board of Directors, and its officers, be and they are hereby authorized to give their several powers of attorney to Gale E. Klappa and Wayne Boston for the purposes set out above. - - - - - - - - - - The undersigned officer of Savannah Electric and Power Company does hereby certify that the foregoing is a true and correct copy of resolution duly and regularly adopted at a meeting of the board of directors of Savannah Electric and Power Company, duly held on February 22, 2001, at which a quorum was in attendance and voting throughout, and that said resolution has not since been rescinded but is still in full force and effect. Dated March 28, 2001 SAVANNAH ELECTRIC AND POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary -----END PRIVACY-ENHANCED MESSAGE-----